Exhibit 99
New York New York
John Diaz Mo Ying W. Seto
Managing Director Senior Vice President
Corporate Finance Corporate Finance
Moody's Investors Service Moody's Investors Service
JOURNALISTS: 212-553-0376 JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653 SUBSCRIBERS: 212-553-1653
MOODY'S AFFIRMS RATINGS FOR PUBLIC SERVICE ELECTRIC AND GAS COMPANY (A3 SR.
SEC.) WITH STABLE OUTLOOK. MOODY'S ALSO AFFIRMS THE DEBT RATINGS OF PUBLIC
SERVICE ENTERPRISE GROUP INC. (Baa2 SR. UNSEC.), PSEG POWER LLC (Baa1 SR.
UNSEC.) AND PSEG ENERGY HOLDINGS LLC (Baa3 SR. UNSEC.), BUT CHANGES THEIR
OUTLOOK TO NEGATIVE
Approximately $15.9 Billion of Debt Affected
- -----------------------------------------------
New York, [October 11, 2002] -- Moody's affirmed the debt ratings of Public
Service Electric and Gas Company (A3 senior secured) with a stable outlook. At
the same time, Moody's affirmed the debt ratings of Public Service Enterprise
(Enterprise) Group Inc., (Baa2 senior insecured), PSEG Power (Power) LLC (Baa1
senior unsecured), and PSEG Energy Holdings (Energy Holdings) LLC (Baa3 senior
unsecured), but changed their outlook to negative. Moody's action stems from
pressures at Energy Holdings' portfolio of investments in Latin America and in
leases to the merchant energy sector. In addition, Power faces renewal of its
contracts in the near term at time of weaker power prices, which could result in
lower margins and cash flow from this subsidiary.
Ratings confirmed include the following:
Public Service Electric and Gas Company's A3 first mortgage bonds; its A3 senior
secured pollution control revenue bonds; its shelf registration of senior
secured debt rated (P)A3, senior unsecured debt rated (P)Baa1 and subordinated
debt/preferred stock rated (P)Baa2(P)Baa3; its revolving credit facilities rated
Baa1; and its Baa1 issuer rating. Also confirmed are Public Service Electric and
Gas Capital L.P.'s preferred securities rated Baa2; PSE&G Capital Trust II's
preferred securities rated Baa2; PSE&G Capital III's and IV's shelf registration
of preferred securities rated (P)Baa2; and Public Service Electric and Gas
Company's Prime-2 short-term rating for commercial paper.
Energy Holdings is an intermediate holding company for both PSEG Resources
(Resources) and PSEG Global (Global). Energy Holdings' revenues and earnings
represented 11% and 20% of Enterprise's consolidated revenues and earnings,
respectively. Resources has passive investments in leveraged and cross-border
leases. Resources' foreign leases are denominated in and payable in U.S.
dollars. However, the credit quality of certain domestic Resources' leveraged
leases has deteriorated recently. However, 75% of Resources' leases are rated
investment grade. Global develops, owns and operates regulated distribution
utility systems and electric generation in the U.S., Brazil, Chile, Peru,
Poland, Venezuela, Tunisia, Taiwan, and China. Global's investments continue to
be exposed to weakened economics in both the U.S. and abroad, as well as
political and currency risks. All of Global's Argentina investments ($380
million after-tax) were written off in the second quarter of 2002. While Energy
Holdings' cash flow and earnings are diversified, such contributions to
Enterprise's consolidated financial results continue to be very modest.
Moody's said that significant portions of Power's supply is contracted
indirectly to its regulated transmission and distribution affiliate, Public
Service Electric and Gas (PSE&G) and other regulated New Jersey utilities, and
such contracted obligations currently extend through July 31, 2003. However, the
New Jersey Board of Public Utilities (NJBPU) will conduct its next competitive
supply auction in early 2003. At this point, the future terms of such
competitive supply contracts have yet to be determined. The New Jersey
regulators could potentially consider two-year power contracts or one-year
contracts with extension options. While Power has a balanced portfolio with
strong locational advantages, the overall outlook for wholesale power markets
continues to be weak. Although energy prices are currently higher than they were
at the time of initial auction, we believe that future contracted revenues for
Power could result in lower margins than under the current Basic Generation
Service (BGS) contracts it has with suppliers to New Jersey utilities.
Although PSE&G's regulated transmission and distribution business is less risky
than the unregulated generation business, its electric rates have been capped
since August 1999. In addition, the utility has reduced its rates by 13.7%
during the transition period over the last few years. Through the BGS contract,
PSE&G's commodity and price risks are mitigated through July 31, 2003. In May
2002, PSE&G, as required for the state's electric utilities, filed an
application with the NJBPU for a $250 million, or 12.8% increase in electricity
distribution revenues. The NJBPU is expected to issue a rate order by mid-2003
for the new rates to go into effect on August 1, 2003, the end of the
competitive transition period. We believe that the New Jersey regulators would
likely issue a reasonable rate decision next year. In early 2003, the NJBPU will
conduct a second competitive supply auction in order for the state regulated
transmission and distribution utilities to lock in BGS contracts for yet-to-be
determined periods to serve their provider of last resort customers who do not
choose alternative supplies but remain with the incumbent utilities.
Moody's will monitor the quality of Energy Holdings' portfolio. Further
deterioration in the portfolio could lead to further negative rating action.
However, improvement in the portfolio, or a significant reduction in financial
leverage could help to stabilize its rating.
We will also monitor the outcome of the competitive supply auction. Power's
ability to win sound contracts in the auction, particularly if those contracts
are for longer terms, would also help to stabilize its rating.
Public Service Enterprise Group, Inc., a diversified energy holding company, is
headquartered in Newark, New Jersey.
end