Public Service Enterprise Group Incorporated · NYSE:PEG
Public Service Enterprise — Investor Presentation (August 2013)
110 slides from Public Service Enterprise's investor presentation, Aug 8, 2013
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. EXHIBIT 99
Slide 2: Presenters: Kathleen Lally and Caroline Dorsa
PSEG Kathleen Lally VICE PRESIDENT, INVESTOR RELATIONS Caroline Dorsa EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
Slide 3: We make things work for you
& PSEG We make things work for you.
Slide 4: PSEG Strategy
DISCIPLINED INVESTMENT ENGAGED WORKFORCE FINANCIAL STRENGTH OPERATIONAL EXCELLENCE 6 PSEG Strategy Leveraging the strength of PSEG’s balance sheet to invest primarily in our stable, regulated business in ways that meet customer needs and state goals as we protect the upside of the merchant business
Slide 5: PSEG met 2012's challenges with our strong platform of assets
7 PSEG met 2012’s challenges with our strong platform of assets ASSETS AND OPERATING EARNINGS ARE FOR THE YEAR ENDED 12/31/2012. ENERGY HOLDINGS INCLUDES PARENT. SEE PAGE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/NET INCOME TO RECONCILE TO OPERATING EARNINGS. . Electric & Gas Deliv
Slide 6: First Half 2013 Operating Earnings by Subsidiary
10 First Half 2013 Operating Earnings by Subsidiary *SEE PAGE B FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/NET INCOME TO RECONCILE TO OPERATING EARNINGS. Operating Earnings Earnings per Share $ millions (except EPS) 2013 2012 2013 2012 PSEG Power $ 364 $ 306 $ 0.71 $ 0.60 PSE&G 0.59 0
Slide 7: PSEG EPS Reconciliation – First Half 2013 versus First Half 2012
11 PSEG EPS Reconciliation – First-Half 2013 versus First Half 2012 * SEE PAGE B FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/NET INCOME TO RECONCILE TO OPERATING EARNINGS. $1.33 (0.06) 0.11 $1.28 0.00 0.25 0.50 0.75 1.00 1.25 1.50 YTD 2013 Operating Earnings* YTD 2012 Operating Earning
Slide 8: 2013 Operating Earnings Guidance
12 2013 Operating Earnings Guidance * SEE PAGE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/NET INCOME TO RECONCILE TO OPERATING EARNINGS.. Based on our performance year-to-date, we expect full year operating earnings to be at the upper end of guidance, assuming normal weather and uni
Slide 9: Percent of Operating Earnings Contribution by Subsidiary
13 Percent of Operating Earnings Contribution by Subsidiary 2013 Operating Earnings * Investment in the regulated business has changed the earnings mix Our 2009-2013 investment focus has brought us to a 50/50 mix for 2013 PSE&G’s 2013-2017 Energy Strong Program and ongoing transmission investments w
Slide 10: PSEG Focus
14 • 2.4% (planned 1 ) • $866 • $0 • $0 • 1.6% • 29.3TWh • $0 $2.91 • 0.8% (actual 2 ) • $2,500 • $955 • $888 • 1.7% • 29.8TWh • $240 $2.44 • O&M Growth per year • Transmission Rate Base • Utility Cap Stimulus Spending • Utility Solar & EE Cap Exp • EFORd Rate CCGT • Nuclear Generation • Holdings So
Slide 11: Superstorm Sandy met by an exceptional response
15 Superstorm Sandy met by an exceptional response The storm affected PSE&G and Power 2.1 million PSE&G customer restorations (2X Hurricane Irene and 3X the October ’11 Snowstorm) 96 Electric Substations Damaged (39% of the total) 14 Switching Stations Affected (33% of total) 51 of 154 Transmission
Slide 12: PSEG Capital Spending focused on growth
16 $4.2B 67% $0.3B 6% $1.5B 24% $5.1B 81% $1.0B 16% PSEG Capital Spending focused on growth PSEG 2013-2015E Capital Spending* $6.3 Billion by Subsidiary PSEG 2013-2015E Capital Spending* $6.3 Billion Growth / Environmental / Maintenance E = ESTIMATE; CAPITAL EXCLUDES IDC AND AFUDC. *THIS FORECAST DO
Slide 13: What's Next: PSEG's Capital Spending expansion opportunity
17 $1.5B 20% $6.3B 85% $1.0B 13% What’s Next: PSEG ’ s Capital Spending expansion opportunity directed toward growth in regulated business with ~ 25% growth in planned spending Potential PSEG 2013-2015E Capital Spending* $7.5 Billion by Subsidiary Potential PSEG 2013-2015E Capital Spending* $7.5 Bil
Slide 14: PSE&G's Energy Strong Capital Program
18 PSE&G’s Energy Strong Capital Program addresses new reality New ten-year, $3.9 Billion Infrastructure Program filed with the NJBPU to strengthen PSE&G’s distribution system focusing on hardening and resiliency Plan to invest an additional $1.5 Billion in transmission grid over the ten-year period
Slide 15: Local NJ towns and counties support
19 55 local NJ towns and 5 counties support • 55 municipalities and five counties (Bergen, Hudson, Mercer, Passaic and Somerset) have approved resolutions in support of Energy Strong, PSE&G’s infrastructure proposal to improve and fortify its electric and gas distribution systems • The Energy Strong
Slide 16: PSEG Power value advantaged by asset diversity
20 18% 45% 8% 28% 32% 57% 11% 42% 25% 33% PSEG Power value advantaged by asset diversity, fuel flexibility and location Fuel Diversity* Total MW: 13,226 Energy Produced* Total GWh: 52,511 Energy Market Served * Total MW: 13,226 1% Intermediate Peaking Base load Nuclear Oil Coal** Gas Pumped Storage
Slide 17: Where we're going
21 • 2.2% (forecast ³ ) • $12,600 • $5,000 4 • $6,900 5 • $700 5 • 1.4% • 30.4TWh • $290 • $12-$15 2015E • 0.8% (actual ² ) • $9,000 • $2,500 • $5,900 • $600 • 1.7% • 29.8TWh • $240 • $0 2012 • 2.4% (planned ¹ ) • $6,800 • $866 • $5,900 • $0 • 1.6% • 29.3TWh • $0 • $0 • O&M Growth per year • PSE&G R
Slide 18: Balance Sheet Strengthened
22 Equity 55% Debt 45% Equity 59% Debt 41% 57% 43% 55% 45% 70% 30% 51% 49% Balance Sheet Strengthened PSEG has reduced risk PSEG Total Capitalization 2009 2012 Power Power PSE&G PSE&G
Slide 19: Using PSEG's balance sheet strength to finance growth
23 Using PSEG’s balance sheet strength to finance growth in the regulated enterprise without equity issuance PSEG Total Capitalization 2012 2015E* * E = ESTIMATE; INCLUDES THE FOLLOWING PROPOSED FILINGS: EE4A, SL3, S4AE, ENERGY STRONG (ES) AND TRANSMISSION HARDENING. Debt 41% Equity 59% Debt 44% Equ
Slide 20: PSEG Annual Dividend
24 PSEG Annual Dividend A long history of growth and returning cash to shareholders Payout Ratio 62% 70% 63% 66% 43% 44% 43% 44% 50% 58% 61%* 5-year Rate of Growth 2.22% 10-year Rate of Growth 2.92% PSEG Annual Dividend Rate *2013 PAYOUT RATIO REFLECTS THE MIDPOINT OF 2013 OPERATING EARNINGS GUIDANC
Slide 21: We make things work for you
& PSEG We make things work for you.
Slide 22: PSE&G strategy
27 DISCIPLINED INVESTMENT OPERATIONAL EXCELLENCE FINANCIAL STRENGTH ENGAGED WORKFORCE PSE&G strategy Building a sustainable platform that balances reliability, customer rates and public policy to ensure growth at reasonable returns
Slide 23: PSE&G is the largest electric and gas utility in New Jersey
28 Electric Gas Transmission Electric Gas Renewables and Energy Efficiency Approved Programs 2009-2012 Total Program Plan PSE&G is the largest electric and gas distribution and transmission utility company in New Jersey Customers Growth (2008 – 2012) 2.2 Million 0.6% 1.8 Million 0.6% Electric Sales
Slide 24: National reliability award winner
29 National reliability award winner and recognized for emergency response during Hurricane Irene
Slide 25: During Superstorm Sandy
30 During Superstorm Sandy strong winds, heavy rainfall and storm surges caused significant damage to our infrastructure
Slide 26: PSE&G brought in more than 4,000 contractors
31 PSE&G brought in more than 4,000 contractors and mutual aid workers at the height of restoration efforts 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 1,179 1,220 1,476 1,488 1,586 1,702 2,757 3,176 3,176 3,345 3,936 4,174 3,867 3,683 3,576 10.2610.27 10.28 10.2910.30 10.31 11.1 11.2 11.3 11.4
Slide 27: Restoration response incorporated lessons learned from Hurricane Irene
32 Restoration response incorporated lessons learned from Hurricane Irene PSE&G’s response to customer outages during recent major events Cumulative Customers Restored 2,000,000 1,500,000 1,000,000 500,000 Irene Sandy
Slide 28: PSE&G's operating earnings grew ~10%
33 PSE&G’s operating earnings grew ~10%* with increased investment, cost control and supportive rate mechanisms * COMPOUND ANNUAL GROWTH RATE SEE SLIDE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/ NET INCOME TO RECONCILE TO OPERATING EARNINGS.
Slide 29: Growth in rate base driven by favorable recovery mechanisms
34 Growth in rate base is driven by investments with favorable recovery mechanisms $9.0B PSE&G Rate Base $6.8B PSE&G’s rate base has grown ~7% annualized with a focus on meeting the State’s goals and customers’ needs Renewables & Energy Solutions Transmission Gas Distribution Electric Distribution
Slide 30: Transmission has delivered on planned spending
35 Represents ~28% of rate base in 2012 Overall, Transmission has delivered on planned spending PSE&G’s Transmission Capital Expenditures 2009 2009 Plan Actual 2010 2010 Plan Actual 2011 2011 Plan Actual 2012 2012 Plan Actual Remaining Transmission North East Grid Mickelton-Gloucester-Camden Susqueh
Slide 31: Providing solutions for New Jersey's energy and economic goals
36 ($ Millions) Approval Date Forecast Amount* Spend As of 6/30/13 Remaining Spending Total $2,462 $1,920 $542 Providing solutions for New Jersey’s energy and economic development goals Renewables Solar Loan I & II 2008- 2009 $244 $228 $16 Solar 4 All July 2009 Solar Loan III May 2013 - Solar 4 All
Slide 32: Focus on controlling O&M
37 Focus on controlling O&M allows us to earn our authorized return PSE&G O&M* 2008 – 2013 CAGR: 1.4% * EXCLUDES REGULATORY CLAUSES ** INCLUDES $40M IMPACT FROM SUPERSTORM SANDY IN 2012 E = ESTIMATE
Slide 33: PSE&G's capital program
38 PSE&G’s capital program will continue to be focused on delivering energy solutions to meet New Jersey’s public policy PSE&G’s Capital Expenditures DATA AS OF JUNE 30, 2013. * PROPOSED FILINGS INCLUDE ENERGY STRONG (ES) AND EE4A. E = ESTIMATE
Slide 34: 2013-2017 proposed investment plan
39 2013-2017 proposed investment plan would grow our current capital plan by up to 50% 2013-2017E Capital Expenditures Existing Plan $7.2 Billion Existing Plan and Proposed Filings $10.3 Billion * Distribution ES and Transmission Hardening extend 10 years * * DATA AS OF JUNE 30, 2013. E = ESTIMATE D
Slide 35: Proposed investments recovered through contemporaneous mechanisms
40 PSE&G’s proposed investments would be recovered through contemporaneous recovery mechanisms Contemporaneous Recovery Mechanisms Traditional Recovery Mechanisms DATA AS OF JUNE 30, 2013. E = ESTIMATE Energy Strong Filing (ES) Solar/Energy Efficiency Clauses FERC Formula Rates Distribution Base Rat
Slide 36: Major transmission investment program on schedule and budget
41 Approved ROE Inclusion of CWIP in Rate Base 100% Recovery of Costs Due to Abandonment Total Estimated Project Costs Expected In-service Date PSE&G’s existing major transmission investment program remains on schedule and on budget Major Transmission Projects Susquehanna -Roseland 12.93% $790 June
Slide 37: Susquehanna-Roseland project
42 Project Estimate Up To* Through Year-end 2012 2013-2015E Expected In-service Date 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 $790M $324M $466M June 2014 / June 2015 • PJM RTEP projec
Slide 38: Northeast Grid Reliability project
43 Project Estimate Up To Through Year- end 2012 2013-2015E Expected In-service Date 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 twelve existing sta
Slide 39: North Central Reliability project
44 Project Estimate Up To Through Year- end 2012 2013-2015E Expected In-service Date North Central Reliability consists of upgrading 55 circuit miles of 138kV transmission line to 230kV, and converting six existing stations to 230kV operation E = ESTIMATE $390M $163M $227M June 2014 • PJM RTEP proje
Slide 40: Burlington-Camden 230kV project
45 Project Estimate Up To Through Year-end 2012 2013- 2014E Expected In-service Date Burlington-Camden 230kV consists of upgrading 37 circuit miles (30 miles of overhead and 7 miles of under- ground) of 138kV transmission line to 230kV, converting the existing stations to 230kV operation E = ESTIMAT
Slide 41: Mickleton-Gloucester-Camden 230kV project
46 Project Estimate Up To Through Year- end 2012 2013-2015E Expected In-service Date 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/upg
Slide 42: Lower commodity costs offset customer bill impact
49 Lower commodity costs and expiration of certain transition charges are expected to fully offset the impact to customer bills *2018 BGS/BGSS RATES AS WELL AS SBC AND DISTRIBUTION RATES HELD CONSTANT AT CURRENT 2013 RATES. RATES RELATED TO ELECTRIC RESTRUCTURING: SECURITIZATION (STC), NON-UTILITY G
Slide 43: PSE&G's 2013 operating earnings
50 PSE&G’s 2013 operating earnings benefiting from transmission growth and cost containment initiatives E= ESTIMATE *SEE SLIDE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/NET INCOME TO RECONCILE TO OPERATING EARNINGS. $528 2012 2013 Guidance PSE&G Operating Earnings* ($ Millions) $58
Slide 44: Long Island Power Authority
LONG ISLAND POWER AUTHORITY
Slide 45: LIPA T&D management contract
52 LIPA /National Grid Contract Thru Dec 2013 PSEG Transition Period 2012-2013 PSEG Long Island Operating Period 2014 - 2023 LIPA T&D management contract In December 2011, the Long Island Power Authority (LIPA) selected PSEG to manage its electric transmission and distribution system for 10 years st
Slide 46: We make things work for you
& PSEG We make things work for you.
Slide 47: PSEG Energy Holdings strategy
54 STREAMLINED BUSINESS AND REDUCED FINANCIAL RISK CAPITALIZE ON RENEWABLE OPPORTUNITIES MAXIMIZING THE VALUE OF THE REMAINING PORTFOLIO DEVELOP AND EXECUTE NEW BUSINESS OPPORTUNITIES PSEG Energy Holdings strategy Holdings’ priorities are to manage lease risks, sell remaining non- core assets and gr
Slide 48: Energy Holdings monetized legacy assets
55 Merchant Energy Leases Regulated Energy Leases & Other Regulated Energy Leases & Other Merchant Energy Leases LILO/SILO Leases International Investments $M Solar Source $ 159 Merchant Energy Leases GenOn (REMA)/NRG $ 341 EME (Midwest Gen) $ 218 Regulated Energy Leases $ 202 Real Estate Leveraged
Slide 49: Reducing risk and monetizing legacy assets
Reducing Risk and Monetizing Legacy Assets Growth in unregulated renewables PSEG Solar Source Growth by leveraging knowledge PSEG Long Island Merchant Energy Leveraged Leases Regulated Energy Leveraged Leases Real Estate Leveraged and Operating Leases Legacy Generation Assets 56 PSEG Energy Holdings
Slide 50: PSEG Solar Source projects
57 PSEG Solar Source has completed 69 MW and has an additional 19 MW under construction Milford Delaware (15 MW) COD December 2012 Polycrystalline - fixed tilt Investment $47 million 20 year PPA with DEMEC Hackettstown (Mars) New Jersey (2 MW) COD September 2009 Thin film panels – fixed tilt Investm
Slide 51: Solar Source EBITDA
58 PSEG Energy Holdings These projects will produce steady results for PSEG PSEG Solar Source EBITDA E = ESTIMATE. … A STABLE, LOW-RISK PORTFOLIO
Slide 52: Simplifying the business and creating growth in renewables
59 STREAMLINED BUSINESS AND REDUCED FINANCIAL RISK CAPITALIZE ON RENEWABLE OPPORTUNITIES MAXIMIZING THE VALUE OF THE REMAINING PORTFOLIO DEVELOP AND EXECUTE NEW BUSINESS OPPORTUNITIES PSEG Energy Holdings Simplifying the business and creating growth opportunities in renewables Operational Excellence
Slide 53: We make things work for you
& PSEG We make things work for you.
Slide 54: PSEG Power strategy
DISCIPLINED INVESTMENT ENGAGED WORKFORCE FINANCIAL STRENGTH OPERATIONAL EXCELLENCE 61 PSEG Power strategy Focused on safety performance, unit reliability, competitive cost structure with control of maintenance costs, achieving operational excellence, and supporting market rules to maintain a level p
Slide 55: PSEG Power delivered in 2012
63 • Superstorm Sandy impacted our generating sites • Warm winter put pressure on demand and pricing for both electricity and gas • Hot summer weather created challenging operating environment • Unit outages and transmission outages resulted in pressure on basis • Lower gas cost impacted dark spread
Slide 56: PSEG Power generating assets in three competitive markets
64 PSEG Power has generating assets in three competitive markets • Low cost portfolio • Fuel flexibility • Assets near loads • Poised to benefit in real time markets • Fleet will maintain diversity and efficiency in 2016 after HEDD • Most sites suitable for expansion ISO New England New Haven Bridge
Slide 57: Nuclear fleet is critical element of success
65 Hope Creek Salem Units 1 and 2 Peach Bottom Units 2 and 3 PSEG Power Nuclear fleet is a critical element of success • Operated by PSEG Nuclear • PSEG Ownership: 100% • Technology: Boiling Water Reactor • Total Capacity: 1,174 MW • Owned Capacity: 1,174 MW • License Expiration: 2046 • Next Refueli
Slide 58: Fossil fleet availability improvement
67 EFORp improvement and availability at peak demand times has resulted in performance payments in each of the last four years EFORd improvement resulted in over 200 MW of additional capacity available PSEG Power’s Fossil Fleet availability has shown steady improvement
Slide 59: Actions taken to create value
68 Actions Taken to Create Value PSEG Power improvements achieved in combined cycle fleet efficiency • Heat rate improvement program • Operational Excellence Model • Training programs • Unit testing initiative • Outage work to restore efficiency
Slide 60: Superstorm Sandy affected the fleet
69 Superstorm Sandy affected the fleet; when the load returned, Power was ready Planned Outages Salem 2 Bergen 1 Hudson 2 Storm Outages Salem 1 Linden CC Linden 5,6,7,8 Kearny 9,12,13,14 Essex 9,10,11,12 Sewaren 1,2,3,4 Salem 1 Linden 5,7 Kearny 13,14 Linden 6,8 Bergen 1 Salem 2 Kearny 12 All PSEG N
Slide 61: Fleet among the lowest emitting in the industry
70 PSEG Power’s fleet is among the lowest emitting in the industry • Mercury reduced 80% across the timeframe above • Power is well positioned for HAPS 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 10,000 20,000 30,000 40,000 50,000 60,000 70,000 2006 2007 2008 2009 2010 2011 2012 G
Slide 62: Cost control actions taken
71 Cost control actions taken : PSEG Power’s focus on costs has resulted in moderate increase in O&M for six years 2008 to 2013 CAGR = 1.9% Power O&M Expense* * INCLUDES IMPACTS FROM STORM RECOVERY COSTS AND POTENTIAL RELATED INSURANCE PROCEEDS. E = ESTIMATE. • Coal assessment • CCGT material condit
Slide 63: Well positioned for growth in the fleet
72 Available locations Our sites possess infrastructure advantages PSEG Power is well positioned for growth in the fleet when market conditions dictate • Bergen • Burlington • Essex • Edison • Kearny • Hudson • Linden • Sewaren • Bridgeport Harbor • Electric Interconnection • Gas Pipeline Access • S
Slide 64: Maintain diversity and efficiency after 2016 fleet realignment
73 PSEG Power will maintain diversity and efficiency after a realignment of the fleet in 2016 13,226 MW 11,200 MW Fuel Diversity 52.5 TWh 52-54 TWh Energy Produced E Other E=ESTIMATE Oil CCGT Pumped Storage HEDD Other gas Peakers Coal Nuclear CCGT Peakers Coal Nuclear 2012 2016E 2012 2016 Objective
Slide 65: Added value with focus on operational excellence
75 2008 2012 PSEG Power has added value with focus on operational excellence * EXCLUDES SANDY IMPACT. 3,622 Nuclear capacity (MW) 3,632 92% Nuclear equivalent availability 93% 29.3 Nuclear generation (TWhrs) 29.8 Total generation (TWhrs) 3,157 CCGT capacity (MW) 3,176 12.1 CCGT generation (TWhrs) 16
Slide 66: We make things work for you
& PSEG We make things work for you.
Slide 67: PSEG Power ER&T strategy
DIVERSIFIED ASSETS AND FLEXIBLE DISPATCH REGULATORY ADVOCACY MANAGING RISKS AND CREATING VALUE ENGAGED WORKFORCE 77 PSEG Power ER&T strategy Focused on optimizing the value of its asset portfolio and providing outstanding service to our customers, while prudently managing risk
Slide 68: Diversified assets and flexible dispatch
3,632 MW 776 MW 3,176 MW 5,642 MW Integrated trading and dispatch capability around fleet 78 High performing, base load nuclear assets Fuel advantaged, base load coal plants in PA Flexible combined cycle fleet Well leveraged intermediate & peaking assets Diversified assets and flexible dispatch
Slide 69: Fleet capacity advanced by
Reduced O&M and increased start-up success Trading acumen to execute fuel switching opportunities Capturing new products opportunity with minimal investment Improved Heat Rate capability 79 Fleet capacity has been advanced by:
Slide 70: Spark spread replaces dark spread as major value driver
80 Spark spread replaces dark spread as major value driver • Spark spread has risen above dark spread in PJM markets • Power’s gas units operating at record throughput • Gas operation provides much more operational flexibility • Enhances the ability of trading organization to capture volatility
Slide 71: 2013 BGS Auction Results for PSE&G Zone
81 $48 - $50 $45 - $47 $37 - $38 $56 - $58 $39 - $40 ~ $47 ~ $47 ~ $48 ~ $46 ~ $53 81 2013 BGS Auction Results for PSE&G Zone Capacity Load shape Transmission Congestion Ancillary services Risk premium Green BGS sales account for about a third of our forward portfolio of hedges 3 Year Average Round
Slide 72: Hedging mix has changed with the market
82 82 • 3 Year forward BGS sales comprise smaller percentage of Power’s hedges • Other full requirement load deals help capture additional locational and load shape premium NOTE: PERCENTAGES REPRESENT HEDGED VOLUMES IN PLACE AFTER BGS AUCTION. Our hedging mix has changed with the market but still ca
Slide 73: Hedging strategy designed to protect gross margin
83 Hedging strategy designed to protect gross margin and leverage the portfolio HEDGE PERCENTAGES AND PRICES AS OF JUNE 28, 2013. REVENUES OF FULL REQUIREMENT LOAD DEALS BASED ON CONTRACT PRICE, INCLUDING RENEWABLE ENERGY CREDITS, ANCILLARY, AND TRANSMISSION COMPONENTS BUT EXCLUDING CAPACITY. HEDGES
Slide 74: PSEG's locational advantage and electric basis
84 PS Zone On Peak Monthly Day Ahead Basis to PJM West Hub* New Haven Current plant locations Bridgeport Bethlehem Energy Center (Albany) Conemaugh Keystone Peach Bottom Bergen Kearny Essex Sewaren Edison Linden Mercer Burlington National Park Hudson Hope Creek Salem Yards Creek • Basis (PS Zone to
Slide 75: PSEG's locational advantage and gas basis
85 • Lower cost supplies of shale gas have been beneficial to both PSE&G customers and PSEG Power • Over 50% of our available pipeline capacity can access market area supplies of shale gas • Power’s generating units sit in close proximity to the Marcellus fairway • Power buys approximately 350BCF/ye
Slide 76: PJM capacity market recognizes locational value
86 $/MW-Day 2012 / 2013 2013 / 2014 2014 / 2015 2015 / 2016 2016 / 2017 PJM’s capacity market continues to recognize locational value of our fleet *PSEG Power’s cleared megawatts split between PS Zone and EMAAC. Power’s Average Price PS Zone EMAAC RTO Power’s Capacity (MW) $153 $140 $16 10,400 $244
Slide 77: Reserve margins in PJM declining with retirements
Generation Deactivation Notifications Forecast Reserve Margin (PJM January 2013) 87 Reserve margins in PJM declining with retirements Source: PJM TEAC, 1/10/2013 • PJM Pending Deactivation Requests of 12,634 MW as of January 22, 2013 • Approximately 4,000 MW of additional owner announced retirements
Slide 78: Regulatory Advocacy
88 ISSUE /POLICY HOW ADDRESSED? Regulatory Advocacy Current Issues • PJM RPM rules for Capacity Markets • PJM Energy/Ancillary Services Market • New England Capacity Markets • New York Energy Markets • Trade Associations and ISO/RTO activities Recent Rulings • FERC approval of Cost of New Entry (CON
Slide 79: PSEG wholesale market strategy
Diversified Assets & Flexible Dispatch Regulatory Advocacy Managing Risks & Creating Value Managing Risks & Creating Value Consistent hedging strategy • Full load requirements • Capacity sales •Monetize optionality Diversified Assets & Flexible Dispatch Strong operational performance Fuel switching
Slide 80: PSEG Financial Review & Outlook
PSEG FINANCIAL REVIEW & OUTLOOK
Slide 81: Strong financial position
91 Financial Position Strong financial position to support our business initiatives Achieved Earnings Guidance Stable Dividend and Opportunity for Growth Strong Balance Sheet Regulated Growth Opportunity without Equity Issuance Solid Credit Ratings O&M Controlled Well Funded Pension
Slide 82: Maintaining 2013 operating earnings guidance
92 PSEG Operating Earnings $2.25 - $2.50 2013 Earnings Guidance Maintaining 2013 operating earnings guidance E = ESTIMATE *SEE SLIDE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/NET INCOME TO RECONCILE TO OPERATING EARNINGS. Based on our performance year-to-date, we expect full year o
Slide 83: PSE&G expected to represent 50% of 2013 operating earnings
93 PSE&G is expected to represent 50% of 2013 operating earnings PSE&G Power & Other E = ESTIMATE SEE SLIDE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/NET INCOME TO RECONCILE TO OPERATING EARNINGS. Business Mix of Operating Earnings
Slide 84: 2012 Sources and Uses
94 Power Cash from Ops PSE&G Cash from Ops (1) PSE&G Capital Investment Power Capital Investment Cash Shareholder Dividend Net Debt Issuances In 2012, PSE&G executed its capital program, Power generated significant free cash flow and PSEG increased its shareholder dividend Other Net Cash Flow (1) PS
Slide 85: Capital investment options up to $5.4B utility growth
95 PSE&G Growth ~$4.2B PSE&G Maintenance Power & Other EMP ~$0.1B New Transmission ~$0.2B New Distribution ~$1B Our capital investment options can result in as much as $5.4B of utility growth investment through 2015 ~$6.2B ~$6.3B ~$6.5B ~$7.5B PSE&G Growth $5.4B DATA AS OF JUNE 30, 2013. EMP: ENERGY
Slide 86: All scenarios can be financed without new equity
96 Power Cash from Ops PSE&G Cash from Ops (1) PSE&G Capital Investment Power Capital Investment Shareholder Dividend Net Debt Issuances Power Cash from Ops PSE&G Cash from Ops (1) PSE&G Capital Investment Power Capital Investment Shareholder Dividend Net Debt Issuances All scenarios can be financed
Slide 87: Capital spending drives regulated earnings growth
97 ~$2.4B New Transmission ~$0.2B New Distribution ~$1B PSE&G’s capital spending drives regulated earnings growth with a potential future rate base of up to ~$12.6B 2013 – 2015E Rate Base Growth 2015E Rate Base 3-yr CAGR: ~12% ~$11.6B ~$12.6B DATA AS OF JUNE 30, 2013. EMP: ENERGY MASTER PLAN E = EST
Slide 88: Power's credit metrics expected to remain strong
98 Power’s credit metrics are expected to remain strong Power FFO/Debt 2013 – 2015E Average E = ESTIMATE
Slide 89: Using PSEG's balance sheet strength to finance growth
99 Using PSEG’s balance sheet strength to finance growth in the regulated enterprise without equity issuance PSEG Total Capitalization 2012 2015E* * E = ESTIMATE; INCLUDES THE FOLLOWING PROPOSED FILINGS: EE4A, SL3, S4AE, ENERGY STRONG (ES) AND TRANSMISSION HARDENING.
Slide 90: Investment programs are affordable
100 PSE&G Securitization & NUG Impacts ($Millions) Typical Current Average Residential Customer Bill Impact Securitization ~6.6% Non-Utility Generation ~2.1% Our investment programs are affordable, helped by the expiration of known charges by 2017, which lower the average residential customer bill b
Slide 91: Modest O&M growth
101 Modest O&M growth with Power increases from CCGT maintenance cycles, due to high utilization rates (1) POWER EXCLUDES IMPACTS FROM STORM RECOVERY COSTS AND POTENTIAL RELATED INSURANCE PROCEEDS NM = NOT MATERIAL. E = ESTIMATE. PSEG O&M Expense (1) 2013-2015E CAGR: ~2.2% CAGR Transmission ~0.4% Di
Slide 92: Pension contributions expected to decline
102 Amended Benefit Plans 2010 2011 2012 2013E 2014E 2015E Pension contributions expected to decline with well funded plan Pension Plan Contributions E = ESTIMATE Funded Ratio 82% 84% 83% >85% >90% >90%
Slide 93: Long-term outlook influenced by hedge position and PSE&G investment
103 PSEG’s long-term outlook is influenced by Power’s hedge position and increased investment at PSE&G 2014E 2015E Each $1/mcf Change in Natural Gas Each $2/MWh Change in Spark Spread Each $2/MWh Change in Dark Spread Each 1% Change in Nuclear Capacity Factor Segment EPS Drivers Each $100 Million of
Slide 94: Opportunity for modest and sustainable dividend increases
104 PSE&G EPS Opportunity for modest and sustainable dividend increases consistent with stable regulated growth and cash generation outlook at PSEG Power $1.25 $1.14 Annual Dividend Per Share E = ESTIMATE
Slide 95: Appendix
APPENDIX
Slide 96: Second Quarter 2013 Operating Earnings by Subsidiary
107 Second Quarter 2013 Operating Earnings by Subsidiary *SEE PAGE B FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/NET INCOME TO RECONCILE TO OPERATING EARNINGS. Operating Earnings Earnings per Share $ millions (except EPS) 2013 2012 2013 2012 PSEG Power $ 114 $ 110 $ 0.22 $ 0.22 PSE&G 0
Slide 97: PSEG EPS Reconciliation – Q2 2013 versus Q2 2012
108 PSEG EPS Reconciliation – Q2 2013 versus Q2 2012 * SEE PAGE B FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/NET INCOME TO RECONCILE TO OPERATING EARNINGS.
Slide 98: PSE&G provides high reliability at below average cost
109 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.
Slide 99: PSE&G prioritizes public safety
110 PSE&G prioritizes public safety while maintaining value to customers LEAK RESPONSE RATE = PERCENTAGE OF UTILITY RESPONSES TO REPORTED LEAKS WITHIN ONE HOUR.
Slide 100: Formula rates for transmission
111 Formula rates for transmission make the process more predictable with contemporaneous returns
Slide 101: Slow economic recovery in NJ constraining growth
113 Slow economic recovery in NJ is constraining growth in all market sectors Modest residential growth limited by housing market inactivity and the slow economic recovery Consumer spending is trending with the slow economic recovery and impacting growth in the commercial sector Industrial sales gro
Slide 102: Key economic indicators forecast renewed growth
114 Key economic indicators forecast renewed growth over the 2012 to 2015 timeframe The New Jersey economy increased by 0.3% annually from 2010 to 2012 and is anticipated to grow 2.3% per year from 2012 to 2015 New Jersey total non-farm employment increased by 0.6% annually from 2010 to 2012 and is
Slide 103: Nuclear fuel needs hedged through 2015
115 Nuclear fuel needs have been hedged through 2015 $0 $5 $10 2013 2014 2015 Anticipated Nuclear Fuel Cost Hedged
Slide 104: Power's coal hedging
116 Station Coal Type Pricing ($/MWh) * Comments Power’s coal hedging reflects 2013 supply matched with 2013 sales… Contracted Coal Bridgeport Harbor Adaro Mid $50’s Higher price, lower BTU, enviro coal Hudson CAPP High $40’s Flexibility after BET in 2010 Mercer Metallurgical CAPP/NAPP Mid $40’s Mor
Slide 105: Full requirements BGS rate and PJM capacity price
117 The full requirements BGS rate recognizes the forward PJM capacity market price
Slide 106: PSEG Energy Holdings Investment Portfolio
118 PSEG Energy Holdings Investment Portfolio * BOOK BALANCE EXCLUDING DEFERRED TAX ACCOUNTS **EME AND ITS SUBSIDIARIES FILED CHAPTER 11 BANKRUPTCY ON 12/17/2012. LEASE REJECTION OR ACCEPTANCE DECISION IS PENDING.
Slide 107: PSEG Liquidity as of June 30, 2013
119 PSEG Liquidity as of June 30, 2013 Expiration Total Available Facility Date Facility Usage Liquidity ($Millions) 5-year Credit Facility (PSE&G) Mar-18 $600 $170 $430 5-Year Credit Facility (Power) Mar-17 1,600 1,546 5-Year Credit Facility (Power) Mar-18 1,000 1,000 5-Year Bilateral (Power) Sep-1
Slide 108: Capitalization
120 $Billions Capitalization Strong Balance Sheet supports our full capital program without the need for equity DEBT INCLUDES SHORT TERM DEBT (INCLUDING COMMERCIAL PAPER) AND EXCLUDES NON- RECOURSE AND SECURITIZATION DEBT Subsidiary Debt (1) 2010 2011 2012 PSE&G 4.28 4.27 5.06 PSEG Power 3.45 2.75 2
Slide 109: Items Excluded from Income to Reconcile to Operating Earnings
2012 2011 2010 2009 2008 Fully Diluted Average Shares Outstanding (in Millions) 507 507 507 507 508 For the Year Ended December 31, Pro-forma Adjustments, net of tax A Items Excluded from Income from Continuing Operations/Net Income to Reconcile to Operating Earnings Earnings Impact ($ Millions) Gai
Slide 110: Items Excluded from Income from Continuing Operations
B Items Excluded from Income from Continuing Operations/Net Income to Reconcile to 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 INCOME FROM CONTINUING OPERATIONS/NET INCOME. 2013 2012 2013 2012 Ear
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