We have the energy to make things better … for you, for our investors and for our stakeholders. EXHIBIT 99 |
2 Forward-Looking Statement 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. Certain of the matters discussed in this report about our 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 transmission planning, • 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 and enforcement 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 manage our energy obligations, available supply and risks, • adverse outcomes of any legal, regulatory or other proceeding, settlement, investigation or claim applicable to us and/or the energy industry, • any deterioration in our credit quality or the credit quality of our counterparties, • 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 insurance coverage or recover proceeds of insurance with respect to such events, • acts of terrorism, cybersecurity attacks or intrusions that could adversely impact our businesses, • increases in competition in energy supply markets as well as for 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, • changes in technology, such as distributed generation and micro grids, and greater reliance on these technologies, and • changes in customer behaviors, including increases in energy efficiency, net-metering and demand response. |
3 GAAP Disclaimer These materials and other financial releases can be found on the pseg.com website under the investor tab, or at http://investor.pseg.com/ PSEG presents Operating Earnings in addition to its 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. The last slide in this presentation includes a list of items excluded from Net Income to reconcile to Operating Earnings, with a reference to those slides included on each of the slides where the non-GAAP information appears. |
4 2015 PSEG Conference Agenda Presentation Presenter Welcome and Introductions Kathleen Lally PSEG Ralph Izzo PSE&G Ralph LaRossa Q&A Session Break PSEG Power William Levis Power ER&T Shahid Malik Q&A Session Financial Review & Outlook Caroline Dorsa Summary and Q&A Conference Conclusion |
STRATEGY – DELIVERING GROWTH CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER Ralph Izzo |
6 Operational Excellence: Maintaining reliability and improving performance as we control costs in low price environment Financial Strength: Strong financial position supports investment program and dividend growth Disciplined Investment: Results PSEG’s Strategy Investment program delivering results • Transformed business mix • Robust pipeline of opportunities • Project 3 rd year of EPS growth • Increased rate of dividend growth • Best in class utility growth rate • Stable business mix with upside potential from power markets DISCIPLINED INVESTMENT OPERATIONAL EXCELLENCE FINANCIAL STRENGTH ENGAGED WORKFORCE |
7 Two complementary businesses A stable platform, each with growth opportunities Strategy: Diverse (fuel and dispatch) fleet geographically and environmentally well positioned, with investments to enhance competitiveness Value Proposition: Provides substantial free cash flow in current environment and upside from market rule improvements Assets $12B Operating Earnings $642M Regional Competitive Generation Strategy: Investments aligned with public policy and customer needs Value Proposition: An $11 billion infrastructure program – focused on transmission – produces double-digit rate base growth through 2019 Assets $22B Operating Earnings $725M Electric & Gas Delivery and Transmission 2014 2014 ASSETS AND OPERATING EARNINGS ARE FOR THE YEAR ENDED 12/31/2014. PSE&G AND POWER DO NOT ADD TO TOTAL DUE TO PARENT AND PSEG LONG ISLAND ACTIVITY. SEE SLIDE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/NET INCOME TO RECONCILE TO OPERATING EARNINGS. |
8 Delivering on commitments and realizing growth Operational Excellence • PSE&G: Mid-Atlantic Reliability Award (13 th consecutive year), top ranked among eastern electric and gas utilities in business customer satisfaction • PSEG Power: Record output from combined cycle units • PSEG Long Island: Demonstrated management and integration capability through a successful transition in first year • PSEG: Cost-control benefits continue Financial Strength • Earnings performance exceeded guidance • Cash flows and business mix support strong credit ratings and ability to fully fund robust investment pipeline without issuing new equity • Increased rate of dividend growth in 2015 Disciplined Investment • PSE&G Transmission capital program execution and growth Energy Strong infrastructure program underway Energy efficiency program extension Further growth planned – Gas System Modernization Program • Power: Unit uprates, PennEast Pipeline, Solar Source |
9 ** ** Operating Earnings Disciplined investment program and focus on operational excellence have supported growth Power’s diverse fuel mix and dispatch flexibility continue to generate strong earnings and free cash flow in low price environment PSE&G’s investment program has driven double digit compound annual earnings growth since 2010 Operating Earnings* Contribution by Subsidiary *SEE SLIDE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/ NET INCOME TO RECONCILE TO OPERATING EARNINGS. E=ESTIMATE ** 2015 PERCENTS USE MIDPOINT OF EARNINGS GUIDANCE. |
10 Robust pipeline of investment opportunities supports growth objectives 2015E - 2019E*: $13 Billion 2010 – 2014: $12.6 Billion Power Total*** $2.7B PSE&G Total $9.8B PSE&G Total $10.8B PSEG Capital Spending Power Total*** $2.0B 2015E–2019E: • $1.3B of capital for Gas System Modernization Program and Artificial Island would be incremental *INCLUDES ALL PLANNED SPENDING. **ENERGY STRONG EXCLUDES RISK AND CONTINGENCY. ***POWER CAPITAL SPENDING EXCLUDES NUCLEAR FUEL. ****INCLUDES PENNEAST PIPELINE EQUITY INVESTMENT OF $0.1B. E=ESTIMATE. DATA AS OF MARCH 2, 2015. |
11 Balance sheet strength supports capital allocation Timeframe Actions taken 2010 – 2014: Transformed business mix • Applied $16 billion towards investments and dividends • Improved credit ratings • Monetized Energy Holdings’ portfolio • Strong balance sheet sustained during period of low power prices, while increasing the dividend 2015 – Forward: Strong financial position supports continued growth • Increased rate of dividend growth in 2015 • $13 billion investment program through 2019 • Gas System Modernization Program and Artificial Island increase capital program by $1.3 billion through 2019 • Financial capability supports further expansion of the current capital plan |
12 PSE&G’s investment program Meeting public policy goals and customer needs PSE&G Rate Base and Operating Earnings* *SEE SLIDE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/ NET INCOME TO RECONCILE TO OPERATING EARNINGS. |
13 Containing customer bills while investing in the system • PSE&G customers’ combined electric and gas bills declined 23% over the period. • Low gas prices drove rate decreases; in addition, gas customers received bill credits of ~$400 in total from 2012 through 2014. Gas Electric PSE&G Typical Residential Customer Bills* *FOR ALL YEARS THE BILLING ASSUMES 7,200 KWH FOR ELECTRIC AND 1,010 THERMS FOR GAS ANNUALLY. E = ESTIMATE |
14 PSE&G Planned and Potential Capital Projects • Planned capital spending expected to drive double digit rate base growth and high single digit EPS growth through 2017 • Transmission expected to grow to >50% of rate base in 2019 • Gas System Modernization Program and Artificial Island investments would be incremental • Seeking to broaden platform to expand energy efficiency and other investments PSE&G’s robust capital investment pipeline E=ESTIMATE |
15 Economic Drivers Outlook Combined Cycle Nuclear Scrubbed Coal Peakers Renewable Energy Margins • Low natural gas and energy prices • Robust portfolio of gas pipeline contracts n/a n/a Capacity Markets • Tightened rules proposed for capacity performance n/a Environmental Regulations • Tighter air emissions standards Location • Assets in well-designed markets, premium regions • Opportunities on brownfield sites n/a PSEG Power Capacity (GW) Total 13 GW 3.2 3.6 2.4 3.7 0.1 Power’s fleet has the desired attributes to be successful in today’s and tomorrow’s market • Largest nuclear site in the eastern U.S. and ownership in large, fully scrubbed coal facilities at Keystone and Conemaugh provide economies of scale that enhance energy margins in current low market, and provide for upside potential if prices improve. • Dual fuel peakers meet reliability criteria in capacity markets and provide option value in energy market. Opportunity exists to repower peakers that do not meet NJ HEDD environmental regulations. |
16 Power – Growing value by improving market rules and developing investment opportunities Value Source Opportunities and Actions Taken Improving rules will better recognize value of our fleet • PJM’s Capacity market – 2014 limits on demand response and 2015 Capacity Performance proposal • Demand response treatment at U.S. Courts / FERC • Energy price formation at FERC • Increasing air standards through Federal and State regulations Our footprint provides growth opportunities • Nuclear and Combined Cycle plant uprates are underway • Brownfield expansions at existing sites New peakers built at New Haven and Kearny sites Continue to explore further opportunities • PennEast pipeline - equity investment and gas portfolio enhancement • Solar Source owns ~123 MW*, with significant project pipeline • Continue to seek opportunities to expand the fleet *PROJECT SIZE IN MEGAWATTS SHOWN IN DC (DIRECT CURRENT), AC EQUIVALENT IS 96 MW. |
17 PSEG Annual Dividend An increased dividend growth rate with potential for consistent and sustainable growth given our business mix and financial position Payout Ratio 50% 58% 56% 54% 55%* PSEG Annual Dividend Rate 2011-2014 CAGR: 2.6% *2015E PAYOUT RATIO REFLECTS THE MIDPOINT OF OPERATING EARNINGS GUIDANCE. E=ESTIMATE |
18 Focus areas over business plan horizon PSE&G • Capital program execution – Transmission, Energy Strong and additional programs • Operational excellence and cost control • Regulatory framework • Continue to develop incremental growth opportunities PSEG Power • Operational excellence and cost control • Strong performance at Nuclear and Fossil to maximize fleet value in dynamic markets • Monitor and shape market rules - Capacity markets and environmental regulations • Develop growth opportunities PSEG Long Island • Continue execution – Integration and achievement of performance metrics |
19 PSEG’s Value Proposition • A stable platform with predictable earnings and a robust investment pipeline • PSE&G - Best in class utility performance and growth profile • PSEG Power - Well-positioned fleet that generates substantial free cash flow in this market environment with upside for improvements in pricing • Strong balance sheet - Supports strong credit rating, growth objectives and the potential for sustainable dividend growth |
We have the energy to make things better … for you, for our investors and for our stakeholders. |
PSE&G PRESIDENT AND CHIEF OPERATING OFFICER Ralph LaRossa |
22 PSE&G strategy Building a sustainable platform that balances reliability, customer rates and public policy to ensure growth at reasonable returns |
23 PSE&G is the largest electric and gas distribution and transmission utility company in New Jersey * GAS FIRM ONLY SALES. ** ESTIMATED ANNUAL GROWTH PER YEAR, ASSUMES NORMAL WEATHER. *** SOME PROJECTS APPROVED FOR SPECIFIC ROE. Electric Gas Customers Growth (2010 – 2014) 2.2 Million 0.3% 1.8 Million 0.3% 2014 Electric Sales and Gas Sold and Transported 40,737 GWh 2,628M Therms* Projected Annual Load Growth (2015 – 2017)** 1.1% 0.5% Projected Annual Load Growth Transmission (2015 – 2017) 0.9% Sales Mix Residential 32% 60% Commercial 58% 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 2009-2014 Total Program Plan Solar Loan Capacity 83 MW 178.5 MW Solar 4 All Capacity 100 MW 125 MW Energy Efficiency Annual Electric savings 206 GWh 214 GWh Energy Efficiency Annual Gas savings 6.5 M Therms 7 M Therms |
24 Mid-Atlantic ReliabilityOne award winner for 13 years in a row |
25 PSE&G’s service and reliability is being recognized by customers |
26 PSE&G has achieved annual growth in operating earnings of ~18% over the past five years with implementation of supportive rate mechanisms on our expanded capital program and cost control *SEE SLIDE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/NET INCOME TO RECONCILE TO OPERATING EARNINGS. PSE&G’s Contribution to PSEG Operating Earnings* Per Share |
27 PSE&G plans to invest $10.8B over the next five years PSE&G’s Capital Expenditures* *INCLUDES AFUDC. E=ESTIMATE. |
28 PSE&G’s existing major Transmission projects are being completed on schedule and on budget Major Transmission Investments Project Roster Approved ROE Inclusion of CWIP in Rate Base 100% Recovery of Costs Due to Abandonment Estimate Up To ($ Millions) Expected In-service Date Susquehanna-Roseland 12.93% $790 June 2014 -June 2015 Northeast Grid Reliability 11.93% $907 June-Dec 2015 North Central Reliability 11.68% $390 Completed Burlington–Camden 230kV 11.68% $399 Completed Mickleton–Gloucester–Camden 230kV 11.68% $435 June 2015 |
29 A robust pipeline of Transmission investments focus on reliability improvements and replacement of aging infrastructure Major Transmission Investments Project Roster Approved ROE Program Description Estimate Up To ($ Millions) Expected In-service Date Bergen—Linden Corridor 345kV 11.68% PJM baseline project receiving CWIP in rate base treatment $1,200 June 2018 PJM Regional Transmission Expansion Plan (RTEP) – multiple projects 11.68% PJM mandated system reliability projects $1,900 Various 69kV Upgrade – multiple projects 11.68% Upgrade of 26kV to 69kV $1,500 Various Transmission Lifecycle – multiple projects 11.68% Replacement of aging infrastructure $1,100 Various Transmission Hardening– multiple projects 11.68% Reliability projects focused on system resiliency $650 Various *INCREMENTAL INVESTMENT IN HARDENING INCLUDED AS PART OF OTHER PROGRAMS. |
30 Bergen-Linden Corridor is a project which will provide a double-circuit 345kV line designed to maintain system reliability Project Estimate Up To Through Year-end 2014 Expected Completion Date $1,200M $40M June 2018 • PJM RTEP project b2436 and b2437 with phased in- service dates • 30 miles of underground cable • New ~ 23 miles • Reconductor (Upgrade of 138 to 345) ~7 miles • 13 miles of double circuit overhead conductor (replacing double circuit 138 with double circuit 345) • 11 station upgrades to 345kV Customer Benefit: Addresses thermal and short-circuit reliability Project Status: Engineering, Licensing and Construction Marion Substation Pile Installation |
31 Major Transmission programs focus on reliability and replacing aging infrastructure • PJM’s Regional Transmission Expansion Plan (RTEP) identifies system enhancements needed for reliability • 69kV system upgrades improve system reliability and provide capacity for future growth • Transmission Lifecycle is an ongoing program to manage transmission asset life to maintain and improve system integrity and reliability • Transmission Hardening projects focus on increasing system resiliency |
32 PSE&G has successfully worked with regulators to develop multiple solutions for New Jersey’s energy and economic development goals • Solar Loan I – 2008 • Solar Loan II – 2009 • Solar 4 All – 2009 • Solar Loan III – 2013 • Solar 4 All Ext – 2013 RENEWABLES creative solutions to install solar generation • Carbon Abatement – 2008 • Demand Response – 2009 • Energy Efficiency (EE) – 2009 • EE Extension – 2011 • EE Extension II – 2015 ENERGY EFFICIENCY assisting customers with controlling energy usage • NJ Capital Infrastructure Program 1 (CIP 1) – 2009 • NJ Capital Infrastructure Program 2 (CIP 2) – 2011 • Energy Strong – 2014 DISTRIBUTION improving electric and gas delivery infrastructure * IF APPROVED. To date we have invested over $2B in the above programs Over $1B ahead in Energy Strong, Energy Efficiency Ext II* and Solar programs Gas System Modernization Program would increase potential investment by ~$1.6B |
33 PSE&G is successfully executing on Energy Strong with ~$150M deployed during the latter half of 2014 Program Approved Spend thru 2014 Flood Mitigation $620M $19M Electric Contingency Reconfiguration $100M $26M Electric Advanced Technology $100M $10M Gas Utilization Pressure Cast Iron (UPCI) $350M $94M Gas Metering & Regulating (M&R) $50M $1M TOTAL $1,220M $150M 33 |
34 Energy Strong will provide increased reliability and resiliency • Electric Flood Mitigation • Engineering and scheduling began on 16 of the 29 total planned substation projects • Electric Contingency Reconfiguration • Over 100 projects have been started and 15 projects have been completed to date, including installation of over 900 poles and 70 reclosers • Advanced Technology • A total of 60 relays replaced and 3 remote terminal unit (RTU) has been installed • Gas Utilization Pressure Cast Iron (UPCI) • Installed ~110 miles of gas main and replaced ~5,300 services • Gas Metering & Regulating (M&R) • Design and engineering completed for all of the eight stations scheduled |
35 Extension of PSE&G’s award winning Energy Efficiency program • Energy Efficiency Extension II seeks to extend the investment and time frame for three previously approved programs already in the marketplace allowing PSE&G to factor in lessons learned and balance policy issues • $95M of rate base investment • If approved, would extend existing programs, two of which have sizable waiting lists: • Hospitals • Multifamily • Direct install – government, non-profit, and small business • Would allow PSE&G to leverage past investments in people, capabilities, systems and processes |
36 Gas System Modernization Program of ~$1.6B focusing on aging gas mains • PSE&G’s gas distribution system currently operates and maintains over 4,800 miles of cast iron and unprotected steel main, the largest such system in any single state • The program provides for investment of ~$1.6B focused on replacing cast iron and unprotected steel main over a five-year period, beginning mid- 2016 • Program will replace approximately 160 miles of main per year • Requested accelerated clause-based recovery similar to the Energy Strong program with a 9.75% ROE • This program is the first phase of a long-term replacement strategy • 30-year cast iron and unprotected steel replacement program • Benefits: • Methane emission reduction is estimated at 24,500 metric tons of CO 2 equivalent per year* • Higher pressure system allows usage of high efficiency appliances by customers * EPA SUBPART W METHODOLOGY. |
37 PSE&G’s demonstrated ability to successfully execute projects on scope, on time, and on budget leaves us well positioned to pursue FERC 1000 opportunities • Artificial Island • PSE&G’s proposal is one of four finalists • The proposal includes building 18 miles of 500kV transmission line running from the Hope Creek Generating Station to the Red Lion substation in Delaware • PJM 2014 Window #2 • PJM staff has recommended awarding PSE&G two projects to resolve criteria violations in the Sewaren and Mercer areas |
38 Traditional Recovery Mechanisms Distribution Base Rates FERC Formula Rates Transmission Artificial Island PSE&G continues to receive contemporaneous/ formula rate recovery on ~75% of its investment program Clause Recovery Mechanisms Energy Strong / Infrastructure / Solar / Energy Efficiency Gas System Modernization Program E = ESTIMATE. DATA AS OF MARCH 2, 2015 20% 56% 24% 2010-2014 PSE&G Capital Spending by Recovery Method $9.8B 9% 9% 55% 2% 25% 2015-2019E PSE&G Capital with Potential Upside by Recovery Method $12.1B |
39 Cost control actions taken: • PSE&G is utilizing the Lean Six Sigma discipline to achieve costs savings and process improvements • Conducted organizational reviews resulting in streamlining of processes through restructuring • Continued focus on vendor and inventory practices ensuring maximum value • Successful management of pension 2009 to 2015 CAGR = 0.3% PSE&G O&M Expense E=ESTIMATE PSE&G has controlled costs through process improvements and will continue to drive future efficiencies $0 $500 $1,000 $1,500 2009 2010 2011 2012 2013 2014 2015E |
40 PSE&G’s 2015 operating earnings expected to benefit from increased investment in Transmission *SEE SLIDE A FOR ITEMS EXCLUDED FROM NET INCOME TO RECONCILE TO OPERATING EARNINGS. E =ESTIMATE. DATA AS OF MARCH 2, 2015. $612 $725 2013 2014 2015 Guidance PSE&G Operating Earnings* ($ Millions) $735 -- $775E |
PSEG LONG ISLAND CHAIRMAN OF THE BOARD PSEG LONG ISLAND Ralph LaRossa |
42 PSEG Long Island is focused on improving customer service and reliability • Provide best-in-class customer service, including building on our new Call Center Technology platform to better serve our customers • According to J.D. Power, in 2014 PSEG Long Island showed the most improvement in overall customer satisfaction of any large electric utility, anywhere in the nation • Work to maintain industry-leading service reliability • Improve every aspect of the storm response process • Leveraged our new Outage Management System to improve storm logistics and outage coordination • Contributed $0.02* to PSEG’s earnings per share in 2014, as expected * EXCLUDES THE ENERGY RESOURCES & TRADE CONTRACT, WHICH WILL BE INCLUDED IN PSEG POWER’S RESULTS. |
PSEG POWER William Levis PRESIDENT AND CHIEF OPERATING OFFICER PSEG POWER |
45 PSEG Power strategy Excellence in operating our units safely, reliably, cost- competitively and in an environmentally, responsible manner DISCIPLINED INVESTMENT DISCIPLINED INVESTMENT OPERATIONAL EXCELLENCE OPERATIONAL EXCELLENCE FINANCIAL STRENGTH FINANCIAL STRENGTH ENGAGED WORKFORCE ENGAGED WORKFORCE |
46 PSEG Power creating value by responding to changing markets and regulations Financial/Economic Focus Regulatory Focus • Nuclear units have performed well for ten consecutive years • Hope Creek recorded its second highest output in its history • Fleet diversity across the dispatch curve and fuel types provide flexibility to meet changing market conditions • Bergen 1 & 2 and Linden 1 individually, and the CCGT fleet in total, set generation records in 2014 • Kearny 13 & 14 have shown increasing output in each year since start-up • Getting the most out of existing fleet • Locational advantage • O&M control programs have delivered a CAGR of 2.6% between 2009 and 2015 • Sites offer competitive advantage for expansion • Strong regulatory performance • Industry leadership in the changing business environment Safety/Environmental Focus Fleet Diversity/Efficiency Focus |
47 Financial Strength Disciplined Investment Operational Excellence • Maximize value of existing generating plants through implementation of the Operational Excellence Model (OEM) • Workforce engagement and development • Deliver on Business Plan Commitments • Maintain competitive markets and improve constituent communication on issues important to Power • Successfully complete the Advanced Gas Path (AGP) uprates • Seek new opportunities in target markets (PJM, ISO-NE, NYISO) • Develop our renewables business (solar) • Maintain new nuclear option by successfully managing the Early Site Permit (ESP) process PSEG Power Delivering on priorities • OEM implemented and achieving measures • Resource sharing program between Nuclear & Fossil initiated • Exceeded earnings guidance in 2014 • Ongoing effort in key markets showing success • Successful court outcome against subsidized generation • Accelerated schedule for AGP to maximize opportunity • LIPA contract for fuel and generation dispatch began January 1, 2015 • Completed three projects with one underway, bringing Solar Source’s portfolio to 123 MW DC • Nuclear ESP is expected in 2016 |
48 PSEG Power met 2014’s challenges Storm and weather challenges • All of the generation sites affected by SuperStorm Sandy were restored to service by mid-2014, with ongoing repairs • Cold weather extremes created a challenging operating environment, but also presented opportunities Market challenges • Transmission (outages and build outs) and gas markets resulted in pressure on basis • Lower gas cost impacted dark spread pressuring coal unit dispatch • Load impacted by economy Value delivered • Expedited return from storm outages, restored margin opportunities • High availability when needed • Flexibility of portfolio captured real- time basis opportunities • Captured value through coal/gas switching, unit flexibility • Management of gas assets benefited customers and fleet • Achieved fuel cost savings |
49 PSEG Power exceeded 2014’s earnings guidance GUIDANCE RANGE Over $60M of additional value gained from: • Weather, basis volatility • Fuel flexibility • Lower gas cost • Spark/dark spread Initial Guidance Actual Revised Guidance *EXCLUDES IMPACTS FROM STORM RECOVERY COSTS. SEE SLIDE A FOR ITEMS EXCLUDED FROM NET INCOME TO RECONCILE TO OPERATING EARNINGS. 2014 PSEG Power Operating Earnings* ($ Millions) $642M $550-$610M |
50 PSEG Power has generating assets in three competitive markets • Assets located near load centers • Low cost portfolio Fuel flexibility with gas cost advantage • Positioned to benefit from volatility in real-time markets • Readiness for capacity performance (CP) in PJM • Fleet positioned to maintain diversity and efficiency after HEDD • 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 |
51 Power’s PJM assets along the dispatch curve reduce the risk of serving full requirement load contracts and can take advantage of volatile market conditions Energy Revenue X X X Capacity Revenue X X X Ancillary Revenue X X Dual Fuel X X • Base Load ensures cash flow certainty • Load Following provides ability to serve load shape • Readiness for Capacity Performance (CP) • Peaking takes advantage of real-time prices and reduces operational risk • Dual fuel capability at 87% of load following and peaking units Illustrative Salem Hope Creek Keystone Conemaugh Hudson 2 Linden 1,2 Bergen 1 Mercer 1, 2 Bergen 2 Peach Bottom Essex 9 Sewaren 1-4 Burlington 12 Yards Creek Base Load Units Peaking Units Load Following Units Kearny 12-13-14 Nuclear Coal Coal/Gas Combined Cycle Steam Combustion Turbine / Pumped Storage Linden 5-8 POST - HEDD |
52 PSEG Power positioned to maintain diversity and efficiency after a realignment of the fleet following HEDD retirements • Maintain fuel diversity • Maintain load-serving capability • Maintain low cost structure • Improve environmental & heat rate profiles • Complete Peach Bottom (PB) uprate Advanced Gas Path (AGP) Objective 2015 2017 13,337 MW 11,900 MW Fuel Diversity Energy Produced 55 - 57 TWh 54 TWh E=ESTIMATE Solar Kalaeloa Oil Pumped Storage HEDD Other Peakers AGP/PB EPU CCGT Coal Nuclear Peakers AGP/PB EPU CCGT Coal Nuclear Oil, Other gas, HEDD, Pumped storage, kalaeloa, Solar 2014 2017 2014 2017 E E |
53 PSEG Power’s fleet is expected to see improvement in heat rate and decline in emissions • AGP (Advanced Gas Path) investments • Other Efficiency improvements • HEDD retirements |
54 PSEG Power’s fleet is among the lowest emitting in the industry 0 20,000 40,000 60,000 80,000 100,000 10,000 20,000 30,000 40,000 50,000 60,000 70,000 2006 2007 2008 2009 2010 2011 2012 2013 2014 Generation SO NOx 2 • Mercury reduced 80% across the timeframe above • More efficient testing and improved operational flexibility through utilization of Continuous Emission Monitoring System testing |
55 PSEG Power Nuclear is a critical element of our success Hope Creek • Operated by PSEG Nuclear • PSEG Ownership: 100% • Technology: Boiling Water Reactor • Total Capacity: 1,178 MW • • License Expiration: 2046 • Next Refueling Spring 2015 Salem Units 1 and 2 • Operated by PSEG Nuclear • PSEG Ownership: 57% • Technology: Pressurized Water Reactor • Total Capacity: 2,307 MW • Owned Capacity: 1,324 MW • License Expiration: 2036 and 2040 • Next Refueling Unit 1 – Spring 2016 Unit 2 -- Fall 2015 Peach Bottom Units 2 and 3 • Operated by Exelon • PSEG Ownership: 50% • Technology: Boiling Water Reactor • Total Capacity: 2,242 MW • Owned Capacity: 1,121 MW • License Expiration: 2033 and 2034 • Next Refueling Unit 2 - Spring 2016 Unit 3 - Fall 2015 • Uprate: 130 MW (PS Share) Unit 2 - March 2015 Unit 3 - 2016 Owned Capacity: 1,178 MW |
56 PSEG Power Nuclear has competitive advantages *STRATEGY KNOWN AS THE “DIVERSE AND FLEXIBLE MITIGATION CAPABILITY” OR FLEX, ADDRESSES RECOMMENDATIONS OF THE NUCLEAR REGULATORY COMMISSION’S FUKUSHIMA TASK FORCE. Continued strong nuclear operations Nuclear excellence program Top quartile of cost performance/MWh Brought security services in-house Significant earnings contributor Recruitment of the best new and experienced talent, and attractive training program Fukushima action plan in response to NRC staff review FLEX* plan submitted with implementation underway 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 |
57 Power’s nuclear fleet is well positioned with significantly lower-than-average US cost structure *SOURCE: ELECTRIC UTILITY COST GROUP. ** SOURCE: PSEG NUCLEAR. Total Fuel, Capital and O&M Costs* 3 YEAR AVERAGE 2011 - 2013 $44/MWh $37/MWh 0 25 50 All US* PSEG Nuclear** |
58 Cost control actions taken: • Fossil plant assessment • CCGT material condition assessment • Vendor contract renegotiations • Nuclear security services brought in- house to control costs • Nuclear maintenance productivity study • Nuclear outage efficiency initiative • Materials management 2009 to 2015 CAGR = 2.6% Power O&M Expense* *EXCLUDES IMPACTS FROM STORM RECOVER COSTS. E=ESTIMATES PSEG Power’s focus on costs has resulted in moderate increase in O&M for seven years $0 $500 $1,000 $1,500 2009 2010 2011 2012 2013 2014 2015E • Fossil plant assessment • CCGT material condition assessment • Vendor contract renegotiations • Nuclear security services brought in- house to control costs • Nuclear maintenance productivity study • Nuclear outage efficiency initiative • Materials management |
59 PSEG Power’s Fossil Fleet has shown improvement in performance *LM6000 AND 7EA UNITS E = ESTIMATE. • Fossil Generation rebounded with market • Peaking Units maintain high start success • Record output from Kearny 13 & 14 peakers • Combined Cycle Generation set record • Bergen AGP uprate project scheduled for 2015 Fossil Generation Peaking Start Success* Coal Generation Combined Cycle Generation |
60 PSEG Power initiatives result in continuing improvement in combined cycle heat rate AGP projected efficiency improvement 2015-2018 2018E E= ESTIMATE. 7,300 7,400 7,500 7,600 7,700 7,800 2008 2009 2010 2011 2012 2013 2014 |
61 PSEG Power CCGT/Fossil initiatives Actions Taken to Create Value Capacity • Advanced Gas Path (AGP) investments 2014 through 2018 to provide additional efficient capacity, heat rate improvements • New lower cost gas line at BEC with Dominion Performance • EPRI efficiency initiatives • GE initiatives for large data analytic • Consolidation of unit testing • Auto tuning software Maintenance • Ongoing outage efficiency improvement • Improvements to reliability • Central fleet monitoring and diagnostic center |
62 PSEG Power’s capital expenditures for environmental requirements are essentially complete* *BASED ON CURRENTLY KNOWN AND QUANTIFIABLE ENVIRONMENTAL REQUIREMENTS. E=ESTIMATE. DATA AS OF DECEMBER 31, 2014. COMPLETION OF CONEMAUGH SCR/FGD IN 2015 $0 $200 $400 $600 $800 $1,000 2010 2011 2012 2013 2014 2015E 2016E 2017E Penn East (equity investment) Growth Environmental/Regulatory Maintenance |
63 PSEG Power’s Growth Investments Site Project Cost Benefits Status BEC Dominion Gas Line $8 Access to a 2 nd , lower cost gas supply: Completed Linden AGP Upgrade $69 Increased capacity and improved heat rate: Completed Linden Kearny Black Start: Linden 7/8 Kearny 12 $13 New ancillary revenue source: Linden Completed Kearny Underway CA / TX / VT Solar Source Projects $44 Increased capacity: 21 MW Completed Peach Bottom Peach Bottom EPU (2014 – 2015) $417 Increased capacity: 130 MW PB2 March 2015, PB3 in 2016 Bergen / BEC Future AGP Upgrades: Bergen (2015) BEC (2017-2018) $98 Increased capacity and improved heat rate: Underway Various Interim ISA’s* No cost Increased capacity: 69 MW Completed Eastern PA to Mercer, NJ PennEast Pipeline $119 Estimated Earnings in 2019: Underway Total Increased Capacity – 371 MW * INTERCONNECTION SERVICE AGREEMENTS. ($ millions) $13 million 88 MW capacity increase ~1.2% heat rate improvement ~ $3 million per year 63 MW capacity increase ~1.2% heat rate improvement $8-9 million/year increase in margin |
64 Additional investment opportunities under consideration Site Project Benefits Bridgeport Harbor CCGT development New ISO NE Capacity: 475 MW Hope Creek Uprate Additional PJM Nuclear Capacity: 20 MW Edison / Essex SCR retrofit Continued operation of FT4s Edison: up to ~ 470 MW Essex: up to ~ 330 MW Bergen Bergen 1 Uprate (AGP-type uprate) Additional PJM Capacity: Up to 50 MW Sewaren CCGT development New PJM Capacity: 450 – 625 MW Various Additional solar projects under investigation 100’s of MW of new solar capacity under evaluation |
65 Hackettstown (Mars) New Jersey (2 MW) COD September 2009 Thin film panels – fixed tilt Investment $13 million 15 year PPA with Mars, Inc. Milford Delaware (15 MW) COD December 2012 Polycrystalline - fixed tilt Investment $47 million 20 year PPA with DEMEC Badger I Arizona (19 MW) COD November 2013 Polycrystalline - single axis Investment $48 million 30 year PPA with APS PSEG Solar Source owns ~123 MW of solar facilities * with long term contracted revenues *PROJECT SIZE IN MEGAWATTS SHOWN IN DC (DIRECT CURRENT), AC EQUIVALENT IS 96 MEGAWATTS. E=ESTIMATE. In Construction – Rockfish Maryland (13 MW) COD - June 2015E Polycrystalline - single axis 20 year PPA with SMECO Queen Creek Arizona (25 MW) COD October 2012 Polycrystalline - single axis Investment $75 million 20 year PPA with SRP Newman Texas (13 MW) COD December 2014 Polycrystalline - single axis Investment $22 million 30 year PPA with El Paso Elec. Wyandot Ohio (12 MW) COD May 2010 Thin film panels – fixed tilt Investment $44 million 20 year PPA with AEP JEA Florida (15 MW) COD September 2010 Thin film panels – fixed tilt Investment $59 million 30 year PPA with JEA Shasta A & B California (4 MW) COD March 2014 Polycrystalline - single axis Investment $13 million 20 year PPAs with PG&E Whitcomb Vermont (4 MW) COD October 2014 Polycrystalline - single axis Investment $10 million 25 year PPA with VT Electric Power Producers, Inc. |
66 Gas Asset Optimization Large wholesale provider to PSE&G and others Storage capacity of approximately 75 Bcf (in the Gulf and market regions) Firm transportation of 1.3 Bcf/day on seven pipelines Off-system sales margins shared with residential customers Commercial & Industrial customers (C&I) Weather and price volatility Ancillary Services LIPA Fuel and energy dispatch management PSEG Power has other attractive sources of revenues to round out a robust portfolio, in addition to energy and capacity |
67 PSEG Power has delivered on its commitments during volatile market conditions 2009 2010 2011 2012 2013 2014 Annual Cooling Degree Days % greater/(less) than average (17%) 35% 26% 13% 7% (5%) Annual Heating Degree Days % greater/(less) than average (1%) (8%) (11%) (17%) (1%) 5% # Days over 90 degrees 12 48 29 29 21 12 # Days below 20 degrees 24 14 13 7 13 33 Gas Volatility: Transco Z6 Min $2.50 Max $19.93 Min $3.76 Max $23.43 Min $3.38 Max $18.93 Min $2.40 Max $12.43 Min $3.10 Max $39.43 Min $1.39 Max $115.00 LMP Volatility: PS Zone Min $4 Max $156 Min $7 Max $289 Min $15 Max $417 Min $5 Max $370 Min $10 Max $335 Min $5 Max $1,021 Basis Volatility: PJM-W to PS Zone Min ($22) Max $50 Min ($29) Max $71 Min ($40) Max $116 Min ($49) Max $97 Min ($28) Max $79 Min ($131) Max $455 Power Earnings On Guidance On Guidance High End of Guidance Above Guidance High End of Guidance High End of Guidance |
68 PSEG Power is an established leader within the industry • National Nuclear Accrediting Board • Communications Advisory Committee • Board of Directors • Board of Directors Executive Committee • Emergency Preparedness Working Group • Security Working Group • Fukushima Response Steering Committee • Joint Information System Task Force • Nuclear Strategic Issues Advisory Committee Steering Group • Chairman Nuclear Power Council • Executive Committee Nuclear Power Council • Vice Chair of the Executive Oversight Committee • Chair • Executive committee member • Chair of the Cooling Systems Committee • Member of various Committees at PJM • Chairman & Vice-Chair of the Supplier Sector of the New England Power Pool (NEPOOL) • Chair of the PJM Power Providers Board • Board member & member of the board’s Executive Committee of Independent Power Producers of New York (IPPNY) • Member of water resources subcommittee • Member of Executive Committee Utilities Service Alliance (USA) Fleet BWR Owners Group EPRI NEI INPO National Coal Council EEI PJM/NY/ISO-NE EPSA UWAG |
69 Developing People to drive operational excellence and to optimize the workforce • Succession planning and development planning • Recent CNO retirement & succession was part of the plan • Training & development of employees • Rotational assignments for key leaders in PSEG Power • Outreach programs • Employee engagement • Shared resources between Fossil and Nuclear (outage support) • Diversity & inclusion |
70 Power’s 2015 operating earnings maintain solid performance Power Operating Earnings ($ Millions)* • 75-80% hedged at $52/MWh • Increase in average hedge price for energy helps mitigate reset in capacity price and volume 2015 Observations 2013 2014 2015 Guidance $710 $642 $620 – 680E *SEE SLIDE A FOR ITEMS EXCLUDED FROM NET INCOME TO RECONCILE TO OPERATING EARNINGS. |
PSEG POWER ER&T PSEG POWER Shahid Malik PRESIDENT |
72 Agenda • Gas, Power, Spark Spreads • Gas and Power Basis PSEG Power’s Portfolio • PJM • Northeast PSEG Power’s Locational and Fleet Strengths • Robust capacity market pricing • Advantageous medium-term full requirements opportunity in NJ • Hedging plan mitigates risk while allowing for upside Market Review |
73 Market Review: 2014 was influenced by extremes in weather highlighting the importance of winter Q1: Periods of extreme cold temperatures resulted in high gas prices, significant basis differentials, and higher energy demand. Q3: A cooler than normal summer, combined with increased supply of gas, reduced energy prices and basis. 2014 Q1 Gas 2014 Q1 PS Zone Electric 2014 Q3 PS Zone Electric 2014 Q3 Gas |
74 Market Review: PSEG’s extensive gas asset portfolio gives unparalleled access to Marcellus Shale gas • PSEG Power maintains a robust portfolio of pipeline and storage assets in the Mid-Atlantic • PSEG Power’s gas for generation was ~100 BCF in 2014, of which >60% was supplied by Shale gas • PSEG Power procured over 400 BCF in 2014 with ~75% going to PSE&G’s utility gas customers • When gas is surplus to customer needs, PSEG Power sells surplus to others; margins from such sales benefit PSE&G gas customers and PSEG Power Power’s Gas for Generation in 2014 Eastern PA Shale Western PA Shale Gulf Coast Delivered Gas |
75 Market Review: Winter Z6 gas prices retain seasonal volatility; spark spreads have continued to be robust in PJM FORWARDS AS OF DECEMBER 31, 2014 2015 YTD Z6 PJM West vs. PS Zone Spark Spreads (2013-2018) 2015-2018 Z6 |
76 Market Review: New pipelines will move significant quantities of Marcellus gas out of the region by 2018 New pipeline investment is expected to increase takeaway capacity from the low cost Marcellus/Utica shale and reduce regional surpluses and increase gas prices by 2018 Pipeline capacity grows significantly by 2018 Historical and Expected Marcellus Production New England 3.4 bcf/d Southeast 6.4 bcf/d Midwest 5.9 bcf/d Gulf Coast 3.1 bcf/d NJ/NY 1.4 bcf/d 0 5 10 15 20 25 30 2010 2011 2012 2013 2014 2015 2016 2017 2018 |
77 ANNUAL FORWARD BASIS TO PJM-WEST AS OF DECEMBER 31, 2014. Power Basis in Eastern PJM: Expected to be volatile but positive on an annual basis with winter pricing driving value Electric Basis will remain positive overall and stabilize within 3 years due to: • • • Export of ~18 bcf/day of gas which will significantly strengthen regional gas prices Easing of transmission constraints in Virginia/Maryland Construction of significant new gas-fired generation in VA/MD PS Zone RTC Basis to PJM West 0 1 2 3 4 5 6 2012 2013 2014 2015 2016 2017 2018 PS Basis Forward Curve for Electric Basis (prior to delivery year) |
78 Regulatory Framework: Significant reforms already implemented and new rules being promulgated to improve energy and capacity market designs ISSUE /POLICY OUTCOME PJM CAPACITY • Higher payments for enhanced reliability (Capacity Performance) DEMAND RESPONSE RULES • Stricter rules for eligibility and deployment ENERGY PRICE FORMATION • PJM and FERC forcing improvements to energy price formation; higher caps ISO-NE CAPACITY • Higher prices in recent auction better reflect tight supply conditions • Implementation of sloping demand curve in FCA 9 • Zonal demand curves expected in FCA 10 ENERGY • Demand response required to participate in Day Ahead markets • Implemented hourly offers/real time reoffers • Reserve market prices better reflect scarcity prices • 5 minute interval LMP settlements expected Q1 2016 NYISO CAPACITY • New Capacity Zone (LHV) leads to more accurate price signals ENERGY • Improvement in price formation during reserve shortage conditions FEDERAL DEMAND RESPONSE • EPSA VS. FERC and national implications ENVIRONMENTAL REGULATIONS • HEDD, CPP, HAPS/MACT will lead to tightening of supply in 2015+ timeframe |
79 Agenda Market Review • • PSEG Power’s Portfolio • • PSEG Power’s Locational and Fleet Strengths • • • Gas, Power, Spark Spreads Gas and Power Basis PJM Northeast Robust capacity market pricing Advantageous medium-term full requirements opportunity in NJ Hedging plan mitigates risk while allowing for upside |
80 PJM Capacity Performance Proposal: aims to increase electric supply reliability • Capacity performance (CP) proposal places emphasis on reliability, given observed outages during times of extreme weather stress and anticipated retirements; Imposition of higher penalty structure and enhanced opportunities for cost recovery to encourage reliability • Elimination of 2.5% holdback offsetting weak demand growth, making all capacity resources annual products in end state, net CONE bidding safe harbor, and the change in the demand curve (VRR) support price formation and improve resource adequacy • Generator performance/flexibility is key objective for units with secure fuel supply capable of meeting more stringent operating standards |
81 Capacity Performance: capacity performance standards with minimal to moderate investment CP Compliant Assets * EXCLUDES 205MW OF PUMPED STORAGE Combined Cycle Steam Nuclear Combustion Turbine Meets CP Requirement with No to Minimal Investment Moderate Investment to Meet CP Requirement Larger Investment to Meet CP Requirement of PSEG’s PJM capacity meets the new How does our fleet stack up? * >90% |
Northeast Portfolio: New York and New England 82 • Long Island Power Authority Management Contract • Investment in new lateral to connect to the Dominion pipeline at Bethlehem Energy Center (BEC) allows for access to fuel supply from Marcellus • Single state ISO New York (774MW) • Gas pipeline infrastructure poses supply challenges/opportunity • Significant siting and permitting challenges • High volatility due to extreme (winter) weather conditions • Significant improvement in market construct • Small but dynamic market New England (972MW) |
83 PSEG Power acting as an agent for LIPA began January 2015 Northeast Portfolio: Expanding our footprint with PSEG Long Island 38% 36% 16% 7% 3% LIPA Capacity (6,163MW) Steam Combustion Turbine Cables Combined Cycle Resource Recovery, Pumped Storage, Solar • Additional experience in Eastern NY and Connecticut markets • Bigger natural gas footprint • Fee-based services contract • Performing ISO bidding for LIPA’s 6,000MWs of generation/tolls • Procuring natural gas and oil for the majority of these assets • Scheduling two DC transmission cables (ISO-NE and PJM) into Long Island • Entering into financial hedges to reduce LIPA customer’s price volatility This relationship has provided PSEG Power: |
84 Agenda • Robust capacity market pricing • Advantageous medium-term full requirements opportunity in NJ • Hedging plan mitigates risk while allowing for upside PSEG Power’s Locational and Fleet Strengths • PJM • Northeast PSEG Power’s Portfolio • Gas, Power, Spark Spreads • Gas and Power Basis Market Review |
85 2018 Onwards RPM Auction Impacted By: • Capacity Performance • Demand response rules • Convex Demand Curve • Elimination of 2.5% Holdback • Change in Net CONE • Reduction in Load Forecast • Change in PJM Parameters • Environmental Retirements Capacity Market Pricing: PJM’s capacity market is transitioning to recognize operating performance as well as locational value *PSEG POWER’S AVERAGE PRICES AND CLEARED CAPACITY (MW) REFLECT BASE AND INCREMENTAL RPM AUCTION RESULTS AS OF FEBRUARY 2015. DELIVERY YEAR RUNS FROM JUNE 1 TO MAY 31 OF THE NEXT CALENDAR YEAR. RPM Auction Results ($/MW-day) Power’s Average Prices $242 $168 $168 $167 $165 Rest of Pool Prices $28 $126 $136 $59 $120 Power’s Cleared Capacity (MW) 10,900 10,600 8,800 8,700 8,700 2013 / 2014* 2014 / 2015* 2015 / 2016* 2016 / 2017* 2017 / 2018 |
86 Auction Results: BGS Auction provides ability to forward hedge our generation and protect our power basis Capacity Load shape Transmission Congestion Ancillary services Risk premium Green $56 - $58 BGS sales account for approximately 20% of our forward portfolio of hedges 3 Year Average Round the Clock PJM West Forward Energy Price $/MWH; BGS PRICES REFLECT PSE&G ZONE; RESULTS FOR 2013-2015 ARE THE NEW BLENDED PRICES BEGINNING JUNE 1, 2015. $94.30 $83.88 ~ $46 $92.18 ~ $48 ~ $53 ~ $59 $97.39 $48 - $50 $45 - $47 $39 - $40 $37 - $38 $38 - $39 ~ $62 $37 - $38 $99.54 2011 2012 2013 2014 2015 |
87 Hedging strategy: designed to protect gross margin while leveraging the portfolio 2015 2016 2017 Volume TWh 36 36 36 Base Load % Hedged 100% 80-85% 40-45% (Nuclear and Base Load Coal) Price $/MWh $52 $52 $52 Volume TWh 21 19 19 Intermediate Coal, Combined % Hedged 40-45% 0% 0% Cycle, Peaking Price $/MWh $52 $52 $52 Volume TWh 55-57 55-57 55-57 Total % Hedged 75-80% 50-55% 25-30% Price $/MWh $52 $52 $52 HEDGE PERCENTAGES AND PRICES AS OF FEBRUARY 2015. 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. EXCLUDES SOLAR AND KALAELOA. |
88 PSEG Power’s Value Proposition • Well-positioned fleet of merchant generating assets in attractive markets • Advantaged by low cost structure, fuel diversity and dispatch flexibility • Value add from strong gas supply capability • Significant drive by regulatory bodies to improve market constructs • Low capital requirements to meet enhanced performance standards • Organic growth opportunities to increase nuclear and combined cycle generation • Hedging strategy is responsive to changing market dynamics, providing attractive returns and free cash flow |
We have the energy to make things better … for you, for our investors and for our stakeholders. |
PSEG EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER Caroline Dorsa |
91 Strong financial position to support our business initiatives 2014 Financial Position Strong 2014 earnings growth Exceeded earnings guidance Executed major PSE&G capital program Strong balance sheet with no long term Parent debt Solid credit metrics 2015 and Beyond Third year of anticipated positive earnings growth in 2015 Controlled O&M growth Balance Sheet and Cash Flow support investment program without equity issuance Substantial additional investment capacity Growth in PSE&G investments with contemporaneous/formula rate returns Consistent and strong cash flow from both Power and PSE&G Potential for accelerated and sustainable dividend growth |
92 Earnings increase of 7% exceeded guidance *SEE SLIDE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/NET INCOME TO RECONCILE TO OPERATING EARNINGS. PSEG Operating Earnings 2013 2014 PSE&G $612 $725 PSEG Power $710 $642 Other ($13) $33 Operating Earnings $1,309 $1,400 Operating EPS* $2.58 $2.76 Revised Earnings Guidance (Oct 2014) $2.60 - $2.75 Earnings Guidance (Feb 2014) $2.55 - $2.75 Key Takeaways 18% increase in PSE&G earnings 52% regulated earnings contribution in 2014 Power’s results exceeded guidance $ Millions (except EPS) |
93 Power produced significant and consistent Free Cash Flow 2012 Power Cash From Ops 2013 2014 2012 2013 2014 Power Free Cash Flow $0.0 $0.5 $1.0 $1.5 |
94 PSE&G delivers increasing cash flow due to investment program 2012 PSE&G Cash Investment PSE&G Cash From Ops (1) 2013 2014 (1) PSE&G CASH FROM OPERATIONS ADJUSTS FOR SECURITIZATION PRINCIPAL REPAYMENTS OF ~$215 TO ~$240 MILLION OVER 3 YEAR PERIOD 2012 2013 2014 $0.0 $0.5 $1.0 $1.5 $2.0 $2.5 |
95 In 2014, Power’s Free Cash Flow supported PSE&G’s capital program and shareholder dividend Power Cash from Ops ~$1.4B PSE&G Cash from Ops (1) ~$1.6B PSE&G Cash Investment ~$2.2B Power Cash Investment (3) ~$0.7B Shareholder Dividend ~$0.7B PSE&G Net Debt ~$0.7B (1) PSE&G CASH FROM OPERATIONS ADJUSTS FOR SECURITIZATION PRINCIPAL REPAYMENTS OF ~$240 MILLION. (2) OTHER CASH FLOW INCLUDES HOLDINGS NET CASH FLOW AND INVESTED CASH (3) POWER CASH INVESTMENT INCLUDES NUCLEAR FUEL AND EMISSION PURCHASES Other Cash Flow (2) ~$0.1B PSEG Consolidated 2014 Sources and Uses $0.0 $1.0 $2.0 $3.0 $4.0 Sources Uses |
96 PSEG 2015– 2019E Capital Expenditures (1) PSEG growth spend represents ~70% of total investment with new PSE&G investment opportunities of over $1B Power & Other Maintenance PSE&G Distribution Maintenance Power Growth PSE&G Transmission Growth PSE&G Energy Strong, Solar and New Business (1) INCLUDES AFUDC AND IDC; PENNEAST PIPELINE EQUITY INVESTMENT OF~$0.1B IS INCLUDED IN POWER GROWTH. E = ESTIMATE. PSEG Planned Spend Maintenance ~$3.8B PSE&G Potential Upside PSEG Potential Spend Potential Upside ~$1.3B ~$1.6B ~$0.6B ~$2.2B ~$1.9B ~$6.7B ~$14.3B ~$1.3B ~$13.0B Planned Growth Investment ~ $9.2B |
97 2014 – 2017E Rate Base CAGR Growth of ~12% Distribution Transmission PSE&G’s Capital Program drives double-digit growth in rate base through 2019 ~$11.4B ~$16.0B ~$6.9B ~$4.5B ~$2.1B ~$9.7B ~$3.1B ~$8.5B Rate Base Growth E = ESTIMATE ~$0.1B 2014 Rate Base Planned 2017E Rate Base Potential Upside Potential 2019E Rate Base Planned 2019E Rate Base ~$1.5B ~$8.4B ~$7.6B ~$18.2B ~$1.0B ~$9.5B ~$9.9B ~$19.4B ~$0.2B 2014 – 2019E Rate Base CAGR Growth of ~10% Rate Base Growth 2014 – 2019E Potential Rate Base CAGR Growth of ~11% |
98 Continuing our track record of 5 year double digit rate base growth leading to high single-digit growth in earnings through 2017 2010 – 2015E PSE&G 5 Year Rate Base CAGR 2011 – 2016E 2012 – 2017E 2013 – 2018E 2014 – 2019E ~11% ~13% ~12% ~10% ~10% ~11% PLANNED POTENTIAL E = ESTIMATE. 0% 5% 10% 15% |
99 Substantial internal cash generation supports our planned growth capital program and potential investment opportunities without the need for equity PSE&G Cash from Ops (1) PSE&G Cash Investment PSE&G Net Debt PSEG 2015 - 2019E Sources and Uses (1) PSE&G CASH FROM OPERATIONS ADJUSTS FOR SECURITIZATION PRINCIPAL REPAYMENTS OF ~$260M FROM 2015-2019 (2) OTHER CASH FLOW INCLUDES PSEG LI, HOLDINGS NET CASH FLOW, INVESTED CASH, AND PARENT SHORT-TERM DEBT (3) POWER CASH INVESTMENT INCLUDES NUCLEAR FUEL AND EMISSION PURCHASES E = ESTIMATES. PSE&G Cash from Ops (1) PSE&G Net Debt Planned Programs Including Potential Upside Projects Shareholder Dividend Power Cash from Ops Shareholder Dividend Power Cash from Ops Power Cash Investment (3) PSE&G Cash Investment Power Net Debt Other Cash Flow (2) Other Cash Flow (2) Power Net Debt Power Cash Investment (3) Sources Uses Sources Uses |
100 Power’s key credit metric remains strong providing opportunity for incremental investment 2015-2017E Average Increased contribution to earnings from the more stable regulated business Power’s annual Cash From Operations and Funds From Operations each average ~$1.4B over the 2015 to 2017 period supported by: - Capacity Revenues - Hedged Generation - O&M Control Financial strength can be used to pursue future growth in both businesses beyond current plans E = ESTIMATE 2013 2014 PSEG Power Funds from Operations / Debt 0% 10% 20% 30% 40% 50% 60% 70% |
101 Total Incremental Investment Capacity through 2017 Substantial Investment Capacity to pursue additional growth without the need for equity Average Funds from Operations /Debt 2015 - 2017 Our incremental investment capacity can support over $6B in regulated investments $0.0 $4.0 Power Parent Total ($ Billions) Power PSEG Estimate ~ 55% ~30% Minimum Threshold 30% Low - 20’s |
102 Pension Fund Returns for the periods ending December 2014 Well Funded Pension due to our long term asset allocation strategy 2014 Funded Ratio ~93% Cumulative pension contributions total less than $50M through 2017 (1) Modest pension expense in 2015 with pension income expected by 2017 given fully funded level Annualized Return (%) (1) REPRESENTS CONTRIBUTIONS TO QUALIFIED PENSION PLANS. Total company pension expense of <$0.07 per share in 2015, expected return to pension income by 2017 0 5 10 15 1 Year 3 Year 5 Year |
103 (1) POWER EXCLUDES IMPACTS FROM STORM RECOVERY COSTS AND POTENTIAL RELATED INSURANCE PROCEEDS. N.M.= NOT MATERIAL E = ESTIMATE. 2014 – 2017E CAGR Transmission ~(1.4%) Distribution ~2.7% Power ~1.0% Other: N.M. Controlling O&M growth, with manageable pension impacts and PSE&G continuing to grow its asset base PSEG O&M Expense (1) 2014 - 2017E CAGR: ~1.4% $0 $500 $1,000 $1,500 $2,000 $2,500 2014 2015E 2016E 2017E |
104 PSEG Operating Earnings $ Millions (except EPS) 2013 2014 2015E PSE&G $612 $725 $735 - $775 PSEG Power $710 $642 $620 - $680 Enterprise/Other ($13) $33 $40 - $45 Operating Earnings* $1,309 $1,400 $1,395 - $1,500 Operating EPS* $2.58 $2.76 $2.75 - $2.95 Regulated % of Earnings 47% 52% 52% (1) Increasing PSE&G earnings with stable contribution from Power (1) REPRESENTS MID POINT OF GUIDANCE *SEE SLIDE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/NET INCOME TO RECONCILE TO OPERATING EARNINGS. E+ ESTMATE. |
105 PSE&G EPS Annual Dividend Per Share 2011 – 2014 CAGR: 2.6% (1) THE 2015 PAYOUT RATIO IS BASED ON THE MIDPOINT OF PSEG'S 2015 OPERATING EARNINGS GUIDANCE OF $2.75-$2.95E PER SHARE. SEE SLIDE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/NET INCOME TO RECONCILE TO OPERATING EARNINGS. E= ESTIMATE. Potential for meaningful and sustainable dividend growth given significant contribution from regulated earnings and Power’s strong free cash flow 5.4% increase Payout Ratio 50% 58% 56% 54% 55% (1) $1.53 $1.45 $1.37 $1.42 $1.44 $1.48 $1.56 $0.60 $0.80 $1.00 $1.20 $1.40 $1.60 2011 2012 2013 2014 2015E |
106 PSEG’s longer-term outlook is influenced by Power’s hedge position and increased investment at PSE&G 2015E 2016E Segment EPS Drivers Sensitivities derived from typical annual market variability* * Estimated annual variability approximating one standard deviation based on 2011 – 2013 historical data and forward curve estimates applied to PSEG Power open positions. E = ESTIMATE. POWER EARNINGS SENSITIVITIES UPDATED FOR 2015 BGS AUCTION AND 12/31/14 PRICE CURVES. 2015E 2016E 2017E 2017E Each $0.75/mcf Change in Natural Gas Each $2/MWh Change in Spark Spread Each $5/MWh Change in Dark Spread Each 1% Change in Nuclear Capacity Factor Each $100 Million of Incremental Investment Each 1% Change in Sales Electric Gas Each 1% Change in O&M Each 10 basis point Change in Distribution ROE Each 10 basis point Change in Transmission ROE $0.01 $0.01 $0.01 $0.01 $0.01 $0.01 $0.03-$0.06 $0.04 $0.04 $0.01 $0.02-$0.04 $0.03 $0.01 $0.01 $0.01 $0.01 $0.01 $0.01 $0.01 $0.01 $0.10-$0.13 $0.04 $0.04 $0.01 $0.01 $0.01 $0.01 $0.01 $0.01 $0.01 |
107 PSEG Summary • Our 2014 earnings of $2.76 exceeded our revised operating earnings guidance of $2.60 - $2.75 per share • Continued third year of anticipated positive earnings trend in 2015 with operating earnings guidance of $2.75 to $2.95 per share • Continued 5 straight year of expected double digit, 5 year growth in rate base • Anticipated high single digit earnings growth at PSE&G on three-year basis from 2014 to 2017, driven by transmission investments and planned programs • Power’s continued focus on operational excellence, market expertise and financial strength delivers value in current price environment • Strong Balance Sheet and Cash Flow support full capital program and new potential opportunities without the need for equity • Our $0.08 per share dividend increase is consistent with our long history of returning cash to the shareholder through the common dividend, with potential for consistent and sustainable growth th |
PSEG EXECUTIVE PROFILES |
109 CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED Ralph Izzo Ralph Izzo was elected chairman and chief executive officer of Public Service Enterprise Group Incorporated (PSEG) in April 2007. He was named as the company’s president and chief operating officer and a member of the board of directors of PSEG in October 2006. Previously, Mr. Izzo was president and chief operating officer of Public Service Electric and Gas Company (PSE&G). Since joining PSE&G in 1992 Mr. Izzo was elected to several executive positions within PSEG’s family of companies, including PSE&G senior vice president – utility operations, PSE&G vice president – appliance service, PSEG vice president - corporate planning, and PSE&G vice president - electric ventures. In these capacities he broadened his experience in the areas of general management, strategic planning and finance. Mr. Izzo is a well-known leader within the utility industry, as well as the public policy arena. He is frequently asked to testify before Congress and speak to organizations on matters pertaining to national energy policy. Mr. Izzo’s career began as a research scientist at the Princeton Plasma Physics Laboratory, performing numerical simulations of fusion energy experiments. He has published or presented over 35 papers on magnetohydrodynamic modeling. Mr. Izzo received his Bachelor of Science and Master of Science degrees in mechanical engineering and his Doctor of Philosophy degree in applied physics from Columbia University. He also received a Master of Business Administration degree, with a concentration in finance from the Rutgers Graduate School of Management. He is listed in numerous editions of Who’s Who and has been the recipient of national fellowships and awards. Mr. Izzo has received Honorary Degrees from the New Jersey Institute of Technology (Doctor of Science), Thomas A. Edison State College (Doctor of Humane Letters), Bloomfield College (Doctor of Humane Letters), Rutgers University (Doctor of Humane Letters), and Raritan Valley Community College (Associate of Science). Mr. Izzo serves as chair of the New Jersey Chamber of Commerce, and on the board of directors for The Williams Companies, the New Jersey Utilities Association, the Edison Electric Institute (EEI), the Nuclear Energy Institute (NEI), and The Center for Energy Workforce Development. He is the past Chair of the Rutgers University Board of Governors. He is also a member of the Board of Trustees of Peddie School, Columbia University School of Engineering Board of Visitors and the Princeton University Adlinger Center for Energy and the Environment Advisory Council, as well as a member of the Visiting Committee for the Department of Nuclear Engineering at MIT. |
110 EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED, PUBLIC SERVICE ELECTRIC AND GAS COMPANY, PSEG POWER LLC AND PSEG SERVICES CORPORATION Caroline Dorsa Caroline Dorsa was named executive vice president and chief financial officer for Public Service Enterprise Group Incorporated (PSEG) in April 2009. She is also the executive vice president and chief financial officer of Public Service Electric and Gas Company (PSE&G), PSEG Power and PSEG Services Corporation. Ms. Dorsa is responsible for all financial functions, including Internal Audit Services, Investor Relations and Corporate Development. Given the array of financial instruments which serve as the primary means of selling wholesale energy to customers, Ms. Dorsa also has responsibility for the Risk Management function, which provides independent oversight of the PSEG Power trading organization. In addition to her financial responsibilities, Ms. Dorsa leads the Information Technology and Procurement organizations. She is a member of PSEG’s Executive Officer Group. In her role as chief financial officer, she has overseen the execution of the Company’s financial strategy, which has involved a significant deleveraging of the balance sheet and enhancement of the company’s financial strength. The company is in the midst of a major capital investment program focused on deploying more than $6 billion over three years to ensure the reliability and efficiency of the energy generation and distribution system in New Jersey. PSEG has an uninterrupted record of paying dividends to shareholders for 108 years. Ms. Dorsa had been a member of the PSEG Board of Directors for six years, and a member of PSEG's Audit, Corporate Governance and Finance Committees before joining the company’s management. Her previous management position had been with Merck & Co., where she was senior vice president – global human health, strategy and integration. Prior to this, Ms. Dorsa served as senior vice president and chief financial officer at Avaya, Inc. Earlier in her career, she held a range of financial positions at Merck, including serving as vice president and treasurer of the company for over 12 years. She was also the Secretary of the Finance Committee of Merck's Board of Directors. Before joining Merck, Ms. Dorsa worked for Mayor Edward Koch of the City of New York promoting economic development in midtown Manhattan. Ms. Dorsa is a member of the Junior Achievement of New Jersey State Board of Directors. She is a member of the Board of Directors and the financial expert for the Finance and Audit Committee of Biogen Idec (NASDAQ: BIIB), a biopharmaceutical company located in Cambridge, MA. Ms. Dorsa is also a member of the Board of Directors and Chairman of the Audit Committee of Joule, a privately financed solar fuels company based in Bedford, MA. Ms. Dorsa holds a B.A. from Colgate University and an M.B.A from Columbia Business School. |
111 EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED, PUBLIC SERVICE ELECTRIC AND GAS COMPANY, PSEG POWER, PSEG SERVICES CORPORATION Tamara L. Linde Tamara Linda was named executive vice president and general counsel for Public Service Enterprise Group Incorporated (PSEG) in July 2014. She is also the executive vice president and general counsel of Public Service Electric and Gas Company (PSE&G), PSEG Power and PSEG Services Corporation. As PSEG’s chief legal officer, Ms. Linde has responsibility for all legal and regulatory functions, and has general supervisory responsibilities for the office of corporate secretary, business assurance and resilience and federal affairs and sustainability. Ms. Linde is a member of PSEG’s Executive Officer Group. Previously Ms. Linde was vice president – regulatory, PSEG. She has led the company’s federal and state regulatory functions, as well as managed corporate, environmental and labor/employment practices within the company. Ms. Linde has served as regulatory counsel on many of the company’s most important initiatives in recent years. Ms. Linde joined the law department of Public Service Electric and Gas Company (PSE&G), as an attorney in 1990 handling a variety of natural gas and electric regulatory and transactional matters. After holding several other legal positions at PSE&G she became general solicitor, in 2000. In that position she was responsible for the regulatory affairs of the PSEG companies including electric, gas and nuclear matters. She has had significant experience working on regulatory matters before various state and federal regulatory agencies on industry issues relating to electric transmission and distribution and energy markets. Ms. Linde is a member of the New Jersey, New York, District of Columbia and Texas bars. She is past President of the Northeast Chapter of the Energy Bar Association and served as chair of the Energy Bar Association Electricity Regulation and Compliance Committee. Ms. Linde graduated from Seton Hall University School of Law with a Juris Doctorate and from Seton Hall University with a bachelor’s degree. |
112 Ralph A. LaRossa PRESIDENT AND CHIEF OPERATING OFFICER PUBLIC SERVICE ELECTRIC AND GAS COMPANY Mr. LaRossa joined PSE&G in 1985 as an associate engineer and advanced through a variety of management positions in the utility’s gas and electric operations. In 1998, he received Gas Industry Magazine’s Outstanding Manager of the Year Award. Mr. LaRossa is a graduate of Stevens Institute of Technology and has completed the Harvard Business School’s Program for Management Development. He serves on the board of directors for the American Gas Association (AGA), New Jersey Utilities Association (NJUA), New Jersey Performing Arts Center (NJPAC), Partnership for a Drug-Free NJ, and Bergen County’s United Way. Mr. LaRossa is Chairman of Choose New Jersey, Inc. and serves on its board of directors. He is also the Chairman of Montclair State University and serves on its board of trustees. Ralph A. LaRossa was named president and chief operating officer of Public Service Electric and Gas Company (PSE&G) in October 2006. PSE&G is New Jersey’s oldest and largest regulated gas and electric delivery utility, serving approximately 2.4 million customers, nearly three- quarters of the state’s population. Prior to this position he was vice president - electric delivery for PSE&G. In addition, on January 1, 2014, Mr. LaRossa became Chairman of the Board of PSEG Long Island, a subsidiary of Public Service Enterprise Group (PSEG), which manages the electric transmission and distribution systems on Long Island and in the Rockaways. PSEG Long Island serves 1.1 million customers. |
113 William Levis PRESIDENT AND CHIEF OPERATING OFFICER PSEG POWER Mr. Levis has a Bachelor of Science degree in marine engineering from the U.S. Naval Academy and holds an SRO (senior reactor operator) certification. He retired as a commander in the Naval Reserves and attained his professional engineer license in 1985. Mr. Levis is a member of Nuclear Energy Institute’s (NEI) Board of Directors and serves as a member of the Institute of Nuclear Power Operations (INPO) National Nuclear Accrediting Board. He is a member of the Philadelphia Archdiocese Catholic Charities Appeals Board and its Operations Committee and is a member of the CEO Council for Growth based in Philadelphia. William Levis is president and chief operating officer of PSEG Power, a position he’s held since June 2007. PSEG Power is a major, unregulated independent power producer in the U.S. with four main subsidiaries: PSEG Nuclear, PSEG Fossil, PSEG Energy Resources and Trade (ER&T) and PSEG Power Ventures. PSEG Power operates one of the most balanced portfolios in the country, both in terms of fuel mix and market segment (based load units, load following units and peaking units). Its low-cost, load following fleet is geographically well positioned in competitive markets. Its 13,337 MWs represent a diverse fuel mix which includes 45 percent natural gas, 27 percent nuclear; 18 percent coal, 8 percent oil, 1 percent pumped storage, and 1 percent solar. Before coming to PSEG, Mr. Levis was Exelon Nuclear’s vice-president – Mid-Atlantic operations. Prior to joining Exelon, Mr. Levis worked at Ontario Hydro’s Pickering Plant and held several positions over a five- year period with Carolina Power and Light’s Brunswick facility. |
114 Shahid Malik PRESIDENT PSEG ENERGY RESOURCES & TRADE company’s strategy and operations and led a successful turnaround of the company, achieving significant growth in products and services while reducing costs. Mr. Malik’s career has included Executive Leadership positions with several energy companies in the US and Europe. In addition, he served on the Board of Directors of South Jersey Industries (NYSE: SJI) immediately prior to joining PSEG. Mr. Malik has been in the energy business for more than 20 years, since receiving his Economics degree from Manchester University in England and an MBA from Rice University, Houston. He sits on the Executive Committee of the Board of Trustees of Newark Museum as well as the Board of the Electric Power Suppliers Association in Washington DC. Shahid Malik was elected President of PSEG Energy Resources & Trade (ER&T) in 2011. PSEG operates one of the most balanced generation and marketing portfolios in the country, both in terms of fuel mix and market segment (base load units, load following units and peaking units), and Mr. Malik is essentially responsible for managing these assets and taking them to market. He oversees PSEG’s generation portfolio and the purchase, sale and risk management of all energy commodities. Mr. Malik has an extensive background in the energy industry across the oil, gas, electric and renewable energy sectors in Europe and the United States. Previously, he was with Pittiglio, Rabin, Todd & McGrath (PRTM) in Pittsburgh, PA and was responsible for all aspects of the global energy business, with a primary focus on the North American utility sector. Prior to that he served as President & CEO of Strategic Energy, Great Plains Energy’s retail marketing subsidiary and a provider of energy and services to business clients in North America. He was accountable for the |
115 Derek M. DiRisio PRESIDENT PSEG SERVICES CORPORATION Derek M. Di Risio was named President, PSEG Services Corporation, in July 2014. He is responsible for the coordination and delivery of several centralized services currently residing within PSEG Services Corporation including corporate communications, corporate citizenship, corporate real estate, information technology, procurement, payroll and other transactional services. Prior to his current role, Mr. Di Risio was vice president and controller of Public Service Enterprise Group (PSEG), Public Service Electric and Gas Company (PSE&G), PSEG Services Corporation, PSEG Energy Holdings (Holdings) and PSEG Power, a position he assumed in December 2006. He was previously vice president and assistant controller, since July 2004. Mr. Di Risio had been vice president – planning and analysis of Holdings since March 2004, and vice president – controller for Holdings since July 1998. Prior to that he was director – accounting services and responsible for several accounting and planning functions for Holdings, including overall coordination of the business planning process, accounting research and policy development, financial forecasts and analysis. Mr. Di Risio was also responsible for the budgeting, analysis and reporting process for PSE&G. Mr. Di Risio joined PSE&G in September 1991 and has held a variety of positions, including assignments with the internal auditing, electric business, and corporate planning departments. He was instrumental in reengineering the Enterprise business planning process, and advancing the use of performance metrics and balanced scorecard measures to improve business results. Prior to joining PSE&G he worked for several firms, including Chase Manhattan Bank. Mr. Di Risio graduated from Rutgers University with a degree in accounting/computer science, and received a Master of Business Administration degree from the same university. He is a certified public accountant (inactive) and a certified internal auditor. Mr. Di Risio also completed the Program for Management Development at the Graduate School of Business Administration of Harvard University. He served on the Drew University Board of Trustees and is currently a co-chairman of the Board of Directors of the New Jersey All Stars Project Inc. |
116 PRESIDENT AND CHIEF NUCLEAR OFFICER PSEG NUCLEAR Thomas P. Joyce Thomas P. Joyce was named president and chief nuclear officer of PSEG Nuclear (Nuclear), in October 2008. Mr. Joyce has announced his retirement from PSEG effective the end of March 2015. He had been senior vice president – operations of Salem/Hope Creek for Nuclear, since June 2007. Mr. Joyce was also vice president – Salem, since January 2007, and previously assumed the role of PSEG Nuclear’s site vice president as part of the Nuclear Operating Services Agreement between PSEG and Exelon Corporation in 2005. PSEG Nuclear’s Salem and Hope Creek Generating stations comprise the second largest commercial nuclear power facility in the United States. Together the units provide enough electricity for three million homes. Together the plants also provide 49 percent of New Jersey’s electricity. Mr. Joyce has more than 38 years of experience in commercial nuclear power operations. Under his leadership as president and chief nuclear officer, Salem and Hope Creek combined to set a new site generation record in 2009. In 2011, the stations also received approval from the Nuclear Regulatory Commission (NRC) to extend their operating licenses an additional 20 years. Reinforcing the company’s strong ties to the local community, the license renewal approvals did not encounter any formal legal contentions like many other plants across the country. While leading Salem, the station completed two successful reactor vessel head replacement outages. Salem Unit 1 completed its outage capturing the world record for shortest head replacement outage. Prior to coming to PSEG Mr. Joyce was site vice president at Exelon Nuclear’s Braidwood Station. During his tenure the station achieved overall performance improvements and retained their excellent INPO rating. The plant completed a refueling in 15 days, 14 hours – setting a record for outage efficiency among U.S. pressurized water reactors. Before serving at Braidwood he held leadership positions at Exelon’s Byron, Dresden, and Zion Stations, and in the corporate offices of both Exelon Corporation and Exelon Nuclear. Mr. Joyce holds a Bachelor of Science degree in nuclear engineering from the University of Missouri at Rolla, and a Master of Business Administration degree from the Keller Graduate School of Management. While at Byron, he earned his senior reactor operators (SRO) license. A recognized leader in the nuclear industry, Mr. Joyce currently serves as chairman of the Utilities Service Alliance (USA). The organization is comprised of eight of America’s leading electric utilities operating 14 nuclear reactors located at 10 stations. Its two major objectives are to improve individual plant and fleet performance and to reduce operating and maintenance costs. Mr. Joyce also chairs the Nuclear Energy Institute’s (NEI) Emergency Preparedness Working Group and the EPRI Nuclear Power Council. |
117 Richard P. Lopriore PRESIDENT PSEG FOSSIL Mr. Lopriore has been a valuable part of the electric generation industry for more than 43 years. Prior to joining PSEG Fossil, he had been senior vice president - mid-Atlantic operations for Exelon Nuclear, responsible for oversight of the Limerick, Peach Bottom, Oyster Creek and Three Mile Island stations. During his tenure, Three Mile Island achieved INPO 1 status (2007). From 1997-1999, Mr. Lopriore was an Executive Advisor for Ontario Hydro Nuclear Power Plant’s recovery and performance improvement program. Mr. Lopriore joined Exelon as plant manager of Byron Stations in 1999 and was promoted to site vice president in 2001. In 2003 he became corporate vice president - operations support at Exelon’s nuclear headquarters, responsible for both the Midwest and mid-Atlantic regions. He then became vice president - operations, Midwest boiling water reactors in 2004 responsible for the Dresden, LaSalle County, Quad Cities and Clinton nuclear plants. Prior to Exelon, Mr. Lopriore held several key management positions at the Brunswick Nuclear Plant in North Carolina, including plant manager. At Vermont Yankee, he achieved an operational SRO certification for Boiling Water Reactors. Mr. Lopriore received his Bachelor of Science degree from Southern Vermont College and is a member of the American Nuclear Society. He also served in the National Guard. Richard P. Lopriore was elected president of PSEG Fossil in May 2007. He oversees operations for 13 generation facilities spanning four states. He is also responsible for the oversight of two service groups: Laboratory & Testing Services, and Maintenance & Repair Services. Additionally, he is responsible for Construction, Capital Projects and Engineering. The PSEG Fossil fleet is comprised of natural gas, coal and oil-fired electric generating units that contribute about 9,700 megawatts of electricity to PSEG Power’s generation portfolio. This includes an ownership interest of 1,000 megawatts in three jointly-owned facilities. Under Lopriore’s leadership, nine LM6000 peaking units were constructed. Fossil also outfitted its two New Jersey coal plants with about $1.5 billion in new pollution control equipment resulting in substantial reductions in emissions. These plants are among the cleanest, most responsible coal stations in the country. Mr. Lopriore instituted an in-depth Operational Excellence Model (OEM), one of the first programs in the nation to drive standardization across a Fossil fleet. The program resulted in consistent improvement in operating results, reliability and fleet performance and the achievement of all-time generation records. He also revamped PSEG Fossil’s training program. Two industry-first, award-winning mobile training trailers were developed to take training directly to the work sites reducing costs and increasing productivity. |
118 Robert C. Braun SENIOR VICE PRESIDENT & CHIEF OPERATING OFFICER PSEG NUCLEAR Robert C. Braun was elected President and Chief Nuclear Officer to succeed Thomas Joyce, upon Mr. Joyce’s retirement at the end of March 2015. Mr. Braun will continue to be responsible for the day-to-day operations of PSEG’s Salem and Hope Creek Generating Stations. He will report directly to William Levis, and be a member of PSEG’s Executive Officers Group. Mr. Braun was named senior vice president and chief operating officer of PSEG Nuclear, in September 2012. He had been senior vice president – PSEG Nuclear since 2009. Mr. Braun joined PSEG Nuclear in March 2007 as vice president of Operations Support. Mr. Braun has more than 30 years of experience in commercial nuclear power operations. Previously, Mr. Braun was site vice president of Exelon Corporation’s Peach Bottom Atomic Power Station. Prior to his appointment at Peach Bottom, he was vice president – nuclear oversight of Exelon’s nuclear group headquarters and previously served as plant manager of the company’s Limerick Generating Station, where he held a senior reactor operator license. Mr. Braun began his career at Limerick in 1982. Mr. Braun has a Bachelor of Mechanical Engineering degree from Villanova University and earned his Senior Reactor Operator (SRO) license while at Exelon. |
119 Margaret M. Pego, SPHR SENIOR VICE PRESIDENT – HUMAN RESOURCES AND CHIEF HUMAN RESOURCES OFFICER PSEG SERVICES CORPORATION Margaret M. Pego was named senior vice president – human resources and chief human resources officer of PSEG Services Corporation in December 2006. Prior, she had been vice president – human resources. Ms. Pego joined PSEG in 1974, and has held a variety of management positions in the human resources department. Ms. Pego holds a Bachelor of Arts degree in business administration from William Paterson College, and a Master of Business Administration degree with a concentration in management and labor relations from Seton Hall University. In addition, she holds a certificate in EEO studies from Cornell University, and has completed the Human Resources Executive Program at the University of Michigan. She is also certified as a senior professional in human resources. Ms. Pego was named one of 2013’s HR Top 10 Breakaway Leaders by Evanta, a leading organization that fosters leadership development and collaborative exchange among North America’s top executives. Ms. Pego is active in several local and national organizations, including the EEI Chief HR Executive Advisory Committee; the American Gas Association HR Policy Committee; the Conference Board Advisory Council of HR Management – Council of HR Executives; and the Society for Human Resources Management. In addition, she is Chair of the Children’s Specialized Hospital Board, a member of the Children’s Specialized Hospital Foundation Board, RWJ Health Care Corporation Board and Rutgers Business School. She is the former Chair of the Center for Energy Workforce Development (CEWD) Executive Council. She is a former member of the Supreme Court of New Jersey Attorney Ethics Committee. Ms. Pego is a 2002 Leadership New Jersey fellow, 1997 TWIN Honoree, 2006 Executive Woman of New Jersey Honoree and 2008 NJ Best 50 Women in Business Honoree. |
120 PSE&G APPENDIX |
121 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, EXCLUDING MAJOR EVENTS. SOURCES: PSE&G PEER PANEL STUDY, FIRST QUARTILE BENCHMARK STUDY AND VARIOUS REGULATORY REPORTS.. |
122 PSE&G prioritizes public safety while maintaining value to customers LEAK RESPONSE RATE = PERCENTAGE OF UTILITY RESPONSES TO REPORTED LEAKS WITHIN ONE HOUR. SOURCES: PSE&G PEER PANEL STUDY AND AGA BENCHMARK STUDY. |
123 PSEG POWER AND ER&T APPENDIX |
124 $0 $5 $10 2015 2016 2017 Nuclear fuel needs have been hedged through 2017 Anticipated Nuclear Fuel Cost Hedged |
125 Power’s coal hedging reflects 2015 supply matched with 2015 sales Contracted Coal Station Coal Type Pricing ($/MWh)* Comments Bridgeport Harbor Adaro Low $40’s Higher price, lower BTU, enviro coal Hudson CAPP Mid $40’s Coal/Gas Fuel Flexibility Mercer Metallurgical CAPP/NAPP Mid $40’s More limited segment of coal market Keystone NAPP Mid $20’s Prices steady Conemaugh NAPP Mid $20’s Prices steady % Hedged (left scale) $/MWh (right scale) *COMMODITY PLUS TRANSPORTATION $0 $10 $20 $30 $40 $50 0% 20% 40% 60% 80% 100% 2015 2016 2017 |
126 PSEG Power value advantaged by asset diversity, fuel flexibility and location Fuel Diversity* Total MW: 13,146 Energy Produced* Total GWh: 54,162 Energy Market Served* Total MW: 13,146 *2014, EXCLUDES SOLAR AND KALAELOA. **INCLUDES NEW JERSEY UNITS THAT FUEL SWITCH TO GAS. Load Following Peaking Base load Gas Pumped Storage Nuclear Oil Coal** Gas Pumped Storage Nuclear Oil Coal** |
127 The full requirements BGS rate recognizes the forward PJM capacity market price Capacity Price per BGS Tranche 2015-2016 166 $ Three Year Average ($/MW-day) $173 2016-2017 177 $ Average MW per Tranche (varies by EDC) 111 2017-2018 175 $ Days per Year 365 173 $ 7,007,656 $ MWh per Tranche Average MW per Tranche (varies by EDC) 111 Hours per Year 8,768 Load Factor (varies by EDC) ~37% MWh per Tranche, approx. 355,000 Capacity Cost per MWh 20 $ Capacity Price per RPM Auction for PSEG Zone Average Capacity Price ($/MW-day) Average Capacity Cost per Tranche |
128 PSEG FINANCIAL APPENDIX |
129 Power Cash from Ops ~$1.4B Power Cash Investment (1) ~0.7B Dividend to Parent ~$0.9B Power 2014 Cash Flows Free Cash Flow ~$0.7B Cash Used ~$0.2B (2) In 2014, Power had significant free cash flow (1) POWER CAPITAL INVESTMENT INCLUDES NUCLEAR FUEL AND EMISSION PURCHASES (2) POWER INVESTED CASH BALANCE DECREASED FROM ~$0.8B TO ~$0.6B ~$0.7B Shareholder dividend ~$0.2B Capital contribution to PSE&G $0.0 $0.5 $1.0 $1.5 |
130 PSE&G Cash from Ops (1) ~$1.6B PSE&G Cash Investment ~$2.2B In 2014, PSE&G used $1.6B of internally generated cash flow and debt to invest over $2B while maintaining its capital structure (1) PSE&G CASH FROM OPERATIONS ADJUSTS FOR SECURITIZATION PRINCIPAL REPAYMENTS OF ~$240 MILLION. Cash Invested ~$0.3B PSE&G 2014 Cash Flows PSE&G Net Debt ~$0.7B Parent Capital Contribution ~$0.2B $0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 |
131 December 31, 2014 $ Billions PSEG PSE&G Power Cash and Cash Equivalents $0.4 $0.3 $0.0 Short Term Debt $0.0 $0.0 N/A Long Term Debt (1) 8.9 6.3 2.5 Common Equity 12.2 6.8 5.6 Total Capitalization $21.1 $13.1 $8.1 Total Debt / Capitalization 42% 48% 31% PSE&G Regulated Equity Ratio (2) 51.4% Our balance sheet remains strong (1)INCLUDES L-T DEBT DUE WITHIN 1 YEAR; EXCLUDES SECURITIZATION DEBT OF $259 MILLION AND NON-RECOURSE DEBT OF $16 MILLION. (2)REGULATED EQUITY RATIO INCLUDES CUSTOMER DEPOSITS OF ~$98 MILLION AND EXCLUDES SHORT-TERM DEBT. |
132 PSEG Liquidity as of December 31, 2014 Expiration Total Available Company Facility Date Facility Usage Liquidity ($Millions) PSE&G 5-year Credit Facility Mar-18 $600 1 $14 $586 5-Year Credit Facility (Power) Apr-19 $1,600 $97 $1,503 5-Year Credit Facility (Power) Mar-18 $1,000 $0 $1,000 5-Year Bilateral (Power) Sep-15 $100 $100 $0 5-year Credit Facility (PSEG) Apr-19 $500 $8 $492 5-year Credit Facility (PSEG) Mar-18 $500 3 $0 $500 Total $4,300 $219 $4,081 1 PSE&G Facility to be reduced by $29M on April 15, 2016 $71 2 Power Facility to be reduced by $48M on April 15, 2016 PSE&G ST Investment $294 3 PSEG Facility to be reduced by $23M on April 15, 2016 Total Liquidity Available $4,446 Total Parent / Power Liquidity $3,566 PSEG / Power PSEG Money Pool ST Investment 2 |
133 PSEG Energy Holdings Investment Portfolio Equipment Investment Balance* at 12/31/14 ($Millions) Merchant Energy Leases NRG REMA Keystone, Conemaugh & Shawville (PA) 3 coal-fired plants (1,162 equity MW) 354 NRG Energy, Inc./Midwest Gen** 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) 146 Grand Gulf Nuclear station in Mississippi (175 equity MW) 55 Real Estate Leveraged Leases GM Renaissance Center; Wal-Marts; E-D (shopping) Centers 62 Real Estate Operating Leases Office Towers, Shopping Centers - 28 properties 42 Generation Legacy Assets GWF (in wind down stage), GSOE 2 Other Land 5 Total Holdings Investments $884 * BOOK BALANCE EXCLUDING DEFERRED TAX ACCOUNTS. **EME WAS ACQUIRED BY NRG ON APRIL 1 2014. |
134 PSEG 2014 operating earnings up 7% * SEE SLIDE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/NET INCOME TO RECONCILE TO OPERATING EARNINGS. Operating Earnings Earnings per Share $ Millions (except EPS) 2014 2013 2014 2013 PSE&G $ 725 $ 612 $ 1.43 $ 1.21 PSEG Power 642 710 1.27 1.40 PSEG Enterprise/Other 33 (13) 0.06 (0.03) Operating Earnings* $ 1,400 $ 1,309 $ 2.76 $ 2.58 Twelve Months ended December 31 |
Items Excluded from Income from Continuing Operations/Net Income to Reconcile to Operating Earnings PLEASE SEE PAGE 3 FOR AN EXPLANATION OF PSEG’S USE OF OPERATING EARNINGS AS A NON-GAAP FINANCIAL MEASURE AND HOW IT DIFFERS FROM NET INCOME. (a) Includes the financial impact from positions with forward delivery months. A 2014 2013 2012 2011 2010 2009 Earnings Impact ($ Millions) Operating Earnings 1,400 $ 1,309 $ 1,236 $ 1,389 $ 1,584 $ 1,567 $ Gain (Loss) on Nuclear Decommissioning Trust (NDT) Fund Related Activity (PSEG Power) 68 40 52 50 46 9 Gain (Loss) on Mark-to-Market (MTM) (a) (PSEG Power) 66 (74) (10) 107 (1) (11) Lease Transaction Activity (PSEG Enterprise/Other) - - 36 (173) - 29 Storm O&M (PSEG Power) (16) (32) (39) - - - Market Transition Charge Refund (PSE&G) - - - - (72) - Gain (Loss) on Asset Sales and Impairments (PSEG Enterprise/Other) - - - 34 - - Income from Continuing Operations 1,518 $ 1,243 $ 1,275 $ 1,407 $ 1,557 $ 1,594 $ Discontinued Operations - - - 96 7 (2) Net Income 1,518 $ 1,243 $ 1,275 $ 1,503 $ 1,564 $ 1,592 $ Fully Diluted Average Shares Outstanding (in Millions) 508 508 507 507 507 507 Per Share Impact (Diluted) Operating Earnings 2.76 $ 2.58 $ 2.44 $ 2.74 $ 3.12 $ 3.09 $ Gain (Loss) on NDT Fund Related Activity (PSEG Power) 0.13 0.08 0.10 0.10 0.09 0.02 Gain (Loss) on MTM (a) (PSEG Power) 0.13 (0.14) (0.02) 0.21 - (0.02) Lease Transaction Activity (PSEG Enterprise/Other) - - 0.07 (0.34) - 0.05 Storm O&M (PSEG Power) (0.03) (0.07) (0.08) - - - Market Transition Charge Refund (PSE&G) - - - - (0.14) - Gain (Loss) on Asset Sales and Impairments (PSEG Enterprise/Other) - - - 0.06 - - Income from Continuing Operations 2.99 $ 2.45 $ 2.51 $ 2.77 $ 3.07 $ 3.14 $ Discontinued Operations - - - 0.19 0.01 - Net Income 2.99 $ 2.45 $ 2.51 $ 2.96 $ 3.08 $ 3.14 $ (Unaudited) For the Year Ended December 31, PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED Reconciling Items, net of tax |