Public Service Enterprise Group Incorporated · NYSE:PEG
Public Service Enterprise — Investor Day (2013)
137 slides from Public Service Enterprise's investor day presentation, 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. 1
Slide 2: Forward Looking Statement
Forward Looking Statement Readers are cautioned that statements contained in this presentation about our • any deterioration in our credit quality or the credit quality of our counterparties, future performance, including future revenues, earnings, strategies, prospects, including in our leveraged l
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 gains or losses associa
Slide 4: 2013 Conference Agenda
2013 Conference Agenda Presentation Presenter Welcome and Introductions Kathleen Lally PSEG Ralph Izzo PSE&G Ralph LaRossa PSEG Energy Holdings Randall Mehrberg Q&A Session Break PSEG Power William Levis Power ER&T Shahid Malik Q&A Session Financial Review & Outlook Caroline Dorsa Summary Ralph Izzo
Slide 5: PSEG Introduction & Overview - Ralph Izzo
PSEG INTRODUCTION & OVERVIEW Ralph Izzo CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
Slide 6: PSEG Strategy
PSEG Strategy Leveraging the strength of PSEG’s balance sheet to invest primarily in DISCIPLINED INVESTMENT our stable, regulated business in ways that meet customer ENGAGED WORKFORCE needs and state goals as we protect FINANCIAL OPERATIONAL the upside of the STRENGTH EXCELLENCE merchant business an
Slide 7: PSEG met 2012's challenges with our strong platform of assets
PSEG met 2012’s challenges with our strong platform of assets * Electric & Gas Delivery Regional Renewable and Transmission Wholesale Energy Investments PSE&G positioned PSEG Power’s PSEG Energy to meet NJ’s low-cost, base Holdings positioned energy policy and load and load to pursue attractive econ
Slide 8: PSEG – 2012 Highlights
PSEG – 2012 Highlights 2012 Earnings in-line with guidance • Achieved operating earnings of $2.44 per share, at the high end of guidance range of $2.25-$2.50, including storm-related costs at PSE&G • PSE&G represented 43% of consolidated operating earnings with growth in transmission Operational exc
Slide 9: 2013 Operating Earnings Guidance
2013 Operating Earnings Guidance * SEE PAGE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING 9 OPERATIONS TO RECONCILE TO OPERATING EARNINGS. E = ESTIMATE.
Slide 10: 2013 Operating Earnings
2013 Operating Earnings* Investment in the Percent of Operating Earnings Contribution by Subsidiary regulated business has changed the $3.09 $3.12 $2.74 $2.44 $2.25 -$2.50E earnings mix Other Our 2009-2013 61% 47% investment focus has 52% brought us to a 50/50 69% Power 76% mix for 2013 PSE&G’s 2013
Slide 11: PSEG Focus
PSEG Focus Operational excellence and disciplined investment helped offset the earnings impact of lower energy prices 2008 PSEG Focus 2012 ($ millions, except as noted) $2.91 Operating Earnings Per Share $2.44 $69.85 PJM West RTC ($/MWh) $33.88 • 2.4% (planned1) • O&M Growth per year • 0.8% (actual2
Slide 12: SuperStorm Sandy met by an exceptional response
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 Transmissi
Slide 13: PSEG Capital Spending focused on growth
PSEG Capital Spending focused on growth PSEG 2013-2015E Capital Spending* PSEG 2013-2015E Capital Spending* $6.1 Billion $6.1 Billion Growth / Environmental / Maintenance by Subsidiary $0.05B 1% $0.2B 4% $4.9B 81% $1.5B $4.0B 25% 65% $0.3B $1.0B 5% 16% $0.1B $0.05B 2% 1% PSE&G Growth Power Growth PS
Slide 14: What's Next: PSEG's Capital Spending expansion opportunity
What’s Next: PSEG’s Capital Spending expansion opportunity directed toward growth in regulated business with ~ 25% growth in planned spending Potential Potential PSEG 2013-2015E Capital Spending* PSEG 2013-2015E Capital Spending* $7.6 Billion $7.6 Billion Growth / Environmental / Maintenance by Subs
Slide 15: PSE&G's Energy Strong Capital Program addresses new reality
PSE&G’s Energy Strong Capital Program addresses new reality • New $3.9 Billion Infrastructure Program filed with the NJBPU to strengthen PSE&G’s electric and gas system focusing on hardening and resiliency • Plan to invest an additional $1.5 Billion in Transmission grid over the ten-year period • PS
Slide 16: PSEG Power value advantaged by asset diversity, fuel flexibility and location
PSEG Power value advantaged by asset diversity, fuel flexibility and location Fuel Diversity* Energy Produced* Energy Market Served* Total MW: 13,226 Total GWh: 52,511 Total MW: 13,226 8% 28% 57% 33% 25% 1% 45% 18% 11% 32% 42% Gas Nuclear Coal** Intermediate Pumped Oil Peaking Storage
Slide 17: Where we're going
Where we’re going PSEG Focus ($ millions, except as noted) 2008 2012 2015E • 2.4% (planned1) • 0.8% (actual2) • O&M Growth per year • 2.2% (forecast3) • $6,800 • $9,000 • PSE&G Rate Base • $12,600 • $866 • $2,500 Transmission • $5,0004 • $5,900 • $5,900 E&G Distribution • $6,9005 • $0 • $600 EMP • $
Slide 18: Balance Sheet Strengthened
Balance Sheet Strengthened PSEG has reduced risk PSEG Total Capitalization 2009 2012 Power Power 30% 57% 43% 70% Equity Debt Equity Debt 55% 45% 59% 41% 55% 45% 51% 49% PSE&G PSE&G 18
Slide 19: Using PSEG's balance sheet strength to finance growth
Using PSEG’s balance sheet strength to finance growth in the regulated enterprise without equity issuance PSEG Total Capitalization 2012 2015E* Debt 41% Debt Equity 44% Equity 56% 59% * E = ESTIMATE; INCLUDES THE FOLLOWING PROPOSED FILINGS: EE4A, SL3, S4AE, ENERGY STRONG (ES) AND 19 TRANSMISSION HAR
Slide 20: PSEG Annual Dividend
PSEG Annual Dividend A long history of growth and returning cash to shareholders PSEG Annual Dividend Rate $1.44** $1.42 $1.37 $1.37 5-year Rate of Growth 2.22% $1.33 10-year Rate of Growth $1.29 2.92% $1.17 $1.14 $1.12 $1.10 $1.08 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Payout Ratio
Slide 21: Value Proposition
Value Proposition PSEG is positioned to expand its investment in PSE&G projects that provide reasonable, risk adjusted returns, in ways that meet customer needs and state goals, given strong cash flow of Power and growing cash contribution from PSE&G. PSEG will maintain a strong financial profile th
Slide 22: PSE&G - Ralph LaRossa
PSE&G Ralph LaRossa PRESIDENT AND CHIEF O PER AT IN G O FFIC E R
Slide 23: PSE&G strategy
PSE&G strategy Building a sustainable DISCIPLINED platform that INVESTMENT balances reliability, ENGAGED WORKFORCE customer rates and public FINANCIAL OPERATIONAL policy to ensure STRENGTH EXCELLENCE growth at reasonable returns 23
Slide 24: PSE&G is the largest electric and gas utility in New Jersey
PSE&G is the largest electric and gas distribution and transmission utility company in New Jersey Electric Gas Customers 2.2 Million 1.8 Million Growth (2008 – 2012) 0.6% 0.6% 3,397 M Electric Sales and Gas Sold and Transported 41,641 GWh Therms Projected Annual Load Growth (2013 – 2015) 0.7%* 0.2%*
Slide 25: National reliability award winner
National reliability award winner and recognized for emergency response during Hurricane Irene 25
Slide 26: During SuperStorm Sandy
During SuperStorm Sandy strong winds, heavy rainfall and storm surges caused significant damage to our infrastructure 26
Slide 27: PSE&G brought in more than 4,000 contractors and mutual aid workers
PSE&G brought in more than 4,000 contractors and mutual aid workers at the height of restoration efforts 27
Slide 28: PSE&G's response to customer outages
PSE&G’s response Restoration response incorporated lessons learned from to customer Hurricane Irene outages Cumulative Customers Restored during recent major events 28
Slide 29: PSE&G's operating earnings grew ~10%
PSE&G’s operating earnings grew ~10%* with increased investment, cost control and supportive rate mechanisms PSE&G Operating Earnings per Share $1.03 $1.04 $0.85 $0.71 $0.63 2008 2009 2010 2011 2012 * COMPOUND ANNUAL GROWTH RATE SEE SLIDE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS T
Slide 30: PSE&G's rate base has grown ~7%
PSE&G’s PSE&G Rate Base rate base $9.0B has grown ~7% 6% Renewables & Energy annualized with a $6.8B 13% 28% Solutions Transmission focus on meeting 33% 25% the State’s goals Gas Distribution and customers’ 54% 41% Electric needs Distribution 2008 2012 Growth in rate base is driven by investments wi
Slide 31: Transmission has delivered on planned spending
Overall, PSE&G’s Transmission Capital Expenditures Transmission 1,200 has 1,000 delivered 800 ($ Millions) on planned 600 spending 400 200 0 2009 2009 2010 2010 2011 2011 2012 2012 Plan Actual Plan Actual Plan Actual Plan Actual Remaining Transmission Susquehanna-Roseland North East Grid North Centr
Slide 32: Providing solutions for New Jersey's energy and economic development goals
Providing Forecast Spending Remaining solutions for Approval ($ Millions) Date Amount* Thru 2012 Spending Renewables New Jersey’s Solar Loan I & II April 2008/ November 2009 $243 $209 34 energy and Solar 4 All July 2009 456 437 19 economic Energy Efficiency December Carbon Abatement 45 45 - 2008 dev
Slide 33: Focus on controlling O&M allows us to earn our authorized return
Focus on controlling O&M allows us to earn our authorized return PSE&G O&M* 2008 – 2013 CAGR: 1.4% 1,200 1,000 800 ($ Millions) 600 400 200 0 2008 2009 2010 2011 2012 ** 2013E * EXCLUDES REGULATORY CLAUSES ** INCLUDES $40M IMPACT FROM SUPERSTORM SANDY IN 2012 E = ESTIMATE 33
Slide 34: PSE&G's capital program focused on New Jersey public policy
PSE&G’s capital program will continue to be focused on delivering energy solutions to meet New Jersey’s public policy PSE&G’s Capital Expenditures 2,500 2,000 1,500 ($ Millions) 1,000 500 0 2009 2010 2011 2012 2013E 2014E 2015E 2016E 2017E Transmission Hardening Proposed Filings* Approved Solar/Ener
Slide 35: 2013-2017 proposed investment plan
2013-2017 proposed investment plan would grow our current capital plan by up to 50% 2013-2017E Capital Expenditures Existing Plan Existing Plan and Proposed Filings $6.9 Billion $10.6 Billion 1% 8% 6% 22% 64% 34% 21% 42% 2% Distribution Distribution ES Filing * Transmission Transmission Hardening* A
Slide 36: Proposed investments recovered through contemporaneous mechanisms
PSE&G’s proposed investments would be recovered through contemporaneous recovery mechanisms 2013-2017E Capital Spending by Recovery Method $10.6 Billion Contemporaneous Recovery Mechanisms Energy Strong Filing (ES) 22% 21% Solar/Energy Efficiency Clauses 10% FERC Formula Rates Traditional Recovery M
Slide 37: Existing major transmission investment program on schedule and budget
PSE&G’s existing major transmission investment program remains on schedule and on budget Major Transmission Projects 100% Total Inclusion Recovery Expected Approved Estimated of CWIP in of Costs In-service ROE Project Rate Base Due to Date Costs Abandonment June 2014 / Susquehanna-Roseland 12.93%
Slide 38: Susquehanna-Roseland
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 Project Through Expected Estimate 2013-2015E Year-end 2012 In-service Date Up To* June 2014 / June $790M $324M $466M 2015 • PJM RTEP project b
Slide 39: Northeast Grid Reliability
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 stations to 230kV operation Project Through Year- Expected Estimate Up 2013-2015E end 20
Slide 40: North Central Reliability
North Central Reliability consists of upgrading 55 circuit miles of 138kV transmission line to 230kV, and converting six existing stations to 230kV operation Project Through Year- Expected 2013-2015E Estimate Up To end 2012 In-service Date $390M $163M $227M June 2014 • PJM RTEP project b1154 • ROE o
Slide 41: Burlington-Camden 230kV
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 Project Through Expected 2013- Estimate Year-end In-service 2014E Up To 2012 Date June $399M $16
Slide 42: Mickleton-Gloucester-Camden 230kV
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/upgrades at five existing stations Project Through Year- Expected 2013-2015E Estimate Up
Slide 43: State policy imperatives redefined by SuperStorm Sandy
State policy imperatives have been redefined by SuperStorm Sandy Storm report issued by NJBPU general authority to defer storm focusing on: restoration costs, thereby making • Preparedness Efforts such costs potentially recoverable • Communications in future rate filings • Restoration and Response •
Slide 44: Plan focused on infrastructure hardening and resiliency
We have also responded with a plan focused on infrastructure hardening and resiliency • PSE&G filed a petition on February 20, • ES program represents a potential 2013, with the NJBPU seeking investment of approximately $3.9 approval for the Energy Strong billion over the next 10 years. PSE&G Progra
Slide 45: Continuing to provide solutions for NJ EMP goals
PSE&G is continuing to provide solutions to assist New Jersey in achieving its EMP goals Solar 4 All extension (S4Ae)* • The program will assist the state in • Filed July 2012 meeting its solar policy objective by • Investment up to $690 million and providing loans to solar developers 136 MW and gen
Slide 46: Lower commodity costs offset impact to customer bills
Lower commodity costs and expiration of certain transition charges are expected to fully offset the impact to customer bills Typical Residential Annual Bill $4,000 $3,500 $3,000 ES $2,500 EE4All $2,000 S4AExt/SL3 Gas $1,500 Electric $1,000 CPI $500 $0 2008 2013 2018* *2018 BGS/BGSS RATES AS WELL AS
Slide 47: PSE&G's 2013 operating earnings
PSE&G’s 2013 operating earnings is benefiting from transmission growth and cost containment initiatives PSE&G Operating Earnings* ($ Millions) $580 - $635E $528 2012 2013 Guidance *SEE SLIDE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING E= ESTIMATE OPERATIONS TO RECONCILE TO OPERATING EARNINGS. 4
Slide 48: Long Island Power Authority
Long Island Power Authority 48
Slide 49: LIPA T&D management contract
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 starting in 2014 • Reasons for selecting PSEG included: • Proven technical capabilities and track record of top quartile custom
Slide 50: PSEG Energy Holdings - Randall Mehrberg
PSEG ENERGY HOLDINGS Randall Mehrberg EXECUTIVE VICE PRESIDENT ST R AT E GY A N D D E V E LO PM E N T PRESIDENT PSEG ENERGY HOLDINGS
Slide 51: PSEG Energy Holdings strategy
PSEG Energy Holdings strategy STREAMLINED BUSINESS Holdings’ priorities AND REDUCED are to manage FINANCIAL RISK lease risks, sell DEVELOP AND EXECUTE remaining non- NEW BUSINESS OPPORTUNITIES core assets and CAPITALIZE ON grow the MAXIMIZING THE VALUE OF RENEWABLE renewables THE REMAINING OPPORTUNI
Slide 52: Energy Holdings has monetized the majority of its legacy assets
PSEG Energy Holdings has monetized the majority of its legacy assets, eliminated all Holdings debt, and returned cash to PSEG Holdings Investment Portfolio $4.9B LILO/SILO Leases LILO/SILO Lease $M Terminations Solar Source $ 159 ~$1.2B Merchant Energy Leases International & GenOn (REMA)/NRG $ 3
Slide 53: PSEG Energy Holdings
PSEG Energy Holdings Legacy Generation Assets Merchant Energy Leveraged Leases Reducing Risk and Monetizing Legacy Assets Regulated Energy Leveraged Leases Real Estate Leveraged and Operating Leases Growth in PSEG Solar Source unregulated renewables Growth by PSEG Long Island leveraging knowledge …M
Slide 54: PSEG Solar Source has completed 69 MW
PSEG Solar Source has completed 69 MW and has an additional 19 MW under construction Hackettstown (Mars) JEA New Jersey (2 MW) Florida (15 MW) COD September 2009 COD September 2010 Thin film panels – fixed tilt Thin film panels – fixed tilt Investment $13 million Investment $59 million 15 year PPA w
Slide 55: Solar Source EBITDA
PSEG Energy Holdings These projects will produce steady results for PSEG PSEG Solar Source EBITDA 15 12 ($ Millions) 9 6 3 0 2010 2011 2012 2013 E E = ESTIMATE.. … A STABLE, LOW-RISK PORTFOLIO 55
Slide 56: PSEG Energy Holdings
PSEG Energy Holdings Simplifying the business and creating growth opportunities in STREAMLINED renewables BUSINESS AND REDUCED FINANCIAL RISK Operational Excellence DEVELOP AND EXECUTE Financial Strength NEW BUSINESS Disciplined Investment OPPORTUNITIES MAXIMIZING CAPITALIZE ON THE VALUE OF RENEWABL
Slide 57: PSEG Power - William Levis
PSEG POWER William Levis PR E S ID E N T & C HIE F O PE R AT IN G OFFICER, PSEG POWER
Slide 58: PSEG Power strategy
PSEG Power strategy Focused on safety performance, unit DISCIPLINED reliability, competitive INVESTMENT cost structure with control of ENGAGED maintenance costs, WORKFORCE achieving operational FINANCIAL OPERATIONAL excellence, and STRENGTH EXCELLENCE supporting market rules to maintain a level play
Slide 59: PSEG Power creating value by responding to changing markets
PSEG Power creating value by responding to changing markets and regulations Safety/Environmental Focus capacity in 2012 Fleet Diversity/Efficiency Focus Financial/Economic Focus • Fleet diversity across the dispatch • O&M cost control programs have curve and fuel types provides flexibility delivered
Slide 60: PSEG Power delivered in 2012
PSEG Power delivered in 2012 Storm and Market Value weather challenges challenges delivered • SuperStorm Sandy • Unit outages and • Cost control impacted transmission • Lower dispatch and fuel cost our generating sites outages resulted in pressure on basis • Captured value through coal/gas • Warm wi
Slide 61: PSEG Power has generating assets in three competitive markets
PSEG Power has generating assets in three competitive markets • Low cost portfolio • Fuel flexibility • Assets near loads ISO New York ISO New • Poised to benefit in real England time markets Bethlehem Energy Center (Albany) • Fleet will maintain Bridgeport diversity and efficiency in New Haven 2016
Slide 62: Nuclear fleet is a critical element of success
PSEG Power Nuclear fleet is a critical element of success Salem Peach Bottom Hope Creek Units 1 and 2 Units 2 and 3 • Operated by PSEG Nuclear • Operated by PSEG Nuclear • Operated by Exelon • PSEG Ownership: 100% • PSEG Ownership: 57%, • PSEG Ownership: 50% • Technology: Boiling Water Exelon – 43%
Slide 63: Nuclear is core to the fleet with competitive advantages
PSEG Power Nuclear is core to the fleet and has competitive advantages • Continued strong nuclear operations – • Developing Fukushima action plan eight consecutive years of >90% in response to NRC staff review capacity factor • Peach Bottom extended power uprate, • Significant earnings contributor 1
Slide 64: Fossil Fleet availability has shown steady improvement
PSEG Power’s EFORd EFORd Fossil Fleet improvement resulted in over 10% 9% availability has 200 MW of additional 8% shown capacity available 7% steady 6% 5% improvement 2008 2009 2010 2011 2012 EFORp EFORp 4% improvement and availability 3% at peak demand times has 2% resulted in performance 1% payme
Slide 65: Combined cycle fleet efficiency improvements
PSEG Power improvements achieved in Combined Cycle Operating Heat Rate 7,800 combined cycle 7,700 fleet efficiency BTU/KWh 7,600 7,500 7,400 2008 2009 2010 2011 2012 Actions Taken to Create Value • Heat rate improvement • Training programs program • Unit testing initiative • Operational Excellence •
Slide 66: SuperStorm Sandy affected the fleet
SuperStorm Sandy affected the fleet; when the load returned, Power was ready SuperStorm 15 Sandy All PSEG NJ Planned Storm Generation Outages Outages Salem 1 Megawatts (000’s) Salem 2 Linden CC 10 Bergen 1 Linden CC Hudson 2 Hudson 2 Linden 5,6,7,8 Linden 6,8 Essex 9,10 Kearny Bergen 1 Kearny 12 9,1
Slide 67: Fleet among the lowest emitting in the industry
PSEG Power’s fleet is among the lowest emitting in the industry 70,000 90,000 80,000 60,000 70,000 50,000 60,000 GWh 50,000 Tons 40,000 40,000 30,000 30,000 20,000 20,000 10,000 10,000 0 2006 2007 2008 2009 2010 2011 2012 Generation SO2 SO2 NOx • Mercury reduced 80% across the timeframe above • Powe
Slide 68: Power's focus on costs and O&M
PSEG Power’s Power O&M Expense* focus on costs $1,500 2008 to 2013 CAGR = 1.9% has resulted in $1,000 moderate $Millions increase in O&M $500 for six years $0 2008 2009 2010 2011 2012 2013E Cost control actions taken: • Coal assessment • Material management • CCGT material condition assessment • Nuc
Slide 69: Well positioned for growth in the fleet
PSEG Power is well positioned for growth in the fleet when market conditions dictate Available locations Our sites possess infrastructure advantages • Bergen • Hudson • Electric Interconnection • Burlington • Linden • Gas Pipeline Access • Essex • Sewaren • Sites/Space • Edison • Bridgeport • Emissi
Slide 70: Maintain diversity and efficiency after 2016 realignment
PSEG Power will maintain diversity and efficiency after a realignment of the fleet in 2016 Objective Fuel Diversity Energy Produced 2012 2016E 13,226 MW 11,200 MW 52.5 TWh 52-54 TWh • Maintain fuel diversity Oil53000 Other Oil Other gas • Maintain load serving Pumped CCGT storage capability 43000
Slide 71: Established leader within the industry
PSEG Power is an established leader within the industry INPO • Nuclear Strategic Issues Advisory • Board of Directors Committee Steering Group • National Nuclear Accrediting Board EPRI NEI • Chairman Nuclear Power Counsel • Chair Communications Advisory • Executive Committee Nuclear Power Committee
Slide 72: Added value with focus on operational excellence
PSEG Power has added value with focus on operational excellence 2008 2012 3,622 Nuclear capacity (MW) 3,632 • 3,622 • Nuclear capacity (MW) 92% Nuclear equivalent • Nuclear availability equivalent availability 93% • 92% •29.3 29.3 • Nuclear Nuclear generation(TWhrs) generation (TWhrs) 29.8 • 55 • To
Slide 73: PSEG Power ER&T - Shahid Malik
PSEG POWER ER&T Shahid Malik PRESIDENT ENERGY RESOURCES AND TRADE
Slide 74: ER&T strategy
PSEG Power ER&T strategy Focused on DIVERSIFIED ASSETS AND optimizing the value FLEXIBLE DISPATCH of its asset portfolio and providing outstanding service to our customers, MANAGING REGULATORY while prudently RISKS AND ADVOCACY managing risk CREATING VALUE 74
Slide 75: Agenda
Agenda Diversified Assets & Flexible Dispatch Managing Risks & Creating Value Regulatory Advocacy 75
Slide 76: PSEG wholesale market strategy
PSEG wholesale market strategy built on a strong asset portfolio Managing Risks & Creating Value Consistent hedging strategy • Full load requirements • Capacity sales •Monetize optionality Managing Diversified Assets & Risks & Regulatory Advocacy Flexible Dispatch Creating Value Supports competitive
Slide 77: Diversified assets and flexible dispatch
Diversified assets and flexible dispatch High performing, baseload nuclear assets 3,632 MW Fuel advantaged, baseload coal plants in PA 776 MW Flexible combined cycle fleet 3,176 MW Well leveraged intermediate & peaking assets 5,642 MW Integrated trading and dispatch capability around fleet 77
Slide 78: Fleet capacity has been advanced by
Fleet capacity has been advanced by: Improved Heat Rate capability Trading acumen to execute fuel switching opportunities Reduced O&M and increased start-up success Capturing new products opportunity with minimal investment 78
Slide 79: Spark spread replaces dark spread as major value driver
Spark spread replaces dark spread as major value driver PSEG Power Natural Gas Actual Monthly On Peak Spreads Use for Electric Generation PS Zone vs M3/CAPP 900 60 800 55 700 50 mmdth/day 45 600 40 35 500 $/MWh 30 25 400 20 15 300 10 200 5 0 100 -5Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 -10 - -15
Slide 80: Agenda
Agenda Diversified Assets & Flexible Dispatch Managing Risks & Creating Value Regulatory Advocacy 80
Slide 81: 2013 BGS Auction Results for PSE&G Zone
2013 BGS Auction Results for PSE&G Zone $103.72 Capacity $95.77 Load shape $94.30 $92.18 Transmission $83.88 ~ $53 Congestion ~ $47 Ancillary ~ $53 services ~ $47 ~ $48 Risk premium ~ $46 Green $56 3 Year Average $56 - $48 -$58 $45 Round the Clock $48- $58 $45- $37 $39 PJM West -$50 -
Slide 82: Hedging mix has changed with the market
Our hedging mix has changed with the market but still captures the fleet’s locational advantage 2008 2010 2012 44% 35% 50% 50% 52% 57% 8% 4% BGSSales BGS SalestotoNJ NJEDC's OtherFull Other LoadLoad OtherHedges Other Hedges EDCs • 3 Year forward BGS sales comprise smaller percentage of Power’s hedge
Slide 83: Hedging strategy designed to protect gross margin
Hedging strategy designed to protect gross margin and leverage the portfolio Ratable Hedging on Baseload: 2013 2014 2015 • 3 year ratable hedge tactics • 3 year PJM hedge of capacity Volume TWh 35 35 35 (not included in table) Baseload • Load following sales (such as (Nuclear and % Hedged 100% 80-85
Slide 84: PSEG's locational advantage and electric basis
PSEG’s locational advantage and electric basis Current plant PS Zone On Peak Monthly Day Ahead Basis to PJM West Hub* locations 30 Bethlehem Energy Center (Albany) 25 Bridgeport 20 New Haven $/MWH 15 10 Hudson Yards Creek 5 Keystone Bergen Kearny 0 Mercer Essex Jun-00 Dec-02 Jun-05 Dec-07 Jun-10 Dec
Slide 85: PSEG's locational advantage and gas basis
PSEG’s locational advantage and gas basis • Lower cost supplies of shale gas have been beneficial to both PSE&G customers and PSEG Power • Over 50% of our available Albany pipeline capacity can access market area supplies of shale gas • Power’s generating units sit Shale Supply 0.6 BCF/D in close pr
Slide 86: PJM's capacity market recognizes locational value
PJM’s capacity market continues to recognize locational value of our fleet $/MW-day 2012 / 2013 2013 / 2014 2014 / 2015 2015 / 2016 Power’s $153 $244 $162 $167 Average Prices Rest of Pool $16 $28 $126 $136 Prices Power’s Capacity (MW) 10,400 10,600 10,300 9,000 2016/2017 RPM Auction Influenced By: •
Slide 87: Reserve margins in PJM declining with retirements
Reserve margins in PJM declining with retirements Generation Deactivation Notifications Forecast Reserve Margin (PJM January 2013) 30% 25% 20% Reserve Margin 15% 10% 5% Source: PJM TEAC, 1/10/2013 0% 6/1/13 6/1/14 6/1/15 6/1/16 6/1/17 • PJM Pending Deactivation Requests of 12,634 MW as of January 22
Slide 88: Agenda
Agenda Diversified Assets & Flexible Dispatch Managing Risks & Creating Value Regulatory Advocacy 88
Slide 89: Regulatory Advocacy
Regulatory Advocacy ISSUE /POLICY HOW ADDRESSED? MOPR Sufficiency/Exceptions before FERC and courts Performance/eligibility/compensation issues before courts, FERC, and PJM PJM DEMAND RESPONSE RULES stakeholder process Regulation/Black-start modifications under consideration in PJM stakeholder ANCIL
Slide 90: PSEG wholesale market strategy
PSEG wholesale market strategy built on a strong asset portfolio Managing Risks & Creating Value Consistent hedging strategy • Full load requirements • Capacity sales •Monetize optionality Managing Diversified Assets & Risks & Regulatory Advocacy Flexible Dispatch Creating Value Supports competitive
Slide 91: PSEG Financial Review & Outlook - Caroline Dorsa
PSEG FINANCIAL REVIEW & OUTLOOK Caroline Dorsa EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
Slide 92: Strong financial position to support our business initiatives
Strong financial position to support our business initiatives Financial Position 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 92
Slide 93: 2013 guidance in same range as 2012
2013 guidance in same range as 2012 PSEG Operating Earnings $ Millions (except EPS) 2013E PSEG Power $535 - $600 PSE&G $580 - $635 PSEG Energy Holdings/Parent $25 - $35 Operating Earnings* $1,140 - $1,270 2013 Earnings Guidance $2.25 - $2.50 *SEE SLIDE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUIN
Slide 94: PSE&G expected to represent 50% of 2013 operating earnings
PSE&G is expected to represent 50% of 2013 operating earnings Business Mix of Operating Earnings Power 73% 62% 57% ~50% & Other PSE&G 27% 38% 43% ~50% 2010 2011 2012 2013E SEE SLIDE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS TO 94 RECONCILE TO OPERATING EARNINGS. E = ESTIMATE
Slide 95: 2012 sources and uses
In 2012, PSE&G executed its capital program, Power generated significant free cash flow and PSEG increased its shareholder dividend 2012 Sources and Uses $3.0 Cash Shareholder Dividend Net Debt Issuances Other Net ($Billions) Cash $2.0 PSE&G Flow Cash PSE&G from Ops (1) Capital Investment $1.0 Power
Slide 96: Capital investment options through 2015
Our capital investment options can result in as much as $5.6B of utility growth investment through 2015 2013 – 2015E Capital Investment Approved Programs Potential Opportunities ~$7.6B New Distribution ~$6.4B New ~$6.6B ~$1B Transmission ~$6B EMP ~$0.2B ~$0.4B PSE&G PSE&G Growth Growth ~$4B $5.6B PS
Slide 97: All scenarios can be financed without new equity
All scenarios can be financed without new equity Approved Programs plus EMP, New Approved Programs Transmission and New Distribution Net Debt Shareholder Issuances Dividend Net Debt Issuances Shareholder Other Other Dividend Net Net Cash Flow Cash Flow PSE&G PSE&G PSE&G Cash PSE&G Cash Capital from
Slide 98: Capital spending drives regulated earnings growth
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 Approved Programs Potential New Opportunities ~$12.6B New ~$11.4B New ~$11.6B Distribution ~$11.2B EMP Transmission ~$1B ~$0.2B ~$0.2B ~$2.2B ~$9B 2012 Rate Base
Slide 99: Power's credit metrics expected to remain strong
Power’s credit metrics are expected to remain strong Power FFO/Debt 80% 70% 60% 2013 – 2015E Average 50% 40% 30% 20% 10% 0% 2010 2011 2012 Approved Approved plus EMP, New Transmission and New Distribution E = ESTIMATE 99
Slide 100: Using PSEG's balance sheet strength to finance growth
Using PSEG’s balance sheet strength to finance growth in the regulated enterprise without equity issuance PSEG Total Capitalization 2012 2015E* Debt 41% Debt Equity 44% Equity 56% 59% * E = ESTIMATE; INCLUDES THE FOLLOWING PROPOSED FILINGS: EE4A, SL3, S4AE, ENERGY STRONG (ES) AND 100 TRANSMISSION HA
Slide 101: Investment programs are affordable
Our investment programs are affordable, helped by the expiration of known charges by 2017, which lower the average residential customer bill by ~ 8.7% based on today’s current bill PSE&G Securitization & NUG Impacts ($Millions) PSE&G Securitization Impacts 2013 2014 2015 2016 2017 Revenues 439 445 3
Slide 102: Modest O&M growth
Modest O&M growth with Power increases from CCGT maintenance cycles, due to high utilization rates PSEG O&M Expense(1) $2,500 2013-2015E CAGR: ~2.2% CAGR Transmission ~0.4% $2,000 Distribution $Millions $1,500 ~1.3% $1,000 Power ~2.9% $500 Holdings & $0 Other: N.M. 2013E 2014E 2015E (1) POWER EXCLUD
Slide 103: Pension contributions expected to decline
Pension contributions expected to decline with well funded plan $500 Pension Plan Contributions $400 Amended Benefit $ Millions $300 Plans $200 $100 $0 2010 2011 2012 2013E 2014E 2015E Funded Ratio 82% 84% 83% >85% >90% >90% E = ESTIMATE 103
Slide 104: Long-term outlook influenced by Power's hedge position and PSE&G investment
PSEG’s long-term outlook is influenced by Power’s hedge position and increased investment at PSE&G Segment EPS Drivers 2014E 2015E Each $1/mcf Change in Natural Gas $0.03 - $0.06 $0.10 - $0.13 Each $2/MWh Change in Spark Spread $0.04 $0.04 Each $2/MWh Change in Dark Spread $0.01 $0.01 Each 1% Change
Slide 105: Opportunity for modest and sustainable dividend increases
Opportunity for modest and sustainable dividend increases consistent with stable regulated growth and cash generation outlook at PSEG Power Annual Dividend Per Share $1.44 $1.42 $1.40 $1.37 $1.37 $1.33 PSE&G EPS $1.25 $1.20 ($/Share) $1.14 $1.00 $0.80 $0.60 2009 2010 2011 2012 2013E E = ESTIMATE 105
Slide 106: Summary
Summary • Operating Earnings Guidance for 2013 of $2.25 - $2.50 per share with earnings mix shifting to 50% regulated • Double digit operating earnings growth at PSE&G starting in 2013, and continuing through 2015 driven by transmission investments and approved programs • Power’s continued focus on
Slide 107: PSEG Executive Profiles
«> PSEG We make things work for you.
Slide 108: Ralph Izzo
Ralph Izzo CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED Ralph Izzo was elected chairman and chief executive officer of Public Science and Master of Science degrees in mechanical engineering and his Service Enterprise Group Incorporated (PSEG) in April
Slide 109: J. A. Bouknight, Jr. (Lon)
J. A. Bouknight, Jr. (Lon) EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL, PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED, PUBLIC SERVICE ELECTRIC AND GAS COMPANY, PSEG SERVICES CORPORATION, EXECUTIVE VICE PRESIDENT AND PSEG POWER J.A. Bouknight, Jr. (“Lon”) was named executive vice president and From 2
Slide 110: Caroline Dorsa
Caroline Dorsa EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, 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 Caroline Dorsa was named executive vice presi
Slide 111: Anne E. Hoskins
Anne E. Hoskins SENIOR VICE PRESIDENT – PUBLIC AFFAIRS & SUSTAINABILITY PSEG SERVICES CORPORATION Anne E. Hoskins serves as senior vice president – public affairs and Ms. Hoskins holds a Doctor of Law degree from Harvard Law School, a sustainability of PSEG Services Corporation. Ms. Hoskins has led
Slide 112: Thomas P. Joyce
Thomas P. Joyce PRESIDENT AND CHIEF NUCLEAR OFFICER PSEG NUCLEAR Thomas P. Joyce was named president and chief nuclear officer of PSEG Prior to coming to PSEG Mr. Joyce was site vice president at Exelon Nuclear (Nuclear), in October 2008. He had been senior vice president – Nuclear’s Braidwood Stati
Slide 113: Ralph LaRossa
Ralph LaRossa PRESIDENT AND CHIEF EXECUTIVE OFFICER PUBLIC SERVICE ELECTRIC AND GAS COMPANY Ralph A. LaRossa was named president and chief operating officer of Mr. LaRossa is a graduate of Stevens Institute of Technology and has Public Service Electric and Gas Company (PSE&G), in October 2006. Prior
Slide 114: William Levis
William Levis PRESIDENT & CHIEF OPERATING OFFICER PSEG POWER William Levis is president and chief operating officer of PSEG Power, a PSEG Energy Resources & Trade (ER&T) manages PSEG Power’s generation position he’s held since June 2007. PSEG Power is a major, unregulated portfolio and basic gas sup
Slide 115: Richard P. Lopriore
Richard P. Lopriore PRESIDENT PSEG FOSSIL Richard P. Lopriore was elected president of PSEG Fossil in May 2007. Mr. Lopriore has been a valuable part of the electric generation industry He oversees operations for 13 generation facilities spanning four states. for more than 40 years. Prior to joining
Slide 116: Shahid Malik
Shahid Malik PRESIDENT PSEG ENERGY RESOURCES & TRADE Shahid Malik was elected President of PSEG Energy Resources & Trade Mr. Malik’s career has included Executive Leadership positions with (ER&T) in December, 2011. PSEG operates one of the most balanced several energy companies including Entergy Cor
Slide 117: Randall Mehrberg
Randall Mehrberg EXECUTIVE VICE PRESIDENT STRATEGY AND DEVELOPMENT PRESIDENT PSEG ENERGY HOLDINGS Randall E. Mehrberg is president of PSEG Energy Holdings. PSEG Energy Mr. Mehrberg holds a Doctor of Law degree from the University of Holdings develops, manages and owns renewable energy solutions. Mic
Slide 118: Margaret M. Pego, SPHR
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 Ms. Pego is active in several local and national organizations; including and chief human resources officer of
Slide 119: PSE&G Appendix
PSE&G Appendix © PSEG
Slide 120: PSE&G provides high reliability at below average cost
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. 120
Slide 121: PSE&G prioritizes public safety
PSE&G prioritizes public safety while maintaining value to customers LEAK RESPONSE RATE = PERCENTAGE OF UTILITY RESPONSES TO REPORTED LEAKS WITHIN ONE HOUR. 121
Slide 122: Formula rates for transmission make the process more predictable
Formula rates for transmission make the process more predictable with contemporaneous returns Transmission (Federal) Distribution Base Rate Case (State) Current ROE • 11.68% base • 10.3% • 12.93% with incentives on Susquehanna-Roseland • 11.93% with incentives on Northeast Grid • Higher – performanc
Slide 123: New Jersey Board of Public Utilities (BPU)
New Jersey Board of Public Utilities (BPU) • The Board of Public Utilities consists of five commissioners appointed by the Governor. These appointees are confirmed by the NJ Senate for six-year, staggered terms. The Governor appoints one of the five to serve as Commission President. Currently, the c
Slide 124: Slow economic recovery in NJ constraining growth
Slow economic recovery in NJ is constraining growth in all market sectors 2013 - 2015 Projected Sales Modest residential growth limited Growth – Gas* by housing market inactivity and the slow economic recovery Consumer spending is trending with the slow economic recovery and impacting growth in the
Slide 125: Key economic indicators forecast renewed growth
Key economic indicators forecast renewed growth over the 2012 to 2015 timeframe The New Jersey economy increased by 0.3% NJ Real Gross State Product $480,000 (Millions) annually from 2010 to 2012 and is $460,000 $440,000 anticipated to grow 2.3% per year from $420,000 $400,000 2012 to 2015 2010 2012
Slide 126: PSEG Power Appendix
PSEG Power Appendix © PSEG
Slide 127: Nuclear fuel needs have been hedged through 2015
Nuclear fuel needs have been hedged through 2015 Anticipated Nuclear Fuel Cost $10 ($/MWh) $5 $0 2013 2014 2015 Hedged 127
Slide 128: Power's coal hedging reflects 2013 supply
Power’s coal hedging reflects 2013 supply matched with 2013 sales… Contracted Coal Pricing % Hedged (left scale) Station Coal Type ($/MWh) Comments 100% $50 * $/MWh Higher (right Bridgeport Mid $50’s price, lower Adaro 80% scale) $40 Harbor BTU, enviro coal High Flexibility 60% $30 (% Hedged) $40’s
Slide 129: Full requirements BGS rate recognizes forward PJM capacity price
The full requirements BGS rate recognizes the forward PJM capacity market price 129
Slide 130: PSEG Energy Holdings Appendix
PSEG Energy Holdings Appendix 130
Slide 131: PSEG Energy Holdings Investment Portfolio
PSEG Energy Holdings Investment Portfolio Investment Balance * at 12/31/12 Equipment ($millions) Solar Source Five Operating Solar Facilities : NJ, DE, OH, FL, AZ – 69 MW $159 Merchant Energy Leases GenOn (REMA) Keystone, Conemaugh & Shawville (PA) $341 3 coal-fired plants (1,162 equity MW) Edison M
Slide 132: PSEG Financial Appendix
PSEG Financial Appendix © PSEG
Slide 133: Delivered on 2012 earnings guidance
Delivered on 2012 earnings guidance PSEG Operating Earnings $ Millions (except EPS) 2012 PSEG Power $644 PSE&G $528 PSEG Energy Holdings/Parent $64 Operating Earnings* $1,236 Earnings per Share $2.44 2012 Earnings Guidance $2.25 - $2.50 *SEE SLIDE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPE
Slide 134: PSEG 2013 Operating Earnings Guidance - By Subsidiary
PSEG 2013 Operating Earnings Guidance - By Subsidiary $ millions (except EPS) 2013E 2012A PSE&G $580 – $635 $528 PSEG Power $535 – $600 $644 PSEG Energy Holdings/Enterprise $25 – $35 $64 Operating Earnings* $1,140 – $1,270 $ 1,236 Earnings per Share $ 2.25 – $ 2.50 $2.44 * SEE SLIDE A FOR ITEMS EXCL
Slide 135: Strong Balance Sheet supports full capital program without equity
Strong Balance Sheet supports our full capital program without the need for equity $Billions Capitalization Subsidiary Debt (1) 2010 2011 2012 PSE&G 4.28 4.27 5.06 PSEG Power 3.45 2.75 2.34 Parent & Other 0.08 0.04 0.04 Total PSEG Debt 7.81 7.06 7.44 Subsidiary Equity PSE&G 4.42 4.65 5.17 PSEG Power
Slide 136: PSEG Liquidity as of December 31, 2012
PSEG Liquidity as of December 31, 2012 136
Slide 137: Items Excluded from Income from Continuing Operations
Items Excluded from Income from Continuing Operations 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 NET INCOME. A 137
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