Public Service Enterprise Group Incorporated · NYSE:PEG
Public Service Enterprise — Investor Day (February 2014)
138 slides from Public Service Enterprise's investor day presentation, February 2014
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 Statement
Forward-Looking Statement Certain of the matters discussed in this communication about our and our subsidiaries’ • any deterioration in our credit quality or the credit quality of our counterparties, future performance, including, without limitation, future revenues, earnings, strategies, including
Slide 3: GAAP Disclaimer
GAAP Disclaimer PSEG presents Operating Earnings in addition to its Income from Continuing Operations/Net Income reported in accordance with accounting principles generally accepted in the United States (GAAP). Operating Earnings is a non- GAAP financial measure that differs from Income from Continu
Slide 4: 2014 PSEG Conference Agenda
2014 PSEG Conference Agenda Presentation Presenter Welcome and Introductions Kathleen Lally PSEG Ralph Izzo PSE&G Ralph LaRossa PSE&G Transmission Kim Hanemann PSEG Long Island Ralph LaRossa Q&A Session Break PSEG Power William Levis Power ER&T Shahid Malik Q&A Session Financial Review & Outlook Car
Slide 5: PSEG Introduction & Overview
PSEG INTRODUCTION & OVERVIEW Ralph Izzo CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
Slide 6: PSEG's Strategy – delivering results
PSEG’s Strategy – delivering results Our businesses’ focus on cost- effective, reliable operations yields strong cash flow We are funding growth-oriented DISCIPLINED investments aligned with customer INVESTMENT needs and state energy policies We are enhancing the competitiveness ENGAGED of our envir
Slide 7: Two complementary businesses
Two complementary businesses Strong asset platform, performing well and positioned for the future Electric & Gas Delivery Regional Competitive Generation and Transmission Strategy: Positioned to meet customers’ Strategy: Fuel diverse fleet is geographically needs as we respond to state and federal a
Slide 8: Delivering on commitments and pursuing opportunities for growth
Delivering on commitments and pursuing opportunities for growth Operational • Power: Record 2013 output at Linden CCGT and Salem 2; Excellence nuclear capacity factor greater than 90% for 9th straight year • PSE&G: Mid-Atlantic Reliability Award (12th consecutive year) • PSEG Long Island: Went “live
Slide 9: Operating Earnings Guidance
Operating Earnings Guidance Building on the successful implementation of our strategy $2.55 - $2.75E $2.58 $2.44 2012 2013 2014 Guidance SEE SLIDE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING 9 OPERATIONS/NET INCOME TO RECONCILE TO OPERATING EARNINGS. E = ESTIMATE.
Slide 10: Operating Earnings Mix
Operating Earnings Mix Long term investment program has driven increased earnings contribution from stable, regulated business Power’s diverse fuel mix Operating Earnings* Contribution by Subsidiary (%) and dispatch flexibility $2.55 - continues to generate $3.09 $3.12 $2.74 $2.44 $2.58 $2.75E earni
Slide 11: Maintaining a robust capital program focused on growth
Maintaining a robust capital program focused on growth PSEG 2009 - 2013 Capital Spending PSEG 2014 - 2018E Capital Spending $11.3 Billion $11.8 Billion PSE&G PSE&G $8.4B $10B $6.8 $4.1 $1.0 $0.3 $0.8 $3.3 $1.2 Power $2.9 $2.8B $1.0 $0.8 $0.1 Power $0.2 $0.2 $0.4 $1.6B NOTE: POWER 2009–2013 ACTUALS A
Slide 12: PSEG's business profile has been transformed
PSEG’s business profile has been transformed through significant growth in utility capital spending $2,500 3 YEAR AVERAGE PSE&G CAPITAL SPENDING GREW AT A RATE OF $2,175 23% PER YEAR FROM 2008 - 2013 $2,000 PSE&G CAPEX CAGR $1,770 (2008-2013) 3 YR $1,749 24% AVG ENDED 3 YR $1,500 $1,302 3 $1,443 YR
Slide 13: Energy Strong Proposal recognizes need to strengthen and harden the distribution system
Energy Strong Proposal recognizes need to strengthen and harden the distribution system • Energy Strong is: A $2.6 Billion investment program over 5 years as the first phase of a 10-year, $3.9 Billion infrastructure program Proposal is based on contemporaneous recovery of investment, subject to
Slide 14: PSEG Power – Value-advantaged through asset diversity
PSEG Power – Value-advantaged through asset diversity, fuel flexibility, location and installed environmental controls Fuel Diversity Energy Produced Energy Market Served Total MW: 13,450 Total GWh: 54,264 Total MW: 13,450 1% <1% <1% 18% 2% 13% 1% 34% 30% 23% 9% 44% 55% 43% 27% Load Following Ga
Slide 15: PSEG Power – Our diverse fleet and flexible portfolio
PSEG Power – Our diverse fleet and flexible portfolio allow us to capture opportunities arising from market volatility PSEG Power Gross Margin** $55 $50 $/MWh $45 $40 2011 2012 2013 Hedges + Forwards* Actual *AT THE BEGINNING OF EACH YEAR. **EXCLUDES BGSS. 15
Slide 16: Balance Sheet Strength
Balance Sheet Strength 2009 – 2013: Reduced risk profile and transformed business mix • Invested $8.4 billion in PSE&G • Improved credit ratings • Monetized and de-risked Holdings’ portfolio 2014 – Forward: Strong cash flows and increasingly regulated business mix fully support: • PSE&G’s $10B appro
Slide 17: Where we're going … actions taken to focus on more predictable growth
Where we’re going … actions taken to focus on more predictable growth PSEG Focus 2008 2013 ($ Millions except as noted) ($ millions, except as noted) 2016E $2.91 $2.58 Operating Earnings Per Share $70 $38 PJM West RTC ($/MWh) $38 6 • 2.4% (planned1) • 1.5% (actual2) • O&M Growth per year •(0.7%) (fo
Slide 18: PSEG Annual Dividend – A long history of growth
PSEG Annual Dividend – A long history of growth and returning cash to shareholders with a financial position that provides opportunity for consistent and sustained growth PSEG Annual Dividend Rate $1.48* $1.44 $1.42 10-YEAR COMPOUND ANNUAL RATE OF GROWTH 3.0% $1.37 $1.37 $1.33 $1.29 $1.17 $1.14 $1.1
Slide 19: Value Proposition
Value Proposition PSEG is positioned to expand its investment in PSE&G projects that provide reasonable, risk-adjusted returns, in ways that meet customer needs and state goals, given strong cash flow of Power and growing cash contribution from PSE&G. PSEG will maintain a strong financial profile th
Slide 20: 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. 20
Slide 21: PSE&G
PSE&G Ralph LaRossa PR E S ID E N T A N D C HIE F O PE R AT IN G O FFIC E R PUBLIC SERVICE ELECTRIC & GAS
Slide 22: Agenda
Agenda • Company Overview • Financial Performance • Capital Investment • Energy Strong • In-depth Transmission Review 22
Slide 23: PSE&G strategy
PSE&G strategy Building a sustainable DISCIPLINED platform that INVESTMENT balances reliability, ENGAGED WORKFORCE customer rates and public FINANCIAL OPERATIONAL policy to ensure STRENGTH EXCELLENCE growth at reasonable returns 23
Slide 24: PSE&G is the largest electric and gas distribution and transmission utility in New Jersey
PSE&G is the largest electric and gas distribution and transmission utility company in New Jersey Electric Gas Customers 2.2 Million 1.8 Million Growth (2009 – 2013) 0.6% 0.6% 3,813M Electric Sales and Gas Sold and Transported 41,286 GWh Therms Projected Annual Load Growth (2014 – 2016) 0.6%* 0.5%*
Slide 25: 12 time Mid-Atlantic ReliabilityOne award winner
12 time Mid-Atlantic ReliabilityOne award winner and Outstanding Response to a Major Event 25
Slide 26: PSE&G's operating earnings grew ~18%
PSE&G’s operating earnings grew ~18% over the 5-year period with increased investment, cost control and supportive rate mechanisms PSE&G Operating Earnings* Per Share $1.21 $1.03 $1.04 $0.85 $0.63 2009 2010 2011 2012 2013 *SEE SLIDE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/NET INC
Slide 27: Focus on controlling O&M and lower pension costs
Focus on controlling O&M and lower pension costs support decline in expenses PSE&G O&M* 2009–2014 CAGR: (1.0%) 1,200 1,000 800 ($ Millions) 600 400 200 0 2009 2010 2011 2012 ** 2013 2014E * EXCLUDES REGULATORY CLAUSES ** INCLUDES $40M IMPACT FROM SUPERSTORM SANDY. E = ESTIMATE 27
Slide 28: PSE&G's rate base has grown ~9% annualized
PSE&G’s PSE&G Rate Base rate base $10.4B has grown 6% ~9% annualized $7.3B 1% 36% Solar & Energy with investment 15% Efficiency Transmission focused on Distribution meeting 84% 58% customers’ requirements 2009 2013 Growth in rate base is driven by investments with constructive recovery mechanisms 28
Slide 29: Successfully worked with regulators to develop multiple solutions
Successfully worked with regulators to develop multiple solutions for New Jersey’s energy and economic development goals RENEWABLES – creative ENERGY EFFICIENCY – DISTRIBUTION – improving solutions to install solar assisting customers with the electric and gas delivery generation: $0.7B controlling
Slide 30: A 40% increase to $10 billion in our 5-year investment program
A 40% increase to $10 billion, in our 5-year investment program, with further opportunity from Energy Strong PSE&G’s Capital Expenditures 2013-2017E 2014-2018E $7.0 Billion $10.0 Billion 29% 33% 65% 2% 68% 3% Distribution Solar/Energy Efficiency Transmission E = ESTIMATE 30
Slide 31: PSE&G's capital program has been expanded
PSE&G’s capital program has been expanded and continues to focus on delivering energy solutions PSE&G’s Capital Expenditures 3,000 2,500 2,000 ($ Millions) 1,500 1,000 500 0 2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E Distribution Transmission Solar/Energy Efficiency Previous Forecast for
Slide 32: PSE&G's capital program could expand further with Energy Strong
PSE&G’s capital program could expand further with the addition of Energy Strong PSE&G’s Capital Expenditures 3,000 2,500 2,000 ($ Millions) 1,500 1,000 500 0 2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E Distribution Transmission Solar/Energy Efficiency Energy Strong - as filed Previous For
Slide 33: Energy Strong filing for resiliency and hardening
Energy Strong filing for resiliency and hardening to support customers’ needs in the wake of Superstorm Sandy • Filed 5-year $2.6 billion capital program with NJ Board of Public Utilities (BPU) in February 2013 • Program addresses system resiliency and hardening by: • Protecting distribution substat
Slide 34: Over 70% of investment program recovered through contemporaneous mechanisms
Over 70% of PSE&G’s $10 billion investment program will be recovered through contemporaneous mechanisms 2014-2018E PSE&G Capital Spending by Recovery Method $10.0 Billion Clause Recovery Mechanisms 29% Solar/Energy Efficiency FERC Formula Rates Transmission Traditional Recovery Mechanisms 3% Distrib
Slide 35: Energy Strong impact to customer bills expected to be fully offset
The Energy Strong impact to customer bills is expected to be fully offset PSE&G’s Typical Average Residential Bill $4,000 Consumer Price Index $3,000 $2,000 $1,000 $0 2008 2014 2015 2016 2017 2018 2019 Customer Bill Customer Bill Transitional Energy Securitization Non-Utility Energy Strong - Electri
Slide 36: In-Depth Transmission Review
IN-DEPTH TRANSMISSION REVIEW Kim Hanemann VICE-PRESIDENT DELIVERY PROJECTS AND CONSTRUCTION
Slide 37: Transmission has delivered, and has grown to ~36% of rate base
PSE&G’s Transmission Capital Expenditures Transmission 1,800 has 1,600 delivered, 1,400 1,200 ($ Millions) and has grown 1,000 800 to represent 600 ~36% of rate 400 200 base - 2009 2010 2011 2012 2013 Burlington-Camden Mickelton-Gloucester-Camden North Central Reliability Northeast Grid Susquehanna-
Slide 38: Major transmission investment program remains on schedule and on budget
PSE&G’s existing major transmission investment program remains on schedule and on budget Major Transmission Projects 100% Project Inclusion Recovery Expected Approved Estimate of CWIP in of Costs In-service ROE Up To Rate Base Due to Date ($ Millions) Abandonment June 2014 / Susquehanna-Roseland 12.
Slide 39: Susquehanna-Roseland
Susquehanna-Roseland consists of constructing 150 miles of 500kV circuit (46 miles in NJ) with two new 500kV GIS switching stations at Roseland and Hopatcong Project Through Expected Estimate Year-end 2013 In-service Date Up To* June 2014 $790M $661M / June 2015 • PJM RTEP project b0489 • ROE of 12.
Slide 40: Northeast Grid Reliability
Northeast Grid Reliability consists of upgrading approximately 50 overhead circuit miles of 138kV transmission line to 230kV, constructing ~18 miles of new underground 230kV lines, and converting/upgrading 12 existing stations to 230kV operation Project Estimate Through Year-end Expected Up To 2013
Slide 41: North Central Reliability
North Central Reliability consists of upgrading 55 circuit miles of 138kV transmission line to 230kV, and converting six existing stations to 230kV operation Project Estimate Through Year-end Expected Up To 2013 In-service Date $390M $349M June 2014 • PJM RTEP project b1154 • ROE of 11.68% • 100% CW
Slide 42: Burlington-Camden 230kV
Burlington-Camden 230kV consists of upgrading 37 circuit miles (30 miles of overhead and 7 miles of underground) of 138kV transmission line to 230kV, converting the existing stations to 230kV operation Project Estimate Through Year-end Expected Up To 2013 In-service Date $399M $301M June 2014 • PJM
Slide 43: Mickleton-Gloucester-Camden 230kV
Mickleton-Gloucester-Camden 230kV consists of upgrading 10 circuit miles of overhead transmission, installing ~16 circuit miles of new 230kV underground, 10 circuit miles of new 230kV overhead, and modifications/upgrades at five existing stations Project Estimate Through Year-end Expected Up To 2013
Slide 44: Bergen-Linden Corridor
Bergen-Linden Corridor is a recently approved project which will provide a double-circuit 345kV line to maintain reliability Project Estimate Through Year-end Expected Up To 2013 Completion Date $1,200M - June 2018 • PJM RTEP project b2436 • 30 miles of underground cable • New ~ 23 miles • Reconduct
Slide 45: Planned transmission spend of $6.8 billion
Planned transmission spend of $6.8 billion is driven by PJM reliability projects, 69kV conversions and life-cycle replacement projects PSE&G’s Transmission Capital Expenditures Previous Forecast for 2013-2017 E= ESTIMATE 45
Slide 46: Processes and culture are the foundation for project execution success
PSE&G’s processes and culture are the foundation for project execution success ● Diverse, well-rounded team ● Culture with a focus for on-time, on-scope and on-budget execution People ● Successful recruitment, development and retention strategies ● Strong unions and supplier relationships ● Cradle t
Slide 47: Demonstrated ability positions us to pursue new opportunities
PSE&G’s ● Future RTEP as identified by PJM demonstrated ● Near-term participation ability to in RTO competitive successfully open planning windows ● PJM execute large ● MISO projects leaves us ● NYISO well positioned to ● Anticipate participating pursue new in future competitive opportunities solici
Slide 48: PSE&G's 2014 operating earnings to benefit from transmission investment
PSE&G’s 2014 operating earnings to benefit from increased investment in transmission and on-going cost control PSE&G Operating Earnings* ($ Millions) $705 - $745E $612 $528 2012 2013 2014 Guidance *SEE SLIDE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING E=ESTIMATE OPERATIONS/NET INCOME TO RECONCI
Slide 49: PSEG Long Island
PSEG LONG ISLAND Ralph LaRossa CHAIRMAN OF THE BOARD PSEG LONG ISLAND
Slide 50: PSEG selected to operate LIPA's electric T&D system for 12 years
PSEG was selected to operate Long Island Power Authority’s (LIPA) electric transmission and distribution system for 12 years starting in 2014 ● Pursuant to the Operating Services Agreement (OSA), all expenses and capital costs to operate the system are pre-funded by LIPA and passed through to their
Slide 51: PSEG Long Island commenced operations on January 1, 2014
PSEG Long Island commenced operations on January 1, 2014 Key elements of Operating Services Agreement Increased PSEG Use of PSEG brand 3-Year rate freeze scope and control as PSEG Long Island (2013-2015) NY Department of Potential for “Utility Performance metrics Public Service 2.0” investment overs
Slide 52: 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. 52
Slide 53: PSEG Power
PSEG POWER William Levis PRESIDENT AND CHIEF O PER AT IN G O FFIC E R PSEG POWER
Slide 54: 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 54
Slide 55: Agenda
Agenda • Delivering Value • Fleet Advantage, Location, Flexibility and Fuel Diversity • Nuclear Operation • Fossil Operation • Financial Performance • Expansion Opportunities • Regulatory • Engaged Workforce 55
Slide 56: PSEG Power creating value by responding to changing markets and regulations
PSEG Power creating value by responding to changing markets and regulations Safety/Environmental Focus Financial/Economic Regulatory Focus Fleet Diversity/Efficiency Focus Focus • Nuclear units continue to achieve • “Getting the most out of • Strong regulatory strong operational results, operating e
Slide 57: PSEG Power Delivering on priorities
PSEG Power Delivering on priorities • Maximize value of existing generating • OEM implemented and Operational plants through implementation of the achieving measures Excellence Operational Excellence Model (OEM) • Resource sharing program • Workforce engagement and development initiated • Deliver on
Slide 58: PSEG Power met 2013 challenges
PSEG Power met 2013 challenges Storm and Market Value weather challenges challenges delivered • SuperStorm Sandy • Unit outages and • Optimized unit dispatch across fleet impacted planned during storm recovery our generating sites transmission outages resulted in • Expedited return from storm outage
Slide 59: PSEG Power exceeded 2013's earnings guidance
PSEG Power exceeded 2013’s earnings guidance $710M SOLAR/ $630-$685M KALAELOA $15M* $535M-$600M GUIDANCE RANGE Over $100M of additional value gained from fleet flexibility, locational advantage and market volatility Initial Winter/ Lower Basis Spark/ Fuel Revised Actual Summer Gas Volatility Dark Fl
Slide 60: PSEG Power has generating assets in three competitive markets
PSEG Power has generating assets in three competitive markets • Assets near loads ISO New • Low cost portfolio New York ISO England • Fuel flexibility with gas Bethlehem Energy Center cost advantage (Albany) Bridgeport • Poised to benefit from New Haven volatility in real-time markets Hudson • Fleet
Slide 61: Maintain diversity and efficiency after realignment of the fleet due to HEDD
PSEG Power will maintain diversity and efficiency after a realignment of the fleet due to HEDD Objective Fuel Diversity Energy Produced 15,000 2013 2017 13,450 MW 11,900 MW 54 TWh 55 - 56 TWh 13,000 • Maintain fuel diversity Oil, Other gas, HEDD, Pumped storage, 11,000 • Maintain load-serving Sola
Slide 62: Power's PJM assets along the dispatch curve
Power’s PJM assets along the dispatch curve reduce the risk of serving full requirement load contracts and can take advantage of volatile market conditions Nuclear National Park Coal Sewaren 6 Dispatch Cost ($/MWh) Mercer 3 Coal/Gas Salem 3 Combined Cycle Burlington 8-9-11 Bergen 3 Steam Edison 1-2-
Slide 63: PSEG Power Nuclear is a critical element of our success
PSEG Power Nuclear is a critical element of our success Salem Peach Bottom Hope Creek Units 1 and 2 Units 2 and 3 • Operated by PSEG Nuclear • Operated by PSEG Nuclear • Operated by Exelon • PSEG Ownership: 100% • PSEG Ownership: 57% • PSEG Ownership: 50% • Technology: Boiling Water • Technology: Pr
Slide 64: PSEG Power Nuclear is core to the fleet and has competitive advantages
PSEG Power Nuclear is core to the fleet and has competitive advantages • Continued strong nuclear operations: • Fukushima action plan nine consecutive years of >90% in response to NRC staff review capacity factor FLEX* plan submitted with implementation starting with Fall outage • Significant earn
Slide 65: Nuclear fleet well positioned with lower-than-average cost structure
Power’s nuclear fleet is well positioned with significantly lower-than-average US cost structure Total Fuel, Capital and O&M Costs* 50 3 YEAR AVERAGE 2010 - 2012 $/MWh 25 0 All US* PSEG Nuclear** *SOURCE: ELECTRIC UTILITY COST GROUP ** SOURCE: PSEG NUCLEAR 65
Slide 66: PSEG Power's Fossil Fleet Performance has shown improvement
PSEG Power’s Fossil Fleet Performance has shown improvement Capacity Factor NJ Coal EFORp 75% 15% 50% 10% 25% 5% 0% 2008 2009 2010 2011 2012 2013 0% 2008 2009 2010 2011 2012 2013 Coal Combined Cycle Peaking Peaking Start Success* NJ Combined Cycle EFORp 100% 5% 4% 95% 3% 90% 2% 85% 1% 80% 0% 2008 20
Slide 67: Combined cycle fleet efficiency improvements achieved
PSEG Power Combined Cycle Operating Heat Rate improvements 7,800 7,700 achieved in 7,600 Heat Rate AGP projected efficiency improvement 2014-2018 combined cycle 7,500 7,400 fleet efficiency 7,300 2008 2009 2010 2011 2012 2013 2018 Actions Taken to Create Value • Operational Excellence Model • Heat r
Slide 68: Investing to expand CCGT capacity and improve efficiency
Investing to expand CCGT capacity and improve efficiency PSEG Power - CCGT Uprate Project AGP Project Benefits o Expand Power’s CCGT fleet, one of the CCGT capacity uprates of ~150 MW: largest gas-fired portfolios in PJM, with - Linden (63 MW – 2014) incremental base and peaking MWs - Bergen (31MW
Slide 69: PSEG Power's fleet is among the lowest emitting in the industry
PSEG Power’s fleet is among the lowest emitting in the industry 70,000 90,000 80,000 60,000 70,000 SO2 & NOx Tons 50,000 60,000 50,000 GWh 40,000 40,000 30,000 30,000 20,000 20,000 10,000 10,000 0 2006 2007 2008 2009 2010 2011 2012 2013 Generation SO2 NOx • Mercury reduced 80% across the timeframe a
Slide 70: Capital expenditures for environmental requirements essentially complete
PSEG Power’s capital expenditures for environmental requirements are essentially complete* $700 $600 $500 COMPLETION OF $400 ($Millioms) CONEMAUGH SCR/FGD MODS IN 2015 $300 $200 $100 $0 2009 2010 2011 2012 2013 2014E 2015E 2016E Growth Environmental / Regulatory Maintenance *BASED ON CURRENTLY KNOWN
Slide 71: PSEG Power's focus on costs has resulted in moderate increase in O&M
PSEG Power’s Power O&M Expense* focus on costs 2009 to 2014 CAGR = 1.6% $1,500 has resulted in moderate increase $1,000 $Millions in O&M for $500 six years $0 2009 2010 2011 2012 2013 2014E Cost control actions taken: • Fossil plant assessment • Nuclear maintenance productivity study • CCGT material
Slide 72: PSEG Power is well-positioned for growth when market conditions warrant
PSEG Power is well-positioned for growth when market conditions warrant Available locations Our sites possess infrastructure advantages • Bergen • Hudson • Electric Transmission Interconnections • Burlington • Linden • Access to Gas Pipelines • Essex • Sewaren • Space • Edison • Bridgeport • Emissio
Slide 73: PSEG Solar Source owns 88 MW of operating solar facilities
PSEG Solar Source owns 88 MW of operating solar facilities and has one project under construction Hackettstown (Mars) Queen Creek New Jersey (2 MW) Arizona (25 MW) COD September 2009 COD October 2012 Thin film panels – fixed tilt Polycrystalline - single axis Investment $13 million tracker 15 year P
Slide 74: PSEG Power is an established leader within the industry
PSEG Power is an established leader within the industry INPO USA Alliance • Board of Directors • Chair • National Nuclear Accrediting Board EPSA NEI • Executive committee member • Chair Communications Advisory Committee UWAG • Board of Directors • Chair of the Cooling Systems Committee • Board of Di
Slide 75: Developing People to drive operational excellence
Developing People to drive operational excellence and to optimize the workforce • Succession planning and development planning • Training & development of employees • Outreach programs • Employee engagement • Shared resources between Fossil and Nuclear (outage support) 75
Slide 76: PSEG Power ER&T
PSEG POWER ER&T Shahid Malik PRESIDENT, PSEG ENERGY RESOURCES & TRADE
Slide 77: Portfolio Management Strategy
Portfolio Management Strategy Optimize value of assets DISCIPLINED INVESTMENT Manage risk vs. reward ENGAGED Directly engage with ENGAGED WORKFORCE WORKFORCE regulatory agencies FINANCIAL OPERATIONAL STRENGTH EXCELLENCE 77
Slide 78: Agenda
Agenda Market Review PSEG’s Competitive Advantage PSEG’s Sustainable Advantage 78
Slide 79: Market Review: Prices have stabilized
Market Review: Prices have stabilized NYMEX Natural Gas Price PJM West RTC $50 $6 $45 $5 $4 $40 $/MMbtu $/MWh $3 $35 $2 $30 $1 $- $25 $20 2011 2012 2013 2014F 2015F 2016F 2017F 2018F Historical Forward PJM West Spark Spreads $23 $21 • Energy and gas prices appear to have $19 stabilized $17 • Environ
Slide 80: Market Review: New generation in PJM not keeping pace with coal retirements
Market Review: New generation in PJM not keeping pace with coal retirements Cumulative Generation Retirements* Forecast Reserve Margin (PJM January 2014) 16,000 30.0% 14,000 25.0% 12,000 Reserve Margin 20.0% 10,000 15.0% MW 8,000 6,000 10.0% 4,000 5.0% 2,000 0.0% 6/1/2014 6/1/2015 6/1/2016 6/1/2017
Slide 81: Market Review: Regulatory framework showing signs of improvement
Market Review: Regulatory framework showing signs of improvement ISSUE / POLICY REGULATORY GAINS SUBSIDIZED GENERATION • Comprehensively defeated in federal court (appeals currently pending) (NJ and MD) DEMAND RESPONSE PJM • PJM and ISO-NE enacted stricter rules of eligibility and deployment RULES •
Slide 82: Enjoys real and competitive advantages in merchant generation
PSEG Power: Enjoys real and competitive advantages in the merchant generation space Market Review PSEG’s Competitive Advantage • Fuel Flexibility • Heat Rate Diversity • Access to Marcellus Shale Gas • Trading & Asset Flexibility • Volatile Power Basis to PJM-West • Location PSEG’s Sustainable Advan
Slide 83: Competitive Advantage: Heat Rate Diversity & Flexible Dispatch
Competitive Advantage: Heat Rate Diversity & Flexible Dispatch PJM Dispatch Curve National Park Sewaren 6 Mercer 3 Dispatch Cost ($/MWh) Salem 3 Burlington 8-9-11 Bergen 3 Edison 1-2-3 Essex 10-11-12 Sewaren 1-4 Linden 5-8 / Essex 9 Burlington 12 Keystone Hudson 2 Linden 1,2 Kearny 9-12-13-14 Peach
Slide 84: Competitive Advantage: Extensive gas asset portfolio
Competitive Advantage: PSEG’s extensive gas asset portfolio gives unparalleled access to Marcellus Shale gas Shale Supply 0.6 BCF/D Storage 0.9 BCF/D Gulf Coast Supply 0.7 BCF/D 84
Slide 85: Competitive Advantage: ~25% of Power's gas from Marcellus
Competitive Advantage: ~25% of Power’s gas for generation comes from Marcellus Market Spot Natural Gas Prices: Jun-Dec 2013 Prices for $5 Natural Gas $4 $3 $/MMbtu Access $2 to Lower Cost Shale Gas in Marcellus $1 and Utica $- Henry Hub Leidy-Transco (Marcellus) • Our combined cycle and peaking asse
Slide 86: Competitive Advantage: Locational advantage from basis volatility
Competitive Advantage: Locational advantage from short term basis volatility PS Zone Annual Basis to PJM-W PS Zone Day Ahead On Peak Monthly Basis to PJM-W $20 $20 $18 $18 $16 $16 $14 $14 $/MWh $12 $/MWh $12 $10 $10 $8 $8 $6 $6 $4 $4 $2 $2 $- $- 2011 2012 2013 2014 F 2015 F 2016 F 2017 F 2018 F PS Z
Slide 87: Competitive Advantage: Trading & Asset Flexibility
Competitive Advantage: Trading & Asset Flexibility PSEG Zone LMP’s on January 7, 2014 On Peak Basis to PJM-W on January 7, 2014 $2,000 $1,800 Salem/HC PB Key/Con Mer Hud Ber Linden $1,600 $100.0 $1,400 Day Ahead $80.0 $1,200 Real Time $60.0 $/MWh $1,000 $40.0 $/MWh $800 $20.0 $600 $- $400 $(20.0) $2
Slide 88: Competitive Advantage: Trading & Asset Flexibility
Competitive Advantage: Trading & Asset Flexibility PSEG Zone LMP’s on July 18, 2013 On Peak Basis to PJM-W on July 18, 2013 $600 Salem/HC Key/Con Hud Linden $500 Day Ahead $20.0 $400 Real Time $15.0 $300 $10.0 $/MWh $/MWh $200 $5.0 $100 $- $- $(5.0) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Slide 89: Enjoys real and sustainable advantages in merchant generation
PSEG Power: Enjoys real and sustainable advantages in the merchant generation space Market Review PSEG’s Competitive Advantage PSEG’s Sustainable Advantage • Positive cash-flow hedging into the long-term • Robust capacity market pricing in one of the most concentrated load pockets in the US • Long-t
Slide 90: Sustainable Advantage: BGS Auction provides hedging opportunity
Sustainable Advantage: BGS Auction provides excellent opportunity to forward hedge our generation Capacity Load shape Transmission $95.77 $94.30 $92.18 ~ $97.39 $53 Congestion ~ $43 $83.88 Ancillary ~ $47 services ~ $48 ~ $43 ~ $53 ~ $59 Risk premium ~ $47 Green ~ $48 ~ $46 ~ $53 $68 -
Slide 91: Sustainable Advantage: Hedging strategy
Sustainable Advantage: Hedging strategy designed to protect gross margin while leveraging the portfolio HEDGE PERCENTAGES AND PRICES AS OF FEBRUARY 11, 2014. REVENUES OF FULL REQUIREMENT LOAD DEALS BASED ON CONTRACT PRICE, INCLUDING RENEWABLE ENERGY CREDITS, ANCILLARY, AND TRANSMISSION COMPONENTS BU
Slide 92: Sustainable Advantage: PJM's capacity market recognizes locational value
Sustainable Advantage: PJM’s capacity market is expected to continue to recognize locational value $/MW-day 2012 / 2013 2013 / 2014 2014 / 2015 2015 / 2016 2016 / 2017 Power’s $153 $244 $162 $167 $166 Average Prices Rest of Pool $16 $28 $126 $136 $59 Prices Power’s Capacity 10,400 10,600 10,300 9,00
Slide 93: Sustainable Advantage: Fuel advantage continues throughout the curve
Sustainable Advantage: Fuel advantage continues throughout the curve Basis to Henry Hub 1.00 0.75 0.50 0.25 - (0.25) (0.50) (0.75) $/MMbtu (1.00) (1.25) (1.50) (1.75) (2.00) (2.25) (2.50) 2013 2014F 2015F 2016F 2017F 2018F Leidy Basis to HH TRANS6 Basis to HH TETM3 Basis to HH Forward curve shows th
Slide 94: Enjoys real and sustainable advantages in merchant generation
PSEG Power: Enjoys real and sustainable advantages in the merchant generation space Market Review • Gas, Power, Spark Spreads • Regulatory construct PSEG’s Competitive Advantage • Fuel flexibility • Heat Rate diversity • Access to Marcellus Shale gas • Asset flexibility PSEG’s Sustainable Advantage
Slide 95: PSEG Power's Value Proposition
PSEG Power’s Value Proposition • Well-positioned fleet of merchant generating assets concentrated in PJM market • Advantaged by low cost structure, fuel diversity and dispatch flexibility • Low environmental capital requirements • Capacity uprates to enhance value of nuclear and combined cycle stati
Slide 96: 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. 96
Slide 97: PSEG Caroline Dorsa
PSEG Caroline Dorsa EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
Slide 98: Strong financial position to support our business initiatives
Strong financial position to support our business initiatives 2013 Financial Position Exceeded upwardly revised 2013 earnings guidance Pension fully funded Strong balance sheet and upgraded credit ratings 2014 and Beyond Continued positive earnings trend in 2014 Controlled O&M growth Bal
Slide 99: Exceeded upwardly revised guidance in both businesses
Exceeded upwardly revised guidance in both businesses PSEG Operating Earnings $ Millions (except EPS) 2012 2013 PSE&G $528 $612 PSEG Power $663 $710 Other $45 ($13) Operating Earnings $1,236 $1,309 Operating EPS* $2.44 $2.58 Upwardly Revised Earnings Guidance (Nov 2013) $2.40 - $2.55 Earnings Guidan
Slide 100: In 2013, Power had significant free cash flow
In 2013, Power had significant free cash flow Power 2013 Cash Flows $1.5 Power Capital ~$0.9B Available for PSEG Investment $1.0 ~0.6B ($ in Billions) Power Cash Net Debt from Ops ~$0.2B ~$1.3B Dividend to Parent Free Cash Flow ~$0.7B $0.5 ~$0.7B Cash ~$0.2B $0.0 100
Slide 101: In 2013, PSE&G invested over $2B
In 2013, PSE&G invested over $2B, using $1.4B of internally generated cash flow and debt, while maintaining its capital structure PSE&G PSE&G 2013 2013 ash Cash Flows Flows $2.5 Cash ~$0.1B $2.0 PSE&G Parent Capital ($ in Billions) Net Debt Contribution ~$0.1B ~$0.6B $1.5 PSE&G Capital Investment ~$
Slide 102: Power's Free Cash Flow supported PSE&G's capital program and dividend
In 2013, Power’s Free Cash Flow supported PSE&G’s capital program and shareholder dividend PSEG Consolidated $4.0 2013 Sources and Uses Other Cash Flow(2) ~$0.1B Shareholder Dividend $3.0 Power ~$0.7B Cash from Ops ~$1.3B Power Capital ($Billions) Investment ~$0.6B $2.0 PSE&G Cash from Ops (1) PSE&G
Slide 103: PSEG growth spend of ~$5.4B represents ~72% of total investment
PSEG growth spend of ~$5.4B represents ~72% of total investment with Energy Strong potentially enhancing the profile PSEG 2014 – 2016E Capital Investment Potential Maintenance ~$2B Approved Growth Investment ~$5.4B Energy Strong ~$8.7B ~$1.3B ~$7.4B ~$4.3B ~$0.8B ~$0.3B ~$1.1B ~$0.9B PSE&G Power PSE
Slide 104: PSE&G's Capital Program drives double-digit growth in rate base
PSE&G’s Capital Program drives double-digit growth in rate base and earnings over the 2013 to 2016 period 2013 – 2016E Rate Base CAGR in approved Growth of ~10% Approved Rate Base ~$3.3B Potential Energy Strong ~$15.0B ~$13.7B ~$1.3B ~$2.7B ~$6.5B ~$10.4B ~$0.6B ~$6.5B Transmission ~$3.8B ~$8.5B Dis
Slide 105: Cash flows support growth investments without new equity
PSE&G’s Cash from Operations and Power’s Free Cash Flow support growth investments without the need for new equity PSEG Sources and Uses Approved Programs With Energy Strong Power Net Debt Other Power Net Cash Flow(3) Shareholder Other Debt Dividend Cash Flow(2) Shareholder Dividend Power Power Powe
Slide 106: Power's key credit metric supports incremental investment
Power’s key credit metric supports incremental investment opportunities PSEG Power Funds From Operations / 80% Debt(1) Increased contribution to earnings from the more 70% stable regulated business allows us to reset Power’s FFO/Debt threshold from 35% to 30%, 60% providing additional financial fl
Slide 107: Pension: asset allocation strategy resulted in ~17% increase in assets
Pension: Our Long Term Asset allocation strategy resulted in a ~17% increase in pension assets during 2013 $6.0 ~$0.86B ~($0.25B) $5.12B $5.0 ~$0.15B $4.36B ($Billions) $4.0 $3.0 $2.0 $1.0 $0.0 Trust Assets Cash Investment Gross Benefits Trust Assets 12/31/2012 Contributions Return Paid 12/31/2013 P
Slide 108: Pension management expected to result in pension income
Our Pension Management is expected to result in pension income in 2014 and over the planning horizon Pension (Expense)/Income $25 Income ~$15M per annum Other (1) ~$15M ($Millions) ($25) Investment Return Expense ~$70M ($110) M ($75) Discount Rate ~$40M ($125) 2013 to 2014 Drivers 2013 2014E 2015E 2
Slide 109: Ongoing cost control expected to reduce O&M over forecast period
Ongoing cost control efforts, including pension, expected to reduce O&M over the forecast period PSEG O&M Expense(1) 2013 - 2016E CAGR: ~(0.5)% $2,500 2013 – 2016E CAGR Transmission ~(0.8)% $2,000 $Millions Distribution $1,500 ~(0.9)% $1,000 Power ~(0.7)% $500 $0 Other: N.M. 2013 2014E 2015E 2016E (
Slide 110: Improving Operating Earnings and increased contribution from PSE&G
Improving Operating Earnings and increased contribution from PSE&G PSEG Operating Earnings $ Millions (except EPS) 2012 2013 2014E PSE&G $528 $612 $705 - $745 PSEG Power $663 $710 $550 - $610 Other $45 ($13) $35 - $40 Operating Earnings* $1,236 $1,309 $1,290 - $1,395 Operating EPS* $2.44 $2.58 $2.55
Slide 111: Opportunity for consistent and sustainable dividend growth
Opportunity for consistent and sustainable dividend growth supported by strong cash flow from both businesses 2.8% increase Annual Dividend Per Share $1.60 (10 YEAR HISTORICAL CAGR ~3%) $1.48 $1.44 $1.47 $1.42 $1.40 $1.37 $1.37 $1.39 $1.33 $1.20 ($/Share) $1.00 PSE&G EPS $0.80 $0.60 2009 2010 2011 2
Slide 112: PSEG's longer-term outlook and segment EPS drivers
PSEG’s longer-term outlook is influenced by Power’s hedge position and increased investment at PSE&G Segment EPS Drivers Sensitivities derived from typical annual market variability* 2015E 2016E Each $0.75/mcf Change in Natural Gas $0.04 - $0.07 $0.12 - $0.15 Each $2/MWh Change in Spark Spread $0.04
Slide 113: PSEG Summary
PSEG Summary • Our 2013 earnings of $2.58 exceeded our upwardly revised operating earnings guidance of $2.40 - $2.55 per share • Double digit earnings growth at PSE&G on one and three year basis from 2013 to 2016, driven by transmission investments and approved programs • Power’s continued focus on
Slide 114: PSEG Executive Profiles
«> PSEG We make things work for you.
Slide 115: 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 Doctor of Philosophy degree in applied physics from Columbia University. Service Enterprise Group Incorporated (PSEG) in April
Slide 116: J. A. Bouknight, Jr. (Lon)
J. A. Bouknight, Jr. (Lon) EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL, PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED, PUBLIC SERVICE ELECTRIC AND GAS COMPANY, PSEG SERVICES CORPORATION, EXECUTIVE VICE PRESIDENT AND PSEG POWER J.A. Bouknight, Jr. (“Lon”) was named executive vice president and From 2
Slide 117: Caroline Dorsa
Caroline Dorsa 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 Caroline Dorsa was named executive vice president and chief financial Committees before joining the
Slide 118: Thomas P. Joyce
Thomas P. Joyce PRESIDENT AND CHIEF NUCLEAR OFFICER PSEG NUCLEAR Thomas P. Joyce was named president and chief nuclear officer of PSEG Prior to coming to PSEG Mr. Joyce was site vice president at Exelon Nuclear (Nuclear), in October 2008. He had been senior vice president – Nuclear’s Braidwood Stati
Slide 119: 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 of Mr. LaRossa is a graduate of Stevens Institute of Technology and has Public Service Electric and Gas Company (PSE&G), in October 2006. Pr
Slide 120: Shahid Malik
Shahid Malik PRESIDENT PSEG ENERGY RESOURCES & TRADE Shahid Malik was elected President of PSEG Energy Resources & Trade Mr. Malik’s career has included Executive Leadership positions with (ER&T) in December, 2011. PSEG operates one of the most balanced several energy companies including Entergy Cor
Slide 121: 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 Ms. Pego is active in several local and national organizations, including the and chief human resources office
Slide 122: William Levis
William Levis PRESIDENT AND CHIEF OPERATING OFFICER PSEG POWER William Levis is president and chief operating officer of PSEG Power, a held several positions over a five-year period with Carolina Power and position he’s held since June 2007. PSEG Power is a major, merchant Light’s Brunswick facility
Slide 123: Richard P. Lopriore
Richard P. Lopriore PRESIDENT PSEG FOSSIL Richard P. Lopriore was elected president of PSEG Fossil in May 2007. He more than 40 years. Prior to joining PSEG Fossil, he had been senior vice versees operations for 13 generation facilities spanning four states. He is also president - mid-Atlantic opera
Slide 124: Kim C. Hanemann
Kim C. Hanemann VICE PRESIDENT – DELIVERY PROJECTS AND CONSTRUCTION PUBLIC SERVICE ELECTRIC AND GAS COMPANY Kim C. Hanemann is vice president-delivery projects and construction, for Ms. Hanemann holds a Bachelor of Science degree in mechanical PSE&G, where she is responsible for ensuring the on-time
Slide 125: PSE&G Appendix
PSE&G APPENDIX © PSEG
Slide 126: PSE&G provides high reliability at below average cost
PSE&G provides high reliability at below average cost which creates superior value to customers SAIDI = SYSTEM AVERAGE INTERRUPTION DURATION INDEX, A MEASURE OF AVERAGE OUTAGE DURATION FOR ALL CUSTOMERS SERVED. 126
Slide 127: PSE&G prioritizes public safety while maintaining value
PSE&G prioritizes public safety while maintaining value to customers LEAK RESPONSE RATE = PERCENTAGE OF UTILITY RESPONSES TO REPORTED LEAKS WITHIN ONE HOUR. 127
Slide 128: PSEG Power and ER&T Appendix
PSEG POWER AND ER&T APPENDIX 128
Slide 129: Nuclear fuel needs have been hedged through 2016
Nuclear fuel needs have been hedged through 2016 Anticipated Nuclear Fuel Cost $10 ($/MWh) $5 $0 2014 2015 2016 Hedged 129
Slide 130: Power's coal hedging reflects 2014 supply matched with 2014 sales
Power’s coal hedging reflects 2014 supply matched with 2014 sales Contracted Coal Pricing % Hedged Station Coal Type Comments ($/MWh)* (left scale) 100% $50 Higher Bridgeport price, lower Adaro Low $40’s Harbor BTU, enviro $/MWh 80% (right scale) $40 coal Flexibility Hudson CAPP Mid $40’s after BET
Slide 131: Full requirements BGS rate recognizes forward PJM capacity price
The full requirements BGS rate recognizes the forward PJM capacity market price Capacity Price per RPM Auction for PSEG Zone Capacity Price per BGS Tranche 2014-2015 $172 Three Year Average ($/MW-day) $172 2015-2016 $166 MW per Tranche (varies by EDC) 109 2016-2017 $178 Days per Year 365 Three Year
Slide 132: PSEG Financial Appendix
PSEG FINANCIAL APPENDIX © PSEG
Slide 133: Our balance sheet remains strong
Our balance sheet remains strong December 31, 2013 $ Billions PSEG PSE&G Power Cash Investments $0.4 $0.0 N/A(2) Short Term Debt $0.1 $0.1 N/A(2) Long Term Debt(3) 8.1 5.6 2.5 Common Equity 11.6 5.9 5.9 Total Capitalization $19.8 $11.5 $8.4 Total Debt / Capitalization 41% 49% 30% PSE&G Regulated Equ
Slide 134: PSEG Liquidity as of December 31, 2013
PSEG Liquidity as of December 31, 2013 134
Slide 135: PSEG Energy Holdings Investment Portfolio
PSEG Energy Holdings Investment Portfolio Investment Balance * at 12/31/13 Equipment ($millions) Merchant Energy Leases GenOn (REMA) Keystone, Conemaugh & Shawville (PA) $343 3 coal-fired plants (1,162 equity MW) Edison Mission Energy (EME)** Powerton & Joliet Generating Stations (IL) $218 2 coal-fi
Slide 136: Strong, full year 2013 operating earnings delivered
Strong, full year 2013 operating earnings delivered Twelve Months ended December 31 Operating Earnings Earnings per Share $ millions (except EPS) 2013 2012 2013 2012 PSEG Power $ 710 $ 663 $ 1.40 $ 1.31 PSE&G 612 528 1.21 1.04 PSEG Enterprise/Other (13) 45 (0.03) 0.09 Operating Earnings* $ 1,309 $ 1
Slide 137: PSEG EPS Reconciliation – Full Year 2013
PSEG EPS Reconciliation– Full Year 2013 versus Full Year 2012 3.00 0.17 0.09 (0.12) $2.58 2.50 $2.44 Higher Capacity 0.34 Transmission 0.14 Absence of Tax 2.00 Market Pricing and Lower Renewables Settlement (0.07) Supply Costs 0.05 and CIP 0.02 Tax Adjustment (0.03) 1.50 Gas Send-out and Fixed Cost
Slide 138: Items Excluded from Income to Reconcile to Operating Earnings
Items Excluded from Income from Continuing Operations/Net Income to Reconcile to Operating Earnings PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED For the Year Ended Reconciling Items, net of tax December 31, 2013 2012 2011 2010 2009 2008 Earnings Impact ($ Millions) (Unaudited) Operating Earnings $ 1
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