Public Service Enterprise Group Incorporated · NYSE:PEG
Public Service Enterprise — Investor Day (March 2017)
115 slides from Public Service Enterprise's investor day presentation, March 2017
Slide 1: We have the energy to make things better
We have the energy to make things better … for you, for our investors and for our stakeholders. 1
Slide 2: Forward-Looking Statements
Forward-Looking Statements Certain of the matters discussed in this presentation 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 “forwa
Slide 3: GAAP Disclaimer
GAAP Disclaimer PSEG presents Operating Earnings and Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) in addition to its Net Income reported in accordance with accounting principles generally accepted in the United States (GAAP). Operating Earnings and Adjusted EBITDA
Slide 4: 2017 PSEG Conference Agenda
2017 PSEG Conference Agenda Presentation Presenter Welcome and Introductions Kathleen Lally PSEG Ralph Izzo Regulatory & Policy Overview Tamara Linde PSE&G Ralph LaRossa Q&A Session Break PSEG Power William Levis Q&A Session Financial Review & Outlook Dan Cregg Summary and Q&A Conference Conclusion
Slide 5: PSEG Strategy: Growing a High-Quality, Financially Sound Energy Infrastructure Company
PSEG STRATEGY: GROWING A HIGH-QUALITY, FINANCIALLY SOUND ENERGY INFRASTRUCTURE COMPANY Ralph Izzo CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
Slide 6: PSEG Strategy - Delivering Value
PSEG Strategy - Delivering Value Operational Excellence: Improving reliability and customer service as we control costs in a low price environment Financial Strength: Strong financial position supports investment program DISCIPLINED Disciplined Investment: INVESTMENT • Program focused on achieving o
Slide 7: Two strong businesses
Two strong businesses A stable platform, each with growth opportunities Electric & Gas Delivery Regional Competitive Generation and Transmission Strategy: Investments aligned with public Strategy: Investment program enhances policy and customer needs competitive position with addition of efficient,
Slide 8: Focus on building a reliable, efficient, clean energy infrastructure
Focus on building a reliable, efficient, clean energy infrastructure 2012 2013 2014 2015 2016 Selected Accomplishments • Award winning • Expanded Solar • Energy Strong • Gas System • Solar 4 All Superstorm Sandy investment program Modernization Extension storm response • 90% nuclear approved Program
Slide 9: Delivering on commitments and realizing growth
Delivering on commitments and realizing growth • PSE&G: 15 consecutive years of recognition as the most reliable utility in the Mid- Atlantic region Operational • PSEG Power: Lowest CCGT EFORd in last 5 years, while moving the fleet towards improved efficiency and environmental position Excellence •
Slide 10: PSEG 5-Year Results
PSEG 5 -- Year Results GAAP: Contribution to Non-GAAP*: Contribution to PSEG Net Income ($ Millions) PSEG Operating Earnings ($ Millions) and Net Income per share ($/Share) and Operating Earnings per share ($/Share) 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 *SEE SLIDE A FOR ITEMS EXCLUDED FR
Slide 11: Growth in operating earnings and dividends
Focus on earning our cost of capital has provided for growth in operating earnings* and dividends Non-GAAP Operating Earnings* Dividends 2012-2016 CAGR 2012-2016 CAGR ~4% ~4% 3.0 $2.91 $2.90 2.0 $2.76 $2.58 $2.44 $1.64 $1.56 $1.44 $1.48 $1.42 2.0 $/share $ EPS 1.0 1.0 0.0 0.0 2012 2013 2014 2015 201
Slide 12: Earnings profile with growth at PSE&G has been transformed
Earnings profile with growth at PSE&G has been transformed Non-GAAP Operating Earnings* Contribution by Subsidiary Power’s locational and fuel cost advantage generate free cash flow in low price environment PSE&G’s earnings contribution has increased with growth in capital program *SEE SLIDE A FOR I
Slide 13: Baseline programs yield 7% compound annual growth in rate base
Baseline programs yield 7% compound annual growth in rate base 4,000 2017-2021E PSE&G Capital Spending 3,500 $12.3 Billion Baseline Investment 3,000 2,500 ($ Millions) 2,000 1,500 1,000 500 0 2017E 2018E 2019E 2020E 2021E Transmission Distribution Solar Energy Efficiency 2016 Annual Financial Conf.
Slide 14: PSE&G has a track record of identifying capital investment opportunities
PSE&G has a track record of identifying opportunities for capital investment PSE&G 2017 Forecasted Capital 4,000 3,500 3,000 2,500 ($ Millions) 2,000 1,500 1,000 500 0 2017 in 2013 2017 in 2014 2017 in 2015 2017 in 2016 2017E Annual Financial Conference Forecast E = ESTIMATE. 14
Slide 15: Expansion/Extension of existing baseline programs
Expansion/Extension of existing baseline programs enhances reliability for our customers 4,000 2017-2021E PSE&G Capital Spending 3,500 $13.8 Billion; 9% Rate Base CAGR 3,000 2,500 ($ Millions) 2,000 1,500 1,000 500 0 2017E 2018E 2019E 2020E 2021E Transmission Distribution Solar Energy Efficiency Pot
Slide 16: PSE&G investment program provides 7%-9% growth in rate base
PSE&G’s investment program provides for 7%–9% growth in rate base Year-end Rate Base with extension / expansion of current programs $ Millions E = ESTIMATE. 16
Slide 17: Managing total costs to customers
Executing on investment program and continuing to manage the total costs to customers PSE&G Typical Residential Customer Bills 2009-2017E* Electric Gas $1,800 $1,800 $1,600 $1,600 $1,400 $1,400 $1,200 $1,200 $1,000 $1,000 $800 $800 $600 $600 $400 $400 $200 $200 $0 $0 2009 2010 2011 2012 2013 2014 20
Slide 18: Power's fleet to be transformed with new investment
Power’s fleet to be transformed with new investment and improvement in efficiency Projected Fleet Comparison 2016 to 2021E 2021E Fuel Diversity1 2021E Energy Produced1 Total MW: 11,900 Total GWh: 61,000 2016 Fuel Diversity 2016 Energy Produced Total MW: 11,577 Total GWh: 51,510 At conclusion of Powe
Slide 19: Nuclear outlook is increasingly challenged
Nuclear outlook is increasingly challenged 6 plant closures 2 state interventions National Legislation pending in CT New Jersey PJM Grid 2020 study Impacts Economy/Jobs Emissions New No sustainable wind resource Lack of open space for solar Cost to replace Jersey fields; RPS Standards; Marcellus gas
Slide 20: Investment programs provide opportunity for growth
Investment programs provide opportunity for growth 2017E Non-GAAP Operating 2017-2021E Earnings Guidance Total Capital** Contribution* 9% annual growth PSE&G ~$13.8B in rate base with expansion/extension 66% of existing programs Power 32% ~18% GWh growth Enterprise/ Other ~$2.6B from efficient, low
Slide 21: Long-term opportunities to invest in the grid
Long-term opportunities to invest in the grid supports performance and enables customer access Utility of the Future Integration of Infrastructure with Customer Access Renewables 2017-2021 Expanded Energy Efficiency Upgrade of Aging Infrastructure Opportunity for a continuation of 2012-2016 PSE&G’s
Slide 22: Our commitment to customers, community, employees, environment
Our commitment to customers, community, employees, the environment, innovation and operational excellence is widely recognized Industry Employer Commerce & Industry Association of NJ award Linden CCGT for embracing recognizing commitment to PA Consulting Mid-Atlantic advanced digital monitoring Top
Slide 23: PSEG's Value Proposition
PSEG’s Value Proposition • A stable platform with a robust investment pipeline providing opportunity for growth • PSE&G – Delivering on promise for rate base growth through disciplined investment, customer satisfaction and safety • PSEG Power – Efficient, low-cost, clean fleet advantaged by asset di
Slide 24: PSEG Regulatory & Policy Review
PSEG REGULATORY & POLICY REVIEW Tamara Linde EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
Slide 25: Regulatory & Policy Review - Agenda
Regulatory & Policy Review - Agenda • PSE&G Investment Program Recap • PSE&G 2017 Base Rate Case Filing • Regulatory Reform in NJ • Preserving Nuclear Generation • Federal Regulatory Framework • Summary 25
Slide 26: PSE&G approved multi-year investment programs
PSE&G has received approval for 15 multi-year investment programs that advance state energy goals 2008/ 2011 2013 2014 2015 2015 2016 2009 Selected Accomplishments • Capital • Energy Efficiency • Solar Loan III • Energy Strong • Energy Efficiency • Solar 4 All Infrastructure I Extension Extension II
Slide 27: PSE&G plans to file Distribution Base Rate Case
PSE&G plans to file Distribution Base Rate Case proceeding no later than November 1, 2017 Support Opportunity • Requirement of 2014 • Establish/update rate Energy Strong settlement design, capital structure and depreciation • Update for known changes in sales growth forecast, • Pursue decoupling O&M
Slide 28: NJ Distribution Base Rate Case Timeline
NJ Distribution Base Rate Case Timeline Months 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Rate Case Filing is Made Discovery Commences Settlement Conferences Rate Counsel Intervenor Testimony Company Rebuttal and Company Updates For Latest Test Year Results Evidentiary Hearing Initial Brief – One mon
Slide 29: New Jersey Long-term Infrastructure Regulatory Reform
New Jersey – Long-term Infrastructure Regulatory Reform with Customer Focus Support Opportunity • Alignment with community • PSE&G will be seeking and customer needs approval of multi-year programs that extend • NJ Energy Master Plan existing efforts to improve • Support extension of our system resi
Slide 30: Preserving Existing Nuclear Power Plants
Preserving Existing Nuclear Power Plants as Part of a Resilient Energy System Support Opportunity • Generation from Power’s • Preserve highly reliable, nuclear units produces clean resources as part of a ~40% of NJ supply and diverse energy portfolio provides 97% of NJ’s carbon free energy • Preserv
Slide 31: What are other states doing to preserve nuclear generation?
What are other states doing to preserve at-risk nuclear generation? New York Illinois Connecticut Ohio April 2016 November 2016 2017? 2017? Clean Energy Standard Future Energy Jobs Bill Connecticut Legislature Legislative action approved by NYPSC enacted establishing a currently debating clean under
Slide 32: Federal Regulatory Framework
Federal Regulatory Framework – Ensuring market structures recognize the value of reliable, diverse and clean dispatchable generation Support Opportunity • FERC is driving ISOs to • Advocate for market improve market solutions that fairly constructs and rules on compensate generators energy pricing f
Slide 33: PSEG Regulatory and Policy focus
PSEG Regulatory and Policy focus on mechanisms that provide customers clean, affordable, resilient energy supply NJ Distribution Base Rate Proceeding • True-up data from 2010 base rate case for known changes in customers usage, taxes, O&M and investments Long-Term Infrastructure Investment Platform
Slide 34: PSE&G
PSE&G Ralph LaRossa P R E S I D E N T A N D C H I E F O P E R AT I N G O F F I C E R PUBLIC SERVICE ELECTRIC & GAS
Slide 35: Discussion topics
Discussion topics • Overview of PSE&G - Strategy and delivering results • Operational excellence • Capital investment program • 2017 Distribution rate case filing • Customer rates 35
Slide 36: PSE&G - New Jersey's largest utility
PSE&G –New Jersey’s largest: • Electric and Gas Distribution utility • Transmission business • Investor in renewables and energy efficiency • Appliance service provider Electric Gas Customers 2.2 Million 1.8 Million Growth (2012 – 2016) 0.5% 0.4% 41,580 2,360M 2016 Electric and Gas Sales GWh Therms*
Slide 37: PSE&G strategy
PSE&G strategy Building a sustainable DISCIPLINED platform that INVESTMENT balances reliability, ENGAGED customer rates WORKFORCE and public FINANCIAL OPERATIONAL policy to ensure STRENGTH EXCELLENCE growth at reasonable returns 37
Slide 38: Delivering on Our Promises
Delivering on Our Promises Operational • Strong safety, reliability and customer service record Excellence • Cost control efforts have led to flat O&M • Achieved 5-year annual growth in net income of 11% Financial • Achieved 5-year annual growth in rate base of 13% Strength • Maintaining solid inves
Slide 39: Operational Excellence - Safety
Operational Excellence - Safety • Management focus and collaboration with unions resulted in top decile safety performance in 2016 SOURCE: PSE&G 39
Slide 40: Operational Excellence - Reliability
Operational Excellence - Reliability Consistently recognized for customer reliability Our system performance, as measured by Named most reliable electric utility System Average Interruption Duration Index in the Mid-Atlantic region for 15th (SAIDI), has consistently been among the consecutive year b
Slide 41: Operational Excellence - Customer satisfaction
Operational Excellence - Customer satisfaction PSE&G has improved on an absolute and relative basis compared to its peers over the past five years JD Power Residential and Business Scores 41
Slide 42: Operational Excellence - O&M costs
Operational Excellence – O&M costs PSE&G O&M Expense 1,200 2012 to 2017E CAGR = 0.5% 1,000 Demonstrated ability to control O&M, $Millions 800 preserving earnings 600 and returns in a low 400 sales growth 200 environment - 2012 2013 2014 2015 2016 2017E Distribution Transmission Cost control actions:
Slide 43: Disciplined Investment - Delivering annual growth
Disciplined Investment – Delivering annual growth $ Millions $ Millions 16,000 Rate Base and Net Income 900 CAGR 13% and 11% 14,000 800 12,000 700 600 10,000 Net Income Rate Base 500 8,000 400 6,000 300 4,000 200 2,000 100 - - 2012 2013 2014 2015 2016 Distribution Transmission Renewables Net Income
Slide 44: Continued growth in robust capital program
Disciplined Investment – Continued growth in robust capital program 2017-2021E PSE&G Capital Spending Base Capital, with extension / expansion including GSMP extension of current programs $12.3B $13.8B Rate Base CAGR 7% Rate Base CAGR 9% 4% 2% 22% 26% 50% 44% 26% 26% Transmission Gas Distribution El
Slide 45: Transmission - ~$6 billion, 5-year investment program
Transmission - ~$6 billion, 5-year investment program focusing on reliability and replacing aging infrastructure • Formula rate recovery of capital and expenses • PJM’s Regional Transmission Expansion Plan (RTEP) identifies system enhancements needed for reliability • Portfolio transitioning – compl
Slide 46: Electric Distribution - ~$3 billion investment program
Electric Distribution – ~$3 billion, 5-year investment program focused on reliability and resiliency • Energy Strong - Completion of currently approved program • Future growth efforts • Hardening – Extend program for critical system infrastructure • Aging infrastructure – Life cycle investments to e
Slide 47: Electric Distribution - Technology
Electric Distribution - Technology • Making the grid smarter • Deployment of hundreds of microprocessor relays • A new state of the art distribution SCADA system to facilitate full communication and control • Ability to integrate Distributed Energy Resources into the grid while enhancing grid reliab
Slide 48: Gas Distribution - ~$3 billion investment program
Gas Distribution – ~$3 billion, 5-year investment program focused on modernizing and upgrading cast iron and unprotected steel main • Cost efficiency of broad replacement approach • Customer service – conversion from low pressure to high pressure • Environmental Collaboration with EDF and Google to
Slide 49: Solar and Energy Efficiency - ~$250 million
Solar and Energy Efficiency – ~$250 million, 5-year investment supports New Jersey policy objectives • Solar – • Grid-connected solar on landfills and brownfields provides clean energy for all customers • 210 MW installed of the 300 MW total approved programs • Energy efficiency – Continuing program
Slide 50: Developing investment opportunities with contemporaneous recovery
Developing investment opportunities with near-contemporaneous recovery mechanisms 2017-2021E PSE&G Capital with Plan to increase current five year, $12.3B Program extensions by Recovery Method $13.8B capital plan by ~$1.5B through program extensions and expansions: 33% • GSMP acceleration • Electric
Slide 51: PSE&G Investment Evolution
PSE&G Investment Evolution: System needs, customer expectations and public policy objectives drive need for continued and increasing Distribution investments Utility of the Future Electric Infrastructure Life cycle programs, distribution automation, EV Charging 2017-2021E Gas Infrastructure Complete
Slide 52: Investment program supports strong rate base growth
Investment program supports strong rate base growth -- off a higher base Year-end Rate Base with extension / expansion $ Millions of current programs 35,000 Rate Base CAGRs - 2016-2021E 30,000 with extension and expansion of 25,000 Base capital current programs 20,000 7% 9% 15,000 10,000 5,000 0 201
Slide 53: Distribution - 2017 base rate case filing
Distribution – 2017 base rate case filing • Obligated to file rate case no later than November 1, 2017 • Last rate case – 2009 test year, settled in 2010 Since last rate case • Sales growth – flat, customer growth offset by energy efficiency • O&M – held flat, with increased regulatory requirements
Slide 54: Optimal time for extension and expansion of investment programs
Optimal time for extension and expansion of investment programs • 2017 investment program filings • GSMP - extension and acceleration • Electric infrastructure - resiliency and modernization • Energy efficiency – extension, potential future expansion • Seeking long-term programs to optimize planning
Slide 55: Customer bills are materially lower
Customer’s bills are materially lower, supporting needed investment in the system $2,000 PSE&G Typical Residential Customer Bills* $1,593 $1,500 $1,322 $1,251 $1,000 $861 $500 $0 2009 2017E 2009 2017E Electric Gas Distribution Clauses Supply CPI • Combined electric and gas bills declined ~28% over t
Slide 56: PSE&G 2017 net income to benefit from investment programs
PSE&G’s 2017 net income to benefit from investment programs and cost control PSE&G Net Income ($ Millions) $945 -- $985E $889 $787 2015 2016 2017 Guidance E =ESTIMATE. 56
Slide 57: PSEG Long Island
«> PSEG We make things work for you.
Slide 58: PSEG Long Island - Improving customer service and reliability
PSEG Long Island - Focused on improving customer service and reliability while managing costs • 4th year of 12 year contract (with option to extend 8 years) • 2016 - Earned $0.08 per share* • Fixed fee of $65 million / year, escalated for CPI • Incentive opportunity of 15% • Power has $20 million /
Slide 59: PSEG Long Island continues to drive improvement in performance metrics
PSEG Long Island continues to drive improvement in performance metrics 800 OSHA JD Power - Residential 700 675 3.0 2.8 610 584 600 532 OSA 2.5 2.3 OSA 588 2.3 500 2.0 1.5 400 1.5 300 1.0 200 0.5 100 0.0 0 2014 2015 2016 2014 2015 2016 2017* SAIFI CAIDI 1.20 1.11 90 82 OSA 79 1.00 OSA 85 0.84 0.92 68
Slide 60: We have the energy to make things better
We have the energy to make things better … for you, for our investors and for our stakeholders. 60
Slide 61: PSEG Power
PSEG POWER William Levis P R E S I D E N T A N D C H I E F O P E R AT I N G O F F I C E R PSEG POWER
Slide 62: PSEG Power strategy
PSEG Power strategy Excellence in operating our units DISCIPLINED INVESTMENT safely, reliably, cost- competitively and in ENGAGED an environmentally WORKFORCE responsible manner FINANCIAL OPERATIONAL STRENGTH EXCELLENCE 62
Slide 63: Power is transforming its portfolio
Power is transforming its portfolio to be newer, more efficient and flexible 2012 2011 2013 2012 20132014 2014 20152015 2016 Selected Accomplishments Towards Transformation Cost Control • Additional 400 • Bethlehem • CCGT Advanced • Continued growth with • Bridgeport Harbor 5 MW of new Energy Center
Slide 64: Power has generating assets in three competitive markets
Power has generating assets in three competitive markets New York ISO • Major assets located near key Bethlehem Energy Center load centers (Albany) Bridgeport (incl. Bridgeport Harbor 5, • Constructing three new, CCGT under construction) efficient combined-cycle units New Haven ISO New England • Pos
Slide 65: Power has a diverse fleet of generating assets
Power has a diverse fleet of generating assets which enables it to respond to market needs Fuel Diversity 2016* Energy Produced 2016* Total MW: 11,577 Total GWh: 51,510 * EXCLUDES SOLAR (326MWDC /257MWAC) AND KALAELOA (104MW). **INCLUDES NEW JERSEY UNITS THAT FUEL SWITCH TO GAS. 65
Slide 66: Power's Fossil Fleet maintains solid performance
Power’s Fossil Fleet maintains solid performance in a challenging environment Combined Cycle Availability Factor 100% 80% • Generation records at BEC and Bergen 2 combined-cycle units 60% • Combined-cycle EFORd* and EFORp lowest in five years 40% • Start Success Rate: • Peaking: 99.7% 20% • Coal/Ste
Slide 67: Nuclear is vital to New Jersey
Nuclear is vital to New Jersey with Salem and Hope Creek providing ~40% of the State’s energy consumption Salem Peach Bottom Hope Creek Units 2 and 3 Units 1 and 2 • Operated by PSEG Nuclear • Operated by PSEG Nuclear • Operated by Exelon • PSEG Ownership: 100% • PSEG Ownership: 57% • PSEG Ownership
Slide 68: PSEG Nuclear addressing economic challenges
PSEG Nuclear has been addressing the economic challenges in the current low gas price environment • 2012 to 2017E CAGR: --1.4% • Fukushima-related compliance drove $198 M of Regulatory/Environmental spend • The 2015 Labor increase / outside services decrease is due to bringing • 2016 and 2017E capit
Slide 69: PSEG Nuclear leading efforts on economic viability
PSEG Nuclear is leading the industry in efforts to ensure economic viability of fleet Goals • Industry goal to achieve reductions in O&M, fuel and capital costs by 2018 • The three-year program to examine and implement opportunities to: Advance safety, Improve operations, and Prevent premature
Slide 70: Power has demonstrated ability to control O&M
Power has demonstrated its ability to control O&M Power O&M Expense* 2012 to 2017E CAGR: -- 0.3% $Millions *EXCLUDES IMPACTS FROM STORM RECOVERY COSTS AND THE HUDSON/MERCER EARLY RETIREMENT. E=ESTIMATE 70
Slide 71: Power developing ~1,800 MW of new CCGT capacity
Power is developing ~1,800 MW of new, efficient CCGT capacity in MD, NJ and CT BRIDGEPORT HARBOR 5 SITE SEWAREN 7 SITE KEYS ENERGY CENTER SITE 71
Slide 72: Growth Project Update - Keys Energy Center
Growth Project Update - Keys Energy Center Commence Site Target Guaranteed SNC Notice to Proceed Full Site Begin HRSG Back Feed Clearing First Fire Substantial Substantial Mobilization Erection Switchyard 6/18/15 2/9/18(E) Completion Completion 8/25/15 3/2/16 11/10/16 8/3/17(E) 4/30/18(E) 5/1/18(E)
Slide 73: Growth Project Update - Sewaren 7
Growth Project Update – Sewaren 7 Commence Site Target Guaranteed Sewaren Clears Auction Full Site Begin HRSG Backfeed Plant Clearing CTG First Fire Substantial Substantial Mobilization Erection Substation 8/21/15 12/19/17(E) Completion Completion 11/30/15 3/14/16 1/23/17 8/15/17(E) 4/1/18(E) 6/1/18
Slide 74: Growth Project Update - Bridgeport 5
Growth Project Update – Bridgeport 5 BHS Unit 5 Clears Commence Site Target Plant Full Site Begin HRSG Backfeed Plant Auction Prep CTG First Fire Substantial Commences Mobilization Erection Substation 11/15/18(E) Completion Operations 2/10/16 10/17/16 4/1/17(E) 1/2/18(E) 3/1/18(E) 5/1/19(E) 6/1/19(E
Slide 75: Power's fleet transformed with focus on efficiency
Power’s fleet is being transformed with focus on improvement in efficiency Projected Fleet Comparison 2016 to 2021E 2021E Fuel Diversity1 2021E Energy Produced1 Total MW: 11,900 Total GWh: 61,000 Energy Produced increases by >18% 2016 Fuel Diversity 2016 Energy Produced Total MW: 11,577 Total GWh: 5
Slide 76: Power's fleet more efficient, productive and clean
Power’s fleet is transitioning to become more efficient, productive and clean E E E SO2 lbs/MWh NOX lbs/MWh CO2 lbs/MWh E E = ESTIMATE. 76
Slide 77: Power's capital needs decline following construction
Power’s capital needs decline following construction of new capacity, enhancing free cash flow Power Capital Investment $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 2015 2016 2017E 2018E 2019E 2020E 2021E Maintenance Environmental / Regulatory Growth E=ESTIMATE. DATA AS OF FEBRUARY 2017. EXCLUDES NUC
Slide 78: Power's fleet has access to shale gas production
Power’s fleet is well-located with access to shale gas production PSEG’s Total PJM Gas Procurement Pipeline capacity grows significantly by 2018 New England 1.2 bcf/d NJ/NY 1.7 bcf/d Midwest 4.9 bcf/d Southeast 6.1 bcf/d Gulf Coast 5.4 bcf/d • PSEG Power procured approximately 400 • Significant amou
Slide 79: Price convergence appearing in gas markets
With additional pipeline capacity, some price convergence is beginning to appear in the gas markets Natural Gas Actual and Forward Western Hub and PS Zone RTC Actual and Prices Forward LMPs $4 $40 $3 $ per mmBTU $/MWh $2 $30 $1 $0 $20 2015A 2016A 2017E 2018E 2015A 2016A 2017E 2018E Henry Hub (12/30/
Slide 80: NJ BGS hedging and retail marketing
New Jersey BGS accounts for ~11 TWh of our hedging – Retail marketing will complement BGS NJ BGS RSCP Supply Pricing Retail Electric / Gas Marketing $97.39 $99.54 $96.38 $92.18 $90.78 ME ~ $53 VT NH ~ $53 ~ $59~ $43 ~ $62 ~ $63 ~ $58 NY MA ~ $47 ~ $48 CT ~ $53 RI PA $56 $37 OH - M NJ - $48 $39 $38 $
Slide 81: Hedging Strategy to secure gross margin
Our Hedging Strategy is designed to secure gross margin while leveraging the portfolio 2017 2018 2019 V olu me TWh 34 34 34 Base Load % Hed ged 100% 80-85% 35-40% (Nuclear and Base Load Coal) P rice $/MWh $46 $43 $43 V olu me TWh 16 21 26 Intermediate Coal, Combined % Hed ged 45-50% 0% 0% Cycle, Pea
Slide 82: Capacity Markets provide continuing revenue stream
Capacity Markets provide a solid and continuing revenue stream PJM’s RPM Auction Results* Delivery Year 2015/2016 2016/2017 2017/2018 2018/2019 2019/2020 Power’s Average Prices ($/MW-day) $168 $172 $177 $215 $116 $165/$150 $100/$80 Rest of Pool Prices ($/MW-day) $136 $59 $120 (CP/Base) (CP/Base) Pow
Slide 83: Solar has grown to 326 MWDC in operations
Solar has grown to 326 MWDC in operations with 70 MWDC under construction Solar in Operation / Construction at Year-End 500 400 300 MW DC 200 100 0 2014 2015 2016 Operating In Construction PORTFOLIO CONSISTs OF 326 MWDC /257 MWAC IN OPERATIONS, 70 MWDC /55 MWAC IN CONSTRUCTION. 83
Slide 84: Other attractive sources of revenues
Other attractive sources of revenues round out a robust portfolio Gas Supply and Asset Optimization ● Wholesale provider to PSE&G and others Storage capacity of approximately 78 Bcf (in the Gulf and market regions) Firm transportation of 1.3 Bcf/day on seven pipelines ● Off-system sales margins
Slide 85: Power's 2017 non-GAAP Operating Earnings
Power’s 2017 non-GAAP Operating Earnings reflect efforts being taken in challenging market conditions PSEG Power non-GAAP Operating Earnings* ($ Millions) Net Net Income Income $856 $18 *SEE SLIDE B FOR ITEMS EXCLUDED FROM NET INCOME TO RECONCILE TO OPERATING EARNINGS (NON-GAAP). 85 E = ESTIMATE.
Slide 86: PSEG Power's Value Proposition
PSEG Power’s Value Proposition Efficient fleet Advantaged locations Investing to grow • Well-positioned, well-run fleet of merchant generating assets in competitive markets • Early retirement of Hudson and Mercer coal stations in mid-2017 improves fleet efficiency and returns • Addition of 1,800 MWs
Slide 87: PSEG Financial Review & Outlook
PSEG FINANCIAL REVIEW & OUTLOOK Dan Cregg EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
Slide 88: Strong financial position driven by PSE&G
Strong financial position driven by PSE&G with meaningful contribution from Power 2016 Financial Position Delivered on 2016 guidance under challenging conditions Earnings Increased PSE&G earnings contribution Executed major PSE&G capital program balanced between Investment Transmission and Dis
Slide 89: Consistently deliver earnings guidance
We consistently deliver our earnings guidance by executing our growth plans, managing O&M, and optimizing assets PSEG Non-GAAP Operating Earnings* $ Millions (except EPS) 2012 2013 2014 2015 2016 Initial Operating Earnings $2.25 – $2.50 $2.25 – $2.50 $2.55 – $2.75 $2.75 – $2.95 $2.80 – $3.00 Guidanc
Slide 90: PSE&G forecasted 66% of 2017 operating earnings
PSE&G forecasted to be 66% of PSEG’s 2017 non-GAAP Operating Earnings Non-GAAP Operating Earnings * Contribution by Subsidiary PSEG Non-GAAP Operating Earnings $ Millions (except EPS) 2017E Guidance PSE&G $945 - $985 PSEG Power $435 - $510 Enterprise/Other $35 Operating Earnings* $1,415 - $1,530 Ope
Slide 91: PSE&G capital spending drives rate base growth
PSE&G’s capital spending drives high single-digit growth in rate base 2016 – 2019E 2016 – 2021E 2016 – 2021E Rate Base with Rate Base Rate Base Program Extensions & Expansion CAGR of ~9% CAGR of ~7% CAGR of ~9% ~$22.9B ~$21.6B ~$19.6B Utility of the Future • Electric Infrastructure ~$10.4B Transmiss
Slide 92: Power's hedging program secured gross margin
Power’s hedging program has secured 55% - 60% of its estimated gross margin for the next 3 years Energy Produced in 2016 51,510 GWh 3 Year Average - Gross Margin (%) 33% 10% 2017E-2019E 57% Nuclear Gas Coal Capacity Available in 2016 11,577 MW 8% 7% 85% Capacity Margin (hedged) Energy Margin (hedged
Slide 93: PSEG capital program focused on growth
PSEG capital program focused on growth PSEG 2017E – 2021E Capital Investment Maintenance ~$4.1B Identified Growth Investment ~$10.9B Program Extensions & Expansion ~$1.5B ~$16.5B PSE&G Growth represents ~75% ~$15.0B ~$1.5B of its total spend ~$1.5B ESMP ~$0.8B GSMP Expansion ~$0.3B EE Extension ~$0.
Slide 94: Ability to identify opportunities to deploy balance sheet
We have demonstrated an ability to identify opportunities to deploy our balance sheet 5.0 PSEG Capital Spending(1) Forecast vs Actual $4.3 4.0 $3.9 ($Billions) 3.0 $2.8 $2.1 $2.0 2.0 $1.5 1.0 0.0 2011 Est. 2014 2014 Actual 2012 Est. 2015 2015 Actual 2013 Est. 2016 2016 Actual (1) CAPITAL INCLUDES ID
Slide 95: Power's free cash flow improves as construction ends
Power’s free cash flow improves as construction program ends, providing funding for growth PSEG Power PSE&G 2017E – 2021E Capital Spending (1) 2017E – 2021E Capital Spending (1) $MM $MM Utility of the Future 1,200 3,500 Program Extensions & 3,000 Expansion 1,000 2,500 800 Free cash flow to 2,000 imp
Slide 96: Growth in PSE&G results in more regulated cash flow
Growth in PSE&G results in a more regulated cash flow profile PSEG Consolidated 2017E – 2021E Sources and Uses Other Net Cash Flow(3) Shareholder Dividend PSE&G Cash from Operations Adding incremental growth projects with near contemporaneous returns PSE&G increases both sources and Growth uses of c
Slide 97: Strong credit metrics provide investment capacity
Strong credit metrics provide substantial investment capacity for increased utility investment Average Funds From Operations / Debt Total Incremental Investment Capacity 2017E – 2019E ($ Billions) $4.0 Power PSEG Estimate ~40% Low – 20’s $2.0 Minimum 30% High - teens Threshold $0.0 Power Parent Tota
Slide 98: Manageable Pension and OPEB Expense
Manageable Pension and OPEB Expense with a reduction of ~$22 million in 2017 Post-Capitalization Pension and OPEB Expense(1) $ Millions 2016 Pension funded ratio ~90% 120 Historical 5-year annualized pension 100 returns exceeded 10% 80 No qualified pension contributions planned 60 Merger of
Slide 99: PSEG demonstrated ability to control O&M
PSEG has demonstrated an ability to control O&M, with plans to reduce in 2017 PSEG O&M Expense(1) 2012 - 2017E CAGR: ~0.0% $2,500 2012 – 2017E CAGR Transmission $2,000 ~5.6% (Formula Rate Treatment) $Millions $1,500 Distribution ~(0.2%) $1,000 Power ~(0.3%) $500 $0 Other 2012 2013 2014 2015 2016 201
Slide 100: 2017 Federal Tax Reform - PSEG well positioned
2017 Federal Tax Reform – PSEG is well positioned Given positive non-utility contribution to earnings and a strong balance sheet, PSEG is well positioned for potential tax reform Assumption PSE&G PSEG Power PSEG Parent Customer rates lowered with After-tax earnings and cash After-tax earnings and ca
Slide 101: Opportunity for meaningful and sustainable dividend growth
Opportunity for meaningful and sustainable dividend growth Annual Dividend Per Share (2011-2017E CAGR: 3.9%) PSE&G $2.00 EPS 1.94 1.86 $1.80 1.72 1.64 $1.60 1.56 1.48 1.42 1.44 $1.40 1.37 ($/Share) $1.20 $1.00 $0.80 $0.60 2011 2012 2013 2014 2015 2016 2017E Payout 50% 58% 56% 54% 54% 57% 59%(1) Rati
Slide 102: Longer-term outlook and segment EPS drivers
PSEG’s longer-term outlook is influenced by Power’s hedge position and investment at PSE&G Segment EPS Drivers Sensitivities derived from typical annual market variability 2017E 2018E 2019E Each $0.75/mcf Change in Natural Gas $0.00 - $0.02 $0.02 - $0.05 $0.08 - $0.12 Each $2/MWh Change in Spark Spr
Slide 103: PSEG Summary
PSEG Summary • 2016 Operating Earnings (non-GAAP) at upper end of revised guidance of $2.80 - $2.95 per share • 2017 guidance for Operating Earnings (non-GAAP) of $2.80 to $3.00 per share supported by PSE&G growth • PSE&G capital spending provides high single-digit rate base growth for foreseeable f
Slide 104: PSEG Executive Profiles
PSEG We make things work for you.
Slide 105: Ralph Izzo
Ralph Izzo CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED Ralph Izzo was elected chairman and chief executive officer of Public He also received a Master of Business Administration degree, with a Service Enterprise Group Incorporated (PSEG) in April 2007
Slide 106: Tamara L. Linde
Tamara L. Linde EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED, PUBLIC SERVICE ELECTRIC AND GAS COMPANY, PSEG POWER, PSEG SERVICES CORPORATION Tamara Linde was named executive vice president and general counsel gas and electric regulatory and transactional
Slide 107: Ralph A. LaRossa
Ralph A. LaRossa PRESIDENT AND CHIEF OPERATING OFFICER PUBLIC SERVICE ELECTRIC AND GAS COMPANY Ralph A. LaRossa was named president and chief operating officer advanced through a variety of management positions in the utility’s of Public Service Electric and Gas Company (PSE&G) in October gas and el
Slide 108: William Levis
William Levis PRESIDENT AND CHIEF OPERATING OFFICER PSEG POWER William Levis is president and chief operating officer of PSEG Power, a Mr. Levis has a Bachelor of Science degree in marine engineering from the position he’s held since June 2007. PSEG Power is a major, unregulated U.S. Naval Academy a
Slide 109: Daniel Cregg
Daniel Cregg 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 Daniel J. Cregg was named executive vice president and chief financial valuations, competitive intelli
Slide 110: Derek M. Di Risio
Derek M. Di Risio PRESIDENT PSEG SERVICES CORPORATION Derek M. Di Risio was named President, PSEG Services Corporation, in Mr. Di Risio joined PSE&G in September 1991 and has held a variety of July 2014. He is responsible for the coordination and delivery of several positions, including assignments
Slide 111: Shahid Malik
Shahid Malik PRESIDENT PSEG ENERGY RESOURCES & TRADE Shahid Malik was appointed President of PSEG Energy Resources & Trade (ER&T) in 2011. PSEG operates one of the most balanced generation and company’s strategy and operations and led a successful turnaround of the marketing portfolios in the countr
Slide 112: Margaret M. Pego, SPHR
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 collaborative exchange among North America’s top executives. and chief human resources officer of PSEG Service
Slide 113: Peter P. Sena III
Peter P. Sena III PRESIDENT & CHIEF NUCLEAR OFFICER PSEG NUCLEAR Peter P. Sena III was named president of PSEG Nuclear (Nuclear) in Regulatory Commission as a resident inspector in Region 1. Mr. Sena’s February 2016 and Chief Nuclear Officer in July 2016. Most recently, nuclear training began as an
Slide 114: Reconciliation of Non-GAAP Operating Earnings
Reconciliation of Non-GAAP Operating Earnings Public Service Enterprise Group Incorporated -- Consolidated Operating Earnings (non-GAAP) Reconciliation Year Ended Reconciling Items December 31, 2016 2015 2014 2013 2012 ($ millions, Unaudited) Net Income (Loss) $ 887 $ 1,679 $ 1,518 $ 1,243 $ 1,275 (
Slide 115: Reconciliation of non-GAAP Operating Earnings for PSEG Power and Enterprise/Other
Reconciliation of non-GAAP Operating Earnings for PSEG Power and Enterprise/Other PSEG Power Reconciliation Year Ended Reconciling Items December 31, 2016 2015 2014 2013 2012 ($ millions, Unaudited) Net Income (Loss) $ 18 $ 856 $ 760 $ 644 $ 666 (Gain) Loss on Nuclear Decommissioning Trust (NDT) Fun
Public Service Enterprise Group — Investor Day (March 2017) on 6ix