Public Service Enterprise Group Incorporated · NYSE:PEG
Public Service Enterprise — 42nd EEI Financial Conference 2007
45 slides from Public Service Enterprise's conference presentation, Nov 5, 2007
Slide 1: Public Service Enterprise Group 42nd EEI Financial Conference
Exhibit 99 Public Service Enterprise Group 42nd EEI Financial Conference Lake Buena Vista, Florida November 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 Chairman, President and Chief Executive Officer
Slide 5: PSEG Overview
PSEG Overview 2007E Operating Earnings(4) : $1,305M - $1,410M 2007 EPS Guidance(4) : $5.15 - $5.45 Assets (as of 09/30/07): $28.9B Market Capitalization (as of 11/1/07): $23.9B Traditional T&D Regional Wholesale Energy Electric Customers: 2.1M Nuclear Capacity: 3,500 MW Domestic/Int’l Leveraged Gas
Slide 6: Operational excellence is our foundation for success
Operational excellence is our foundation for success … Operational Excellence Disciplined Financial Investment Strength … and this will yield financial strength that will be deployed through disciplined investment. 5
Slide 7: 2007 Overview – Year-to-date update
2007 Overview – Year-to-date update Management team in place Strong PSE&G – Mid-Atlantic ReliabilityOne award for sixth Operations consecutive year PSEG Power expects to be in a position to resume independent operation of nuclear fleet Constructive Committed to working with the State to meet NJ’s Re
Slide 8: Announced increased earnings guidance for 2007
Announced increased earnings guidance for 2007 … $7.00 $5.60 - $6.10 $6.00 $5.15 - $5.45 $5.00 $4.00 $3.71 $3.00 9 Months YTD Operating $2.00 Earnings: $4.47 $1.00 $0.00 2006 Operating Earnings* 2007 Guidance 2008 Guidance … driven by strong power markets and operations. * As reported: Excludes Loss
Slide 9: The current business environment creates opportunities for long-term growth
The current business environment … Well operating nuclear fleet with growth potential Environmental position Back-end technology on Hudson & A carbon constrained future Mercer ($1B - $1.2B) Solar initiative proposed for $100M Increased utility investment Critical infrastructure needs Transmission in
Slide 10: Climate change is the preeminent issue of our time
Climate change is the preeminent issue of our time … The issue cuts across the PSEG group of companies Three critical strategies are required to meet carbon reduction goals: Conservation Renewables Clean, zero and low-carbon central station electric generating capacity … with our response defining t
Slide 11: Climate initiatives
Climate initiatives … Regional Greenhouse Gas Initiative (RGGI) effective January 1, 2009 Energy Master Plan – No explicit CO2 target, but: 20% energy efficiency by 2020 Calls for 20% renewables by 2020 Draft Plan expected before year-end NJ Global Warming Response Act: Stabilization of economy-wide
Slide 12: Policymakers are looking to Cap and Trade for the power industry
Policymakers are looking to Cap and Trade for the power industry to reduce CO2 emissions… 2004 Emission Rate Ranking (24 largest Generating Companies in PJM) 2,500 2,000 1,500 1,000 500 0 PSEG’s generation carbon intensity is lower than many competitors and benefits from virtually any form of carbon
Slide 13: 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 14: PSEG Power
PSEG Power Tom O’Flynn Executive Vice President and Chief Financial Officer President – PSEG Energy Holdings
Slide 15: Positioned for growth in 2007 and beyond – PSEG Power
Positioned for growth in 2007 and beyond – PSEG Power Nuclear fleet has maintained strong performance Strong Expect to be in a position to resume independent Operations operations at year-end Increased output from fossil fleet Constructive NJ BGS model represents deep, liquid market providing opport
Slide 16: Hedging program provides near-term stability from market volatility
Hedging program provides near-term stability from market volatility … Power’s Generation Output 100% Other output 80% Open coal and nuclear output Includes roll off of 4 year, 60% 500MW RTC contract ($125M+) and other recontracting Contracted coal and nuclear output 40% 20% Contracted Prices 2008 20
Slide 17: Power expects to realize increasing margin improvement
Power expects to realize increasing margin improvement … Total Capacity 100% Open Capacity 75% Contracted Capacity 50% 25% Contracted Prices 2008 2009 2010 $38-40/KW-yr $49-51/KW-yr $50-54/KW-yr 0% 2008 2009 2010 Estimated impact of $10/KW-yr $0.01 - $0.02 $0.01 - $0.02 $0.14 - $0.18 capacity price
Slide 18: Power's capacity is located in three northeast markets
Power’s capacity is located in three northeast markets … PSEG Power Total Generating Capacity NY NE PJM Total Capacity 13,600MW (~ 1,000 - 1,500MW under RMR) … with pricing secured through May of 2010 in PJM and New England. 17
Slide 19: Operational improvements and recontracting in current markets
Operational improvements and recontracting in current markets … Realized Gross Margin $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. 18
Slide 20: Power's open EBITDA is approximately $2.4 - $2.6 billion
Power’s open EBITDA is approximately $2.4 - $2.6 billion… Impact Assumption Sensitivity $2.5 EBITDA Capacity ~ $60 - $65/KW-yr $10/KW-yr ~ $120M (~ $165 - $175/MW-day) Energy ~ $63 - 67/MWh $1/MWh ~ $40M (PJM-West) $2.0 $1.5 $1.0 … which will vary depending upon market drivers. 19
Slide 21: PSE&G
PSE&G
Slide 22: Positioned for growth in 2007 and beyond – PSE&G
Positioned for growth in 2007 and beyond – PSE&G Mid-Atlantic ReliabilityOne award – six years Strong running Operations O&M growth less than inflation Rate agreement provides opportunity to earn Constructive authorized return Regulatory and PSE&G advocated a strong role for utilities in Business me
Slide 23: 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 24: PSEG Energy Holdings
PSEG Energy Holdings
Slide 25: A re-positioning of assets at PSEG Energy Holdings
A re-positioning of assets at PSEG Energy Holdings Texas gas-fired assets – continued strong performance Strong Improving performance from international Operations assets Resources – focus on credit ratings Strong economic growth and stable foreign Constructive exchange rates have supported values f
Slide 26: Improved risk profile by reducing capital invested in non-strategic assets
Improved risk profile by reducing capital invested in non-strategic assets while increasing returns and sharpening focus on G&A Global’s Invested Capital Composition of Global’s Pre-tax Contribution by Region* $2.6B $317M** $13 4% $2.0B Other $900M 35% $1.8B 7% $205M-$225M** $150M $129 41% $150M 7%
Slide 27: YTD Operating Earnings by Subsidiary
YTD Operating Earnings by Subsidiary Nine months ended September 30, $ Millions (except EPS) Operating Earnings Per Share 2007 2006 2007 2006 PSE&G $ 299 $ 198 $ 1.18 $ 0.79 PSEG Power 744 413 2.93 1.64 PSEG Energy Holdings 134 193 0.53 0.76 Enterprise (43) (50) (0.17) (0.20) PSEG $ 1,134 $ 754 $ 4.
Slide 28: Strong earnings growth projected in 2007 and 2008
Strong earnings growth projected in 2007 and 2008 … Operating Earnings by Subsidiary 10% $5.60 - $6.10 + 40 - 45% $5.15 - $5.45 $3.77* $3.71** 890-940 Power 446 515 PSE&G 347 262 360-380 Holdings 227 196 110-135 Parent (71) (66) (55)-(45) 0 2005 2006 2007 2008 … with reduced international risk. * 20
Slide 29: Excess cash between $2.0B and $2.5B expected through 2011
Excess cash between $2.0B and $2.5B expected to be available through 2011… PSEG Sources and Uses 2007 - 2011 Financing $15.0 Asset $2.0 – $2.5 Share Repurchases / Sales New Investments* $12.0 Net Shareholder $9.0 Dividend Cash $6.0 from Ops Investment $3.0 $0.0 Sources Uses …which could translate in
Slide 30: Public Service Enterprise Group dedicated to meeting commitments
Public Service Enterprise Group dedicated to … Meeting commitments 2007 earnings in excess of guidance System reliability enhanced with expansion of transmission system Turning challenges into opportunities Addressing NJ’s Clean Energy goals Solar initiative PSE&G to use more energy efficient equipm
Slide 31: Creating shareholder value for the long-term
Creating shareholder value for the long-term … Total Comparative Returns 600 (10/31/97 – 10/31/07) 500 400 300 200 100 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 -100 PEG S&P Electrics … has been and will continue to be our focus. 30
Slide 32: Public Service Enterprise Group
Public Service Enterprise Group
Slide 33: Appendix
APPENDIX
Slide 34: Regional Greenhouse Gas Initiative (RGGI) for the power sector is real
Regional Greenhouse Gas Initiative (RGGI) for the power sector is real … Agreement between 10 northeast states to cap CO2 emissions from power plants Emissions capped at 2000-2004 baseline levels in 2009 - NJ cap = 22.9 million tons Reduce CO2 emissions by a total of 10% during 2015 – 2018 Allowance
Slide 35: The potential impact of CO2 on PSEG Power
The potential impact of CO2 on PSEG Power… By Fuel Type Coal CTs CC Carbon tons/MWh 1.0 0.6 0.4 Price ($/MWh) @$5 $5.0 $3.0 $2.0 PSEG Power Generation by Fuel @$10 $10.0 $6.0 $4.0 Total GWh: 53,617 @$30 $30.0 $18.0 $12.0 Nuclear 55% Pumped Dispatch curve implication @ $10/ton* Storage On margin $/MW
Slide 36: 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 Regional focus with demonstrated 8% 26 % Pumped BGS success Storage 47 % 18% 1% Assets favorably located Coal Many units east of PJM constrai
Slide 37: 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 38: Our environmental response
Our environmental response… 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 39: Long-term market prices
Long-term market prices … $/MWh $/mmbtu $70 $12 Natural Gas Henry Hub (right scale) $60 $9 Electricity (left scale) $50 $6 $40 Coal(1) (right scale) $3 $30 $20 $0 2002 2003 2004 2005 2006 2007 2008 2009 (2) (2) (2) Est Fwd Fwd (1) (2) Central Appalachian coal Forward prices as of September 21, 2007
Slide 40: RPM Capacity Auction – transparent pricing model
RPM Capacity Auction – transparent pricing model Results from PJM’s third capacity auction under the Reliability Pricing Model for the 2009-2010 delivery year provided strong price signals. Delivery Year ($MW/Day) Zones 2007 / 2008 2008 / 2009 2009 / 2010 Eastern MAAC $197.67 $148.80 $191.32 MAAC &
Slide 41: Power's fleet diversity and location
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 ~ $32 ~
Slide 42: The capital program has been expanded
The capital program has been expanded … 2007 2008 2009 2010 2011 TOTAL Capital Spending Update ($ 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 43: Why invest in PSEG?
Why invest in PSEG? Growing and visible stream of earnings Hedging and RPM Regulated utility operations Earnings Per P/E Share* Strong balance sheet 2007E 2008E 2007E 2008E Yield % PSEG $5.30 $5.85 17.7 16.1 2.5% Cash available for growth Merrill Lynch Index** $3.18 $3.58 18.0 15.9 3.3% Competitive
Slide 44: New Officers
New Officers Izzo – PSEG - Chairman, President & CEO Levis – PSEG Power - LaRossa – PSE&G O’Flynn – PSEG - EVP/ Selover – PSEG Simpson – PSEG Svcs President, CNO, COO – President & COO CFO, PSEG Holdings - Svcs - EVP & Gen - President & COO President Counsel Joyce – SVP Byrd – SVP Finance, Operation
Slide 45: 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 Sept. 30, Nine Months Ended Sept. 30, Quarter Ended Sept. 30, Nine Months Ended Sept. 30, 2007 2006 2007 2006 2007 2006 2007 2006 Merger related Costs: PSE&G $ - $ 1 $ - $ (1) P
Public Service Enterprise Group — 42nd EEI Financial Conference 2007 on 6ix