Public Service Enterprise Group Incorporated · NYSE:PEG
Public Service Enterprise — Investor Day (May 2018)
109 slides from Public Service Enterprise's investor day presentation, May 31, 2018
Slide 1: 2018 PSEG Investor Conference
2018 PSEG Investor Conference New York Stock Exchange • May 31, 2018 NYSE: PEG EXHIBIT 99
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 These materials and other financial releases can be found on the PSEG website at www.pseg.com, under the Investors tab. From time to time, PSEG, PSE&G and PSEG Power release important information via postings on their corporate website at http://investor.pseg.com. Investors and other
Slide 4: 2018 PSEG Conference Agenda
2018 PSEG Conference Agenda Presentation Presenter Welcome and Introductions Kathleen Lally PSEG Ralph Izzo Regulatory & Policy Overview Tamara Linde Q&A Session PSE&G Dave Daly Q&A Session Break PSEG Power Ralph LaRossa Q&A Session Financial Review & Outlook Daniel Cregg Summary and Q&A Conference
Slide 5: PSEG Strategy: Building a sustainable, financially sound energy infrastructure company
PSEG STRATEGY: building A sustainable, financially Sound energy infrastructure company Chairman, president and chief executive Officer Ralph Izzo
Slide 6: PSE&G Represents 65% of Non-GAAP Operating Earnings
PSE&G Represents 65% of Non-GAAP Operating Earnings Promoting Sound Energy Policy 5–Year Investment Program Provides Opportunity for 8%-10% CAGR in PSE&G Rate Base 4.7% Increase in 2018 Common Dividend 115 Years Investing in NJ’s Critical Infrastructure
Slide 7: Two strong businesses with a track record of success
Two strong businesses with a track record of success Strategy: Investment program enhances competitive position with addition of efficient, clean, reliable CCGT capacity Value Proposition: Provides substantial free cash flow and upside from market rule improvements Assets $12B Net Income $479M Non-G
Slide 8: Delivering on commitments, realizing growth
Delivering on commitments, realizing growth * Based on the mid-point of 2018 non-gaap operating earnings guidance of $3.00 to $3.20 per share. See slide a for a reconciliation of net Income to non-gaap Operating Earnings, slide b for reconciliations for PSE&G and pseg Power, and SLIDE C for enterpri
Slide 9: Strategic focus produced growth in non-GAAP Operating Earnings
Strategic focus produced growth in non-GAAP Operating Earnings as regulated business contribution grew to ~65% Regulated annual Rate Base growth of 13% to $17 Billion Transmission has grown to 46% of Rate Base Efficient growth: O&M held flat Overall customer bill is down $1.42 Common Dividend Per Sh
Slide 10: Next Steps: Building on a successful and sustainable platform
Next Steps: Building on a successful and sustainable platform that meets the needs of customers and shareholders Investing $12 Billion-$15.5 Billion to upgrade New Jersey infrastructure and meet NJ’s Clean Energy goals Minimizing risk/volatility of merchant generation Continued cost discipline in op
Slide 11: Expanded utility investment program provides rate base growth of 8%-10%
E = estimate. Hashed portion of the chart represents PLANS FOR extension of Energy Strong (ES2) and a Clean Energy Future (CEF) program. 8% - 10% - ($ Millions) PSE&G Year-end Rate Base Expanded utility investment program of $12B - $15.5B provides opportunity for rate base growth of 8% - 10% CLEAN E
Slide 12: Power's fleet transformed with focus on improvement in efficiency
2022E Fuel Diversity Total MW: 12,022 2022E Energy Produced Total GWh: 64,000 1 REFLECTS RETIREMENT OF HUDSON AND MERCER UNITS IN JUNE 2017 E=ESTIMATE Projected Fleet Comparison 2017 to 2022E Power’s fleet transformed with focus on improvement in efficiency 2022 2022 2017 2017 45% 47% 6% 1% <1% <1 %
Slide 13: NJ Zero Emission Certificates support carbon free nuclear generation
NJ Zero Emission Certificates (ZEC) support carbon free nuclear generation Legislation signed by New Jersey Governor Murphy on May 23 Starts a 330-Day process – NJ Board of Public Utilities to determine eligibility and selection of nuclear plants eligible for ZECs Hope Creek and Salem produce >90% o
Slide 14: PSEG's future direction aligned with customer needs and NJ's Clean Energy agenda
PSEG’s future direction aligned with customer needs and NJ’s Clean Energy agenda 14 Transmission expansion Storm hardening and resiliency New peaking generation and generation uprates Regulated & Unregulated Renewables Upgrade aging infrastructure and Transmission Storm hardening and resiliency New,
Slide 15: Regional price comparison - Gas is 2nd lowest and Electric lower than average
Regional price comparison** - Gas is 2nd lowest and Electric is lower than average Distribution revenue component is the lowest in the state for Gas and second lowest for Electric Investing at the filing levels of the infrastructure extension and clean energy future programs will keep rates under 20
Slide 16: Non-GAAP Operating Earnings contribution by subsidiary
*See slides a, B and C for Items excluded from net Income/(loss) to reconcile to non-gaap Operating Earnings FOR PSEG, PSE&G, PSEG POWER AND ENTERPRISE/OTHER. E= estimate. Non-GAAP Operating Earnings* Contribution by Subsidiary Strategic focus generating growth in earnings with increased contributio
Slide 17: Opportunity for consistent and sustainable dividend growth
($/Share) Opportunity for consistent and sustainable dividend growth $1.44 $1.48 $1.56 $1.64 $1.72 PSE&G 2018 Non-GAAP Operating Earnings Guidance Range E=Estimate. Annual Dividend Per Share (2013-2018E CAGR: 4.6%) PSE&G EPS
Slide 18: Sustainability is the hallmark of our years of Public Service
Sustainability is the hallmark of our 115 years of Public Service PSEG’s climate goal is to eliminate 13 million tons of CO2 equivalent emissions by 2030 from 2005 levels Named to the Dow Jones North America Sustainability Index for over a decade Working to secure the economic viability of PSEG Powe
Slide 19: PSEG's commitment to its many stakeholders is widely recognized
PSEG’s commitment to its many stakeholders is widely recognized PSEG ranked #1 in financial performance (2016) Named to DJSI North America for the 10th consecutive year (2017) Commerce & Industry Association of NJ award Approved Employer by STEM Jobs (2017) Linden CCGT for embracing advanced digital
Slide 20: Successful execution of PSEG strategy recognized by the market
PSEG S&P 500 Dow Jones Utilities Average S&P 500 Utility Index Successful execution of PSEG strategy recognized by the market PSEG Comparative Market Performance 1/3/5 year Total Shareholder Returns (For the periods ended December 31, 2017)
Slide 21: PSEG Value Proposition
PSEG Value Proposition PSE&G – Delivering on promise for rate base growth through safe operations, customer satisfaction, and disciplined investment PSEG Power – Efficient, low-cost, clean fleet advantaged by asset diversity, fuel mix and location Focus on providing strong, sustainable returns of in
Slide 22: PSEG Strategy: Review of Regulatory and Policy Initiatives
PSEG STRATEGY: Review of Regulatory and Policy initiatives Executive Vice president and General Counsel Tammy Linde
Slide 23: Regulatory and policy topics overview
NJ Base Rate Case First Since 2010 has Modest 3% Request Preserving NJ’s Nuclear Energy Infrastructure Investment Program Supports PSE&G Reliability & Resiliency Supporting NJ’s Energy Agenda Pursuing Critically Needed Market Reforms
Slide 24: Regulatory and policy initiatives results to date
NJ Distribution Base Rate Case Long-Term Infrastructure Regulatory Reform Properly Value Nuclear Supply Pursuit of Price Reform in Wholesale Energy Market Progressing on filing schedule Adopted January 2018; Model for GSMP II and future filings Governor Murphy signed bill on May 23; Regulatory proce
Slide 25: PSE&G Base Rate Filing: A path to long-term rate stability
PSE&G Base Rate Filing: A path to long-term rate stability Base rate case filed January 2018 and updated in May 2018, calls for an overall increase in electric and gas revenue of 3% First base rate request since 2010 Filing updated to reflect the April 1, 2018 rate reduction associated with decline
Slide 26: NJ addresses investment in energy infrastructure; streamlined process
NJ addresses investment in energy infrastructure; Streamlined process reduces regulatory lag NJBPU approved agreement May 22 Provides $1.9 Billion to be invested over five years beginning 2019 Clause mechanism provides semi-annual recovery of 84% ($315M) of annual spend ROE to be set in pending base
Slide 27: Broad based benefits from properly valuing nuclear
Broad based benefits from properly valuing nuclear… Seeks fair compensation for the environmental attributes of at-risk nuclear generating plants Bill approved by NJ Legislature on April 12, and signed by NJ Governor on May 23; NJBPU has 330 days to determine eligibility and select which nuclear pow
Slide 28: As NJ advances a new Clean Energy agenda
…As NJ advances a new Clean Energy agenda Energy Efficiency (EE) Requires electric utilities to reduce energy consumption by 2% and gas utilities to reduce energy consumption by 0.75% from average annual usage over prior 3-year period within 5 years Allows utilities to recover “reasonable and pruden
Slide 29: PSEG Engaged in Wholesale Energy Market Reform
PSEG Engaged in Wholesale Energy Market Reform … process moving slowly Federal Energy Regulatory Commission (FERC) PSEG Power is an active participant in dialogue at FERC to expand the definition of resiliency to incorporate the impact on the bulk electric system from a loss of fuel diversity associ
Slide 30: Regulatory/legislative policy initiatives strengthen foundation
Regulatory/legislative policy initiatives strengthen foundation for providing clean, affordable and resilient energy supply Base Rate Case Provides Opportunity for Long-Term Rate Stability Decision expected in Q4 2018 NJ regulators endorse streamlined process supporting long-term investment GSMP II
Slide 31: PSEG Value Proposition
PSEG Value Proposition 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 diversity, fuel mix and location Focus on providing strong, sustainable returns of invested cap
Slide 32: PSE&G: Dave Daly
PSE&G President and chief operating officer public service electric & gas Chairman of the Board, PSEG Long Island Dave Daly
Slide 33: Named Most Reliable Electric Utility in Mid-Atlantic for 16th Consecutive Year
Named Most Reliable Electric Utility in The Mid-Atlantic Region for 16th Consecutive Year 5-Year Compound Annual Growth of 13% in Net Income and Rate Base $6.2B of 2017 Revenue ~$1 Billion of 2017 Net Income Supportive State Regulatory Environment Approved 17 Programs Over Past 9 Years Leader in NJ
Slide 34: Discussion Topics
Discussion Topics Capital investment program Operational excellence Customer rates PSE&G Strategy: Building a sustainable platform that balances reliability, customer rates and public policy, realizing growth at reasonable returns
Slide 35: PSE&G Rate Base and Earnings
($ Millions) ($ Millions) Rate Base Non-GAAP Operating Earnings* Our rate base is roughly balanced between federal and state jurisdictions ~$14B investment program delivered benefits to New Jersey and delivered 13% annual compound growth of rate base and earnings PSE&G Rate Base and Earnings * (Righ
Slide 36: $12B-$15.5B investment program focused on grid modernization, reliability and clean energy
$12B-$15.5B investment program focused on grid modernization, reliability and clean energy PSE&G Capital Spending Clean Energy Future (CEF) ES2 (E&G) Transmission Gas Distribution Electric Distribution Energy Efficiency & Renewables 2017-2021 Plan 2016-2020 Plan E = estimate. Hashed portion of the c
Slide 37: Transmission: ~$6 Billion investment program
Forward-looking Formula Rate recovery of capital and expenses PJM’s Regional Transmission Expansion Plan (RTEP) identifies system enhancements needed for reliability Reliability Criteria Violations: upgrades to relieve network overloads Transmission Hardening: enhancements to system resiliency Trans
Slide 38: Gas Distribution: ~$3 Billion investment program
Gas Distribution: ~$3 Billion investment program focused on modernizing and replacing cast iron and unprotected steel main GSMP I Program Delivered Customer service Conversion from low to high pressure Relocate inside meter sets outside Environmental Collaboration to consider methane leaks in work p
Slide 39: Electric Distribution and Energy Strong investments
Electric Distribution and Energy Strong: $3--$4 Billion of investments focused on reliability and resiliency Energy Strong Program delivered reliability improvements through remote automation, communication and control; elevated sub-stations $1 Billion program will be completed in 2018 Energy Strong
Slide 40: Partnership for a Clean Energy Future
Partnership for a Clean Energy Future: Energy Efficiency: Residential and C&I programs to lower energy bills and combat climate change Savings targeting 2% electric and 0.75% gas savings consistent with NJ Clean Energy Legislation Electric Vehicles: “Smart” electric vehicle infrastructure: residenti
Slide 41: Investment programs provide opportunity for rate base growth
10% Investment programs provide opportunity for rate base growth Year-end Rate Base E = estimate. Hashed portion of the chart represents PLANS FOR extension of Energy Strong (ES2) and a Clean Energy Future (CEF) program. CEF 8% ES2(E&G) ($ Millions) $12B–$15.5B Capital Plan + Tax Reform = Rate Base
Slide 42: Operational Excellence: Safety & Reliability
Top decile safety performance in 2016 & 2017 PSE&G’s System performance, as measured by System Average Interruption Duration Index (SAIDI), has consistently been ranked among the best performers Operational Excellence: Safety & Reliability SOURCE: PSE&G
Slide 43: Operational Excellence: Customer Satisfaction
Achieved top quartile performance in 2017 JD Power Residential and Business Scores Operational Excellence: Customer Satisfaction SOURCE: PSE&G
Slide 44: Operational Excellence: Demonstrated ability to contain growth in O&M
Cost control actions: ‘Best practices’ teams focused on improving performance while managing costs Regular organizational refinement to streamline processes Continued focus on vendors to ensure maximum value Successful management of pension $Millions 2013 to 2018 CAGR = (0.3%) PSE&G O&M Expense Ongo
Slide 45: Regional price comparison - Gas is 2nd lowest and Electric lower than average
Regional price comparison** - Gas is 2nd lowest and Electric is lower than average Distribution revenue component is the lowest in the state for Gas and second lowest for Electric Investing at the filing levels of the infrastructure extension and clean energy future programs will keep rates under 20
Slide 46: PSE&G's 2018 non-GAAP Operating Earnings benefit from investment programs and cost control
PSE&G’s 2018 non-GAAP Operating Earnings* benefit from investment programs and cost control *See slide B for a reconciliation of net Income to non-gaap Operating Earnings FOR PSE&G.
Slide 47: PSE&G Value Proposition
PSE&G Value Proposition Highly reliable, electric and gas distribution utility Infrastructure investment programs focused on reliability and resiliency to meet customer requirements Rate base diversified between state and FERC jurisdictions Supportive regulatory mechanisms consisting of formula rate
Slide 48: We make things work for you.
oO We make things work for you.
Slide 49: PSEG Long Island: Focused on improving customer service and reliability
PSEG Long Island: Focused on improving customer service and reliability while managing costs 5th year of 12-year contract (with option to extend 8 years) 2017: Earned $0.08 per share* Fixed fee of $65 Million/year, escalated for CPI Incentive opportunity of 15% PSEG Power has $20 Million/year energy
Slide 50: PSEG Long Island continues to drive improvement in performance metrics
PSEG Long Island continues to drive improvement in performance metrics OSA = OPERATING SERVICES AGREEMENT BETWEEN PSEG long island AND LIPA SETTING BENCHMARK INCENTIVE LEVELS. Source: PSEG LONG ISLAND. OSA 2.05 OSA 640 OSA 0.92 OSA 85
Slide 51: PSEG Power: Ralph LaRossa
PSEG Power Ralph LaRossa President and Chief operating officer PSEG Power
Slide 52: Cleaner, More Efficient Fleet of Flexible Assets
Cleaner, More Efficient Fleet of Flexible Assets Preserving Nuclear Generation as a Zero-Carbon Resource 12,022 MW 2022E Generating Capacity Free Cash Flow Improves with Completion of Construction Program 414 MW of Solar Under Long-Term Contracts
Slide 53: Power's portfolio is efficient and flexible
Power’s portfolio is efficient and flexible Focused on safe and reliable operations Completing construction of 1,800 MW of efficient, Combined Cycle Gas Turbine (CCGT) generation From 2012 through 2017, retired 3,197 MW of un-economic capacity Asset Profile O&M Free Cash Flow History of controlling
Slide 54: Power's generating assets mainly located in three competitive markets
Bridgeport (incl. Bridgeport 5, under construction) ISO New England New Haven Bethlehem Energy Center (BEC) Conemaugh Keystone Peach Bottom Bergen Kearny Essex Sewaren (incl. Unit 7 under construction) Linden + Linden VFT Burlington Hope Creek Salem Yards Creek New York ISO PJM Keys Energy Center (u
Slide 55: Power nearing completion of ~1,300 MW of new CCGT capacity in PJM
Power nearing completion of ~1,300 MW of new, highly efficient CCGT capacity in PJM 755 MW plant in Prince George’s County, MD 2x1 natural gas combined cycle Outlook Expands geographic footprint to the SWMAAC* load pocket Pricing proximity to PJM West Heat rate: 6,930 Btu/KWh *SWMAAC – SOUTHWEST MID
Slide 56: Bridgeport Harbor Unit 5 CCGT under construction
485 MW plant in Bridgeport, Connecticut 1x1 dual fuel (natural gas & ultra-low sulfur diesel) combined cycle Outlook Under construction on the existing PSEG Bridgeport Harbor site Leveraging existing infrastructure Bridgeport Harbor 3 (383 MW Coal) will retire in 2021 Located in SW Connecticut load
Slide 57: Solar Source solar capacity located in 14 states
Solar Source has developed 414 MWDC in the US Solar capacity located in 14 States S S S S S S S S S S S S S S S S S S S S S S S Black Cap 10.5 MW Shasta A & B 4.4 MW Columbia 25.4 MW Whitethorn 3.9 MW Badger 19.3 MW Queen Creek 25.3 MW Newman 13.0 MW Jacksonville 15.0 MW Sunflower 21.0 MW Cork Oak 2
Slide 58: Power's fleet is transitioning to be more efficient, productive and clean
Power’s fleet is transitioning to be more efficient, productive and clean E = ESTIMATE. SO2 lbs/MWh CO2 lbs/MWh NOX lbs/MWh
Slide 59: Power's fleet transformed with focus on improvement in efficiency
Power’s fleet transformed with focus on improvement in efficiency Additions ~2,912 MW Retirements ~4,025 MW 2012 Kearny 13/14 (267 MW) New Haven 2-4 (129 MW) Solar Assets (40MW) Kearny 10 (122 MW) Kearny 11 (128 MW) 2013 Solar Assets (19 MW) 2014 2015 2016 2017 2018 2019 2020 2021 TOTALS Linden AGP
Slide 60: Power's PJM gas fleet is well-located with access to shale gas production
Power’s PJM gas fleet is well-located with access to shale gas production PSEG Power’s PJM gas fleet consumed ~65 BCF in 2017, of which >85% was supplied by Northeast shale gas Addition of new pipeline takeaway capacity over 2018-2019 expected to bring market closer to balance Spark spreads of New J
Slide 61: PSEG Nuclear is vital to New Jersey
PSEG Nuclear is vital to New Jersey; Salem and Hope Creek represent >90% of the State’s zero carbon energy Plant Operator PSEG Ownership Total Capacity / PSEG Owned (MW) License Expiration Year Next Scheduled Refueling Historical Average Capacity Factor (2014 - 2017) Hope Creek PSEG Nuclear 100% 1,1
Slide 62: Market response to severe winter weather in Q1 2018
Market response to severe winter weather in Q1 2018 demonstrates the importance of fuel diversity and the preservation of nuclear generation to New Jersey As temperatures plummeted, gas prices rose faster than power prices This made even the most efficient combined cycle units uneconomic on gas Oil
Slide 63: Had nuclear units not been available
Had nuclear units not been available or had combined cycle units run out of their secondary fuel… Power prices would likely have skyrocketed Meeting demand would have been dependent on availability of gas Uncertain if sufficient gas for generation would have been available
Slide 64: Available oil volumes were being depleted rapidly
Available oil volumes were being depleted rapidly at the largest PSEG oil burning units despite ongoing oil deliveries at maximum capacity Cold snap in early January quickly depleted oil supply Delivery could not keep up with demand Reliable, low cost nuclear generation provided the bulk of the supp
Slide 65: Power O&M Expense
2013 to 2018E CAGR: (2.6%) Power O&M Expense* *EXCLUDES NUCLEAR ARO, IMPACTS FROM SANDY STORM RECOVERY COSTS AND THE HUDSON/MERCER EARLY RETIREMENT AND INCLUDES THE IMPACT OF THE CHANGE IN PENSION ACCOUNTING STANDARDS. E = ESTIMATE Power has successfully controlled O&M $ Millions
Slide 66: Power intends to continue to drive cost efficiencies to optimize free cash flow
Power intends to continue to drive cost efficiencies to optimize free cash flow E = ESTIMATE.
Slide 67: Power's capital needs decline following construction of new capacity
Power’s capital needs decline following construction of new capacity, enhancing free cash flow E=Estimate. DATA As of MAY 2018. Excludes NUCLEAR FUEL. includes idc. Power Capital Investment
Slide 68: Hedging strategy designed to mitigate risk and secure free cash flow
* Hedge percentages and prices as of March 31, 2018 and reflect revenues of full requirement load deals based on contract price, including renewable energy credits, ancillary, and transmission components but excluding capacity. Hedges include positions with MTM accounting treatment and options. Hedg
Slide 69: Power hedge pricing and retail marketing
~ $53 $48 - $50 $45 - $47 $37 - $38 $56 - $58 $39 - $40 ~ $47 ~ $48 ~ $43 ~ $53 $37 - $38 $97.39 $92.18 $99.54 $96.38 $90.78 ~ $53 ~ $62 ~ $59 ~ $63 ~ $58 $39 - $40 $38 - $39 $33 - $34 $32 - $33 $37 - $38 Ancillary services Capacity Congestion Green Load shape Risk premium Transmission Zonal Basis 3
Slide 70: PJM capacity markets provide a solid and continuing revenue stream
2020 Onward, RPM Auctions include 100% Capacity Performance and will be impacted by changes in: • Net CONE • Demand Response Rules • PJM Parameters • Environmental Retirements • Load Forecasts *PSEG Power’s Average Prices and Cleared Capacity (MW) reflect Base and Incremental auctions. Delivery year
Slide 71: ISO NE Forward Capacity Market auction results
ISO NE Calendar Weighted Average Price *PSEG Power’s Average Prices and Cleared Capacity (MW) reflect Bridgeport harbor 5 targeted addition in mid-2019 and the announced retirement of Bridgeport harbor 3 in the summer of 2021. Delivery years run from june 1 to may 31 of the next calendar year. E=Est
Slide 72: PSEG Power provides a stable return and free cash flow
PSEG Power provides a stable return and free cash flow Expected three year cumulative gross margin over $6 billion from 2018 to 2020 65% - 70% of gross margin hedged over next three years Approximately $2 billion locked in through capacity auctions Completion of growth investment reduces capital req
Slide 73: Power's 2018 non-GAAP Operating Earnings expected to benefit from tax reform
Power’s 2018 non-GAAP Operating Earnings expected to benefit from tax reform * See slide B for items excluded from net income/(Loss) to reconcile to operating earnings (Non-gaap) e =estimate. $505 $514
Slide 74: PSEG Power Value Proposition
PSEG Power Value Proposition Well-positioned fleet of merchant generating assets in competitive markets Retirement of un-economic assets improves fleet efficiency and returns Addition of 1,800 MWs of new, efficient, flexible CCGTs transforms the portfolio Promoting sound energy policy and market ref
Slide 75: PSEG Financial Review & Outlook
PSEG FINANCIAL REVIEW & OUTLOOK Daniel J. Cregg Executive Vice President and Chief Financial Officer
Slide 76: PSE&G Represents 65% of Non-GAAP Operating Earnings
PSE&G Represents 65% Of Non-GAAP Operating Earnings Free Cash Flow Improves Following Completion of CCGT Construction 5–Year Investment Program Provides Opportunity for 8%-10% CAGR in PSE&G Rate Base 4.7% Increase in 2018 Common Dividend 111 Years of Paying a Common Dividend Strong Free Cash Flow En
Slide 77: Strong financial position driven by PSE&G with meaningful contribution from Power
Strong financial position driven by PSE&G with meaningful contribution from Power Earnings 2018 non-GAAP earnings guidance up 6% over 2017* Increased investment and the impact of tax reform expected to drive growth in 2018 non-GAAP Operating Earnings Investment PSE&G investment continues with contem
Slide 78: Expected 6% increase in 2018 non-GAAP Operating Earnings
Growth in utility infrastructure investment and tax reform expected to drive 6% increase in 2018 non-GAAP Operating Earnings* $3.00 - $3.20E PSE&G $1.90 Power $0.99 $0.04 PSE&G $1.97 to $2.03 Power $0.96 to $1.10 $0.07 PSE&G: Net return on increased investment; Timing of capital awaiting regulatory
Slide 79: Capital spending focused on regulated growth
Capital spending focused on regulated growth CAPITAL INCLUDES IDC AND AFUDC Hashed portion of the chart represents PLANS FOR extensions of Energy strong (ES2) and A Clean Energy Future (CEF) program. E=ESTIMATE Power Maintenance & Other Power Growth PSEG 2018E – 2022E Capital Spending $14B to $17B I
Slide 80: PSE&G's increased capital investment is growing consolidated results
PSE&G’s increased capital investment is growing consolidated results E=ESTIMATE $15.5 to Historical & Current PSE&G Forecast Capital Spend as % of Total Capital Spend 5-Year PSE&G Capital Spending Forecasts Provided at Annual Investor Conferences PSE&G ~80% of Total Capex PSE&G 75% PSE&G 83% PSE&G ~
Slide 81: Five-year annual growth of 8%-10% expected in PSE&G's rate base
Five-year annual growth of 8%–10% expected in PSE&G’s rate base $17B E = Estimate. 1) Hashed portion of the chart represents PLANS FOR extension of Energy strong (ES2) and A Clean Energy Future (CEF) program. ~$24.5B - $27.5B ~$21.5B - $22.3B 2017– 2020E Rate Base CAGR of 8%-10% 2017 – 2022E Rate Ba
Slide 82: Power's free cash flow improves as construction program ends
Capital Includes IDC AND AFUDC. E = ESTIMATE Hashed portion of the chart represents PLANS FOR extensions of Energy strong (ES2) and A Clean Energy Future (CEF) program. E = Estimate. Power’s free cash flow improves as construction program ends ($Millions) Free cash flow to improve as capital spendin
Slide 83: PSEG Cash from Operations exceeds investment
PSEG Cash from Operations exceeds investment Shareholder Dividend Cash from Operations(2) Investment(2) PSEG Consolidated 2018E – 2022E Sources and Uses of Cash PSE&G Cash from Operations(1) PSE&G Maintenance Investment Power Growth Investment Shareholder Dividend PSE&G Net Debt(2) Power Cash from O
Slide 84: Solid credit metrics support additional investment capacity
Power PSEG Estimate Low - Forties ~20% Minimum Threshold 30% High - Teens Solid credit metrics support additional investment capacity E=Estimate. Incremental capacity invested in PSE&G would be matched with utility debt * Does not consider potential ZEC impact on estimated FFO/Debt Average Funds Fro
Slide 85: Zero Emission Certificate (ZEC) Process
Zero Emission Certificate (ZEC) Process 2018 2019 2020 Enacted May 23 (Day One) November 2018 (Day 180), BPU issues Order establishing ZEC program April 2019 (Day 330), BPU ranks applicants and selects plants to receive ZECs. Utilities begin purchasing ZECs for ‘stub’ period. Cash payment follows Du
Slide 86: Tax Reform benefits customers and PSEG
Tax Reform benefits customers and PSEG PSE&G Tax Impacts Lowers customer bill Increases 5-year rate base growth for same capital spend by ~1% per year Average earnings increase by $20M/year growing to $30M/year over 2019-2022 Cadence of future rate reductions related to return of excess deferred tax
Slide 87: PSEG has controlled O&M
EXCLUDES REGULATORY BALANCING ACCOUNT ITEMS AND NUCLEAR ARO ACCRETION EXPENSE ; INCLUDES THE IMPACT OF THE CHANGE IN PENSION ACCOUNTING STANDARDS. E = ESTIMATE. $Millions PSEG has controlled O&M Cost Control Actions Continued focus on vendors to ensure maximum value Regular organizational refinement
Slide 88: Strategic focus continues to deliver solid results
Strategic focus continues to deliver solid results *See slide a for Items excluded from net Income to reconcile to non-gaap Operating Earnings. **BASED ON THE MID-POINT OF 2018 NON-GAAP OPERATING EARNINGS GUIDANCE OF $3.00 TO $3.20 PER SHARE. E= estimate. 2012 – 2017 CAGR ~4% 2018E Guidance $3.00 –
Slide 89: Opportunity for consistent and sustainable dividend growth
($/Share) Opportunity for consistent and sustainable dividend growth E=Estimate Annual Dividend per Share (2012-2017 CAGR: 3.9%) +4.7%
Slide 90: PSEG Value Proposition
PSEG Value Proposition 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 diversity, fuel mix and location Focus on providing strong, sustainable returns of invested cap
Slide 91: We make things work for you.
oO We make things work for you.
Slide 92: PSE&G Distribution Base Rate Case Filing
PSE&G Distribution Base Rate Case Filing Dockets ER 18010029 (Electric) and GR 18010030 (Gas) Filed January 12, 2018; Anticipate new rates Fourth Quarter 2018 Test year – July 1, 2017 through June 30, 2018 (with certain pro forma adjustments) Rate base of $9.9B ($5.7 Billion Electric; $4.2 Billion G
Slide 93: PSEG's longer-term outlook and EPS sensitivities
PSEG’s longer-term outlook is influenced by Power’s hedge position and investment at PSE&G 2018E 2019E Each $0.75/mcf Change in Natural Gas Each $2/MWh Change in Spark Spread Each $5/MWh Change in Dark Spread Each 1% Change in Nuclear Capacity Factor Segment EPS Drivers Each $100 Million of Incremen
Slide 94: 2018 PSEG Executive Profiles
2018 PSEG EXECUTIVE PROFILES
Slide 95: Ralph Izzo
Chairman, President and Chief Executive Officer PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED Ralph Izzo Ralph Izzo was elected chairman and chief executive officer of Public Service Enterprise Group Incorporated (PSEG) in April 2007. He was named as the company’s president and chief operating office
Slide 96: John Paul Cowan
John Paul Cowan SENIOR VICE PRESIDENT - OPERATIONS PSEG FOSSIL, LLC John Paul Cowan was named Senior Vice President Operations in February 2011. Mr. Cowan joined PSEG in January 2009 as Director-Fossil Programs and Efficiency. In August 2009 he assumed the position of Vice President Operations. Prio
Slide 97: Daniel J. 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 Daniel J. Cregg was named executive vice president and chief financial officer for Public Service E
Slide 98: David M. Daly
David M. Daly PRESIDENT AND CHIEF OPERATING OFFICER PUBLIC SERVICE ELECTRIC AND GAS COMPANY (PSE&G) David M. Daly was elected president and chief operating officer of Public Service Electric and Gas Company (PSE&G) effective October 2017. PSE&G is New Jersey’s oldest and largest regulated gas and el
Slide 99: Derek M. Di Risio
Derek M. Di Risio PRESIDENT PSEG SERVICES CORPORATION Derek M. Di Risio was named President, PSEG Services Corporation, in July 2014. He is responsible for the coordination and delivery of several centralized services currently residing within PSEG Services Corporation including corporate communicat
Slide 100: Kim C. Hanemann
Kim C. Hanemann SENIOR VICE PRESIDENT – DELIVERY PROJECTS AND CONSTRUCTION PUBLIC SERVICE ELECTRIC AND GAS COMPANY (PSE&G) Kim C. Hanemann is Senior Vice President, Delivery Projects and Construction (DP&C), at Public Service Electric and Gas Company (PSE&G). Headquartered in Newark, New Jersey, PSE
Slide 101: Ralph A. LaRossa
Ralph A. LaRossa PRESIDENT AND CHIEF OPERATING OFFICER PSEG POWER Ralph A. LaRossa was elected president and chief operating officer (COO) of PSEG’s merchant generation business, PSEG Power, effective October 2017. PSEG Power is a major, unregulated independent power producer in the U.S. with four m
Slide 102: John R. Latka
John R. Latka SENIOR VICE PRESIDENT – ELECTRIC AND GAS OPERATIONS PUBLIC SERVICE ELECTRIC AND GAS COMPANY (PSE&G) John R. Latka was named Senior Vice President – Electric & Gas Operations in July 2014. He is a member of PSEG’s Executive Officer Group. John is responsible for Transmission & Distribut
Slide 103: 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 L. Linde Tamara Linde was named executive vice president and general counsel for Public Service Enterprise Group Incorporat
Slide 104: 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 marketing portfolios in the country, both in terms of fuel mix and market segment (base load units, load fo
Slide 105: Margaret M. Pego
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 and chief human resources officer of PSEG Services Corporation in December 2006. Prior, she had been vice pres
Slide 106: Peter P. Sena III
Peter P. Sena III Peter P. Sena III was named president of PSEG Nuclear (Nuclear) in February 2016 and Chief Nuclear Officer in July 2016. Most recently, he was Senior Vice President of Operations, Chief Operating Officer at NextEra Energy. Mr. Sena was named Chief Nuclear Officer of First Energy in
Slide 107: Reconciliation of Non-GAAP Operating Earnings
Reconciliation of Non-GAAP Operating Earnings Please see Page 3 for an explanation of PSEG’s use of Operating Earnings as a non-GAAP financial measure and how it differs from Net Income. A
Slide 108: Reconciliation of non-GAAP Operating Earnings for PSE&G and PSEG Power
Please see Page 3 for an explanation of PSEG’s use of Operating Earnings as a non-GAAP financial measure and how it differs from Net Income. B Reconciliation of non-GAAP Operating Earnings for Public Service Electric & Gas and PSEG Power
Slide 109: Reconciliation of non-GAAP Operating Earnings for PSEG Enterprise/Other
Please see Page 3 for an explanation of PSEG’s use of Operating Earnings as a non-GAAP financial measure and how it differs from Net Income. C Reconciliation of non-GAAP Operating Earnings for PSEG Enterprise/Other
Public Service Enterprise Group — Investor Day (May 2018) on 6ix