Public Service Enterprise Group Incorporated · NYSE:PEG
Public Service Enterprise — Q2 2007 Earnings Presentation
41 slides from Public Service Enterprise's earnings presentation, Aug 1, 2007
Slide 1: PSEG Earnings Conference Call 2nd Quarter 2007
Exhibit 99.1 Public Service Enterprise Group PSEG Earnings Conference Call 2nd Quarter 2007 August 1, 2007
Slide 2: Disclaimer Statement
Disclaimer Statement The statements contained in this communication about our and our subsidiaries’ future performance, including, without limitation, future revenues, earnings, strategies, prospects and all other statements that are not purely historical, are forward-looking statements for purposes
Slide 3: GAAP Disclaimer
GAAP Disclaimer PSEG presents Operating Earnings in addition to its Net Income reported in accordance with generally accepted accounting principles (GAAP). Operating Earnings is a non-GAAP financial measure that differs from Net Income because it excludes the impact of the sale of certain non-core d
Slide 4: PSEG 2007 Q2 Review
PSEG 2007 Q2 Review Tom O’Flynn Executive Vice President and Chief Financial Officer President – PSEG Energy Holdings
Slide 5: Q2 2007 EPS Summary
Q2 2007 EPS Summary $ millions (except EPS) Q2 2007 Q2 2006 Operating Earnings $ 293 $ 172 Loss from RGE - ($177) Merger Costs - ($ 3) Income from Continuing Operations $ 293 ($ 8) Discontinued Operations, net of tax ($ 18) $ 217 Net Income $ 275 $ 209 EPS from Operating Earnings $ 1.15 $ 0.68 4 * S
Slide 6: YTD EPS Summary
YTD EPS Summary Six months ended June 30, $ millions (except EPS) 2007 2006 Operating Earnings $ 627 $ 382 Loss from RGE - ($ 177) Merger Costs - ($ 8) Income from Continuing Operations $ 627 $ 197 Discontinued Operations, net of tax ($ 23) $ 215 Net Income $ 604 $ 412 EPS from Operating Earnings $
Slide 7: PSEG – Q2 Operating Highlights
PSEG – Q2 Operating Highlights Solid Earnings Growth PSEG Power continues to deliver improved earnings Improving margins from energy and capacity prices BGSS margins at typical levels PSE&G performance improves Rate relief supporting returns Normal weather Electric demand growth despite weak industr
Slide 8: PSEG – Meeting Commitments
PSEG – Meeting Commitments Results on track to meet earnings guidance Meeting commitment to system reliability with major expansion of transmission system Addressing NJ’s clean energy commitments Solar initiative PSE&G to use more energy efficient equipment and vehicles Focus on core businesses Tran
Slide 9: PSEG – Markets remain attractive
PSEG – Markets remain attractive Reliability Pricing Model PJM capacity market auctions underway Reasonable pricing Capacity largely open to market prices for 2009-2010 and future years Latin American asset values remain strong Electroandes sale expected to close around year-end Actively exploring s
Slide 10: NJ Global Warming Response Act
NJ Global Warming Response Act Landmark legislation enacted July 6, 2007 Codifies Governor’s pledge 20% reduction in electric demand by 2020 20% renewable resource supply requirement by 2020 20% reduction in carbon by 2020 with 80% reduction by 2050 Addresses “leakage” issue under RGGI with support
Slide 11: 2007 Q2 Operating Company Review
PSEG 2007 Q2 Operating Company Review
Slide 12: Q2 Operating Earnings by Subsidiary
Q2 Operating Earnings by Subsidiary Quarter ended June 30, $ Millions (except EPS) Operating Earnings Per Share 2007 2006 2007 2006 PSE&G $ 62 $ 34 $ 0.24 $ 0.13 PSEG Power 187 86 0.73 0.34 PSEG Energy Holdings 59 70 0.24 0.28 Enterprise (15) (18) (0.06) (0.07) PSEG $ 293 $ 172 $ 1.15 $ 0.68 11 * Se
Slide 13: YTD Operating Earnings by Subsidiary
YTD Operating Earnings by Subsidiary Six months ended June 30, $ Millions (except EPS) Operating Earnings Per Share 2007 2006 2007 2006 PSE&G $ 193 $ 111 $ 0.76 $ 0.44 PSEG Power 406 208 1.60 0.82 PSEG Energy Holdings 61 95 0.24 0.38 Enterprise (33) (32) (0.13) (0.12) PSEG $ 627 $ 382 $ 2.47 $ 1.52
Slide 14: Revising 2007 Operating Earnings Guidance
Revising 2007 Operating Earnings Guidance $ millions (except EPS) Current Prior PSEG Power $840 - $920 $ 825 - $905 PSE&G $340 - $360 $ 340 - $360 PSEG Energy Holdings $120 - $135 $130 - $145 Parent ($55) – ($45) ($50) – ($40) Operating Earnings $1,245 - $1,370 $1,245 - $1,370 Earnings per Share $4.
Slide 15: PSE&G 2007 Q2 Review
PSE&G 2007 Q2 Review
Slide 16: PSE&G – Q2 2007 EPS Summary
PSE&G – Q2 2007 EPS Summary $ millions (except EPS) Q2 2007 Q2 2006 Variance Operating Revenues $ 1,748 $ 1,490 $ 258 Operating Earnings $ 62 $ 34 $ 28 Income from Continuing Operations/ $ 62 $ 33 $ 29 Net Income EPS from Operating Earnings $ 0.24 $ 0.13 $ 0.11 15 * See page 40 for Items excluded fr
Slide 17: PSE&G EPS Reconciliation – Q2 2006 versus Q2 2007
PSE&G EPS Reconciliation – Q2 2006 versus Q2 2007 0.30 .03 (.02) .24 .03 Other .07 Volume/ Other .01 0.20 Demand: Weather: Gas .01 Depreciation (.02) Gas .03 Electric .02 O&M (.01) .13 Rate Relief 0.10 Gas .04 Electric .03 0.00 Q2 2006 Q2 2007 operating operating earnings earnings 16 * See page 40 f
Slide 18: PSE&G – Q2 Operating Highlights
PSE&G – Q2 Operating Highlights Operations Sales growth reflects: Weather normalized growth in residential and commercial electric customer demand of 3.9% and 2.8%, respectively Industrial electric demand reflects customer loss Normal weather O&M increase less than inflation Regulatory PJM approves
Slide 19: Power 2007 Q2 Review
PSEG Power 2007 Q2 Review
Slide 20: PSEG Power – Q2 2007 EPS Summary
PSEG Power – Q2 2007 EPS Summary $ millions (except EPS) Q2 2007 Q2 2006 Variance Operating Revenues $ 1,305 $ 1,129 $ 176 Operating Earnings $ 187 $ 86 $ 101 Income from Continuing Operations $ 187 $ 85 $ 102 Discontinued Operations, net of tax ($ 3) ($ 8) $5 Net Income $ 184 $ 77 $ 107 EPS from Op
Slide 21: PSEG Power EPS Reconciliation – Q2 2006 versus Q2 2007
PSEG Power EPS Reconciliation – Q2 2006 versus Q2 2007 1.00 .04 (.04) .03 (.01) .73 0.75 .37 Mark-to- O&M Depreciation, Market BGSS returns Interest & to normal Other levels 0.50 .34 Recontracting 0.25 0.00 Q2 2006 Q2 2007 operating operating earnings earnings 20 * See page 40 for Items excluded fro
Slide 22: Prices and operations yield margin
Prices and operations yield margin PSEG Power Realized Gross Margin ($/MWh) $60 $48 $50 $36 $40 $30 $20 $10 $0 Q2 2006 Q2 2007 21
Slide 23: RPM Capacity Auction – Transparent Pricing Model
RPM Capacity Auction – Transparent Pricing Model PJM released results on July 13 from its second capacity auction under the Reliability Pricing Model (RPM) for the 2008-2009 delivery year. 2007- 2009 Capacity Auction Results Unit Price Load Price CTR Value* 2007/ 2008/ 2007/ 2008/ 2007/ 2008/ ($/MW-
Slide 24: Capacity Position
Capacity Position Only a portion of PSEG Power’s capacity was open to realize prices in the recent PJM-RPM auctions. Increasing amounts are open to realize prices in future years. A significant percent of Power’s capacity was contracted as part of New Jersey’s 3-year BGS* auction (Power currently se
Slide 25: PSEG Power – Q2 Operating Highlights
PSEG Power – Q2 Operating Highlights Operations: Output increased 2.6% Nuclear fleet capacity factor unchanged from a year ago at 90% Combined cycle fleet performance more than offset decline in output from coal-fired capacity Decision to pursue Hudson back end technology Continued progress toward i
Slide 26: PSEG Power - New nuclear under consideration
PSEG Power - New nuclear under consideration Power’s 3,496MW of nuclear capability is a critical resource that provides clean, low-cost power in heavily constrained markets Power is targeting $50 million of spending over 2007- 2011 to explore an investment in new nuclear capacity Hope Creek site ava
Slide 27: Energy Holdings 2007 Q2 Review
PSEG Energy Holdings 2007 Q2 Review
Slide 28: PSEG Energy Holdings – Q2 2007 EPS Summary
PSEG Energy Holdings – Q2 2007 EPS Summary $ millions (except EPS) Q2 2007 Q2 2006 Variance Operating Earnings $ 59 $ 70 ($ 11) Loss from RGE - ($ 177) $ 177 Income from Continuing Operations $ 59 ($ 107) $ 166 Discontinued Operations, net of tax ($ 15) $ 225 ($ 240) Net Income $ 44 $ 118 ($ 74) EPS
Slide 29: PSEG Energy Holdings EPS Reconciliation – Q2 2006 versus Q2 2007
PSEG Energy Holdings EPS Reconciliation – Q2 2006 versus Q2 2007 0.40 Global 0.30 .28 (.02) Resources (.05) (.01) .04 .24 Texas : MTM .01 Lower lease 0.20 International: income Lower G&A, SAESA .01 Interest & Lower realized Other .04 prices (.03) PPN .01 Italy (.06) 0.10 2006 Sale of RGE (.01) 0.00
Slide 30: PSEG Energy Holdings – Q2 Operating Highlights
PSEG Energy Holdings – Q2 Operating Highlights Operations: Global Italian biomass generation plant resumed operations in June after extended outage; full capacity anticipated during third quarter Markets: Global Distribution businesses performing well Valuations remain strong for international asset
Slide 31: PSEG 2007 Q2 Review
PSEG 2007 Q2 Review
Slide 32: PSEG EPS Reconciliation – Q2 2006 versus Q2 2007
PSEG EPS Reconciliation – Q2 2006 versus Q2 2007 1.50 1.25 (.04) .39 .01 1.15 Holdings Enterprise Lower G&A, Interest .01 1.00 Interest & Other .04 .11 Other International 0.75 .68 Power .01 Recontracting .37 Utility BGSS .03 Rate relief .07 Texas – MTM & 0.50 O&M .04 Operations Weather .03 (.02) Vo
Slide 33: PSEG EPS Reconciliation – YTD 2006 versus YTD 2007
PSEG EPS Reconciliation – YTD 2006 versus YTD 2007 .78 (.14) (.01) 2.47 2.50 Holdings Enterprise Lower G&A, Interest and Interest & Other Donations (.01) 2.00 .32 .03 Sale of Tracy Project .02 1.52 Power 1.50 Re-contracting .60 Other International BGSS .19 .01 Utility O&M .02 Rate relief .17 1.00 Te
Slide 34: Summary of Q2 fundamental factors
Summary of Q2 fundamental factors Operations Generation output increased 2.6% over last year’s levels Distribution and transmission assets provide safe and secure supply under severe weather conditions Markets Markets recognizing value of capacity in constrained zones Location enhances value for cap
Slide 35: Capital Program – Growth identified
Capital Program – Growth identified PSEG’s capital initiatives have grown by $1.25 billion over 2007-2011 to $7.0 billion from the $5.75 billion program outlined at 2006 year-end. PSE&G’s capital commitment expands to $4.1 billion from $3.0 billion Transmission investment of $650M to improve system
Slide 36: Capital spending by subsidiary
Capital spending by subsidiary 2007 2008 2009 2010 2011 TOTAL Capital Spending Update ($ Millions) PSE&G $616 $803 $765 $919 $971 $4,074 PSEG Power* 655 816 580 441 176 2,668 PSEG Energy Holdings 38 31 40 30 31 170 Parent 34 31 23 24 23 135 TOTAL $1,343 $1,681 $1,408 $1,414 $1,201 $7,047 Change from
Slide 37: Balance sheet improvement underway
Balance sheet improvement underway S&P revised its outlook for the credit ratings of PSEG, PSE&G and Power from negative to stable and upgraded its rating for the commercial paper of PSEG and PSE&G from A3 to A2. Sale of Electroandes is expected around year-end. 36
Slide 38: Cash outlook – Forecast intact
Cash outlook – Forecast intact We remain comfortable with a forecast improvement in cash Operating income in line with expectations Asset sales on schedule Planned rate mechanisms for transmission investments would provide cash recovery during construction Excess cash between $1.5 billion and $2.0 b
Slide 39: Strong earnings growth in 2007 and 2008
Strong earnings growth in 2007 and 2008 Operating Earnings by Subsidiary 15% 37% $5.60 - $6.10 $4.90 - $5.30 $3.77* $3.71** 840-920 Power 446 515 PSE&G 347 262 340-360 Holdings 196 227 120-135 Parent (71) (66) (55)-(45) »0 2005 2006 2007 2008 38 * 2005, as reported: Excludes ($.14) Merger Costs, ($.
Slide 40: Common dividend – targeting long-term payout of 50%
Common dividend – targeting long-term payout of 50% Strong earnings growth provides flexibility to consider increase in dividend above recent levels Dividend increase to be evaluated January 2008 Targeting sustainable long-term payout ratio in the range of 50% 39
Slide 41: Items excluded from Net Income to reconcile to Operating Earnings
Items excluded from Net Income to reconcile to Operating Earnings Impact to PSEG EPS $ Millions (except EPS) Quarter Ended June 30, Six Months Ended June 30, Quarter Ended June 30, Six Months Ended June 30, 2007 2006 2007 2006 2007 2006 2007 2006 Merger related Costs: PSE&G $ - $ (1) $ - $ (1) Power
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