Public Service Enterprise Group Incorporated · NYSE:PEG
Public Service Enterprise — Lehman Brothers CEO Energy / Power Conference 2007
36 slides from Public Service Enterprise's conference presentation, Sep 7, 2007
Slide 1: Public Service Enterprise Group – Lehman Brothers CEO Energy / Power Conference
Public Service Enterprise Group Lehman Brothers CEO Energy / Power Conference New York City September 6, 2007
Slide 2: Forward-Looking Statement
Forward-Looking Statement The statements contained in this communication about our and our subsidiaries’ future performance, including, without limitation, future revenues, earnings, strategies, prospects and all other statements that are not purely historical, are forward-looking statements for pur
Slide 3: GAAP Disclaimer
GAAP Disclaimer PSEG presents Operating Earnings in addition to its 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 Net Income because it excludes the impact of the sale
Slide 4: PSEG Strategic Overview
PSEG Strategic Overview Ralph Izzo President and Chief Operating Officer Chairman of the Board and Chief Executive Officer Tom O’Flynn Executive Vice President and Chief Financial Officer President — PSEG Energy Holdings
Slide 5: PSEG Overview
PSEG Overview 2007E Operating Earnings(4): $1,245M - $1,370M 2007 EPS Guidance(4): $4.90 - $5.30 Assets (as of 06/30/07): $28.5B Market Capitalization (as of 8/21/07): $22.1B Traditional T&D Regional Wholesale Energy Electric Customers: 2.1M Nuclear Capacity: 3,500 MW Domestic/Int’l Leveraged Gas Cu
Slide 6: PSEG over the past year
PSEG over the past year … Smooth transition in operations Management in place PSEG Power to resume operation of nuclear capacity by year-end Partnering with NJ to meet environmental objectives in cost effective manner Redeploying capital at PSEG Energy Holdings Balance sheet strengthened … has posit
Slide 7: The current business environment
The current business environment … Convergence of market forces and policy creates the need to address: Critical infrastructure needs Environmental challenges Capacity requirements in constrained markets … creates opportunities for PSEG’s long-term growth. 6
Slide 8: PSEG Power – Solidly positioned
PSEG Power – Solidly positioned … Nuclear and fossil fleet operating at historically high levels with opportunity for incremental improvement Near-term growth fueled by strong markets and roll-off of below market contracts Long-term growth influenced by: Tightening reserve margins Expansion capabili
Slide 9: Hedging program provides near-term protection from market volatility
Hedging program provides near-term protection from market volatility … Power’s Generation Output 50,000 Other output 40,000 Open coal & nuclear output 30,000 Includes roll off of 4 year, 500MW RTC contract ($100M+) and other recontracting 20,000 Contracted coal & nuclear output 10,000 Contracted Pri
Slide 10: PSE&G – A consistent, strong performer
PSE&G – A consistent, strong performer … Regulatory agreements provide opportunity to earn reasonable returns over 2007-2009 Investment in transmission fuels long-term growth Energy Master Plan (EMP) initiatives provide a secondary source of growth Continued top quartile/top decile performance Natio
Slide 11: PSE&G's base investment plan
PSE&G’s base investment plan … Regulated electric transmission, electric and gas distribution system Characteristics FERC regulation for electric transmission; NJ BPU regulation for electric and gas distribution Electric and Gas distribution rates frozen through November 2009 PSE&G Rate Base 2006 Ac
Slide 12: PSEG Energy Holdings - Reducing risk
PSEG Energy Holdings - Reducing risk … Diverse asset base with improved stability and growing markets Latin American distribution assets in stable economies Gas-fired combined cycle generation in Texas A source of capital Asset sales have reduced risk and contributed to an improved balance sheet at
Slide 13: Improved risk profile by reducing capital invested in non-strategic assets
Improved risk profile by reducing capital invested in non-strategic assets … Global’s Invested Capital Composition of Global’s Pre-tax Contribution by Region* $2.6B $317M** $13 4% Other $900M 35% $2.0B $1.9B $150M 7% $129 41% $150M 7% $195M** $180M-$200M** $1.6B $100M 7% Other $50 26% 63% Chile & $1
Slide 14: Strong operations and markets
Strong operations and markets … Six months ended June 30, $ Millions (except EPS) Operating Earnings Per Share 2007 2006 2007 2006 PSE&G $ 193 $ 111 $ 0.76 $ 0.44 PSEG Power 406 208 1.60 0.82 PSEG Energy Holdings 61 95 0.24 0.38 Enterprise (33) (32) (0.13) (0.12) PSEG $ 627 $ 382 $ 2.47 $ 1.52 … sup
Slide 15: Strong earnings growth in 2007 and 2008
Strong earnings growth in 2007 and 2008 … Operating Earnings by Subsidiary 15% $5.60 - $6.10 37% $4.90 - $5.30 $3.77* $3.71** 840-920 Power 446 515 PSE&G 347 262 340-360 Holdings 227 196 120-135 Parent (71) (66) (55)-(45) »0 2005 2006 2007 2008 … with reduced international risk. * 2005, as reported:
Slide 16: Improved earnings cause dividend payout ratio to decline below 50%
Improved earnings causes our dividend payout ratio to quickly decline below 50% ... $2.60 70 Payout $2.50 Ratio 65 ? 60 $2.40 * $2.34 55 $2.30 $2.28 $2.24 50 $2.20 $2.20 45 $2.10 40 $2.00 35 2004 2005 2006 2007 2008 *Indicated annual dividend rate … providing us the flexibility to raise our dividend
Slide 17: The capital program has been expanded
The capital program has been expanded … 2007 2008 2009 2010 2011 TOTAL Capital Spending Update ($ Millions) PSE&G $616 $803 $765 $919 $971 $4,074 PSEG Power* 655 816 580 441 176 2,668 PSEG Energy Holdings 38 31 40 30 31 170 Parent 34 31 23 24 23 135 TOTAL $1,343 $1,681 $1,408 $1,414 $1,201 $7,047 Ch
Slide 18: Liquidity is available with favorable terms and conditions
Liquidity is available with favorable terms and conditions … Available Expiration Total Liquidity Company Facility Date Facility 6/30/07 ($ Millions) PSEG 5-year Credit Facility Dec-11 $ 1,000 $ 949 PSE&G 5-year Credit Facility Jun-11 600 330 Energy Holdings 5-year Credit Facility Jun-10 150 135 Pow
Slide 19: Our forecasted cash flows remain intact
Our forecasted cash flows remain intact… We remain comfortable with a forecast improvement in cash - Operating income in line with expectations - Asset sales on schedule - Planned rate mechanisms for transmission investments would provide cash recovery during construction Excess cash between $1.5 bi
Slide 20: PSEG – Excellent position for today, ready for tomorrow
PSEG – Excellent position for today … Right set of assets… Large, diverse mix of low-cost, base-load, load-following generating assets Reliable electric and gas distribution and transmission systems Stable portfolio of investments in domestic generation, international distribution and leases Right m
Slide 21: Public Service Enterprise Group dedicated to meeting commitments
Public Service Enterprise Group dedicated to … Meeting commitments Earnings on track to meet guidance System reliability enhanced with expansion of transmission system Turning challenges into opportunities Addressing NJ’s Clean Energy goals Solar initiative PSE&G to use more energy efficient equipme
Slide 22: Why invest in PSEG? And we still sell at a discount
Why invest in PSEG? Growing and visible stream of earnings Hedging and RPM Regulated utility operations Earnings Per Share* P/E Strong balance sheet 2007E 2008E 2007E 2008E Yield % PSEG $5.10 $5.85 16.4 14.3 2.8% Cash available for growth Merrill Lynch Index** $3.03 $3.40 16.8 14.9 3.1% Competitive
Slide 23: Public Service Enterprise Group
Public Service Enterprise Group
Slide 24: Appendix
APPENDIX
Slide 25: New Officers
New Officers Izzo – PSEG - Chairman, President & CEO O’Flynn – PSEG - EVP/ Selover – PSEG Levis – PSEG Power - LaRossa – PSE&G Simpson – PSEG Svcs CFO, PSEG Holdings - Svcs - EVP & Gen President, CNO, COO – President & COO - President & COO President Counsel Joyce – SVP Byrd – SVP Finance, Operation
Slide 26: Power's assets reflect a diverse blend of fuels and technologies
Power’s assets reflect a diverse blend of fuels and technologies … Low-cost portfolio Fuel Diversity – 2007 Total MW: 13,600 Strong cash generator Oil Nuclear 8% Regional focus with demonstrated 26 % Pumped BGS success Storage 47 % 18% 1% Assets favorably located Coal Gas Many units east of PJM cons
Slide 27: Power's assets are located in attractive markets near load centers
Power’s assets are located in attractive markets near load centers … Current plant locations, site expansion capability Bethlehem Energy Center (Albany) System Interface New Haven Hudson Bridgeport Keystone Bergen Conemaugh Kearny Mercer Essex Linden Peach Bottom Sewaren Edison Hope Creek Salem Burl
Slide 28: Our environmental strategy
Our environmental strategy… Emissions Control Technology Projects Hudson Unit 2 (608 MW) Mercer (648 MW) – Units 1&2 - NOx control – SCR NOx control – SCR installation complete - SO2 control – Scrubber SO2 control – Scrubbers - Hg and particulate matter control - Hg and particulate matter control –
Slide 29: Long-term market prices unaffected by short-term volatility
Long-term market prices … $/MWh $/mmbtu $70 $12 Natural Gas Henry Hub (right scale) $60 Electricity $9 (left scale) $50 $6 $40 Coal(1) (right scale) $3 $30 $20 $0 2002 2003 2004 2005 2006 2007 2008 2009 Est Fwd Fwd (1) (2) (2) (2) (2) Central Appalachian coal Forward prices as of August 20, 2007 … u
Slide 30: RPM Capacity Auction – Transparent Pricing Model
RPM Capacity Auction – Transparent Pricing Model PJM released results on July 13 from its second capacity auction under the Reliability Pricing Model (RPM) for the 2008-2009 delivery year. 2007- 2009 Capacity Auction Results Unit Price Load Price CTR Value* 2007/ 2008/ 2007/ 2008/ 2007/ 2008/ ($/MW-
Slide 31: Capacity Position
Capacity Position Only a portion of PSEG Power’s capacity was open to realize prices in the recent PJM-RPM auctions. Increasing amounts are open to realize prices in future years. A significant percent of Power’s capacity was contracted as part of New Jersey’s 3-year BGS* auction (Power currently se
Slide 32: Power's hedging strategy aims to balance stable earnings
Power’s hedging strategy aims to balance stable earnings … PJM RTC GWh 6,000 5,000 4,000 3,000 2,000 1,000 - 2007 2008 20072007 20072007 20072007 200720072007 20072007 20072008 200820082008 20082008 20082008 200820082008 20082009 200920092009 20092009 20092009 200920092009 2009 2010 20102010 2010201
Slide 33: Power's hedging of coal and nuclear fuel
Power’s hedging of coal and nuclear fuel … Coal and Nuclear Output Coal and Nuclear Fuel 50,000 50,000 40,000 40,000 30,000 30,000 20,000 20,000 10,000 10,000 - - 2007 2008 2009 2010 2007 2008 2009 2010 Year Year Nuclear and Coal output Contracted sales Coal Uranium Contracted sales Power has contra
Slide 34: Power's fleet diversity and location and BGS auction results
Power’s fleet diversity and location ... Market Perspective – BGS Auction Results Increase in Full Requirements Component Due to: $102 $99 Full Requirements Increased Congestion (East/West Basis) Increase in Capacity Markets/RPM Capacity Load shape Volatility in Market Increases Risk Premium ~ $32 ~
Slide 35: Operational improvements and recontracting in current markets
Operational improvements and recontracting in current markets … Realized Gross Margin ($/MWh) $70 $60 $50 $40 $30 $20 $10 $0 2005 2006 2007 Est 2008 Est 2009 Est Energy Capacity … are expected to drive significant increases in Power’s gross margin. (Energy prices based on recent forward markets; Ill
Slide 36: Items excluded from Net Income to reconcile to Operating Earnings
Items excluded from Net Income to reconcile to Operating Earnings Impact to PSEG EPS $ Millions (except EPS) Quarter Ended June 30, Six Months Ended June 30, Quarter Ended June 30, Six Months Ended June 30, 2007 2006 2007 2006 2007 2006 2007 2006 Merger related Costs: PSE&G $ - $ (1) $ - $ (1) Power
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