We have the energy to make things better … for you, for our investors and for our stakeholders. EXHIBIT 99 |
PSEG Kathleen Lally VICE PRESIDENT, INVESTOR RELATIONS Caroline Dorsa EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER Ralph Izzo CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER |
Forward Looking Statement Certain of the matters discussed in this communication about us and our subsidiaries future performance, including, without limitation, future revenues, earnings, strategies, prospects, consequences and all other statements that are not purely historical constitute “forward -looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated. Such statements are based on management's beliefs as well as assumptions made by and information currently available to management. When used herein, the words “anticipate,” “intend,” “estimate,” “believe,” “expect,” “plan,” “should,” “hypothetical,” “potential,” “forecast,” “project,” variations of such words and similar expressions are intended to identify forward-looking statements. Factors that may cause actual results to differ are often presented with the forward-looking statements themselves. Other factors that could cause actual results to differ materially from those contemplated in any forward looking statements made by us herein are discussed in filings we make with the United States Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K and subsequent reports on Form 10-Q and Form 8-K and available on our website: http://www.pseg.com. These factors include, but are not limited to: • adverse changes in the demand for or the price of the capacity and energy that we sell into wholesale electricity markets, • adverse changes in energy industry law, policies and regulation, including market structures and a potential shift away from competitive markets toward subsidized market mechanisms, transmission planning and cost allocation rules, including rules regarding how transmission is planned and who is permitted to build transmission in the future, and reliability standards, • any inability of our transmission and distribution businesses to obtain adequate and timely rate relief and regulatory approvals from federal and state regulators, • changes in federal and state environmental regulations that could increase our costs or limit our operations, • changes in nuclear regulation and/or general developments in the nuclear power industry, including various impacts from any accidents or incidents experienced at our facilities or by others in the industry, that could limit operations of our nuclear generating units, • actions or activities at one of our nuclear units located on a multi-unit site that might adversely affect our ability to continue to operate that unit or other units located at the same site, • any inability to balance our energy obligations, available supply and risks, • any deterioration in our credit quality or the credit quality of our counterparties, including in our leveraged leases, • availability of capital and credit at commercially reasonable terms and conditions and our ability to meet cash needs, • changes in the cost of, or interruption in the supply of, fuel and other commodities necessary to the operation of our generating units, • delays in receipt of necessary permits and approvals for our construction and development activities, • delays or unforeseen cost escalations in our construction and development activities, • any inability to achieve, or continue to sustain, our expected levels of operating performance, • any equipment failures, accidents, severe weather events or other incidents that impact our ability to provide safe and reliable service to our customers, and any inability to obtain sufficient coverage or recover proceeds of insurance on such matters, • increases in competition in energy supply markets as well as competition from certain rate-based transmission projects, • any inability to realize anticipated tax benefits or retain tax credits, • challenges associated with recruitment and/or retention of a qualified workforce, • adverse performance of our decommissioning and defined benefit plan trust fund investments and changes in funding requirements, and • changes in technology, such as distributed generation and microgrids, and resultant changes in customer usage patterns, including energy efficiency and demand response. All of the forward-looking statements made in this report are qualified by these cautionary statements and we cannot assure you that the results or developments anticipated by management will be realized or even if realized, will have the expected consequences to, or effects on, us or our business prospects, financial condition or results of operations. Readers are cautioned not to place undue reliance on these forward-looking statements in making any investment decision. Forward-looking statements made in this report apply only as of the date of this report. While we may elect to update forward-looking statements from time to time, we specifically disclaim any obligation to do so, even if internal estimates change, unless otherwise required by applicable securities laws. The forward-looking statements contained in this report are intended to qualify for the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 3 |
GAAP Disclaimer PSEG presents Operating Earnings in addition to its Income from Continuing Operations/Net Income reported in accordance with accounting principles generally accepted in the United States (GAAP). Operating Earnings is a non- GAAP financial measure that differs from Net Income because it excludes gains or losses associated with Nuclear Decommissioning Trust (NDT), Mark-to-Market (MTM) accounting, and other material one-time items. PSEG presents Operating Earnings because management believes that it is appropriate for investors to consider results excluding these items in addition to the results reported in accordance with GAAP. PSEG believes that the non-GAAP financial measure of Operating Earnings provides a consistent and comparable measure of performance of its businesses to help shareholders understand performance trends. This information is not intended to be viewed as an alternative to GAAP information. Slides A and B at the end of this presentation include a list of items excluded from Income from Continuing Operations/Net Income to reconcile to Operating Earnings, with a reference to that slide included on each of the slides where the non-GAAP information appears. 4 |
PSEG OVERVIEW & OUTLOOK |
PSEG Strategy Leveraging the strength of PSEG’s balance sheet to invest primarily in our stable, regulated business in ways that meet customer needs and state goals as we protect the upside of the merchant business and provide growth for our shareholders DISCIPLINED INVESTMENT OPERATIONAL EXCELLENCE FINANCIAL STRENGTH ENGAGED WORKFORCE 6 |
PSEG meeting the market’s challenges with our strong platform of assets ASSETS AND OPERATING EARNINGS ARE FOR THE YEAR ENDED 12/31/2012. *ENERGY HOLDINGS INCLUDES PARENT. SEE SLIDE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/NET INCOME TO RECONCILE TO OPERATING EARNINGS. . PSEG Energy Holdings positioned to pursue attractive renewable generation and develop new business opportunities Assets $1.5B Operating Earnings $64M Renewable Investments PSE&G positioned to meet NJ’s energy policy and economic growth objectives with an investment program exceeding $10 billion through 2017 Assets $19.2B Operating Earnings $528M Electric & Gas Delivery and Transmission PSEG Power’s low-cost, base load and load following fleet is geographically well positioned and environmentally responsible Assets $11.0B Operating Earnings $644M Regional Wholesale Energy 7 |
8 PSEG Focus Operational excellence and disciplined investment helped offset the earnings impact of lower energy prices 2008 2012 PSEG Focus ($ millions, except as noted) $69.85 PJM West RTC ($/MWh) $33.88 • 2.4% (planned 1 ) • $866 • $0 • $0 • 1.6% • 29.3TWh • $0 $2.91 • 0.8% (actual 2 ) • $2,500 • $955 • $888 • 1.7% • 29.8TWh • $240 $2.44 • O&M Growth per year • Transmission Rate Base • Utility Cap Stimulus Spending • Utility Solar & EE Cap Exp • EFORd Rate CCGT • Nuclear Generation • Holdings Solar Investment Operating Earnings Per Share SEE SLIDE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/NET INCOME TO RECONCILE TO OPERATING EARNINGS. (1) PLANNED COMPOUND ANNUAL GROWTH RATE 2008-2012.(2) ACTUAL COMPOUND ANNUAL GROWTH RATE 2008- 2012. (3) 2013 INDICATED ANNUAL DIVIDEND RATE IS $1.44 PER SHARE. $1.29 Common Dividend Per Share 3 $1.42 |
9 Superstorm Sandy met by an exceptional response 2.1 million PSE&G customer restorations (2X Hurricane Irene and 3X the October ’11 Snowstorm) 96 Electric Substations Damaged (39% of the total) 14 Switching Stations Affected (33% of total) 51 of 154 Transmission Lines Interrupted (33% of total) 2,427 Utility Poles Replaced or Repaired 48,000 Trees Removed or Trimmed ~4,200 mutual aid or contract workers brought in to assist restoration efforts PSEG Power’s assets were stress tested by Superstorm Sandy, but when the load returned in the days following, Power’s assets were available The storm affected PSE&G and Power |
10 PSEG Capital Spending focused on growth PSEG 2013-2015E Capital Spending* $6.3 Billion by Subsidiary PSEG 2013-2015E Capital Spending* $6.3 Billion Growth / Environmental / Maintenance E = ESTIMATE; CAPITAL EXCLUDES IDC AND AFUDC. *THIS FORECAST DOES NOT REFLECT THE IMPACT OF THE ENERGY STRONG PROPOSAL RECENTLY FILED WITH THE NJBPU. DATA AS OF JUNE 30, 2013. $4.2B 67% $0.3B 6% $1.5B 24% $0.2B 2% $0.05B 1% PSE&G Growth Power Growth Maintenance Environmental Holdings Growth $5.1B 81% $1.0B 16% $0.05B 1% $0.1B 2% PSE&G Power Holdings Parent SC |
11 What’s Next: PSEG’s Capital Spending expansion opportunity directed toward growth in regulated business with ~ 25% growth in planned spending Potential PSEG 2013-2015E Capital Spending* $7.5 Billion by Subsidiary Potential PSEG 2013-2015E Capital Spending* $7.5 Billion Growth / Environmental / Maintenance E = ESTIMATE; CAPITAL EXCLUDES IDC AND AFUDC. *DATA AS OF JUNE 30, 2013. $5.4B 73% $0.3B 4% $1.5B 20% $0.2B 2% $0.05B 1% PSE&G Growth Power Growth Maintenance Environmental Holdings Growth $6.3B 85% $1.0B 13% $0.1B 1% $0.1B 1% PSE&G Power Holdings Parent SC |
12 PSE&G’s Energy Strong Capital Program addresses new reality New ten-year, $3.9 Billion Infrastructure Program filed February 2013 with the NJBPU to strengthen PSE&G’s distribution system focusing on hardening and resiliency Plan to invest an additional $1.5 Billion in transmission grid over the ten-year period The 10-year Energy Strong proposal includes: Protecting 40 utility installations from severe storms ($1.7 Billion) Making the electric grid smarter and easier to repair ($460 Million) Adding backup distribution lines and system redundancies ($550 Million) Undergrounding 20 miles of overhead distribution lines ($60 Million) Modernizing the gas distribution system ($1.2 Billion) PSE&G is seeking BPU approval to implement the first five years of the Energy Strong proposal, an investment of $2.6 Billion The proposed filing creates ~5,800 jobs and stimulates economic activity for New Jersey businesses |
13 74 local NJ towns and 7 counties support • 74 municipalities and seven counties (Bergen, Hudson, Mercer, Passaic, Somerset, Union and Middlesex) have approved resolutions in support of Energy Strong, PSE&G’s infrastructure proposal to improve and fortify its electric and gas distribution systems • The Energy Strong proposal is currently being evaluated by the NJ Board of Public Utilities |
14 PSEG Power value advantaged by asset diversity, fuel flexibility and location Fuel Diversity* Total MW: 13,226 Energy Produced* Total GWh: 52,511 Energy Market Served* Total MW: 13,226 Intermediate Peaking Base load *2012 **INCLUDES NJ UNITS THAT FUEL SWITCH TO GAS. 18% 45% 8% 28% 1% 32% 57% 11% 42% 25% 33% Gas Pumped Storage Nuclear Oil Coal** |
Where we’re going … PSE&G operating earnings are forecast to grow at double digit rate through 2015 • O&M Growth per year • PSE&G Rate Base Transmission E&G Distribution EMP • EFORd Rate - CCGT • Nuclear Generation • Holdings Solar Investment • LIPA Earnings PSEG Focus ($ millions, except as noted) • 2.2% (forecast 3 ) • $12,600 • $5,000 4 • $6,900 5 • $700 5 • 1.4% • 30.4TWh • $290 • $15-$20 6 2015E • 0.8% (actual 2 ) • $9,000 • $2,500 • $5,900 • $600 • 1.7% • 29.8TWh • $240 • $0 2012 • 2.4% (planned 1 ) • $6,800 • $866 • $5,900 • $0 • 1.6% • 29.3TWh • $0 • $0 2008 (1) Planned compound annual growth rate 2008-2012. (2) Actual compound annual growth rate 2008-2012. (3) Two-year compound annual growth rate from 2013. (4) Includes additional Transmission hardening. (5) Includes approved solar programs and proposed ES programs. (6) Reflects a fully-executed, expanded Operating Services Agreement with LIPA. . E = ESTIMATE. . 15 |
16 Balance Sheet Strengthened PSEG has reduced risk PSEG Total Capitalization 2009 2012 Power Power PSE&G PSE&G Equity 55% Debt 45% Equity 59% Debt 41% 57% 43% 55% 45% 70% 30% 51% 49% |
17 PSEG Year to Date 2013 - Highlights Operating Earnings of $2.09 vs. $2.03 per share for YTD 2012 Delivered solid results in Q3 driven by Power’s locational value, and PSE&G’s continuing investment in transmission Raised 2013 full–year, operating earnings guidance from $2.25 - $2.50 to $2.40 - $2.55 per share Executing on operational goals Power met summer demand using diverse fleet Continued control of O&M supports full-year expectations Executing on capital program Transmission program of $3.4 billion, including construction of 5 major transmission projects, continues on schedule and on budget Review of Energy Strong proposal underway by BPU 74 NJ municipalities and 7 county governments have passed resolutions in support of the Energy Strong infrastructure proposal Market developments US District Courts in NJ and MD rendered decisions supportive of competitive markets and FERC’s rate-setting authority New LIPA agreement will broaden and extend original agreement when fully executed |
18 Raised 2013 operating earnings guidance PSEG Operating Earnings $ Millions (except EPS) 2013E PSEG Power $630 - $685 PSE&G $585 - $600 PSEG Energy Holdings/Parent $0 - $10 Operating Earnings* $1,215 - $1,295 2013 Earnings Guidance $2.40 - $2.55 E = ESTIMATE *SEE SLIDE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/NET INCOME TO RECONCILE TO OPERATING EARNINGS. Based on our performance year-to-date, we have raised guidance for full year operating earnings from $2.25-$2.50 to $2.40-$2.55 per share |
19 PSEG Annual Dividend A long history of growth and returning cash to shareholders Payout Ratio 62% 70% 63% 66% 43% 44% 43% 44% 50% 58% 58%* 5-year Rate of Growth 2.22% 10-year Rate of Growth 2.92% PSEG Annual Dividend Rate *2013 PAYOUT RATIO REFLECTS THE MIDPOINT OF UPDATED 2013 OPERATING EARNINGS GUIDANCE. **INDICATED ANNUAL RATE. $1.08 $1.10 $1.12 $1.14 $1.17 $1.29 $1.33 $1.37 $1.37 $1.42 $1.44 ** 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 |
20 Value Proposition PSEG is positioned to expand its investment in PSE&G projects that provide reasonable, risk adjusted returns, in ways that meet customer needs and state goals, given strong cash flow of Power and growing cash contribution from PSE&G. PSEG will maintain a strong financial profile that provides the opportunity to achieve our growth objectives and maintains our track record of returning cash to shareholders. |
PSE&G |
PSE&G strategy Building a sustainable platform that balances reliability, customer rates and public policy to ensure growth at reasonable returns DISCIPLINED INVESTMENT ENGAGED WORKFORCE FINANCIAL STRENGTH OPERATIONAL EXCELLENCE 22 |
PSE&G is the largest electric and gas distribution and transmission utility company in New Jersey Electric Gas Customers Growth (2008 – 2012) 2.2 Million 0.6% 1.8 Million 0.6% Electric Sales and Gas Sold and Transported 41,641 GWh 3,397 M Therms Projected Annual Load Growth (2013 – 2015) 0.7%* 0.2%* Historical Annual Peak Load Growth Transmission (2008 – 2012) 0.4%** Projected Annual Load Growth Transmission (2013 – 2015) 1.4% Sales Mix Residential 33% 60% Commercial 57% 36% Industrial 10% 4% Transmission Electric Gas Approved Rate of Return 11.68% ROE*** 10.3% ROE 10.3% ROE Renewables and Energy Efficiency Approved Programs 2009-2012 Total Program Plan Solar Loan I-III 67 MW 179 MW Solar 4 All and Extension 74 MW 125 MW Energy Efficiency Annual Electric savings 160 GWh 200 GWh Energy Efficiency Annual Gas savings 5M Therms 7M Therms 23 * WEATHER NORMALIZED - ESTIMATED ANNUAL GROWTH PER YEAR OVER FORECAST PERIOD. ** TRANSMISSION LOAD GROWTH CAGR UTILIZES 2007 AS BASE YEAR. *** SPECIFIC PROJECTS APPROVED FOR INCENTIVE RATE TREATMENT WITH ADDITIONAL ROE. |
National reliability award winner and recognized for emergency response during Hurricane Irene 24 |
During Superstorm Sandy strong winds, heavy rainfall and storm surges caused significant damage to our infrastructure 25 |
PSE&G brought in more than 4,000 contractors and mutual aid workers at the height of restoration efforts 26 |
PSE&G’s response to customer outages during recent major events Restoration response incorporated lessons learned from Hurricane Irene Cumulative Customers Restored 27 |
PSE&G’s operating earnings grew ~10%* with increased investment, cost control and supportive rate mechanisms * COMPOUND ANNUAL GROWTH RATE SEE SLIDE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/ NET INCOME TO RECONCILE TO OPERATING EARNINGS. 28 $0.71 $0.63 $0.85 $1.03 $1.04 2008 2009 2010 2011 2012 PSE&G Operating Earnings per Share |
Growth in rate base is driven by investments with favorable recovery mechanisms 6% PSE&G’s rate base has grown ~7% annualized with a focus on meeting the State’s goals and customers’ needs 29 PSE&G Rate Base 2008 2012 Renewables & Energy Solutions Transmission Gas Distribution Electric Distribution 13% 28% 33% 25% 54% 41% $9.0B $6.8B |
Represents ~28% of rate base in 2012 Overall, Transmission has delivered on planned spending 30 0 200 400 600 800 1,000 1,200 2009 2009 Plan Actual 2010 2010 Plan Actual 2011 2011 Plan Actual 2012 2012 Plan Actual Remaining Transmission Susquehanna -Roseland North East Grid North Central Reliability Mickelton-Gloucester -Camden Burlington-Camden PSE&G’s Transmission Capital Expenditures |
Providing solutions for New Jersey’s energy and economic development goals ($ Millions) Approval Date Forecast Amount* Spend As of 9/30/13 Remaining Spending Renewables Solar Loan I & II 2008- 2009 $244 $229 $15 Solar 4 All July 2009 464 457 7 Solar Loan III May 2013 199 - 199 Solar 4 All Extension May 2013 247 - 247 Energy Efficiency Carbon Abatement December 2008 45 45 - Energy Efficiency Economic Stimulus July 2009 161 158 3 Demand Response July 2009 35 31 4 Energy Efficiency Economic Stimulus Extension July 2011 94 37 57 Distribution NJ Capital Infrastructure Program I (CIP I) April 2009 702 702 - NJ Capital Infrastructure Program II (CIP II) July 2011 280 280 - Total $2,471 $1,939 $532 *SOLAR 4 ALL EXT AND SOLAR LOAN 3 REFLECT BPU APPROVED PROGRAM SPEND “UP TO” LISTED AMOUNTS. 31 |
Focus on controlling O&M allows us to earn our authorized return * EXCLUDES REGULATORY CLAUSES ** INCLUDES $40M IMPACT FROM SUPERSTORM SANDY IN 2012 E = ESTIMATE 32 0 200 400 600 800 1,000 1,200 2008 2009 2010 2011 2012 ** 2013E PSE&G O&M* 2008 – 2013 CAGR: 1.4% |
PSE&G’s capital program will continue to be focused on delivering energy solutions to meet New Jersey’s public policy PSE&G’s Capital Expenditures DATA AS OF JUNE 30, 2013. * PROPOSED FILINGS INCLUDE ENERGY STRONG (ES) AND EEEIII. E = ESTIMATE 33 0 500 1,000 1,500 2,000 2,500 2009 2010 2011 2012 2013E 2014E 2015E 2016E 2017E Transmission Hardening Proposed Filings* Approved Solar/Energy Efficiency Transmission Gas Distribution Electric Distribution |
2013-2017 proposed investment plan would grow our current capital plan by up to 50% * Distribution ES and Transmission Hardening extend 10 years DATA AS OF JUNE 30, 2013. E = ESTIMATE 2013-2017E Capital Expenditures Existing Plan $7.2 Billion Existing Plan and Proposed Filings $10.3 Billion * * 22% 43% 4% 2% Distribution Distribution ES Filing Transmission Transmission Hardening Approved Solar/Energy Efficiency 32% 6% 62% Energy Efficiency Filings 34 23% 6% |
PSE&G’s proposed investments would be recovered through contemporaneous recovery mechanisms Contemporaneous Recovery Mechanisms Traditional Recovery Mechanisms DATA AS OF JUNE 30, 2013. E = ESTIMATE 35 2013-2017E Potential Capital Spending by Recovery Method Energy Strong Filing (ES) Solar/Energy Efficiency Clauses FERC Formula Rates Distribution Base Rates $10.3 Billion 23% 7% 48% 22% |
36 PSE&G’s existing major transmission investment program remains on schedule and on budget Major Transmission Projects Approved ROE Inclusion of CWIP in Rate Base 100% Recovery of Costs Due to Abandonment Total Estimated Project Costs Expected In-service Date Susquehanna-Roseland 12.93% $790 June 2014 / June 2015 Northeast Grid Reliability 11.93% $895 June 2015 North Central Reliability 11.68% $390 June 2014 Burlington – Camden 230kV 11.68% $399 June 2014 Mickleton – Gloucester-Camden 230kV 11.68% $435 June 2015 |
Susquehanna-Roseland consists of constructing 150 miles of 500kV circuit (46 miles in NJ) with two new 500kV GIS switching stations at Roseland and Hopatcong Project Estimate Up To* Through Year-end 2012 2013-2015E Expected In-service Date $790M $324M $466M June 2014 / June 2015 • PJM RTEP project b0489 • ROE of 12.93% (including 1.25% incentive) • 100% CWIP in rate base during development • 100% recovery of prudently incurred costs due to abandonment Project Status: Major permitting & siting complete, outside and inside plant 37 *PROJECT IS SHARED WITH PPL. PROJECT ESTIMATE REPRESENTS PSE&G’S CONSTRUCTION RESPONSIBILITY FOR THE NJ PORTION. E = ESTIMATE construction in progress |
Project Estimate Up To Through Year- end 2012 2013-2015E Expected In-service Date $895M $88M $807M June 2015 • PJM RTEP project b1304 • ROE of 11.93% (including 0.25% incentive) • 100% CWIP in rate base during development • 100% recovery of prudently incurred costs due to abandonment Project Status: Engineering, licensing, and outside plant E = ESTIMATE 38 underground construction in progress Northeast Grid Reliability consists of upgrading approximately 50 overhead circuit miles of 138kV transmission line to 230kV, constructing ~18 miles of new underground 230kV lines, and converting twelve existing stations to 230kV operation |
39 North Central Reliability consists of upgrading 55 circuit miles of 138kV transmission line to 230kV, and converting six existing stations to 230kV operation Project Estimate Up To Through Year- end 2012 2013-2015E Expected In-service Date $390M $163M $227M June 2014 • PJM RTEP project b1154 • ROE of 11.68% • 100% CWIP in rate base during development • 100% recovery of prudently incurred costs due to abandonment Project Status: Major permitting & siting complete, outside and inside E = ESTIMATE 39 plant construction in progress |
Burlington-Camden 230kV consists of upgrading 37 circuit miles (30 miles of overhead and 7 miles of under- ground) of 138kV transmission line to 230kV, converting the existing stations to 230kV operation Project Estimate Up To Through Year-end 2012 2013- 2014E Expected In-service Date $399M $169M $230M June 2014 • PJM RTEP project b1156 • ROE of 11.68% • 100% CWIP in rate base during development • 100% recovery of prudently incurred costs due to abandonment Project Status: Major permitting & siting E = ESTIMATE 40 complete, outside and inside plant construction in progress |
Mickleton-Gloucester-Camden 230kV consists of upgrading 10 circuit miles of overhead transmission, installing ~16 circuit miles of new 230kV underground, 10 circuit miles of new 230kV overhead, and modifications/upgrades at five existing stations Project Estimate Up To Through Year- end 2012 2013-2015E Expected In-service Date $435M $24M $411M June 2015 • PJM RTEP project b1398 • ROE of 11.68% • 100% CWIP in rate base during development • 100% recovery of prudently incurred costs due to abandonment E = ESTIMATE 41 Project Status: Major permitting & siting complete, outside and inside plant construction in progress |
State policy imperatives have been redefined by Superstorm Sandy * NJBPU proceeding on storm recovery is currently in discovery phase. 42 Storm report issued by NJBPU focusing on: Preparedness Efforts Communications Restoration and Response Post Event Analysis Underlying Infrastructure Issues Storm Deferral Filings: On December 19, 2012 the NJBPU granted a PSE&G request for general authority to defer storm restoration costs, thereby making such costs potentially recoverable in future rate filings On February 20, 2013, at its open public meeting, the BPU voted that the recovery of all such storm restoration costs would be reviewed in a generic (multi-utility) proceeding* |
We have also responded with a plan focused on infrastructure hardening and resiliency 43 PSE&G filed a petition on February 20, 2013, with the NJBPU seeking approval for the Energy Strong Program (ES) which will harden electric and gas distribution infrastructure and increase the resiliency of the electric distribution system The filing complements the NJBPU’s recently issued order requiring all Electric Distribution Companies to take specific actions to improve preparedness and response to major storms ES program represents a potential investment of approximately $3.9 billion over the next 10 years. PSE&G has asked for initial funding approval of $2.6 billion during the first five years Additional Transmission investment of approximately $1.5 billion would be included in future FERC Formula Rate filings |
Lower commodity costs and expiration of certain transition charges are expected to offset the impact to customer bills *FOR THE TYPICAL COMBINED ELECTRIC & GAS RESIDENTIAL CUSTOMER, 2018 BGS (INCLUDING TRANSMISSION) / BGSS, AS WELL AS SBC, WNC, RAC AND DISTRIBUTION RATES HELD CONSTANT AS OF THE ES FILING DATE (FEB-2013). RATES RELATED TO ELECTRIC RESTRUCTURING: SECURITIZATION (STC), NON-UTILITY GENERATION CHARGE (NGC), & TRANSITIONAL ENERGY FACILITIES ASSESSMENT (TEFA), ARE REDUCED TO ZERO BY 2018. THE RGGI RECOVERY CHARGE (RRC), SOLAR PILOT RECOVERY CHARGE (SPRC), AND CAPITAL ECONOMIC STIMULUS INFRASTRUCTURE INVESTMENT PROGRAM (CIP I) AND THE CIP EXTENSION (CIP II) BILL IMPACTS ARE INCLUDED IN THEIR RESPECTIVE GAS & ELECTRIC BARS AND FORECASTED BASED UPON MAR-2013 ESTIMATES. THE BILL IMPACTS FOR ES PROGRAM BASED UPON THE PROPOSED FILING AND S4AEXT/SL3 IMPACTS ARE BASED UPON THE BPU APPROVED PROGRAM. Typical Residential Annual Bill 44 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 2008 2013 2018* ES S4AExt/SL3 Gas Electric CPI |
PSE&G’s 2013 operating earnings benefiting from transmission growth and cost containment initiatives $528 2012 2013 Guidance PSE&G Operating Earnings* ($ Millions) $585 - $600E E = ESTIMATE *SEE SLIDE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/NET INCOME TO RECONCILE TO OPERATING EARNINGS. 45 |
LONG ISLAND POWER AUTHORITY |
LIPA T&D management contract Amended Operating Services Agreement will begin January 1, 2014, subject to LIPA receiving IRS ruling on tax status of debt LIPA /National Grid Contract Thru Dec 2013 PSEG Transition Period 2012-2013 PSEG Long Island Operating Period 2014 - 2025 Successful management of the LIPA transmission and distribution system may lead to additional growth opportunities 47 Increases PSEG-Long Island’s management responsibility to operate and maintain the LIPA T&D system Extends original 10-year contract by two years PSEG Power will procure LIPA’s fuel requirements beginning 2015 PSEG-LI compensation will increase in 2016 for expanded management role |
PSEG POWER |
PSEG Power strategy Focused on safety performance, unit reliability, competitive cost structure with control of maintenance costs, achieving operational excellence, and supporting market rules to maintain a level playing field DISCIPLINED INVESTMENT OPERATIONAL EXCELLENCE FINANCIAL STRENGTH ENGAGED WORKFORCE 49 |
PSEG Power creating value by responding to changing markets and regulations 50 Safety/Environmental Focus Fleet Diversity/Efficiency Focus Fleet diversity across the dispatch curve and fuel types provides flexibility Nuclear units continue to achieve strong operational results and are well positioned for the future Peach Bottom steam path retrofit completed Fossil fleet is suited for market dynamics CCGT achieved record output in 2012 Installed 400 MW new peaking capacity in 2012 Financial/Economic Focus O&M cost control programs have delivered Sites offering competitive advantage suited for expansion Regulatory Focus Strong regulatory performance Industry leadership in the changing regulatory environment |
PSEG Power delivered in 2012 51 Storm and weather challenges • Superstorm Sandy impacted our generating sites • Warm winter put pressure on demand and pricing for both electricity and gas • Hot summer weather created challenging operating environment Market challenges • Unit outages and transmission outages resulted in pressure on basis • Lower gas cost impacted dark spread pressuring coal unit dispatch • Load impacted by weather and economy Value delivered • Cost control • Lower dispatch and fuel cost • Captured value through coal/gas switching, unit flexibility • Improved unit availability • Coal & oil sales optimized inventory • Expedited return from storm outages, restored margin opportunities • Optimized unit dispatch across fleet during storm recovery |
52 • Low cost portfolio • Fuel flexibility • Assets near loads • Poised to benefit in real time markets • Fleet will maintain diversity and efficiency in 2016 after HEDD • Most sites suitable for expansion ISO New England New Haven Bridgeport Bethlehem Energy Center (Albany) Conemaugh Keystone Peach Bottom Bergen Kearny Essex Sewaren Edison Linden Mercer Burlington National Park Hudson Hope Creek Salem Yards Creek New York ISO PJM PSEG Power has generating assets in three competitive markets |
53 PSEG Power Nuclear fleet is a critical element of success Hope Creek • Operated by PSEG Nuclear • PSEG Ownership: 100% • Technology: Boiling Water Reactor • Total Capacity: 1,174 MW • License Expiration: 2046 • Next Refueling • Spring 2015 Salem Units 1 and 2 • Operated by PSEG Nuclear • PSEG Ownership: 57%, Exelon – 43% • Technology: Pressurized Water Reactor • Total Capacity: 2,326 MW • Owned Capacity: 1,335 MW • License Expiration: 2036 and 2040 • Next Refueling • Unit 1 – Fall 2014 • Unit 2 – Spring 2014 Peach Bottom Units 2 and 3 • Operated by Exelon • PSEG Ownership: 50% • Technology: Boiling Water Reactor • Total Capacity: 2,245 MW • Owned Capacity: 1,123 MW • License Expiration: 2033 and 2034 • Next Refueling • Owned Capacity: 1,174 MW • Unit 2 – Fall 2014 • Unit 3 – Fall 2015 |
54 PSEG Power Nuclear is core to the fleet and has competitive advantages • Continued strong nuclear operations – eight consecutive years of >90% capacity factor • Significant earnings contributor • Top quartile of cost performance/MWh • One third new staff, recruitment of the best new and experienced talent and attractive training program • Developing Fukushima action plan in response to NRC staff review • Peach Bottom extended power uprate, 130 MW Power’s share, scheduled in service 2015/2016 • Active and influential participation at INPO, NEI, EPRI, USA Alliance |
55 PSEG Power’s Fossil Fleet availability has shown steady improvement 5% 6% 7% 8% 9% 10% 2008 2009 2010 2011 2012 EFORd 0% 1% 2% 3% 4% 2008 2009 2010 2011 2012 EFORp EFORp improvement and availability at peak demand times has resulted in performance payments in each of the last four years EFORd improvement resulted in over 200 MW of additional capacity available |
56 PSEG Power improvements achieved in combined cycle fleet efficiency 7,400 7,500 7,600 7,700 7,800 2008 2009 2010 2011 2012 Combined Cycle Operating Heat Rate Actions Taken to Create Value • Heat rate improvement program • Operational Excellence Model • Training programs • Unit testing initiative • Outage work to restore efficiency |
57 Superstorm Sandy affected the fleet; when the load returned, Power was ready Planned Outages Salem 2 Bergen 1 Hudson 2 Storm Outages Salem 1 Linden CC Linden 5,6,7,8 Kearny 9,12,13,14 Essex 9,10,11,12 Sewaren 1,2,3,4 Salem 1 Linden 5,7 Kearny 13,14 Linden 6,8 Bergen 1 Salem 2 Kearny 12 All PSEG NJ Generation Hudson 2 Essex 9,10 Linden CC Superstorm Sandy 0 5 10 15 Total 28- Oct 31- Oct 5- Nov 12-Nov 19-Nov 30 Nov Dec Jan - |
58 PSEG Power’s fleet is among the lowest emitting in the industry 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 10,000 20,000 30,000 40,000 50,000 60,000 70,000 2006 2007 2008 2009 2010 2011 2012 Generation NOx • Mercury reduced 80% across the timeframe above • Power is well positioned for HAPS SO2 |
59 PSEG Power’s focus on costs has resulted in moderate increase in O&M for six years Cost control actions taken: • Coal assessment • CCGT material condition assessment • Contract renegotiation • Material management • Nuclear maintenance productivity study • Nuclear outage efficiency initiative 2008 to 2013 CAGR = 1.9% Power O&M Expense* * INCLUDES IMPACTS FROM STORM RECOVERY COSTS AND POTENTIAL RELATED INSURANCE PROCEEDS. E = ESTIMATE. $0 $500 $1,000 $1,500 2008 2009 2010 2011 2012 2013E |
60 PSEG Power is well positioned for growth in the fleet when market conditions dictate Available locations Our sites possess infrastructure advantages • Bergen • Burlington • Essex • Edison • Kearny • Hudson • Linden • Sewaren • Bridgeport Harbor • Electric Interconnection • Gas Pipeline Access • Sites/Space • Emissions |
PSEG Power will maintain diversity and efficiency after a realignment of the fleet in 2016 13,226 MW 11,200 MW Fuel Diversity 52.5 TWh 52-54 TWh Energy Produced Objective 2012 2016E E=ESTIMATE Maintain fuel diversity Maintain load serving capability Improve fleet heat rate by 6% Maintain low cost structure Environmental improvement 61 |
PSEG Power is an established leader within the industry 62 • Board of Directors • National Nuclear Accrediting Board • Chair Communications Advisory Committee • Board of Directors • Board of Directors Executive Committee • Chair Emergency Preparedness Working Group • Security Working Group • Fukushima Response Steering Committee • Nuclear Strategic Issues Advisory Committee Steering Group • Chairman Nuclear Power Counsel • Executive Committee Nuclear Power Counsel • Vice Chair of the Executive Oversight Committee USA Alliance • Chair • Various Committees BWR Owners Group PJM/NY/NE ISO INPO NEI EPRI |
PSEG Power has added value with focus on operational excellence * EXCLUDES SANDY IMPACT. 63 3,622 Nuclear capacity (MW) 3,632 92% Nuclear equivalent availability 93% 29.3 Nuclear generation (TWhrs) 29.8 55 Total generation (TWhrs) 53 3,157 CCGT capacity (MW) 3,176 12.1 CCGT generation (TWhrs) 16.2 8.9% Fossil EFORd 6.3%* 87% Fossil equivalent availability 90% 63 SO 2 (Ktons) 9 16 NO x (Ktons) 10 |
Power’s 2013 operating earnings benefiting from locational value and operational efficiency E= ESTIMATE *SEE SLIDE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/NET INCOME TO RECONCILE TO OPERATING EARNINGS. $630 - $685E $644 PSEG Power Operating Earnings* ($ Millions) 64 |
PSEG POWER ER&T |
PSEG Power ER&T strategy DIVERSIFIED ASSETS AND FLEXIBLE DISPATCH REGULATORY ADVOCACY MANAGING RISKS AND CREATING VALUE Focused on optimizing the value of its asset portfolio and providing outstanding service to our customers, while prudently managing risk ENGAGED WORKFORCE 66 |
Diversified assets and flexible dispatch High performing, base load nuclear assets 3,632 MW Fuel advantaged, base load coal plants in PA 776 MW Flexible combined cycle fleet 3,176 MW Well leveraged intermediate & peaking assets 5,642 MW Integrated trading and dispatch capability around fleet 67 |
Fleet capacity has been advanced by: Reduced O&M and increased start-up success Trading acumen to execute fuel switching opportunities Capturing new products opportunity with minimal investment Improved Heat Rate capability 68 |
Spark spread replaces dark spread as major value driver • Spark spread has risen above dark spread in PJM markets • Power’s gas units operating at record throughput • Gas operation provides much more operational flexibility • Enhances the ability of trading organization to capture volatility 69 |
2013 BGS Auction Results for PSE&G Zone Capacity Load shape Transmission Congestion Ancillary services Risk premium Green BGS sales account for about a third of our forward portfolio of hedges 3 Year Average Round the Clock PJM West Forward Energy Price BGS PRICES REFLECT PSE&G ZONE; RESULTS FOR 2011-2013 ARE THE NEW BLENDED PRICES BEGINNING JUNE 1, 2013. 70 2009 2010 2011 2012 2013 $103.72 ~ $47 $95.77 $94.30 ~ $47 ~ $48 ~ $46 $83.88 ~ $53 $92.18 $48 - $50 $45 - $47 $37 - $38 $56 - $58 $39 - $40 |
71 • 3 Year forward BGS sales comprise smaller percentage of Power’s hedges • Other full requirement load deals help capture additional locational and load shape premium NOTE: PERCENTAGES REPRESENT HEDGED VOLUMES IN PLACE AFTER BGS AUCTION. Our hedging mix has changed with the market but still captures the fleet’s locational advantage 50% 0% 50% 2008 44% 4% 52% 2010 35% 8% 57% 2012 BGS Sales to NJ EDCs Other Load Other Hedges |
72 Hedging strategy designed to protect gross margin and leverage the portfolio Dynamic Hedging on Intermediate Coal, Combined Cycle and Peaking: Ratable Hedging on Base Load: • • • Oct-Dec 2013 2014 2015 Volume TWh 8 35 35 Base Load % Hedged 100% 100% 55-60% (Nuclear and Base Load Coal) Price $/MWh $50 $48 $48 Volume TWh 5 18 17 Intermediate Coal, Combined % Hedged 30-35% 5-10% 0% Cycle, Peaking Price $/MWh $50 $48 $48 Volume TWh 13-14 53-55 52-54 Total % Hedged 70-75% 65-70% 35-40% Price $/MWh $50 $48 $48 3 year ratable hedge tactics 3 year PJM hedge of capacity (not included in table) Load following sales (such as BGS) have strong correlation to our units for hedging basis and load shaping premium • Position fleet to take advantage of market volatility • Gas and load-following fleet left open until prompt year to capture volatility • Use all trading products to capture option value of assets and benefit from market dislocations HEDGE PERCENTAGES AND PRICES AS OF SEPTEMBER 30, 2013. REVENUES OF FULL REQUIREMENT LOAD DEALS BASED ON CONTRACT PRICE, INCLUDING RENEWABLE ENERGY CREDITS, ANCILLARY, AND TRANSMISSION COMPONENTS BUT EXCLUDING CAPACITY. HEDGES INCLUDE POSITIONS WITH MTM ACCOUNTING TREATMENT AND OPTIONS. |
PSEG’s locational advantage
and electric basis
Current plant
PS Zone On Peak Monthly Day Ahead locations Basis to PJM West Hub*
30 Bethlehem Energy Center (Albany)
25 Bridgeport New Haven
20
/MWH 15
$ 10 Hudson Yards Creek
5 Keystone Bergen Kearny
0
Mercer Essex
Jun-00 Dec-02 Jun-05 Dec-07 Jun-10 Dec-12 Conemaugh Linden
(5) Sewaren Peach Bottom Edison Hope Creek Burlington Salem National Park
Basis (PS Zone to PJM West) will continue to trend downward for forward sales
Volatility may remain significant in the prompt periods
Power maintains sufficient length to participate in upside volatility as well as a valuable 250MW transmission position into NYC
Basis will continue to have a positive impact on PSEG Power profitability
* A S O F O C T O B E R 3 1 , 2 0 1 3 . 73
74 PJM’s capacity market continues to recognize locational value of our fleet *PSEG Power’s cleared megawatts split between PS Zone and EMAAC. 2016/2017 RPM Auction Influenced By: • New Build and Higher Imports • Updated Transfer Capabilities • Updated Demand Curve • Environmental Retirements • Minimum Offer Price Rule • Lower Demand Response 2012 / 2013 2013 / 2014 / 2015 2015 / 2016 2016 / 2017 Power’s Average Price $153 $244 $162 $167 $166 PS Zone $219 EMAAC $140 $245 $137 $167 $119 RTO $16 $28 $126 $136 $59 Power’s Capacity (MW) 10,400 10,600 10,300 9,000 8,637* 2014 $/MW-Day |
75 Reserve margins in PJM declining with retirements Source: PJM TEAC, 8/8/2013 • PJM Pending Deactivation Requests of 13,340 MW as of August 13, 2013 • Approximately 5,000 MW of additional owner announced retirements in PJM through next auction • PJM forecasts a declining Reserve Margin through 2017 Generation Deactivation Notifications Forecast Reserve Margin (PJM June 2013) 0% 10% 15% 20% 25% 30% 6/1/2013 6/1/2014 6/1/2015 6/1/2016 6/1/2017 5% Reserve Requirement Existing + Expected New Generation |
76 Regulatory Advocacy Current Issues • PJM RPM rules for Capacity Markets • PJM Energy/Ancillary Services Market • New England Capacity Markets • New York Energy Markets • Trade Associations and ISO/RTO activities ISSUE /POLICY HOW ADDRESSED? PJM MOPR Sufficiency/Exceptions before FERC and courts DEMAND RESPONSE RULES ANCILLARY/ENERGY NYISO CAPACITY Jurisdictional dispute at FERC over retirement decisions; Impact of PSC approved Reliability Must Run arrangement on markets NEPOOL FCM Market design issues pending at Court of Appeals, FERC and ISO-NE stakeholder process FEDERAL Gas/Electric Coordination Participation in ISO/FERC/Industry forums Recent Rulings • FERC approval of Cost of New Entry (CONE) • PJM Area Regulation rules • EPA RICE/NESHAPS rules • FERC ruling imposing DR must offer requirement in ISO-NE Performance/eligibility/compensation issues before courts, FERC, and PJM stakeholder process Regulation/Black-start modifications under consideration in PJM stakeholder process before FERC |
77 Diversified Assets & Flexible Dispatch Strong operational performance Fuel switching Ancillary services Managing Risks & Creating Value Consistent hedging strategy • Full load requirements • Capacity sales •Monetize optionality Managing Risks & Creating Value Supports competitive markets Seeks a level playing field Provides insight Creates opportunity MARKET EXPECTATIONS Diversified Assets & Flexible Dispatch Regulatory Advocacy PSEG wholesale market strategy built on a strong asset portfolio Regulatory Advocacy |
PSEG ENERGY HOLDINGS |
79 PSEG Energy Holdings strategy Holdings’ priorities are to manage lease risks, sell remaining non- core assets and grow the renewables portfolio STREAMLINED BUSINESS AND REDUCED FINANCIAL RISK CAPITALIZE ON RENEWABLE OPPORTUNITIES MAXIMIZING THE VALUE OF THE REMAINING PORTFOLIO DEVELOP AND EXECUTE NEW BUSINESS OPPORTUNITIES |
80 Reducing Risk and Monetizing Legacy Assets PSEG Energy Holdings Growth in unregulated renewables PSEG Solar Source Growth by leveraging knowledge PSEG Long Island Merchant Energy Leveraged Leases Regulated Energy Leveraged Leases Real Estate Leveraged and Operating Leases Legacy Generation Assets …MANAGING RISK FOR REMAINING LEGACY ASSETS AND INVESTING IN RENEWABLES |
81 Queen Creek Arizona (25 MW) COD October 2012 Polycrystalline - single axis tracker Investment $75 million 20 year PPA with SRP PSEG Solar Source has completed 69 MW and has an additional 19 MW under construction JEA Florida (15 MW) COD September 2010 Thin film panels – fixed tilt Investment $59 million 30 year PPA with JEA Milford Delaware (15 MW) COD December 2012 Polycrystalline - fixed tilt Investment $47 million 20 year PPA with DEMEC Hackettstown (Mars) New Jersey (2 MW) COD September 2009 Thin film panels – fixed tilt Investment $13 million 15 year PPA with Mars, Inc. Wyandot Ohio (12 MW) COD May 2010 Thin film panels – fixed tilt Investment $45 million 20 year PPA with AEP … OPPORTUNITY FOR GROWTH IN UNREGULATED SOLAR Badger I Arizona (19 MW) Expected COD Q4 2013 Polycrystalline - single axis tracker Investment $51 million 30 year PPA with APS |
82 PSEG Energy Holdings Simplifying the business and creating growth opportunities in renewables Operational Excellence Financial Strength Disciplined Investment STREAMLINED BUSINESS AND REDUCED FINANCIAL RISK CAPITALIZE ON RENEWABLE OPPORTUNITIES MAXIMIZING THE VALUE OF THE REMAINING PORTFOLIO DEVELOP AND EXECUTE NEW BUSINESS OPPORTUNITIES |
PSEG FINANCIAL REVIEW & OUTLOOK |
84 Strong financial position to support our business initiatives Financial Position Achieved Earnings Guidance Stable Dividend and Opportunity for Growth Strong Balance Sheet Regulated Growth Opportunity without Equity Issuance Solid Credit Ratings O&M Controlled Well Funded Pension |
85 In 2012, PSE&G executed its capital program, Power generated significant free cash flow and PSEG increased its shareholder dividend (1) PSE&G CASH FROM OPERATIONS ADJUSTS FOR SECURITIZATION PRINCIPAL REPAYMENTS OF ~$216 MILLION. Power Cash from Ops PSE&G Cash from Ops (1) PSE&G Capital Investment Power Capital Investment Cash Other Net Cash Flow Shareholder Dividend Net Debt Issuances 2012 Sources and Uses |
86 Our capital investment options can result in as much as $5.4B of utility growth investment through 2015 New Transmission ~$0.2B New Distribution ~$1B DATA AS OF JUNE 30, 2013. E = ESTIMATE PSE&G Growth ~$4.2B PSE&G Maintenance Power & Other Potential Opportunities Approved Programs 2013 – 2015E Capital Investment ~$6.3B ~$6.5B ~$7.5B PSE&G Growth $5.4B |
87 All scenarios can be financed without new equity Power Cash from Ops PSE&G Cash from Ops (1) PSE&G Capital Investment Power Capital Investment Shareholder Dividend Net Debt Issuances Power Cash from Ops PSE&G Cash from Ops (1) PSE&G Capital Investment Power Capital Investment Shareholder Dividend Net Debt Issuances (1) PSE&G CASH FROM OPERATIONS ADJUSTS FOR SECURITIZATION PRINCIPAL REPAYMENTS OF ~$725M FROM 2013-2015 EMP: ENERGY MASTER PLAN 2013 – 2015E Other Net Cash Flow 2013 – 2015E Other Net Cash Flow Approved Programs plus EMP, New Transmission and New Distribution Approved Programs E = ESTIMATE |
88 PSE&G’s capital spending drives regulated earnings growth with a potential future rate base of up to ~$12.6B 2013 – 2015E Rate Base Growth Potential New Opportunities ~$9B ~$2.4B ~$11.4B Approved Programs 2015E Rate Base 3-yr CAGR: ~12% New Distribution ~$1B New Transmission ~$0.2B ~$11.6B ~$12.6B DATA AS OF JUNE 30, 2013. E = ESTIMATE 2012 Rate Base 2015E Rate Base 3-yr CAGR: ~8.2% |
89 Power’s credit metrics are expected to remain strong EMP: ENERGY MASTER PLAN Power FFO/Debt 2013 – 2015E Average E = ESTIMATE |
90 Using PSEG’s balance sheet strength to finance growth in the regulated enterprise without equity issuance PSEG Total Capitalization 2012 2015E* * E = ESTIMATE; INCLUDES THE FOLLOWING PROPOSED FILINGS: EE4A, ENERGY STRONG (ES) AND TRANSMISSION HARDENING AND BPU APPROVED SPENDING ON SOLAR. |
91 Our investment programs are affordable, helped by the expiration of known charges by 2017, which lower the average residential customer bill by ~ 8.7% based on today’s current bill PSE&G Securitization & NUG Impacts ($Millions) PSE&G Securitization Impacts 2013 2014 2015 2016 2017 Revenues 439 445 386 0 0 Interest Expense (46) (30) (11) 0 0 Amortization (253) (273) (233) 0 0 Deferred Tax & Other (140) (142) (142) 0 0 P&L Impact (GAAP view) 0 0 0 0 0 PSE&G Non–Utility Generation 2013 2014 2015 2016 2017 Revenues* 157 167 141 49 0 Expenses (157) (167) (141) (49) 0 P&L Impact (GAAP view) 0 0 0 0 0 *NUG revenues reflect Feb 1, 2013 rates Typical Current Average Residential Customer Bill Impact Securitization ~6.6% Non-Utility Generation ~2.1% |
92 Modest O&M growth with Power increases from CCGT maintenance cycles, due to high utilization rates (1) POWER EXCLUDES IMPACTS FROM STORM RECOVERY COSTS AND POTENTIAL RELATED INSURANCE PROCEEDS NM = NOT MATERIAL. E = ESTIMATE. PSEG O&M Expense (1) 2013-2015E CAGR: ~2.2% CAGR Transmission ~0.4% Distribution ~1.3% Power ~2.9% Holdings & Other: N.M. $0 $500 $1,000 $1,500 $2,000 $2,500 2013E 2014E 2015E |
93 Pension contributions expected to decline with well funded plan 2010 2011 2012 2013E 2014E 2015E Funded Ratio 82% 84% 83% >85% >90% >90% Amended Benefit Plans E = ESTIMATE $0 $100 $200 $300 $400 $500 Pension Plan Contributions |
94 Opportunity for modest and sustainable dividend increases consistent with stable regulated growth and cash generation outlook at PSEG Power PSE&G EPS $1.25 $1.14 E = ESTIMATE $1.33 $1.37 $1.37 $1.44 $0.60 $0.80 $1.00 $1.20 $1.40 2009 2010 2011 2012 2013E $1.42 Annual Dividend Per Share |
95 PSEG Summary • Raised 2013 full-year operating earnings guidance to $2.40 - $2.55 per share -- based on financial results to date • Double digit operating earnings growth at PSE&G starting in 2013, and continuing through 2015 driven by transmission investments and approved programs • Power’s continued focus on operational excellence, market expertise and financial strength reduces risk in low price environment • Strong Balance Sheet and Cash Flow support full capital program without the need for equity • Long history of returning cash to the shareholder through the common dividend, with opportunity for future growth |
APPENDIX |
97 Q3 Operating Earnings by Subsidiary Operating Earnings Earnings per Share $ millions (except EPS) 2013 2012 2013 2012 PSEG Power $ 216 $ 217 $ 0.43 $ 0.43 PSE&G 168 155 0.33 0.30 PSEG Energy Holdings/ Enterprise 1 10 - 0.02 Operating Earnings* $ 385 $ 382 $ 0.76 $ 0.75 Quarter ended September 30 * SEE SLIDE B FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/NET INCOME TO RECONCILE TO OPERATING EARNINGS. |
98 $0.75 0.03 $0.76 (0.02) 0.00 0.25 0.50 0.75 1.00 Higher Capacity 0.11 Market Pricing and Lower Supply Costs 0.04 Taxes & Other 0.01 Lower Hedge Pricing (0.10) O&M (0.04) Lower Volume (0.02) Transmission 0.04 Capital Infrastructure Program & Other 0.01 Weather and Demand (0.02) Q3 2013 Operating Earnings* Q3 2012 Operating Earnings* PSEG Power PSE&G Energy Holdings/ Enterprise * SEE SLIDE B FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/NET INCOME TO RECONCILE TO OPERATING EARNINGS. 0.00 2012 Asset Sale and Impairment (0.01) Other (0.01) PSEG EPS Reconciliation – Q3 2013 versus Q3 2012 |
99 Year to Date Operating Earnings by Subsidiary Operating Earnings Earnings per Share $ millions (except EPS) 2013 2012 2013 2012 PSEG Power $ 580 $ 523 $ 1.14 $ 1.03 PSE&G 468 453 0.92 0.89 PSEG Energy Holdings/ Enterprise 13 53 0.03 0.11 Operating Earnings* $ 1,061 $ 1,029 $ 2.09 $ 2.03 Nine months ended September 30 *SEE SLIDE B FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/NET INCOME TO RECONCILE TO OPERATING EARNINGS. |
100 $2.03 0.11 0.03 $2.09 (0.08) 0.00 0.50 1.00 1.50 2.00 2.50 YTD 2013 Operating Earnings* YTD 2012 Operating Earnings* Higher Capacity 0.23 Market Pricing and Lower Supply Costs 0.04 Gas Send-out and Fixed Cost Recovery 0.04 Volume 0.01 Lower Hedge Pricing (0.15) O&M (0.05) D&A (0.01) PSEG Power Transmission 0.10 Capital Infrastructure Program & Other 0.01 Taxes and Other 0.02 O&M (0.02) Weather and Demand (0.01) D&A (0.01) Absence of Tax Settlement (0.06) PSE&G ** PSEG Energy Holdings/ Enterprise Absence of Tax Settlement (0.07) Asset Sales and Other (0.01) * SEE SLIDE B FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/NET INCOME TO RECONCILE TO OPERATING EARNINGS. ** PRIOR QUARTER RESULTS FOR RECONCILING ITEMS MAY NOT ADD TO YEAR-TO-DATE (YTD) TOTALS DUE TO ROUNDING. PSEG EPS Reconciliation – YTD 2013 versus YTD 2012 |
101 PSE&G provides high reliability at below average cost which creates superior value to customers SAIDI = SYSTEM AVERAGE INTERRUPTION DURATION INDEX, A MEASURE OF AVERAGE OUTAGE DURATION FOR ALL CUSTOMERS SERVED. |
102 PSE&G prioritizes public safety while maintaining value to customers LEAK RESPONSE RATE = PERCENTAGE OF UTILITY RESPONSES TO REPORTED LEAKS WITHIN ONE HOUR. |
103 Formula rates for transmission make the process more predictable with contemporaneous returns Transmission (Federal) Distribution Base Rate Case (State) Current ROE • 11.68% base • 12.93% with incentives on Susquehanna-Roseland • 11.93% with incentives on Northeast Grid • 10.3% Volatility of Returns • Low – prospective recovery with annual true-ups for over/under recovery • Higher – performance impacted positively/negatively by cost management, weather, customer demands, etc. Process • Formula – The rate template and specific elements like ROE are predetermined with annual updates and true ups • Litigated case with each element (depreciation, ROE, O&M levels, Rate Base) scrutinized and settled Intervenors • State consumer advocates usually participate • State consumer advocates • Large customers • Other parties affected by the case, e.g. Solar Developers Test Year • PSE&G has fully forecasted test year for both Capital and O&M • Historical test year with pro-forma adjustments for known and measurable items, e.g. wage escalation Time to resolve • Annual Formula updates are filed in October with January 1 effective date • Typically settled within 12-15 months |
104 New Jersey Board of Public Utilities (BPU) • The Board of Public Utilities consists of five commissioners appointed by the Governor. These appointees are confirmed by the NJ Senate for six- year, staggered terms. The Governor appoints one of the five to serve as Commission President. Currently, the commissioners are: • Robert M. Hanna, Commission President • Jeanne M. Fox • Joseph L. Fiordaliso • Mary-Anna Holden • Dianne Solomon • Stefanie Brand, Director of the N.J. Division of Rate Counsel |
105 Slow economic recovery in NJ is constraining growth in all market sectors Modest residential growth limited by housing market inactivity and the slow economic recovery Consumer spending is trending with the slow economic recovery and impacting growth in the commercial sector Industrial sales growth continues to be constrained by slow economic recovery 0.3% 0.4% 0.0% 0.5% 0.9% 0.7% 0.3% 0.7% 2013 - 2015 Projected Sales Growth – Gas* 2013 – 2015 Projected Sales Growth – Electric* Residential Commercial Industrial Total Residential Commercial Industrial Total *WEATHER NORMALIZED ESTIMATED ANNUAL GROWTH PER YEAR OVER FORECAST PERIOD; PROJECTED SALES GROWTH FOR 2013-2015 GAS INCLUDES ONLY FIRM SALES. |
106 Key economic indicators forecast renewed growth over the 2012 to 2015 timeframe The New Jersey economy increased by 0.3% annually from 2010 to 2012 and is anticipated to grow 2.3% per year from 2012 to 2015 New Jersey total non-farm employment increased by 0.6% annually from 2010 to 2012 and is expected to grow 1.4% per year from 2012 to 2015 Real personal income in New Jersey increased by 1.4% annually from 2010 to 2012 and is expected to increase 2.5% per year from 2012 to 2015 Single family housing starts declined by 2.6% annually from 2010 to 2012 and are expected to increase ~24% per year from 2012 to 2015 SOURCE: IHS GLOBAL INSIGHT FEBRUARY 2013 FORECAST. NJ Total Employment 3,700 3,800 3,900 4,000 4,100 2010 2012 2015 NJ Real Gross State Product $400,000 $420,000 $440,000 $460,000 $480,000 2010 2012 2015 NJ Real Personal Income $360,000 $380,000 $400,000 $420,000 $440,000 $460,000 2010 2012 2015 NJ Single Family Housing Starts 0 5 10 15 20 2010 2012 2015 |
107 The full requirements BGS rate recognizes the forward PJM capacity market price Capacity Price per RPM Auction for PSEG Zone Capacity Price per BGS Tranche 2013-2014 250 $ Three Year Average ($/MW-day) $195 2014-2015 170 $ MW per Tranche (varies by EDC) 108 2015-2016 166 $ Days per Year 365 Three Year Average ($/MW-day) $ 195 Capacity Cost per Tranche $ 7,712,637 MWh per Tranche Energy MW per Tranche (varies by EDC) 108 Hours per Year 8,760 Load Factor (varies by EDC) ~37% MWh per Tranche, approx. 350,000 Capacity Cost per MWh 22 $ |
108 PSEG Energy Holdings Investment Portfolio * BOOK BALANCE EXCLUDING DEFERRED TAX ACCOUNTS. ** EME AND ITS SUBSIDIARIES FILED CHAPTER 11 BANKRUPTCY ON 12/17/2012. ON 10/18/2013,NRG ENERGY ANNOUNCED AN ACQUISITION OF EME ASSETS THAT WOULD CURE ALL MONETARY DEFAULTS AT CLOSING AND PRESERVE HOLDINGS’ ENTIRE EQUITY VALUE. Equipment Investment Balance * at 9/30/13 ($millions) Solar Source Five Operating Solar Facilities : NJ, DE, OH, FL, AZ - 69 MW $195 Merchant Energy Leases GenOn (REMA) Keystone, Conemaugh & Shawville (PA) 3 coal-fired plants (1,162 equity MW) $344 Edison Mission Energy (EME)** Powerton & Joliet Generating Stations (IL) 2 coal-fired generating facilities (1,640 equity MW) $218 Regulated Energy Leases Merrill Creek Reservoir in NJ (PECO, MetEd, Delmarva Power & Light) $189 Grand Gulf Nuclear station in Mississippi (175 equity MW) Real Estate Leveraged Leases GM Renaissance Center; Wal-Marts; E-D (shopping) Centers $ 67 Real Estate Operating Leases Office Towers, Shopping Centers - 32 properties $80 Generation Legacy Assets Kalaeloa (HI) 209 MW CC Oil, GWF (in wind down stage) $ 98 Aircraft Leases and Other Delta Airlines aircraft; Land & Receivables $ 22 Total Holdings Investments $1,213 |
109 PSEG Liquidity as of September 30, 2013 Expiration Total Available Facility Date Facility Usage Liquidity ($Millions) 5-year Credit Facility (PSE&G) Mar-18 $600 1 $13 $587 5-Year Credit Facility (Power) Mar-17 1,600 58 1,542 5-Year Credit Facility (Power) Mar-18 1,000 2 0 1,000 5-Year Bilateral (Power) Sep-15 100 100 0 5-year Credit Facility (PSEG) Mar-17 500 5 495 5-year Credit Facility (PSEG) Mar-18 500 3 0 500 Total $4,300 $176 $4,124 $154 PSE&G ST Investment $0 1 PSE&G Facility to be reduced by $29M on April 15, 2016 Total Liquidity Available $4,278 2 Power Facility to be reduced by $48M on April 15, 2016 Total Parent / Power Liquidity $3,691 3 PSEG Facility to be reduced by $23M on April 15, 2016 PSEG Money Pool ST Investment |
110 Strong Balance Sheet supports our full capital program without the need for equity $Billions Capitalization Subsidiary Debt (1) 2010 2011 2012 PSE&G 4.28 4.27 5.06 PSEG Power 3.45 2.75 2.34 Parent & Other 0.08 0.04 0.04 Total PSEG Debt 7.81 7.06 7.44 Subsidiary Equity PSE&G 4.42 4.65 5.17 PSEG Power 5.03 5.44 5.44 Parent & Other 0.18 0.18 0.17 Total PSEG Equity 9.63 10.27 10.78 PSE&G Debt to Cap 49% 48% 49% Power Debt to Cap 41% 34% 30% PSEG Debt to Cap 45% 41% 41% DEBT INCLUDES SHORT TERM DEBT (INCLUDING COMMERCIAL PAPER) AND EXCLUDES NON-RECOURSE AND SECURITIZATION DEBT |
Items Excluded from Income from Continuing Operations to Reconcile to Operating Earnings 2012 2011 2010 2009 2008 Earnings Impact ($ Millions) Operating Earnings 1,236 $ 1,389 $ 1,584 $ 1,567 $ 1,479 $ Gain (Loss) on Nuclear Decommissioning Trust (NDT) Fund Related Activity (PSEG Power) 52 50 46 9 (71) Gain (Loss) on Mark-to-Market (MTM) (a) (PSEG Power) (10) 107 (1) (11) 14 Lease Transaction Activity (Energy Holdings) 36 (173) - 29 (490) Storm O&M (PSEG Power) (39) - - - - Market Transition Charge Refund (PSE&G) - - (72) - - Gain (Loss) on Asset Sales and Impairments (Energy Holdings) - 34 - - (13) Income from Continuing Operations 1,275 $ 1,407 $ 1,557 $ 1,594 $ 919 $ Discontinued Operations - 96 7 (2) 270 Net Income 1,275 $ 1,503 $ 1,564 $ 1,592 $ 1,189 $ Fully Diluted Average Shares Outstanding (in Millions) 507 507 507 507 508 Per Share Impact (Diluted) Operating Earnings 2.44 $ 2.74 $ 3.12 $ 3.09 $ 2.91 $ Gain (Loss) on NDT Fund Related Activity (PSEG Power) 0.10 0.10 0.09 0.02 (0.14) Gain (Loss) on MTM (a) (PSEG Power) (0.02) 0.21 - (0.02) 0.03 Lease Transaction Activity (Energy Holdings) 0.07 (0.34) - 0.05 (0.96) Storm O&M (PSEG Power) (0.08) - - - - Market Transition Charge Refund (PSE&G) - - (0.14) - - Gain (Loss) on Asset Sales and Impairments (Energy Holdings) - 0.06 - - (0.03) Income from Continuing Operations 2.51 $ 2.77 $ 3.07 $ 3.14 $ 1.81 $ Discontinued Operations - 0.19 0.01 - 0.53 Net Income 2.51 $ 2.96 $ 3.08 $ 3.14 $ 2.34 $ (a) Includes the financial impact from positions with forward delivery months. (Unaudited) For the Year Ended December 31, PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED Pro-forma Adjustments, net of tax A PLEASE SEE PAGE 4 FOR AN EXPLANATION OF PSEG’S USE OF OPERATING EARNINGS AS A NON-GAAP FINANCIAL MEASURE AND HOW IT DIFFERS FROM INCOME FROM CONTINUING OPERATIONS/NET INCOME. |
Items Excluded from Income from Continuing Operations/Net Income to Reconcile to Operating Earnings PLEASE SEE PAGE 4 FOR AN EXPLANATION OF PSEG’S USE OF OPERATING EARNINGS AS A NON-GAAP FINANCIAL MEASURE AND HOW IT DIFFERS FROM INCOME FROM CONTINUING OPERATIONS/NET INCOME. 2013 2012 2013 2012 2012 2011 Earnings Impact ($ Millions) Operating Earnings 385 $ 382 $ 1,061 $ 1,029 $ 1,236 $ 1,389 $ Gain (Loss) on Nuclear Decommissioning Trust (NDT) Fund Related Activity (PSEG Power) 12 40 29 49 52 50 Gain (Loss) on Mark-to-Market (MTM) (a) (PSEG Power) 3 (76) (22) (34) (10) 107 Lease Related Activity (PSEG Energy Holdings) - 1 - 7 36 (173) Storm O&M, net of insurance recoveries (PSEG Power) (10) - (25) - (39) - Gain on Sale of Asset (PSEG Energy Holdings) - - - - - 34 Income from Continuing Operations 390 $ 347 $ 1,043 $ 1,051 $ 1,275 $ 1,407 $ Discontinued Operations - - - - - 96 Net Income 390 $ 347 $ 1,043 $ 1,051 $ 1,275 $ 1,503 $ Fully Diluted Average Shares Outstanding (in Millions) 508 507 507 507 507 507 Per Share Impact (Diluted) Operating Earnings 0.76 $ 0.75 $ 2.09 $ 2.03 $ 2.44 $ 2.74 $ Gain (Loss) on NDT Fund Related Activity (PSEG Power) 0.02 0.08 0.06 0.10 0.10 0.10 Gain (Loss) on MTM (a) (PSEG Power) 0.01 (0.15) (0.04) (0.07) (0.02) 0.21 Lease Related Activity (PSEG Energy Holdings) - - - 0.01 0.07 (0.34) Storm O&M, net of insurance recoveries (PSEG Power) (0.02) - (0.05) - (0.08) - Gain on Sale of Asset (PSEG Energy Holdings) - - - - - 0.06 Income from Continuing Operations 0.77 $ 0.68 $ 2.06 $ 2.07 $ 2.51 $ 2.77 $ Discontinued Operations - - - - - 0.19 Net Income 0.77 $ 0.68 $ 2.06 $ 2.07 $ 2.51 $ 2.96 $ (a) Includes the financial impact from positions with forward delivery months. Three Months Ended Nine Months Ended PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED Reconciling Items Excluded from Income from Continuing Operations/Net Income to Compute Operating Earnings (Unaudited) September 30, September 30, Pro-forma Adjustments, net of tax Year Ended December 31, B |