Public Service Enterprise Group Incorporated · NYSE:PEG
Public Service Enterprise — Investor Presentation (January 2023)
39 slides from Public Service Enterprise's investor presentation, January 2023
Slide 1: Public Service Enterprise Group January 2023 Investor Update
Public Service Enterprise Group January 2023 Investor Update NYSE TICKER: PEG
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 in addition to its Net Income/(Loss) 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/(Loss). Non-GAAP Operating Earnings
Slide 4: PSEG is increasing the stability and predictability of our business results
PSEG is increasing the stability and predictability of our business results • PSEG 2022-2023: 90% regulated business mix from stable, predictable operations of PSE&G • PSE&G: Robust capital program of $15.5B – $18B from 2023 – 2027, aligned with state clean energy goals at our best-in-class utility
Slide 5: PSEG has a 17-year track record of meeting or exceeding guidance
PSEG has a 17-year track record of meeting or exceeding guidance Delivering on our Commitments ‒ PSEG has met or exceeded its non-GAAP Operating Earnings guidance for 17 years in a row Looking Forward – PSEG initiated non-GAAP Operating EPS Guidance of $3.35 – $3.55 per share for 2023 Estimate of
Slide 6: Confidence in our long-term outlook drives our 2023–2027 CAGR of 5%–7%
Confidence in our long-term outlook drives our 2023–2027 CAGR of 5%–7% $5.00 Non-GAAP Operating EPS Drivers $4.50 ~$0.20 to ~$0.25 7%* ~$0.90 to ~$0.95 5%* $4.00 • Improved energy $3.35 - $3.55 prices, at nuclear ~$(0.05) to ~$(0.10) ~$(0.10) to ~$(0.15) $3.50 PTC levels, partially PSEG offset by ab
Slide 7: PSE&G – a best-in-class regulated utility and New Jersey’s largest
PSE&G – a best-in-class regulated utility and New Jersey’s largest: Electric and gas distribution utility Transmission business Utility provider of energy efficiency Appliance service provider and renewable energy programs Electric Gas PSE&G YE 2021 Rate Base*** Number of Customers 2.3 Milli
Slide 8: PSEG is focused on advancing Powering Progress investments aligned with New Jersey’s energy policy goals
PSEG is focused on advancing Powering Progress investments aligned with New Jersey’s energy policy goals Past Programs (2009-present) New Jersey Energy Policies Ongoing & Opportunities • Transmission Expansion • 2021 Successor Solar Framework • Infrastructure Advancement Program • “Last Mile” Reliab
Slide 9: PSE&G’s updated five-year spending is ~$1.5B to $2B higher
PSE&G’s updated five-year spending is ~$1.5B to $2B higher, maintaining consistent rate base growth on a higher starting point PSE&G Capital Spending PSE&G Year-end Rate Base Year-end 20,000 40,000 Rate Base CAGR 18,000 6%-7.5% 35,000 $15.5B-$18B 16,000 $14B-$16B 30,000 14,000 12,000 25,000 ($ Milli
Slide 10: Significant backlog of base capital awaiting recovery in PSE&G’s next distribution rate case
Significant backlog of base capital awaiting recovery in PSE&G’s next distribution rate case supports EPS CAGR to 2025 Base Capital Spending Eligible for Distribution Rate Case Recovery Stipulated Base: GSMP/ES/IAP ($0.5B of Total) ($ in billions) Through 2022 2023 2024 Total Deferred Recovery: CE
Slide 11: Electric Distribution – “Last Mile” investment program
Electric Distribution – “Last Mile” investment program is designed to modernize system and improve reliability for customers who are more dependent on the system than ever before Long runway of potential electric system modernization investments: • Targeted asset replacements – Poles, overhead equip
Slide 12: PSE&G’s Infrastructure Advancement Program: 4-year investment begins proactive work on “Last Mile” reliability
PSE&G’s Infrastructure Advancement Program: 4-year investment begins proactive work on “Last Mile” reliability Investment Total Description Replace 1960s-era 4kV switchgear with modern equipment at five stations and Electric Distribution – Inside Plant ~$205M replace oil-filled circuit breakers with
Slide 13: Clean Energy Future programs focus on reducing customers’ energy consumption
Clean Energy Future programs focus on reducing customers’ energy consumption Energy Electric Energy Efficiency Energy Cloud “AMI” Vehicles Storage Creating clean energy $1B $707M* $166M $109M jobs for under-employed Commitment Investment Investment Investment and diverse NJ residents 3 years 4 years
Slide 14: Gas Distribution – Investments to modernize infrastructure and drive reduction in methane leaks
Gas Distribution – Investments to modernize infrastructure and drive reduction in methane leaks % Reduction of absolute methane (CH4) emissions from 2011 as reported to the EPA under 40 CFR 98, Subpart W Actual Forecast 0% PSE&G is on track to achieve its • GSMP II will replace ~875 ~22% methane red
Slide 15: Electric Distribution – Energy Strong program to replace and rebuild substations in flood zones
Electric Distribution – Energy Strong program to replace and rebuild substations in flood zones has brought tremendous benefit to customers Somerville Withstood 56” of Flooding during Tropical Storm Ida, and Remained Operational • Superstorm Sandy & Hurricane Irene caused flooding at 29 substations
Slide 16: Transmission: Investment program focused on enhancing reliability and resiliency
Transmission: Investment program focused on enhancing reliability and resiliency, and replacing aging infrastructure • 69 kV conversion effort to improve reliability and address aging system transitioning from large end-of-life projects • Load increases in certain areas, driven by electrification ef
Slide 17: PSE&G investments create New Jersey job growth and support diverse recruiting efforts
PSE&G investments create New Jersey job growth and support diverse recruiting efforts Infrastructure Programs: Over 1,500 current direct jobs through GSMP II and Energy Strong II, and over 350 more through IAP Clean Energy: Over 3,000 direct jobs planned, with a focus on unemployed, under-employed,
Slide 18: Investments in technology are making us more efficient and reliable
Investments in technology are making us more efficient and reliable, giving customers greater access to information and programs Advanced Metering Infrastructure Providing real time information to help customers Mobile Geographic manage their usage, improving operational Information System efficienc
Slide 19: PSE&G: Achieving Top Quartile Customer Satisfaction Scores
PSE&G: Achieving Top Quartile Customer Satisfaction Scores J.D. Power Residential Customer Satisfaction Studies J.D. Power Business Customer Satisfaction Studies J.D. Power Electric Utility J.D. Power Gas Utility J.D. Power Electric Utility J.D. Power Gas Utility 1Q 1Q 1Q 1Q 802 806 792 795 804 820
Slide 20: PSE&G’s residential customer bills compare favorably
PSE&G’s residential customer bills compare favorably Regional gas bills lowest among peers; Regional electric bills lower than average Monthly Gas Bills Monthly Electric Bills $300 $160 $266 $136 $137 $140 $133 $134 $250 $217 $120 $201 $110 $200 $200 $190 $193 $97 $98 $103 Average = $103 Average = $
Slide 21: Typical residential combined bill relative to median income has declined
Typical residential combined electric and gas bill relative to median income has declined from 4.5% to 2.6% since 2009 PSE&G Electric & Gas Combined Bill (1) Affordability of the % of New Jersey Household Income combined bill has Including Low-income Customers After Assumed Credits improved by over
Slide 22: PSEG offshore wind opportunities
PSEG offshore wind opportunities Ocean Wind Project GSOE/Skipjack Offshore Transmission • Ocean Wind 1 is a 75/25 Joint Venture • PSEG owns 50% of Garden State • In October the BPU completed its review of offshore wind between Ørsted NA and PSEG Offshore Energy (GSOE) with Ørsted NA transmission and
Slide 23: Inflation Reduction Act of 2022 establishes a nuclear power production tax credit
Inflation Reduction Act (IRA) of 2022 establishes a nuclear power production tax credit, expands incentives and promotes carbon-free generation IRA 2022 Provisions Enacts a nuclear power PTC for existing generation PSEG qualifies for the initial PTC of up to $15/MWh subject to adjustment based on
Slide 24: 2023 Operating Earnings guidance of $3.35 to $3.55 per share
2023 Operating Earnings guidance of $3.35 to $3.55 per share reflects expected headwinds and actions to offset $4.00 Non-GAAP Operating EPS Drivers $3.40 - $3.50 $3.35 - $3.55 ~$(0.25) to ~$(0.30) ~$0.10 to ~$0.15 $3.50 ~$0.15 to ~$0.20 ~$0.05 to ~$0.10 ~$(0.15) to ~$(0.20) ~$0.05 to ~$0.10 • CFIO c
Slide 25: 2023 pension expectations capture 2022 asset returns and the OPEB benefit roll-off
2023 pension expectations capture 2022 asset returns and the OPEB benefit roll-off, as well as mitigation actions to date 2022 vs. 2023 Pension and OPEB (Income) / Expense • Submitted regulatory • Higher 2023 filing with the BPU in expected return early September on plan assets requesting an order r
Slide 26: Interest expense is higher but transmission recovery and roll-off of collateral will help
Interest expense is higher but transmission recovery and the roll-off of collateral on hedges will help dampen 2023 impact 2022 vs. 2023 Pre-Tax Interest Expense $600 Collateral pressures to decline pre-tax) as power delivered on hedges through 2023, with incremental ($ Millions) • PSEG 364-day te
Slide 27: PSEG has extended cost reduction efforts into 2023
PSEG has extended cost reduction efforts into 2023 to further mitigate the impacts of higher pension and interest costs 2018 – 2023E CAGR PSEG O&M (3.0%) PSE&G O&M 0.9% $2,500 $2,000 $1,500 ($ Millions) $1,000 $500 $0 2018 2019 2020 2021 2022E 2023E CFIO Distribution Transmission Note: CFIO excludes
Slide 28: 2022 annual dividend increased $0.12 per share
2022 annual dividend increased $0.12 per share, building on a 115-year history of returning cash to our shareholders PSEG Dividend per Share $2.16 $2.04 $1.96 $1.88 $1.80 Opportunity for consistent and $1.72 sustainable dividend growth - $1.64 now with a higher growth rate $1.56 $1.48 $1.44 2013 201
Slide 29: PSEG Sustainability and ESG Summary
PSEG Sustainability and ESG Summary PSEG Leadership Policies & Goals Recognition & Memberships • Joined the U.N.-backed Race to Zero and • PSEG is a vocal advocate for an economy-wide • Named to 2023 JUST 100 list of America’s Most Business Ambition for 1.5°C campaigns price on carbon and preservati
Slide 30: PSEG has outpaced the industry in reducing carbon emissions intensity
PSEG has outpaced the industry in reducing carbon emissions intensity, and is getting recognized for ESG performance PSEG Generation Carbon Emissions Intensity vs. U.S. Fleet Average (2005 – 2023E) PSEG’s ESG Vital Signs: Relative Scores 1,400 PSEG's generation fleet continues to be much less PEERS
Slide 31: PSEG is transitioning to Net-Zero operations
PSEG is transitioning to Net-Zero operations, which will help enable a lower carbon, competitive New Jersey economy Reduce Scope 1 Carbon-Free Generation: PSEG will transition the generation portfolio to 100% GHG-free Maintain support for nuclear generation Increase investments in renewable gene
Slide 32: Appendix
x* PSEG Appendix
Slide 33: PSEG EPS Reconciliation – Year-to-Date Q3 2022 versus Year-to-Date Q3 2021
PSEG EPS Reconciliation – Year-to-Date Q3 2022 versus Year-to-Date Q3 2021 $3.20 0.10 (0.23) $2.96 $2.83 $2.80 Transmission (0.03) Renewables & Electric Gross Margin (0.83) $2.40 Energy Efficiency 0.01 Capacity (0.41) Gas Margin 0.11 Generation (0.28) $2.00 Electric Margin 0.06 Sale of Solar S
Slide 34: Q3 Year-to-Date 2022 Generation Measures & Hedge Update
Q3 Year-to-Date 2022 Generation Measures & Hedge Update Nuclear Generation Nine Months ended Year ended Measures September 30 December 31 Carbon-Free Contracted Energy Sales* Oct – Dec 2022 2021 2021 2023E 2024E 2022E Capacity Factor 94.3% 93.0% 91.9% Fuel Nuclear Nuclear Nuclear Fuel Cost ($ millio
Slide 35: PSEG maintains a solid financial position
PSEG maintains a solid financial position PSEG Public Service Electric & Gas PSEG Senior Unsecured Credit Ratings PSE&G Senior Secured Credit Ratings Moody’s = Baa2 / Outlook = Stable S&P = BBB / Outlook = Stable Moody’s = A1 / Outlook = Stable S&P = A / Outlook = Stable PSEG 364-Day Term Loan Outst
Slide 36: Targeting PSEG’s credit ratings at ‘Solid’ BBB
Targeting PSEG’s credit ratings at ‘Solid’ BBB Target PSEG Issuer Moody’s S&P Credit Metric Senior Unsecured Baa2 BBB FFO / Debt (1) PSEG Outlook Stable Stable ~Mid-Teens Minimum Baa2 @ 14% BBB @ 13% Threshold A1 Senior Secured Regulatory PSE&G A Equity Ratio ~55% Outlook Stable Stable Issuer Rating
Slide 37: Pension is measured annually, at year-end
Pension is measured annually, at year-end, in determining pension impact for the following year PSEG does not “smooth” the year-end asset value, instead, ($ Millions) 2021 2020 we will apply our EROA assumption (7.2% for 2022) to the Fair Value of Plan Assets at year-end in determining pension Dis
Slide 38: Glossary of Terms
Glossary of Terms AFUDC Allowance for Funds Used During Construction ESG Environmental, Social and Governance AMI Automated Metering Infrastructure FFO Funds from Operations ARO Asset Retirement Obligations GHG Greenhouse Gas BPU New Jersey Board of Public Utilities GSMP Gas System Modernization Pro
Slide 39: Reconciliation of Non-GAAP Operating Earnings
Reconciliation of Non-GAAP Operating Earnings Public Service Enterprise Group Incorporated - Consolidated Operating Earnings (non-GAAP) Reconciliation (a) Effective January 1, 2018, unrealized gains (losses) Nine Months Ended Year Ended on equity securities are recorded in Net Income/ Reconciling It
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