Public Service Enterprise Group Incorporated · NYSE:PEG
Public Service Enterprise — EEI Financial Conference 2021
52 slides from Public Service Enterprise's conference presentation, November 2021
Slide 1: EEI Financial Conference
Public Service Enterprise Group EEI Financial Conference NYSE TICKER: PEG November 7 - 9, 2021
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's Powering Progress Vision
PSEG’s Powering Progress Vision: A future in which people use less energy, that energy is cleaner and delivered more reliably than ever. 4
Slide 5: Predominantly regulated with contracted, zero-carbon infrastructure and growth opportunities
PSEG: Predominantly regulated with contracted, zero-carbon infrastructure and a strong set of growth opportunities ● PSEG: 90% regulated business mix from stable, predictable operations of PSE&G, 10% Zero-Carbon Generation, Infrastructure and Other ● PSE&G: Robust capital program aligned with state
Slide 6: PSEG's investments align with New Jersey's clean energy goals
PSEG’s investments align with New Jersey’s clean energy goals, strengthening system reliability and resilience to meet customers’ increasing expectations PSEG 2021-2025E High-end Capex ~$17B ~50% Addresses: • Decarbonization • Emission Reduction • Methane Reduction • Clean Energy Transition Customer
Slide 7: PSEG Sustainability and ESG Summary
PSEG Sustainability and ESG Summary Leadership Policies & Goals Recognition • PSEG has joined the United Nations • PSEG is a vocal advocate for an economy-wide • PSE&G named a recipient of a Stars of Energy Race to Zero and the Business Ambition price on carbon emissions and preserving nuclear Effic
Slide 8: 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 Emission Intensity vs. U.S. Average (2005 – 2020) PSEG’s ESG Vital Signs: Relative Scores PEERS MSCI AA PSEG in top 20% of all MSCI rated companies SSGA PEERS 6
Slide 9: PSEG has accelerated its climate vision to Net-Zero 2030
PSEG has accelerated its climate vision to Net-Zero 2030 and joined the UN-backed Race to Zero campaign ~22% ~60% Methane New PSEG Original PSEG Original Methane Reduction Net-Zero Power 80% PSEG Power Reduction Target* GHG Vision GHG Reduction Net-Zero Vision Target Target 2023 2030 2030 2046 2050
Slide 10: 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 PSE&G 2020 Rate Base*** Customers 2.3 Million 1.9 Million 5-Year Annual Customer Growth* 0.8% 0.6% >$22B Transmission
Slide 11: Continued focus on safety and reliability performance
Continued focus on safety and reliability performance is demonstrated by sustained results OSHA Incident Rate OSHA Recordable Better Better Days Away Rate 7.0 6.0 150.0 5.0 4.0 4th Quartile 100.0 4th Quartile 3.0 3rd Quartile 3rd Quartile 2.0 2nd Quartile 50.0 2nd Quartile 1.0 1st Quartile 1st Quart
Slide 12: Achieving Highest Ever Customer Satisfaction Scores
Achieving Highest Ever Customer Satisfaction Scores for E&G J.D. Power Residential Satisfaction J.D. Power Business Satisfaction J.D. Power Electric Residential J.D. Power Gas Residential J.D. Power Electric Business J.D. Power Gas Business 1Q 1Q 2Q 2Q 742 767 736 743 748 759 785 802 795 804 820 727
Slide 13: PSE&G's 5-year capital program increased by $1 billion
PSE&G’s 5-year capital program increased by $1 billion to $14B - $16B focused on reliability, resiliency, grid modernization and clean energy $1B increase driven by T&D reliability needs, including recent Infrastructure PSE&G Capital Spending Advancement Program 2021E – 2025E 4,000 3,500 Unapproved
Slide 14: Expanded investment program firms ~6.5%-8.0% rate base growth
Expanded investment program firms ~6.5%-8.0% compound annual rate base growth over 2021E-2025E PSE&G Year-End Rate Base 2020-2025E CAGR 35,000 ~8% - Unapproved Programs 30,000 ~6.5% - 25,000 ($ Millions) 20,000 15,000 10,000 5,000 - 2020 2021E 2022E 2023E 2024E 2025E Transmission Electric Distributi
Slide 15: Transmission: Investment program focused on 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 16: New Jersey is experiencing increased frequency of extreme weather events
New Jersey is experiencing an increased frequency of extreme weather events, challenging existing infrastructure 16
Slide 17: Electric Distribution – Energy Strong program
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 TS Ida, and Remained Operational • Superstorm Sandy & Hurricane Irene caused flooding at 29 substations and switchin
Slide 18: Electric Distribution – Last mile investment program
Electric Distribution – Last mile investment program will modernize the system and improve reliability for customers who are more dependent on the system than ever before Last mile electric system modernization investments: • Targeted asset replacements – Poles, overhead equipment, secondary lines,
Slide 19: Infrastructure Advancement Program
Infrastructure Advancement Program – 4-year distribution investment program to improve reliability, reduce emissions and create jobs Investment $ millions Components Filed with BPU, Underground cable replacement, spacer cable, pole upgrades, expected to start Last Mile - Reliability $206 mid-2022 op
Slide 20: Gas Distribution – Investments to reduce 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 • GSMP II program will 0% replace 875 miles of PSE&G is on track to achieve its pipe over 2019-2
Slide 21: Clean Energy Future programs
Clean Energy Future programs focus on reducing customers’ energy consumption Energy Energy Cloud (EC) Electric Energy Efficiency (EE) “AMI” Vehicles (EV) Storage (ES) Creating clean energy $1B $707M* $166M $109M jobs for under-employed Commitment Investment Investment Investment and diverse NJ resid
Slide 22: PSE&G investments create New Jersey job growth
PSE&G investments create New Jersey job growth and support diverse recruiting efforts Infrastructure programs: Over 1,500 current direct jobs through GSMP II and ES II, and over 500 more through IAP filing Clean Energy: Over 3,000 direct jobs planned, with a focus on unemployed, under-employed, low/
Slide 23: Investments in technology are making us more efficient
Investments in technology are making us more efficient and reliable, and giving customers greater access to information and programs Advanced Metering Infrastructure Providing real time information to help customers manage their usage, improving operational Mobile Geographic efficiencies, and suppor
Slide 24: Successfully managing O&M costs
Successfully managing O&M costs, preserving customer affordability PSE&G O&M Expense (1) 2017 – 2022E CAGR = 2.2% 1,200 • Demonstrated ability to control 1,000 O&M, preserving earnings and returns in a low sales growth environment 800 ($ Millions) • Distribution O&M has remained 600 relatively flat
Slide 25: PSE&G's residential customer bills compare favorably
PSE&G’s residential customer bills compare favorably Gas bills lowest among regional peers, Electric bills lower than average Based upon a calculation of monthly bills for an electric customer using 500 kilowatt-hours and a gas customer using 100 therms using rates as of June 1, 2021. Rates sourced
Slide 26: Typical residential electric and gas bills are down
PSE&G: Typical residential electric and gas bills are down almost 25% from over a decade ago, or about 40% adjusted for inflation Combined Monthly Typical Residential Combined Typical Monthly Residential Electric Electric and Gas Customer Bill* Comparison and Gas Customer 2024E Bill Impacts* of 2008
Slide 27: Residential bill relative to median income has declined
Typical residential combined electric and gas bill relative to median income has declined from over 4% to ~2.5% over the past decade PSE&G Electric & Gas Combined Bill Affordability of the % of New Jersey Household Income combined bill has improved Including Low-income Customers After Assumed Credit
Slide 28: Sale of PSEG Fossil fleet is progressing as expected
Sale of PSEG Fossil fleet is progressing as expected • Agreements to sell PSEG Power’s 6,750 MW fossil generating portfolio to ArcLight - one agreement for the sale of NJ and MD assets; another for the sale of NY and CT assets • The transactions are subject to customary regulatory approvals at the f
Slide 29: Benefits of a long-term solution for nuclear generation
Benefits of a long-term solution recognizing the carbon-free attributes of nuclear generation • Ensures workforce stability and ability to attract and retain nuclear talent • Enhances nuclear fuel purchasing and efficient capital planning • Major consideration for Nuclear Regulatory Commission licen
Slide 30: Cost control and stability of gross margin support results
Cost control and stability of gross margin support results Zero-Carbon, Financial Items Power O&M Expense (1) Infrastructure & Other to Consider for 2022 2017 – 2022E CAGR = (7.3%) Gross Margin – 2022E • PSEG Fossil and Solar Source O&M run rate was ~$300 million/year • Fossil/Solar Source Depreciat
Slide 31: Benefits of offshore wind development
Benefits of offshore wind development • Offshore Wind Strategic Plan to develop 7,500 MW by 2035 is a key component of New Jersey’s ‘100% clean energy by 2050’ target • Captures best regional renewable resource • Supports economic growth engine for new supply chain, including the New Jersey Wind Por
Slide 32: PSEG current offshore wind opportunities
PSEG current 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 April 2021, the BPU and PJM opened a between Ørsted NA and PSEG Offshore Energy (GSOE) with Ørsted competitive solicitation fo
Slide 33: PSEG regulatory & policy focus
PSEG regulatory & policy focus supports our low carbon infrastructure platform New Jersey Focus Federal Focus • PSE&G continuing investments in critical energy infrastructure to • Transmission formula rate settlement approved provide customer benefits; Energy Strong program improves • FERC’s propose
Slide 34: PSEG is focused on advancing Powering Progress
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 • IAP • Transmission Expansion • 2021 Successor Solar Framework • Last Mile Reliability • Energy Strong I • 2021 Ne
Slide 35: Pursuing long-term solutions for our nuclear fleet
Pursuing long-term solutions to recognize the zero-carbon attributes of our nuclear fleet Federal Focus Potential State Solutions The Biden Administration's climate agenda recognizes The Murphy Administration’s climate agenda the importance of preserving existing nuclear units recognizes the importa
Slide 36: Sound governance and unwavering ethics
Sound governance and unwavering ethics are the foundation of our high-performing culture • Diverse Board of Directors – Assignment of key topics to full board or specific committee (climate, – Independent Lead Director – Dr. Shirley Ann Jackson cybersecurity, safety, human capital management) – 50%
Slide 37: Long-term focus on regulated utility growth
Long-term focus on regulated utility growth, improving our business mix and enhancing our ESG profile Before Non-Nuclear Divestiture After Non-Nuclear Divestiture PSE&G ~90% and Zero-Carbon, Business Mix Growing Regulated Contribution Infrastructure and Other ~10% 6,750 MW of Fossil Generation with
Slide 38: Sale of non-nuclear assets generated significant cash flow
Sale of non-nuclear assets generated significant cash flow for debt reduction and share repurchases Sources and (Uses) of Cash Net Solar Sale Proceeds ~$0.4B Net Fossil Sale Proceeds ~$1.75B Total After-Tax Proceeds ~$2.15B 2023 and 2031 Power Senior Note Redemptions and (~$1.6B) Make-Whole Premium
Slide 39: Targeting PSEG's credit ratings at 'Solid' BBB
Targeting PSEG’s credit ratings at ‘Solid’ BBB Target PSEG Issuer Moody’s S&P Credit Metric Senior Baa2 BBB Unsecured FFO / Debt PSEG Outlook Stable Stable ~Mid-Teens Minimum Baa2 @ 14% BBB @ 13% Threshold A1 Senior Secured Regulatory PSE&G A Equity Ratio ~55% Outlook Stable Stable Issuer Rating Baa
Slide 40: Enhanced business profile underpins solid credit ratings
Enhanced business profile underpins solid credit ratings and significant debt capacity PSEG 2022E – 2025E Funds from Operations / Debt Average Debt Capacity Financial flexibility utilized to fund planned investments, with significant debt capacity remaining for incremental opportunities 40
Slide 41: PSEG has controlled O&M by focusing on continuous improvement
PSEG has controlled O&M by focusing on continuous improvement and controlling support costs related to non-nuclear divestiture PSEG O&M Expense (1) 2017 – 2022E CAGR = (1.8%) ($ Millions) All support costs related to PSEG Fossil to be fully eliminated with successful just transition placement of imp
Slide 42: PSE&G earnings growth drives long-term earnings growth rate
PSE&G earnings growth drives PSEG’s long-term earnings growth rate PSEG non-GAAP Operating Earnings per Share • Earnings growth driven by robust utility capital program aligned with state Clean Energy PSEG goals, supportive recovery mechanisms and CAGR 5 to 7% rate case, and cost control including w
Slide 43: Raising our 2022 indicative annual dividend increase
Raising our 2022 indicative annual dividend increase from $0.08 to $0.12 per share, effective Q1 2022 Opportunity for consistent and sustainable dividend growth - now with a higher growth rate PSEG Dividend per Share $2.16* $2.04* $1.96 $1.88 $1.80 $1.72 $1.64 $1.56 $1.48 $1.44 2013 2014 2015 2016 2
Slide 44: 2021 Investor Conference Takeaways
2021 Investor Conference Takeaways ● PSEG: 90% regulated business mix from stable, predictable operations of PSE&G, 10% Zero-Carbon Generation, Infrastructure and Other ● PSE&G: Robust capital program aligned with state clean energy goals, increased by $1B to $14B-$16B through 2025, at our best-in-c
Slide 45: Appendix
x* PSEG Appendix 45
Slide 46: PSEG EPS Reconciliation – YTD 2021 versus YTD 2020
PSEG EPS Reconciliation – YTD 2021 versus YTD 2020 $3.50 0.28 (0.09) (0.01) $2.96 $2.91 $3.00 $2.78 Capacity 0.04 Higher O&M and Lower Interest Transmission 0.04 Re-contracting & $2.50 Market (0.17) Electric Margin 0.04 Gas Margin 0.04 Sale of Solar $2.00 Weather & 2020 Gas Source (0.03) Weather Nor
Slide 47: 2021 and 2022 Operating Earnings Guidance
2021 and 2022 Operating Earnings Guidance, reflecting continued growth at PSE&G and transition to more predictable business mix Operating Earnings Guidance Updated Original $ millions (except EPS) 2022E(1) 2021E(2) 2021 Guidance (1) 2022E guidance – expect to PSE&G $1,485 - $1,575 $1,430 - $1,480 $1
Slide 48: PSEG maintains a solid financial position
PSEG maintains a solid financial position PSEG Public Service Electric & Gas Senior Unsecured Credit Ratings 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 Senior Notes Outstanding as of 9/3
Slide 49: PSEG is transitioning to Net-Zero operations
PSEG is transitioning to Net-Zero operations 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 generation that will further reduce the carbon footprint of Reduce Scopes 1
Slide 50: Glossary of Terms
Glossary of Terms AFUDC Allowance for Funds Used During Construction GSMP Gas System Modernization Program AMI Automated Metering Infrastructure IAP Infrastructure Advancement Program BPU New Jersey Board of Public Utilities LIHEAP Low Income Home Energy Assistance Program BOEM Bureau of Energy Mana
Slide 51: Reconciliation of Non-GAAP Operating Earnings
Reconciliation of Non-GAAP Operating Earnings Public Service Enterprise Group Incorporated - Consolidated Operating Earnings (Non-GAAP) Reconciliation Nine Months ended Year Ended Reconciling Items September 30, December 31, (a) Effective January 1, 2018, unrealized gains 2021 2020 2020 2019 2018 20
Slide 52: Reconciliation of Non-GAAP Operating Earnings for PSEG Power and Enterprise/Other
Reconciliation of Non-GAAP Operating Earnings for PSEG Power and PSEG Enterprise/Other PSEG Power LLC - Operating Earnings (non-GAAP) Reconciliation Nine Months Ended Reconciling Items September 30, (a) Includes the financial impact from positions with forward delivery months. 2021 2020 (b) Income t
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