Public Service Enterprise Group Incorporated · NYSE:PEG
Public Service Enterprise — Non-Deal Roadshow (June 2009)
64 slides from Public Service Enterprise's roadshow presentation, Jun 29, 2009
Slide 1: Public Service Enterprise Group European Investor Meetings
Public Service Enterprise Group European Investor Meetings June 29, 2009 – July 2, 2009
Slide 2: Forward-Looking Statement
Forward-Looking Statement Readers are cautioned that statements contained in this presentation about our and our subsidiaries’ future performance, including future revenues, earnings, strategies, prospects and all other statements that are not purely historical, are forward-looking statements for pu
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 establishing a policy leadership position
PSEG establishing a policy leadership position … Electric and Gas Regional Leveraged Leases and Delivery Wholesale Energy Renewable Investments PSE&G positioned to meet PSEG Power’s low-cost PSEG Energy Holdings NJ’s energy policy and baseload nuclear fleet well- positioned to pursue attractive econ
Slide 5: Public Service Enterprise Group … Meeting Commitments
Public Service Enterprise Group … Meeting Delivering Positioned for Commitments Value Today the Future … an energy provider meeting the needs of customers and shareholders. Delivering Value: Today and Tomorrow 5
Slide 6: PSEG: Establishing a foundation… Meeting Commitments
PSEG: Establishing a foundation… Meeting Commitments Achieved 2008 earnings targets Operational excellence drove results Sharpened business focus; international assets sold Balance sheet strengthened; credit outlook improved Attractive dividend growth rate … and building a record that sets us apart.
Slide 7: Making decisions and achieving results… Delivering Value Today
Making decisions and achieving results… Delivering Value Today 2009 earnings guidance represents continued growth Operational excellence improving results Core business investments providing attractive returns Dividend increased – 6th consecutive year; 102nd year of paying an annual dividend Strong
Slide 8: PSEG – 2009: Meeting the Challenge
PSEG – 2009: Meeting the Challenge $3.03 $3.00 - $3.25 $2.68 2007 Operating Earnings Per Share* 2008 Operating Earnings Per Share* 2009 Guidance * See page 64 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings. Delivering Value: Today and Tomorrow 8
Slide 9: Strong operations and risk controls
Strong operations and risk controls… Asset optimization yielding results 7th successful BGS auction validates hedging strategy RPM capacity auction supports asset values in constrained areas Power’s dispatch profile provides operating flexibility On track to achieve PSE&G focused on reliability and
Slide 10: Internally generated cash in 2008 exceeded investment needs
Internally generated cash in 2008 exceeded investment needs. PSEG Consolidated $4.0 2008 Sources and Uses IRS Deposit Share Repurchases $3.0 Net Asset Sales Debt Reduction Shareholder Dividend $2.0 Cash Ops* (Non-GAAP) Investment $1.0 (includes Nuclear Fuel) $0.0 Sources Uses * Cash Ops (Non-GAAP) r
Slide 11: Our balance sheet has been strengthened
Our balance sheet has been strengthened … 2008 Year-End Capital Structure* $ Billions Consolidated PSE&G Power Holdings Net Short Term Debt / (Investments) (0.2) (0.0) - - Total Long-Term Debt 7.2 3.5 2.9 0.5 Preferred Stock 0.1 0.1 - - Common Equity 7.8 3.6 3.9 1.1 Total Capitalization 14.9 7.2 6.8
Slide 12: We are meeting or exceeding key credit measures
We are meeting or exceeding key credit measures … PSEG PSEG Power Funds from Operations / Total Debt Funds from Operations / Total Debt 35% 55% 50% 30% 45% 25% 40% 20% 35% 2007 2008 2009 2007 2008 2009 Target ~ ~ Mid-20’s Target ~ ~ Mid-30’s … maximizing financial flexibility in uncertain credit mar
Slide 13: Sixth consecutive annual increase in common dividend
Sixth consecutive annual increase in common dividend … Dividends per Share $1.33* $1.29 $1.17 $1.14 $1.12 $1.10 2004 2005 2006 2007 2008 2009E Payout Ratio 70% 63% 66% 43% 44% 41% - 44% … continues 102-year history of paying common dividends. *Indicated annual dividend rate Delivering Value: Today a
Slide 14: Positioned for the Future
Operational excellence, financial strength and disciplined investment … Positioned for the Future Balanced business mix BGS: A demonstrated mechanism for meeting customer supply at market prices for multi-year period Federal and State policies provide opportunities for growth – Leadership position i
Slide 15: Future investments are weighted towards PSE&G and growth
Future investments are weighted towards PSE&G and growth. 2009 - 2011 Capital Expenditures $2,500 Solar II Pending Solar 4 All Approval Energy Efficiency $2,000 Infrastructure PSE&G - Other $1,500 PSE&G - Distribution $1,000 PSE&G - Transmission Power – $500 Sustainability Power – Power – BET Growth
Slide 16: PSEG leadership recognized
PSEG leadership recognized One of 125 companies named to DJSI North America and one of only 10 U.S. electric companies included Named one of the Most Admired Companies, 2007 & 2008 Corporation of the year 2007 PSE&G named America’s Most Reliable Utility One of the 400 best Mid-Atlantic Region big co
Slide 17: Operational excellence, financial strength and disciplined investment
Operational excellence, financial strength and disciplined investment… Market’s Questions PSEG Position What is impact on PSE&G current/pending rate needs equal 2-4% impact customer from capital BGS supply generally priced at market programs? Multi-year hedging profile supported by core assets What’
Slide 18: PSEG – Delivering Value: Today and Tomorrow
PSEG – Delivering Value: Today and Tomorrow Positioned for the Future Delivering Value Today Balanced business mix Meeting BGS: A demonstrated Commitments 2009 earnings guidance mechanism for meeting represents continued customer supply at market Achieved 2008 earnings growth prices for multi-year p
Slide 19: PSEG Power - Overview
PSEG We make things work for you. PSEG Power - Overview
Slide 20: PSEG Power - Delivering Value: Today and Tomorrow
PSEG Power - Delivering Value: Today and Tomorrow Positioned for Delivering the Future Value Today Low-cost, baseload Meeting On target to meet 2009 nuclear fleet benefits in Commitments earnings guidance of carbon constrained world $1,210M to $1,285M BET installation improves Achieved 2008 earnings
Slide 21: Power’s assets support commitments in a dynamic environment
Power’s assets support commitments in a dynamic environment… Fuel Diversity Low-cost portfolio Total MW: 13,576 Oil Nuclear Regional focus in competitive, liquid 9% 27 % markets Pumped Storage Assets favorably located near 45 % 18% 1% customers/load centers Coal Gas Many units east of PJM constraint
Slide 22: Power’s assets along the dispatch curve reduce the risk
Power’s assets along the dispatch curve reduce the risk… National Park Sewaren 6 Mercer 3 Kearny 10-11 Burlington 8-9-11 Edison 1-2-3 Nuclear Essex 10-11-12 New Coal Haven Linden 5-8 / Essex 9 Burlington 12 / Kearny 12 Bergen 1 Combined Cycle Linden 1,2 Yards Sewaren 1-4 Keystone Creek Hudson 1 Peac
Slide 23: The recent successful completion of the seventh BGS auction
The recent successful completion of the seventh BGS auction... Market Perspective – BGS Auction Results Increase in Full Requirements Component Due to: Full Requirements Increased Congestion (East/West Basis) $111.50 Capacity $102.51 $98.88 $103.72 Load shape Increase in Capacity Markets/RPM Volatil
Slide 24: Power’s output is sold forward
Power’s output is sold forward… Total Fleet On-Peak Average MW 12,000 10,000 8,000 6,000 4,000 2,000 - 2009 2010 2011 Total Fleet Off-Peak Average MW 12,000 10,000 8,000 6,000 4,000 2,000 - 2009 2010 2011 Nuclear Coal CC Steam / Pk Existing Hedges Existing Loads+ Hedges Existing Loads+ Hedges + Pote
Slide 25: Commodity prices have been volatile
Commodity prices have been volatile… Central Appalachian Coal Henry Hub NYMEX ($/Ton) $10 ($/MMBTU) $120 $100 $8 $80 $6 $60 $4 $40 $20 $2 $0 $0 2004 2005 2006 2007 2008 2009 2010 2011 2004 2005 2006 2007 2008 2009 2010 2011 Fwd * Fwd Fwd Fwd * Fwd Fwd $100 Western Hub RTC West Hub On Peak ($/MWh) $1
Slide 26: The effect of our hedging/forward sales strategy
The effect of our hedging/forward sales strategy… $100 $80 2009 realized price $60 $40 $20 $0 2004 2005 2006 2007 2008 2009 Fwd 2010 * Fwd 2011 Fwd PJM West PS Zone vs PJM West Basis Power’s hedging strategy The 3 year BGS Auction period secures pricing over a 2 - 3 year has the effect of pulling fo
Slide 27: Spark spreads are in line with rising historical averages
Spark spreads are in line with rising historical averages… PJM Western Hub Spark Spread (On-Peak – Henry Hub * 7.5 Heat Rate) $50 $40 $30 $20 $10 $0 -$10 2005 2006 2007 2008 2009 2010 2011 PJM Western Hub Dark Spread (RTC – Central Appalachian Coal * 10 Heat Rate) $70 $60 $50 $40 $30 $20 $10 $0 2005
Slide 28: Power’s hedging program provides near-term stability from market volatility
Power’s hedging program provides near-term stability from market volatility… Contracted Energy 100% $90 Power has 75% $80 contracted at Price (right $70 attractive prices, % sold 50% (left scale) which includes scale) $60 locational basis 25% and load shaping $50 premium. 0% $40 Estimated EPS impact
Slide 29: 2012 / 2013 RPM Auction Results
2012 / 2013 RPM Auction Results PSEG Power’s assets are in constrained zones, which cleared at higher prices. Power’s offer for 178MW of new capacity was accepted by PJM. Auction results reflect impact of new transmission capability. Delivering Value: Today and Tomorrow 29
Slide 30: Through the new capacity construct, and pricing at auction prices
Through the new capacity construct, and pricing at auction prices… PJM Capacity Available to Receive Auction Pricing 12,000 10,000 8,000 6,000 4,000 2,000 0 07/08 08/09 09/10 10/11 11/12 12/13 PJM Zones 2007 / 2008 2008 / 2009 2009 / 2010 2010 / 2011 2011 / 2012 2012 / 2013 Eastern MAAC $197.67 $148
Slide 31: Power’s coal hedging strategy is matched up with generation
Power’s coal hedging strategy is matched up with generation… Indicative $50 Station Coal Type Pricing Comments ($/MWh) Anticipated Coal Cost (Cost/MWh) Higher price, $40 Bridgeport lower BTU, Adaro High $40’s/$50 Harbor enviro coal $30 High $40’s/$50 Adaro / Flexibility after Hudson To Domestic BET
Slide 32: As national carbon regulation looks increasingly likely
As national carbon regulation looks increasingly likely… CO2 $/Ton Impact on PJM Prices and Power’s EBITDA $700 $600 The impact on electric prices moderates at $500 higher CO2 prices as: $400 - the fleet dispatch changes, and $300 - the CO2 intensity of the grid goes down. $200 $100 $0 $0 $10 $20 $3
Slide 33: Power’s commitment in 2009 reflects continued earnings growth
Power’s commitment in 2009 reflects continued earnings growth… Power’s 2008 Operating Earnings vs 2009 Guidance $90 – 100M ($25 – 15M) ($50 – 40M) $1,210 - $88 – 133M $1,285M BGSS Other O&M (pension) $1,107M More capacity Depreciation open to auction Other Operations Uprates BGS Recontracting Fuel 2
Slide 34: Power’s earnings for 2010 will be subject to many influences
Power’s earnings for 2010 will be subject to many influences… 2010+ Drivers $1,210 – $1,285M Revenue/Margin Nuclear output largely contracted Dark Spread change of $5/MWh at market – impact of $0.05-$0.10/share Spark Spread change of $5/MWh at market – impact of $0.05-$0.10/share Capacity change of
Slide 35: PSE&G - Review and Outlook
PSEG We make things work for you. PSE&G - Review and Outlook
Slide 36: PSE&G – Delivering Value: Today and Tomorrow
PSE&G – Delivering Value: Today and Tomorrow Positioned for Delivering the Future Value Today Resolve Distribution base rate Meeting Earnings on track to meet case by mid-2010 Commitments 2009 guidance Investment program Distribution base rate case responsive to NJ’s economic filed mid-2009 and ener
Slide 37: PSE&G regulatory strategy
PSE&G regulatory strategy… Earn authorized returns Minimize regulatory lag Support state energy goals Maintain/enhance local relationships …designed to support customer and shareholder requirements. Delivering Value: Today and Tomorrow 37
Slide 38: New Jersey Electric & Gas Rate Case
New Jersey Electric & Gas Rate Case* Filed: May 29, 2009 Test Year: 2009** Request Electric Gas Increase $133.7 million $96.9 million Rate Base $3.8 billion $2.4 billion Return on Equity 11.5% Equity Ratio 51.2% *New Jersey BPU decision anticipated within 9-12 months. **Test year can be updated for
Slide 39: PSE&G’s current investment plan including state capital stimulus
PSE&G’s current investment plan including the recently approved state capital stimulus … PSE&G Rate Base 2008 2009 2010 2011 Rate Base $6.9B Rate Base $7.6B Rate Base $8.6B Rate Base $9.4B Equity Ratio ~ 50% Equity Ratio ~ 51%* Equity Ratio ~ 51%* Equity Ratio ~ 51%* 51% 49% 49% 47% 23% 17% 19% 15%
Slide 40: PSE&G’s additional investment proposals
PSE&G’s additional investment proposals … PSE&G Annual Potential Capital Investments $400 An additional ~$0.7B of $300 investments to be added 2009-2011 if appropriate $200 regulatory treatment is received $100 $0 2009 2010 2011 Energy Efficiency Stimulus Solar II Solar 4 All Rate Base Including Pot
Slide 41: PSE&G implemented fully-forecasted formula rates with an 11.68% base ROE
PSE&G implemented fully-forecasted formula rates with an 11.68% base ROE, which provides attractive current return on investments. Transmission Growth PJM approved the $750M Susquehanna to Roseland line in October 2007 Jefferson Roseland Siting and permitting process underway Branchburg Incentives a
Slide 42: PSE&G is well positioned to respond to NJ’s needs
PSE&G is well positioned to respond to NJ’s needs… A B C D E FG H I May 2008 Dec Jan 2009 Dec Jan 2010 Jun 2008 Regulatory Activities 2009 Regulatory Activities 2010 Regulatory Activities $215M Filed D. Capital Economic Stimulus Infrastructure Investment I. Resolve Electric and A. Solar Loan Program
Slide 43: Combining operational excellence with prices comparable to regional competitors
Combining operational excellence with prices comparable to regional competitors … Electricity Gas (500kWh/month bill) (100 therm/month bill) 20 18.5 2.00 17.7 18.1 Potential 1.79 Potential 18 Investments** 1.80 1.70 Clauses Clauses 1.65 Investments** 16 1.60 Clauses Clauses Delivery 14 Delivery * 1.
Slide 44: In 2009, controlling O&M will mitigate the effects of rising costs
In 2009, controlling O&M will mitigate the effects of… $10 - 15M ($40 - 35M) $5 - 10M $360M ($15 - 5M) $320 – $345M 2008 Operating Weather Transmission Pension Depreciation, 2009 Guidance Earnings* Interest and Other … increasing pension, depreciation and interest costs. *See page 64 for Items exclu
Slide 45: PSE&G – Business Drivers
PSE&G – Business Drivers 2010+ Drivers Operational excellence and effective cost $320 – $345M management Distribution rate case should improve 2009 ROE’s of 8.0% - 8.8% to 9.0% - 9.5% Addresses capital investment, O&M and sales losses 1% change in Distribution rate case ROE for 2010 = ~$21M change i
Slide 46: PSEG Energy Holdings - Review and Outlook
PSEG Energy Holdings - Review and Outlook
Slide 47: PSEG Energy Holdings – Delivering Value: Today and Tomorrow
PSEG Energy Holdings – Delivering Value: Today and Tomorrow Positioned for Delivering the Future Meeting Value Today Sufficient liquidity and credit Commitments strength to fund potential Earnings on track to meet 2009 guidance LILO/SILO liability through Exceeded 2008 earnings cash, asset value and
Slide 48: By reducing its investment in international assets
By reducing its investment in international assets … PSEG Global Invested Capital ($ Billions) $2.6B $1.9B International $2.2 $1.4 $0.8B $0.6B $0.1 Domestic $0.8 $0.4 $0.5 $0.5 2004 2006 2008 2009 Projected* … Holdings has decreased its risk profile and improved its business focus. *Investment Inclu
Slide 49: Texas assets are the major driver of PSEG Global’s business results
Texas assets are the major driver of PSEG Global’s business results… Market PSEG Nat. Gas Reserve Gross Capacity EBITDA* Henry Hub Spot Margin Margin ($M) Factors ($M) ($/mmBtu) 2006 $6.7 16% $186 54.4% $130 2007 6.9 15% 162 48.7% 104 2008 9.0 14% 214 47.9% 147 2009 4.0 - 5.0 16% 135 – 145 35 – 45%
Slide 50: Holdings is focused on managing its current investment portfolio
Holdings is focused on managing its current investment portfolio. Net Investment in lease portfolio of $0.3B*. Book investment of $2.3B less deferred taxes of $2.0B Assuming 100% litigation loss, the lease portfolio would generate $2.1B* of after-tax cash over the remaining life of the portfolio. Ne
Slide 51: PSEG Energy Holdings – 2009 Earnings Drivers
PSEG Energy Holdings – 2009 Earnings Drivers Holdings 2008 Operating Earnings vs 2009 Guidance $99M ($50 - 40M) $17M ($4 - 2M) ($20 - 16M) ($31 - 29M) ($11 - 9M) $0 – 20M 2008 Operating Texas Margin Texas Project Interest & Other Global Taxes Resources Resources 2009 Guidance Earnings* and Major Fin
Slide 52: PSEG Energy Holdings – Business Drivers
PSEG Energy Holdings – Business Drivers 2010+ Drivers Sale of remaining international assets (Book value $9M) Continued defense of LILO/SILO lease position with improved return post- resolution Focused management of domestic $0 – 20M contracted generation portfolio Support of 2009 joint venture Ener
Slide 53: Appendix
PSEG We make things work for you. Appendix
Slide 54: Q1 2009 Earnings Summary
Q1 2009 Earnings Summary Quarter ended March 31, $ millions (except EPS) 2009 2008 Operating Earnings $ 482 $ 438 Reconciling Items, Net of Tax (38) (3) Income from Continuing Operations 444 435 Discontinued Operations, Net of Tax - 13 Net Income 444 448 EPS from Operating Earnings* $ 0.95 $ 0.86 *
Slide 55: Q1 Operating Earnings by Subsidiary
Q1 Operating Earnings by Subsidiary Quarter ended March 31, Operating Earnings Earnings per Share $ millions (except EPS) 2009 2008 2009 2008 PSEG Power $ 359 $ 279 $ 0.71 $ 0.55 PSE&G 123 136 0.24 0.26 PSEG Energy Holdings 4 28 0.01 0.06 Enterprise (4) (5) (0.01) (0.01) Operating Earnings* $ 482 $
Slide 56: PSEG Power’s asset mix and dispatch profile
PSEG Power’s asset mix and dispatch profile … PSEG Power – Generation (GWh) Quarter ended March 31, Generation declined 4.3%. 15,000 13,700 Nuclear fleet capacity factors: 13,117 NJ fleet operated at 99.3% in 2,776 2,621 Q1 2009 vs 91.0% in Q1 2008. 10,000 Nuclear fleet capacity factor 3,659 2,679 o
Slide 57: PSEG Power – Fuel Costs
PSEG Power – Fuel Costs Year ended December 31, Quarter ended March 31, ($ millions) 2007 2008 2008 2009 Coal 336 423 115 94 Oil & Gas 847 1,141 242 174 Total Fossil $1,183 $1,564 $357 $268 Nuclear 122 129 31 36 Total Fuel Cost $1,305 $1,693 $388 $304 Total Generation 53,197 55,300 13,700 13,117 (GW
Slide 58: Our five unit nuclear fleet
Our five unit nuclear fleet … Hope Creek Operated by PSEG Nuclear PSEG Ownership: 100% Salem Units 1 and 2 Technology: Boiling Water Reactor Operated by PSEG Nuclear Total Capacity: 1,211MW Ownership: PSEG - 57%, Peach Bottom Units 2 and 3 Owned Capacity: 1,211MW Exelon – 43% Operated by Exelon Tech
Slide 59: The implementation of carbon will address the critical issue of global warming
The implementation of carbon will address the critical issue of global warming… By Fuel Type Coal CTs CC Carbon tons/MWh 1.0 0.6 0.4 Price ($/MWh) PSEG Power Generation by Fuel @$10 $10.0 $6.0 $4.0 Energy Produced – 2008 Total GWh: 55,300 @$20 $20.0 $12.0 $8.0 @$30 $30.0 $18.0 $12.0 Nuclear 53% Disp
Slide 60: The RGGI cap on CO2 emission shows that headroom exists
The RGGI cap on CO2 emission shows that headroom exists … Affected Sources CO 2 Emissions vs. RGGI Cap (Actuals through 2007) Fossil-fired electric generating units with a capacity of 25MW 200 and larger Actual & RGGI Cap 190 Forecast CO2 Targets and Timing 180 Three-year compliance periods 170 with
Slide 61: Proposed energy efficiency investment and savings
Proposed energy efficiency investment and savings Savings (MWh) Savings (Dtherms) Category Investment Annual Lifetime Annual Lifetime Jobs Residential ($ millions) Whole House $25 5,428 86,847 27,587 551,744 120 Multi-Family 25 5,428 86,847 27,587 551,744 60 10,856 173,694 55,174 1,103,488 180 Indus
Slide 62: Rate Mechanism
Rate Mechanism PSE&G proposes to recover the costs of the program through an annual adjustment to electric and gas rates which would not exceed 1%. The cost of capital would be based on a capital structure consisting of 51.2% common equity with a return on common equity of 10.3%--consistent with the
Slide 63: PSE&G Solar 4 All Proposal
PSE&G Solar 4 All Proposal Neighborhood Solar (40 megawatts) - $264M investment Solar panels on utility poles and street lights in neighborhoods throughout PSE&G’s service territory. Local Government Solar (43 megawatts) - $273M investment Solar, owned and operated by PSE&G, on municipal and public
Slide 64: Items Excluded from Income from Continuing Operations to Reconcile to Operating Earnings
Items Excluded from Income from Continuing Operations to Reconcile to Operating Earnings PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED Reconciling Items Excluded from Continuing Operations to Compute Operating Earnings (Unaudited) For the Quarters Ended For the Twelve Months Ended March 31, December
Public Service Enterprise Group — Non-Deal Roadshow (June 2009) on 6ix