Attached files
| file | filename |
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| 8-K - FORM 8-K - PUBLIC SERVICE ELECTRIC & GAS CO | d253742d8k.htm |
 PSEG
Public Service Enterprise Group
2011 EEI Financial Conference
November 6-9, 2011
Exhibit 99 |
 2
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, consequences and all other statements that are not purely historical, are
forward-looking statements for purposes of the safe harbor provisions under The Private
Securities
Litigation
Reform
Act
of
1995.
When
used
herein,
the
words
“will”,
“anticipate”,
“intend”,
“estimate”,
“believe”,
“expect”,
“plan”,
“should”,
“hypothetical”,
“potential”,
“forecast”, “project”, variations of such words and similar
expressions are intended to identify forward-looking statements. Although we believe that our expectations are based on
reasonable assumptions, they are subject to risks and uncertainties and we can give no
assurance they will be achieved. The results or developments projected or predicted in
these
statements
may
differ
materially
from
what
may
actually
occur.
Factors
which
could
cause
results
or
events
to
differ
from
current
expectations
include,
but
are
not
limited
to:
•
adverse changes in energy industry law, policies and regulation, including market
structures and a potential shift away from competitive markets toward subsidized market mechanisms,
transmission
planning
and
cost
allocation
rules,
including
rules
regarding
how
transmission
is
planned
and
who
is
permitted
to
build
transmission
in
the
future,
and
reliability
standards,
•
any inability of our transmission and distribution businesses to obtain adequate and
timely rate relief and regulatory approvals from federal and state regulators,
•
changes in federal and state environmental regulations that could increase our costs
or limit our operations, •
changes in nuclear regulation and/or general developments in the nuclear power
industry, including various impacts from any accidents or incidents experienced at our facilities or by others in
the industry that could limit operations of our nuclear generating units,
•
actions
or
activities
at
one
of
our
nuclear
units
located
on
a
multi-unit
site
that
might
adversely
affect
our
ability
to
continue
to
operate
that
unit
or
other
units
located
at
the
same
site,
•
any inability to balance our energy obligations, available supply and trading
risks, •
any deterioration in our credit quality, or the credit quality of our counterparties,
including in our leveraged leases, •
availability of capital and credit at commercially reasonable terms and conditions and
our ability to meet cash needs, •
any
inability
to
realize
anticipated
tax
benefits
or
retain
tax
credits,
•
changes in the cost of, or interruption in the supply of, fuel and other commodities
necessary to the operation of our generating units, •
delays in receipt of necessary permits and approvals for our construction and
development activities, •
delays or unforeseen cost escalations in our construction and development
activities, •
adverse changes in the demand for or price of the capacity and energy that we sell
into wholesale electricity markets, •
increase in competition in energy markets in which we compete,
•
challenges associated with recruitment and/or retention of a qualified
workforce, •
adverse performance of our decommissioning and defined benefit plan trust fund
investments and changes in discount rates and funding requirements, and
•
changes in technology and customer usage patterns.
For further information, please refer to our Annual Report on Form 10-K, including
Item 1A. Risk Factors, and subsequent reports on Form 10-Q and Form 8-K filed with the
Securities and Exchange Commission. These documents address in further detail our
business, industry issues and other factors that could cause actual results to differ
materially from those indicated in this presentation. In addition, any
forward-looking statements included herein represent our estimates only as of today and should not be relied
upon as representing our estimates as of any subsequent date. While we may elect
to update forward-looking statements from time to time, we specifically disclaim any
obligation to do so, even if our internal estimates change, unless otherwise required
by applicable securities laws. |
 3
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 associated with Nuclear
Decommissioning Trust (NDT), Mark-to-Market (MTM) accounting, and other
material one-time items. PSEG presents Operating Earnings because
management believes that it is appropriate for investors to consider results
excluding these items in addition to the results reported in accordance with
GAAP. PSEG believes that the non-GAAP financial measure of Operating
Earnings provides a consistent and comparable measure of performance of its
businesses to help shareholders understand performance trends.
This
information is not
intended to be viewed as an alternative to GAAP information.
The last two slides in this presentation include a list of items
excluded from
Income from Continuing Operations to reconcile to Operating Earnings, with a
reference to that slide included on each of the slides where the
non-GAAP
information appears. |
 PSEG
–
Defining the Future
Ralph Izzo
Chairman, President and Chief Executive Officer
Caroline Dorsa
Executive Vice President and Chief Financial Officer |
 5
PSEG
Advantage:
Right
platform
to
deliver
value to customers and investors…
Electric & Gas Delivery
and Transmission
Regional Wholesale Energy
Renewable Investments
…with a track record for safeguarding shareholder interests.
$17.3B Market Cap*
$29.9B Assets**
*Market
capitalization
as
of
October
31,
2011;
asset
value
as
of
September
30,
2011.
PSE&G positioned
to meet NJ’s
energy policy and
economic growth
objectives
with a $5.2 billion
investment program
through 2013
PSEG Power’s
low-cost, base load
and load following fleet
is geographically well
positioned and
environmentally
responsible
PSEG Energy Holdings
positioned to pursue
attractive renewable
generation opportunities |
 6
PSEG Advantage: Asset mix, strong
operations…
Reliability One Award
winner for Mid-Atlantic
Region
–
9
year
in
a
row
Regulatory agreements
and cost control provide
opportunity for improved
returns
Investment program
focused on growth and
providing customers with
clean, reliable energy
PSEG Power
PSE&G
…with balance sheet to support growth.
Asset mix
Strong platform open to
improvement in the market
Well-run, low-cost
generating fleet combined
with fuel flexibility
supports margins
Hedging strategy mitigates
near-term risk
Major environmental
compliance capital
program completed
Actively working to defend
competitive power markets
Reducing risk
Building a platform for
renewables and investing
through PPA-supported
projects
International lease
investments terminated
Resources carefully
monitoring remaining
traditional leases and
other investments
PSEG Energy Holdings
th |
 7
Year to Date Operating Earnings –
by Subsidiary
Operating Earnings
Earnings per Share
$ millions (except EPS)
2011
2010
2011
2010
PSEG Power
$ 710
$ 879
$ 1.40
$ 1.73
PSE&G
422
347
0.83
0.69
PSEG Energy Holdings
6
43
0.01
0.09
Enterprise
14
12
0.03
0.02
Operating Earnings*
$ 1,152
$ 1,281
$ 2.27
$ 2.53
Nine months ended September 30
* See page 62 for Items excluded from Income from Continuing Operations to
reconcile to Operating Earnings. |
 8
$2.53
(0.33)
0.14
(0.08)
0.01
$2.27
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2.75
PSEG EPS Reconciliation –
YTD 2011 versus
YTD 2010
Nine Months
Ended 9/30/2011
Operating
Earnings*
Nine Months
Ended 9/30/2010
Operating
Earnings*
Interest
Lower Pricing (0.22)
Lower Generating
Volumes (0.03)
Migration (0.02)
Coal
Optimization 0.06
O&M (0.06)
D&A and
Interest (0.06)
WPT 0.02
Other (0.02)
PSEG Power
Margins:
Rate Relief 0.04
Transmission 0.03
Renewables,
Capital Stimulus
and Other 0.06
O&M 0.04
Weather 0.03
D&A (0.03)
Taxes (0.02)
Other (0.01)
PSE&G
PSEG Energy
Holdings
Enterprise
Absence
of Gain on
Lease Sales
and
Impairments (0.04)
ES&P
Investment
Write-off (0.01)
Other (0.03)
* See
page
62
for
Items
excluded
from
Net
Income
to
reconcile
to
Operating
Earnings. |
  9
Outlook for 2011 Operating Earnings
at Upper End of Range
$3.12
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
2010 Operating Earnings*
2011E Earnings Guidance*
* See page 63 for Items excluded from Income from Continuing Operations to
reconcile to Operating Earnings. $2.75E
$2.50E
Strong 9-month results support full-year 2011 EPS at upper end of
guidance. $2.27
Operating
EPS
YTD
Actual |
 10
$1,000
$1,250
$1,500
$1,750
$2,000
$2,250
2010
2011E
2012E
2013E
O&M
PSEG
Consolidated
O&M
(1)
CAGR (’10-’13) = 1-2%
(1)
Excludes O&M related to PSE&G clauses. E: Estimate.
CAGR: Compound annual growth rate. Focus on expense management…
…expected to limit CAGR in O&M, including pension, to 1-2%.
|
 11
PSEG Consolidated Debt / Capitalization
(1)
Includes debt due within one year and short-term debt; excludes Securitization
Debt and Non-Recourse Debt. $0
$2
$4
$6
$8
$10
$12
$14
$16
$18
2009
2010
9/30/2011
Equity
Debt
(1)
Preferred
Stock
Debt
7,311
7,812
7,925
Preferred Stock
80
0
0
Common Shareholders Equity
8,788
9,633
10,159
Debt plus Equity
16,179
17,445
18,084
Debt Ratio
45.2%
44.8%
43.8%
(in $Millions) |
  12
Growth
$4.72 B
69%
Maintenance
$2.13 B
31%
PSEG’s consolidated capital spending
is focused on growth
Parent SC
$0.07 B
1%
Power
$1.50 B
22%
PSE&G
$5.24 B
76%
Holdings
$0.04 B
1%
PSEG 2011-2013E Capital Spending
$6.85 Billion*
by Subsidiary
PSEG 2011-2013E Capital Spending
$6.85 Billion*
Growth vs. Maintenance Spend
*E: Estimate
. |
 $1.08
$1.08
$1.08
$1.10
$1.12
$1.14
$1.17
$1.29
$1.33
$1.37
$1.37
$1.00
$1.25
$1.50
13
PSEG Dividend –
a major source of return
to shareholders …
PSEG Annual Common Dividend Per Share 2001-2011E
…
with a 104-year track record. |
 14
PSEG Advantage
Well-run, low-cost
generating platform
open to improvement
in power markets
Solid operating
performance,
regulatory agreements,
and cost control
enhance ability of
utility to earn
authorized returns
Financial Strength
Operational Excellence
Balance sheet
strength, combined
with the flexibility
and liquidity to
finance growth
opportunities
Our $6.9 billion capital
investment program
for 2011-2013 is
oriented to growth
400 MW of new
peaking capacity in
New Jersey and
Connecticut for 2012
Major environmental
compliance capital
program completed
Disciplined Investment |
 PSEG
Power –
Review and
Outlook |
 16
Low-cost portfolio
Fuel flexibility
Regional focus in competitive, liquid
markets
Assets favorably located near
customers/load centers
Many units east of PJM constraints
Market knowledge and experience to
maximize the value of our assets
Nuclear plants re-licensed
Multiple emission controls installed
…
and
is
well-positioned
to
respond
to
EPA
regulations.
18%
45%
8%
Fuel Diversity*
Coal
Gas
Oil
Nuclear
Pumped
Storage
1%
Energy Produced*
Total GWh: 56,727
52%
19%
28%
Pumped Storage
& Oil <1%
Nuclear
Coal
Gas
Total MW: 13,538
27%
9%
* Twelve months ended December 31, 2010.
Power has focused on optimizing its assets in a
dynamic environment… |
 17
... and
the
fleet
achieved
record
generation
levels
in
2010.
Power’s Northeast assets are located in
attractive markets near load centers... |
 18
…
while maintaining fuel optionality under a variety of conditions.
Power’s PJM assets along the dispatch curve
reduce the risk of serving full requirement load
contracts…
Energy Revenue
X
X
X
Capacity Revenue
X
X
X
Ancillary Revenue
X
X
Dual Fuel
X
X
Peaking units
Load following units
Nuclear
Coal
Combined Cycle
Steam
Peaking
Baseload units
Illustrative
Salem
Hope
Creek
Keystone
Conemaugh
Hudson 2
Linden 1,2
Burlington 8-9-11
Edison 1-2-3
Essex 10-11-12
Bergen 1
Sewaren 1-4
Hudson 1
Mercer 1, 2
Bergen 2
Sewaren 6
Mercer 3
Kearny 10-11
Linden 5-8 / Essex 9
Burlington 12 / Kearny 12
Peach
Bottom
Yards
Creek
National Park
Salem 3
Bergen 3 |
 19
19
-$10
$0
$10
$20
$30
$40
$50
$0
$10
$20
$30
$40
$50
$60
$70
2005
2006
2007
2008
2009
2010
2011
2012
2013
Annual Average
Historical Monthly
Forecast
Note: Forward prices as of October 2011.
PJM Western Hub Spark Spread (On-Peak –
Henry Hub x 7.5 Heat Rate)
PJM Western Hub Dark Spread (RTC –
Central Appalachian Coal x 10 Heat Rate)
…
while
forward
dark
spreads
have
remained
low.
Forward spark spreads have increased significantly
from earlier this year… |
 20
Power’s fleet benefits from fuel mix and
dispatch flexibility …
Coal/Gas fuel mix has changed to ~40/60 due to gas commodity pricing vs coal.
52%
42%
42%
39%
48%
58%
58%
61%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2008
2009
2010
2011 July YTD
Coal
Gas CC |
 st
st
21
11.1
3.1
0.6
2.1
1.0
0.9
3.0
0.7
0.7
0.6
0.7
0.6
0.6
0.6
0.7
2004
2005
2006
2007
2008
2009
2010
2011 E
24.7
27.3
29.1
28.4
29.3
30.3
29.6
30.0
2004
2005
2006
2007
2008
2009
2010
2011 E
79.0
85.0
97.097.0
94.0
91.7
99.098.0
93.9
90.3
96.0
96.0
96.0
97.0
98.5
2004
2005
2006
2007
2008
2009
2010
2011 E**
Salem Unit 2 set a new all time generation
record
Five year average generation was 29 GWh
Salem 1 transformer forced outage in 2010
impacted forced loss rate by ~ 60%
…
as
we
maintain
our
drive
for
excellence.
INPO
Index
(
)
NJ Units
1
Quartile
NJ Units
* Total PS share nuclear generation
**Index revised Jan 2011; average scores 4-7 points lower
Nuclear Generation Output*
(000’s GWh)
Forced
Loss
Rate
(
)
(%)
Our nuclear performance has improved…
1 Quartile |
 22
Power’s coal fleet has seen significant
efficiency improvements…
14
15
15
13
13
9
11
9
0
2
4
6
8
10
12
14
16
18
2004
2005
2006
2007
2008
2009
2010
2011 E
10.3
11.1
11.3
7.9
8.4
4.8
4.2
3.8
0
2
4
6
8
10
12
2004
2005
2006
2007
2008
2009
2010
2011 E
1.11
1.12
1.01
0.91
0.96
0.83
0.4
0.34
0.34
0.29
0.20
0.21
0.19
0.17
0.13
0.17
0
0.2
0.4
0.6
0.8
1
1.2
2004
2005
2006
2007
2008
2009
2010
2011 E
Market conditions were beneficial to
increased output in 2010
Forced outage rate continues to improve
Environmental footprint upgraded with BET
BET coal flexibility
…
as
back-end
technology
investment
has
prepared
us
for
the
future.
Output
(000’s GWh)
Forced
Outage
Rate
(
)
(% EFORD)
SO
2
and NO
x
Rates (
)
(lb/mmbtu)
SO2
NO
x |
 23
Power’s combined cycle fleet benefits from
operating enhancements…
5
4
8
10
12
13
15
15
0
2
4
6
8
10
12
14
16
2004
2005
2006
2007
2008
2009
2010
2011 E
3.4
7
3.4
2.5
1.6
1.5
1.2
0.46
0
1
2
3
4
5
6
7
8
2004
2005
2006
2007
2008
2009
2010
2011 E
8079
7847
7928
7768
7810
7691
7533
7514
7200
7300
7400
7500
7600
7700
7800
7900
8000
8100
8200
2004
2005
2006
2007
2008
2009
2010
2011 E
Output
(000’s GWh)
Forced
Outage
Rate
(
)
(% EFORD)
Period
Heat
Rate
(
)
(mmbtu/KWh)
Highest output ever in 2010
Continued improvement in forced outage
rate
Benefiting from heat rate improvement
program
…and continues to react to market dynamics.
All data excludes Texas |
 24
13
17
23
19
13
14
15
12
2004
2005
2006
2007
2008
2009
2010
2011 E
85
86
76
77
91
92
95
98
2004
2005
2006
2007
2008
2009
2010
2011 E
Consistent record of start success
provides opportunities in ancillary and
real time markets
Adds flexibility in serving load and
managing the needs of a diverse market
environment
Approximately 8,400 starts during 2010
HEDD* is anticipated to reduce fleet size
…
and
provides
the
ability
to
follow
load
during
periods
of
high
demand.
%
Start
Success
(
)
Forced
Outage
Rate
(
)
(% EFORD)
Equivalent
Availability
(
)
(%)
99.7
96.5
98.6
97.0
98.9
99.3
98.3
99.7
2004
2005
2006
2007
2008
2009
2010
2011 E
Our peaking fleet rounds out a diverse
generation portfolio…
*High
Electric
Demand
Day
(HEDD):
New
Jersey
NO
x
regulation. |
 25
Source: MJ Bradley, PSEG
2010
2011
2012
2013
2014
2015
2016
2017
2018
Haz. Air
Pollutants
Criteria
Pollutants
Greenhouse
Gases
Coal
Combustion
316(b)
Compliance with Federal GHG Reporting Rule
Compliance with PSD/BACT and Title V Applies to GHG Emissions from New and Modified
Sources Compliance with Utility MACT
Pre-Compliance Period
Develop Utility
MACT
Develop
Transport
Rule
Interim CAIR
Phase-in of CCR Regulations
Develop Coal Combustion
Residuals Rule
Develop 316(b)
Regulations
Revised Ozone NAAQS may require further NO
x
reductions
Phase-In of 316b Regulations by 2020
Compliance with GHG NSPS
Develop GHG NSPS
…to meet EPA environmental regulations.
Today
Compliance with Cross-State Air Pollution Rule
Power is well-positioned under numerous
outcomes… |
 26
…with Power generally well-positioned for the relative near term.
PSEG Power’s Position
Hazardous Air
Pollutants (HAPs)
•
Fleet generally well-positioned on Hg, Particulate Matter, and HCl
•
Comprehensive coal controls in place (SCR planned at Conemaugh)
Criteria Pollutants
(CSAPR)
•
Fleet well-positioned on NO
x
and SO2
Greenhouse Gases
(GHG)
•
Limited exposure to GHG BACT requirements
•
Potentially benefit from NSPS with trading
Coal Combustion
Residuals
•
Dry ash systems in use at Power’s coal units
•
Coal ash and scrubber waste tested as non-hazardous
316(b) Cooling Water
Regulations
•
Share general industry exposure
•
Over $150M in estuary enhancement program at Salem
•
Potential capital spend exposure
EPA air requirements are expected to influence markets
Uplift to market prices expected as a result of retirements, derates, higher variable
O&M costs, and/or higher emission allowance prices
The potential impacts to Power vary… |
 27
Current Regulations and Compliance Measures
Description
Hudson (NJ)
Mercer (NJ)
Keystone (PA)
Bridgeport (CT)
Conemaugh (PA)
NO
x
SCR
SCR
SCR
Low NO
x
Burners
SCR
2014
SO
2
Scrubber
Scrubber
Scrubber
Ultra-low
Sulfur Coal
Scrubber
Mercury/
Particulate
Baghouse &
Activated
Carbon
Baghouse
& Activated
Carbon
Scrubber & SCR,
ESP
Baghouse &
Activated Carbon
Scrubber & SCR,
ESP
Capital Spend Planned
No Additional Capital Spend Planned
Power’s investment program to mitigate air
pollutants…
…has placed it in good position to meet anticipated regulatory
requirements. |
 28
Source: EPA (2009), EIA (2009), and PSEG Projections
PSEG Projected NO
x
Emission Rate for 2011
versus 2009 400 U.S. Coal Plants
Conemaugh
Hudson
Bridgeport
Mercer Keystone
NO
x
Keystone
Bridgeport
Conemaugh
Hudson Mercer
SO
2
PSEG Projected SO2
Emission Rate for 2011
versus 2009 400 U.S. Coal Plants
Keystone
Conemaugh
Bridgeport
Mercer
Mercury
PSEG Projected HG Emission Rate for 2011
versus 2009 400 U.S. Coal Plants
Hudson
…leaving
Power’s
coal
fleet
among
the
cleanest
in
the
country.
PSEG Power’s environmental program has
resulted in dramatically lower emissions… |
 29
The NJ DEP is considering an extension to the
permits of water-injected HEDD units in the
state…
PSEG
2,787
Others
1,482
RMR ends in 2011
Conversion to Gas
*Replacing 200 MW with 270 MW of new peaking in 2012 at Kearny.
Retire May 2015 or
extend to 2017
New Jersey HEDD Capacity
ICAP MW
PSEG Power HEDD Capacity
ICAP MW
…
which
will
affect
the
timing
of
retiring
these
units.
Water-
injected,
1,408
Uncontrolled
571*
Sewaren 1-4
453
Hudson 1
355 |
 30
…through a balanced, portfolio hedging strategy.
Power will continue to utilize a hedging strategy that incorporates full requirement
load contracts and contracting using other products to secure pricing
over a 2-3 year forward
horizon
Forward prices, spark spreads, and heat rates have improved in 2011, benefiting
companies with the right assets in the right locations
BGS continues to be an important part of our hedging strategy
Three year nature of BGS provides reduced volatility for customers and
generation providers
Impact of migration on margin in 2011 has diminished with decline in headroom
PSEG Power, as part of P3, is an active participant in market discussions challenging
subsidized pricing
Power’s fleet is economically optimized… |
 31
Full Requirements Component
Increase in Capacity Markets/RPM
Growing Renewable Energy Requirements
Component for Market Risk
Market Perspective –
BGS Auction Results
…
we
have
developed
an
expertise
in
serving
full-requirements
contracts.
3 Year Average
Round the Clock
PJM West Forward
Energy Price
Note: BGS prices reflect PSE&G Zone
2003
2004
2005
2006
2007
2008
2009
2010
2011
$55.59
$33 -
$34
$36 -
$37
$44 -
$46
$67 -
$70
$58 -
$60
$68 -
$71
$56 -
$58
$48 -
$50
~ $21
$55.05
~ $18
$65.41
~ $21
$102.51
~ $32
$98.88
~ $41
$111.50
~ $43
$103.72
~ $47
$95.77
~ $47
$45 -
$47
~ $48
$94.30
Through Power’s participation in each of the
BGS auctions…
Capacity
Load shape
Transmission
Congestion
Ancillary services
Risk premium
Green |
 32
…with 2011’s margin affected by weather and improved market
prices. •
Migration has grown steadily from 2009 –
2011
–
Market prices have been below BGS prices
–
Retail penetration has expanded to include residential customers
–
Approximate average migration of ~10% in 2009; ~24% in 2010; and
forecasted to be 32% to 33% in 2011, assuming 33% to 35% at year-end
•
Power margin is a direct function of headroom (the difference between the market
price of power versus the average price paid by customers under the BGS rate)
•
Headroom has varied by year
–
2009 headroom was high as mild weather resulted in low market prices
–
2010 headroom was low as extreme weather resulted in high market prices
–
2011 headroom affected by higher market pricing
–
Retail providers are more likely to promote switching if headroom is seen as
sustainable Migration and headroom are a function of
market and BGS price differentials… |
 33
Hedging Update…
…
our strategy is to hedge our base load generation long term.
Contracted Energy*
2011
2012
2013
Oct - Dec
Volume TWh
8
36
36
Base Load
% Hedged
100%
80-85%
40-45%
(Nuclear and Base Load Coal)
Price $/MWh
$68**
$63
$61
Volume TWh
5
22
22
Intermediate Coal, Combined
% Hedged
46%
Cycle, Peaking
Price $/MWh
$68**
$63
$61
Volume TWh
13
58
58
Total
% Hedged
80%
50-55%
25-30%
Price $/MWh
$68**
$63
$61
*Hedge percentages and prices as of September 30, 2011 for the October 2011 and forward time
frame. **Average price for full-year 2011. Revenues of full requirement load
deals based on contract price, including renewable energy credits, ancillary, and transmission components but
excluding capacity. Hedges include positions with MTM accounting treatment and options.
|
 34
…
with
sites
in
the
eastern
part
of
PJM.
With nearly 1/3 of its capacity in PS North and nearly 2/3 of its capacity in EMAAC, Power’s
assets in congested locations received higher pricing.
•
Locational value of Power’s
fleet recognized.
•
Bid for 89 MW of new
capacity accepted for
2013/2014 auction;
in-service June 2012.
•
On schedule to complete
178 MW of previously
cleared peaking capacity
by June 2012.
•
Latest auction influenced
by updated demand
forecast and transfer
capabilities.
$/MW-day
PJM Zones
2009 / 2010
2010 / 2011
2011 / 2012
2012 / 2013
2013 / 2014
2014 / 2015
Eastern MAAC
$191.32
$174.29
$110.00
$139.73
$245.00
$136.50
MAAC
$191.32
$174.29
$110.00
$133.37
$226.15
$136.50
PSEG
$245.00
PSEG North Zone
$185.00
$245.00
$225.00
Rest of Pool
$102.04
$174.29
$110.00
$16.46
$27.73
$125.99
Reliability Pricing Model –
locational value of
Power’s generating fleet recognized…
PJM Capacity Available to Receive Auction Pricing
0
2,000
4,000
6,000
8,000
10,000
12,000
09/10
10/11
11/12
12/13
13/14
14/15 |
 PSE&G
– Review and Outlook |
 36
PSE&G is the largest utility in New Jersey
providing electric, gas and transmission
services…
…and
delivering
renewable
and
energy
efficiency
solutions
for
customers.
*
Actual
** Weather normalized = estimated annual growth per year over forecast
period
*** Energy Efficiency Annualized Savings (75% Electric/25% Gas Equivalent)
Electric
Gas
Customers
Growth
(2005 –
2010)
2.2 Million
4.0%
1.8 Million
4.0%
Electric Sales and Gas Sold and Transported
43,645 GWh
3,465 M Therms
Historical
Annual
Load
Growth
Distribution
(2006
-
2010)
(0.5%)*
(1.0%)*
Historical
Annual
Peak
Load
Growth
Transmission
(2006
–
2010)
(0.1%)
Projected
Annual
Load
Growth
(2011
–
2013)
1.3%**
0.8%**
Projected
Annual
Load
Growth
Transmission
(2011
–
2013)
1.4%
Sales Mix
Residential
33%
61%
Commercial
57%
36%
Industrial
10%
3%
Transmission
Electric
Gas
Approved Rate of Return
11.68% ROE
10.3% ROE
10.3% ROE
Renewables and Energy Efficiency
2009-2010
Total Program
Plan
Solar Loan
19 MW
81 MW
Solar 4 All
28 MW
80 MW
Energy Efficiency Initiative (lifetime equivalent)***
389 GWh
604 GWh |
 37
New Jersey’s energy future requires continued
investment…
…
while adapting to changes in resources.
Transmission Capacity Growth
Transmission Capacity Reductions
Susquehanna-Roseland ~1,500 MW
North East Grid ~200 MW
Bergen
O66
-
Bergen
to
ConEd's
West
49th
Street
~(670 MW*)
Lakewood
V3-026
-
Lakewood
to
New
York
~550
MW
Werner
X1-078
-
Werner
to
New
York
~525MW
Other Impacts to NJ
Long-term Capacity Agreement Pilot Program (LCAPP)
~2,000 MW
Exelon has entered into an agreement with the state of New
Jersey to close Oyster Creek in 2019 ~(700 MW)
2010-2020 Demand growth of ~1% based on 2011 PJM
Load Forecast report ~1,125 MW
* Project has firm contract for 320MW
Net impact to New Jersey is ~130MW by 2020
Susquehanna-Roseland
Bergen O66
Sources: Imports: PSE&G Estimates; Exports: PJM 2009 RTEP; Load Growth:
PJM 2011 Load Forecast Report Arrows are general indicators and not intended to
represent actual route Oyster
Creek |
 38
Transmission investment recovery is supported by
formula rate treatment…
($ Millions)
Phase
In-Service
Spending
Up To
Susquehanna-Roseland*
Engineering / Licensing
2014 East
2015 West
$750
North East Grid
Preliminary Design
2015
$895
Burlington
–
Camden
230kV
Conversion**
Engineering / Licensing
2014
$381
North Central Reliability**
Engineering / Licensing
2014
$336
Mickleton –
Gloucester –
Camden**
Preliminary Design
2015
$435
…
and CWIP in rate base for certain projects.
*CWIP in Rate Base and 1.25% ROE incentive treatment approved.
** CWIP in rate base approved.
Transmission Projects
Future Projects
Future Transmission project spending will be influenced by PJM
evaluation,
potentially
adding
additional
projects
over
2011
–
2015
and
revising required in-service dates.
Hopatcong
Hopatcong
W Orange
W Orange
Burlington
Burlington
Gloucester
Hopatcong
Hopatcong
W Orange
W Orange
Camden
Mickleton
Hopatcong
Hopatcong
W Orange
W Orange
Burlington
Burlington
Gloucester
Hopatcong
Hopatcong
W Orange
W Orange
Camden
Mickleton
Bergen
Hudson
Bayonne
Sewaren
Middlesex
Bridgewater
Roseland |
 39
PSE&G’s capital program calls for
investing $5.2 billion…
…through investment in transmission and distribution.
*E: Estimate.
2011-2013E Utility Capital Spending
$5.2 Billion*
Renewables/EMP
$0.7 B
Gas Utility
$0.6 B
11%
Electric Distribution
$1.0 B
20%
Transmission
$2.9 B
56%
13% |
 40
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
2010
2011
2012
2013
Susquehanna-Roseland *
RTEP 230 kV Conversions
Other RTEP
69kV Transmission
Other Transmission
FERC’s Transmission formula rate order grants
PSE&G an 11.68% ROE and a fully-forecasted
cost of service
Transmission represents approximately 56% of planned investment over the
2011-2013
plan
and
is
expected
to
comprise
~33%
of
PSE&G
rate
base
by
2013
Supportive
regulatory
treatment
with
contemporaneous
recovery
is
key
to
align
earnings growth with investment
Execution
of
the
Transmission
plan
is
critical
to
achieving
PSE&G’s
future growth.
Transmission Investment by Major Category**
* Susquehanna-Roseland approved for 12.93% ROE. ** 2010 is actual data,
2011-2013 is projected data. |
 41
Our 2011 –
2013 capital plan calls for investing
$5.2 billion…
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
2010
2011E
2012E
2013E
NJ Infrastructure
Stimulus
Solar
Energy Efficiency
Transmission
Core Investment
…with
contemporaneous
recovery
mechanisms
approved
for ~$3.1 billion.
PSE&G Capital Expenditures
E: Estimated. |
 42
PSE&G’s investment program provides
opportunity for ~11%* annualized growth
in rate base
PSE&G Projected Rate Base**
*Starting
from
2010
Rate
Base
of
$7.8
billion.
**2010
is
actual
data;
2011-2013
is
projected
data.
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
2010
2011
2012
2013
Gas Distribution
Electric Distribution
Electric Transmission
Energy Master Plan |
 43
Investment program supporting NJ’s energy
and economic goals has led to 45 MW of solar…
…
with 30 MW in
development. ($ Millions)
Approval
Date
Total
Amount
Spending
Thru
9/2011
Remaining
Spending
Thru 2013
Solar Loan I & II
April 2008/
November 2009
$248
$104
$140
Carbon Abatement
December 2008
46
36
10
NJ Capital Infrastructure Stimulus I
April 2009
694
702
-
Solar 4 All *
July 2009
465
298
155
Energy Efficiency Economic Stimulus
July 2009
166
123
43
Demand Response
July 2009
65
13
32
Energy Efficiency Economic Stimulus
Extension
July 2011
95
-
91
NJ Capital Infrastructure Stimulus II
July 2011
273
10
263
Total
$2,052
$1,286
$734
* Filing amount based on installation of 80MW, total forecasted spend is lower due
to a lower cost per watt to install. |
 PSEG
Energy Holdings - Review & Outlook
|
 45
Energy Holdings is pursuing renewable
energy alternatives with emphasis on solar
•
Solar is a good strategic fit for PSEG
–
Predictable and attractive returns through long-term Power Purchase
Agreements with creditworthy counterparties
–
Improves geographic, technology, regulatory and market risk profile
–
Strong relationships established across the value chain
–
Favorable tax attributes, long-term earnings, short construction cycles and
proven technology
•
Solar In-Service
–
Installed 29 MW at three locations; ~$117 million investment to date
–
Projects completed ahead of schedule and under budget; operating
performance better than plan |
 46
PSEG Energy Holdings has made significant
reductions in size and risks
International Energy:
Global has disposed of all but one
international asset
Domestic Generation:
Only 176 MW of Global’s legacy domestic
generation assets remain
LILO/SILO:
Resources terminated all 18 LILO/SILO leases
Traditional Leases:
Resources continues to carefully manage the
remaining traditional leases and other investments
$264 million gross investment in a lease receivable from Dynegy
resulting in an after-tax charge of $170 million, or $0.34 per share
Energy Holdings fully reserved its
Leveraged Lease Reserve: |
 PSEG
– Financial Review and
Outlook |
 48
25%
30%
35%
40%
45%
50%
2008
2009
2010
2011-2013E
Average
PSEG Power
Funds from Operations / Total Debt
Power’s credit metrics remain strong ...
Power’s free cash
flow produces strong
credit measures and
provides sufficient
cushion for potential
gas price volatility
Free Cash Flow
(1)
~750
~950
~750
Average: ~725
Dividends to Parent
500
850
550
Average: ~475
(in $Millions)
(1)
Free Cash Flow represents cash from operations less cash used for investing.
E: Estimate. …
providing opportunities for growth investments. |
 49
PSEG’s internally generated cash flow
between
2011
–
2013 …
…
supports capital investment and the shareholder dividend without
the need for equity issuance.
* Cash from Operations adjusts for securitization principal repayments
~$0.7B. E: Estimate. ** 2011-2012 includes bonus
depreciation of ~$0.9B offset by ~$0.1B in 2013. Sources
Uses
Power
Cash
from Ops
Debt
Issued
PSE&G
Investment
Debt
Redeemed
Shareholder
Dividend
PSEG
Consolidated
2011
–
2013E
Sources
and
Uses
PSE&G
Cash from
Ops*
Power
Investment
Asset Sale
Proceeds
Includes:
Bonus Depreciation = ~$0.8B**
Pension Contribution = ~($0.5B)
Other Net
Cash Flow |
 50
PSEG Advantage –
Value Proposition:
Compelling Risk-Adjusted Total Return
Investment
Opportunity
Value
Drivers
Disciplined
Capital
Allocation
•Clean and reliable nuclear, coal, and natural gas-fired generation fleet
•Large, reliable electric and gas distribution operations
•Heat rates and spark spreads are expected to improve further
•Environmental compliance costs
•Potential retirements of 11 to 25 GW of existing generation in PJM
•Market prices must rise to incent new generation investment
•PSEG positioned to benefit from higher utilization and market
heat rates as capacity factors improve
•Investments at PSE&G to yield ~11% CAGR in rate base
•Pursuing growth investments with reasonable, risk-adjusted returns
•Monetizing non-core assets through asset sales
•Strong balance sheet provides flexibility and liquidity to finance growth
opportunities
in
our
shareholders’
best
interest
–
without
dilution
•104-year history of paying an annual common stock dividend
•Returning capital to shareholders over time |
 51
PSEG received a perfect score of 100 on the Corporate Equality Index and
Best Places to Work 2010 Survey
conducted by the Human Rights Campaign.
The Edison Award. Presented annually by EEI
and recognizes U.S. and international electric
utilities for their innovation and role in advancing
the industry.
Our focus on customers, community and
employees…
PSE&G named America’s Most Reliable
Utility 4 of past 6 years
Mid-Atlantic
Region
winner
for
the
9
straight
year
Carbon Performance Leadership Index (CPLI)
2010. Named Maplecroft Climate
Innovation Index (CII) utility sector Leader.
Second year in World Index, fourth year
in the North American Index.
PSEG is one of only two U.S. electric companies in the World Index.
…
has been widely recognized.
th |
 Appendix |
 53
0%
10%
20%
30%
40%
2011/2012
2012/2013
2013/2014
2014/2015
2015/2016
…but
over
the
longer
term,
many
influences
will
dictate
sources
of
market sufficiency.
Unforecasted influences that could increase capacity:
=>Government
interventions
–
for
example,
LCAPP
=>Load/demand rate of change
=>Demand response / Economic recovery
Unforecasted influences that could decrease capacity:
=>Government
regulations
–
for
example,
environmental
retirements
=>Load/demand rate of change
=>Demand response / Economic recovery
PJM Forecasted Capacity Reserves
(1)
PJM
•
Reserve margins to tighten, due to:
–
Load growth
–
Announced unit retirements
(2)
–
Anticipated environmental retirements
•
PJM
estimates
that
11
to
25
GW
of
coal
is
at
risk
(3)
•
Likely 3+ GW of oil / gas retirements due to HEDD and MACT
EMAAC
•
Most of Power’s assets located in EMAAC
•
Anticipated retirements, driven primarily by HEDD and HAPs-
MACT rules, beyond the coal retirements already announced
•
Transmission projects expected to increase net imports into
EMAAC, partially offsetting retirements
•
Local legislation (NJ LCAPP) could initially increase reserve
margins, but would discourage long-term merchant
investment
(1)
Reserve margin forecast from PJM as of March 2011. One percent of reserve margin
equals ~1.3 GW of supply. (2)
PJM’s reserve projections assume only 3.2 GW of retirements.
(3)
Source: PJM report as of August 2011.
PJM has adequate reserves to meet near-term
demand… |
 54
Power’s coal hedging reflects 2011 supply
matched with 2011 sales…
…
while maintaining flexibility on supply post BET installation.
0%
20%
40%
60%
80%
100%
2011
2012
2013
$0
$10
$20
$30
$40
$50
Contracted Coal
Station
Coal Type
Pricing
($/MWh)*
Comments
Bridgeport
Harbor
Adaro
High $40’s
Higher price,
lower BTU,
enviro coal
Hudson
CAPP
Mid $40’s
Flexibility
after BET in
2010
Mercer
Metallurgical
CAPP/NAPP
Low $40’s
More limited
segment of
coal market
Keystone
NAPP
High $20’s
Prices
moderating
Conemaugh
NAAP
High $20’s
to Low
$30’s
Prices
moderating
% Hedged
(left scale)
$/MWh
(right
scale)
* Commodity plus transportation. |
 55
$0
$5
$10
2011
2012
2013
Anticipated Nuclear Fuel Cost
…
with
increased
costs
over
that
time
horizon.
Hedged
Power has fully hedged its nuclear fuel needs
through 2013… |
 56
Operated by PSEG Nuclear
PSEG Ownership: 100%
Technology: Boiling Water Reactor
Total Capacity: 1,197MW
Owned Capacity: 1,197MW
License Expiration: 2046
License renewal approved
July 2011
Next Refueling 2012
Operated by PSEG Nuclear
Ownership: PSEG –
57%
Exelon –
43%
Technology: Pressurized Water Reactor
Total Capacity: 2,337MW
Owned Capacity: 1,342MW
License Expiration: 2036 and 2040
License renewal approved June
2011
Next Refueling
Unit 1 –
Fall 2011 (underway)
Unit 2 –
Fall 2012
Operated by Exelon
PSEG Ownership: 50%
Technology: Boiling Water Reactor
Total Capacity: 2,245MW
Owned Capacity: 1,122MW
License Expiration: 2033 and 2034
Next Refueling
Unit 2 –
2012
Unit 3 –
Fall 2011 (completed)
Hope Creek
Salem Units 1 and 2
Peach Bottom Units 2 and 3
…
is a critical element of Power’s success.
Our five unit nuclear fleet… |
 57
0%
25%
50%
75%
100%
2011
2012
2013
$0
$50
$100
$150
$200
$250
0%
25%
50%
75%
100%
2011
2012
2013
$0
$10
$20
$30
$40
$50
$60
$70
$80
…
while remaining open to long-term market forces.
Estimated EPS impact of $5/MWh
PJM West around the clock price
change* (~$1/mmbtu gas change)
Contracted Capacity
Price
(right
scale)
* As of October 2011, assuming normal market commodity correlation and
demand. Power has
contracted for a
considerable
percentage of its
future output
over the next two
years.
The pricing for
most of Power’s
capacity has been
fixed through May
2014, with the
completion of
auctions in PJM
and NE.
% sold
(left
scale)
Contracted Energy
Price
(right
scale)
% sold
(left
scale)
*
$0.02 -
$0.06
$0.14 -
$0.28
$0.20 -
$0.40
Power’s hedging program provides near-term stability
from market volatility… |
 58
Gas competed favorably with coal in 2010, with
operational flexibility favoring gas…
…
and Power’s diverse fleet is positioned to compete under various
market conditions.
PJM Fleet Flexibility
Base Coal
Base Coal
Base Coal
CC/Coal
CC/Coal
CC
PK
PK
PK
Int Coal
Int Coal
Int Coal
CC
CC
-
5,000
10,000
15,000
20,000
25,000
2008
2009
2010
Note: Forward prices as of February 2011. |
 59
PSEG 2011 Operating Earnings Guidance
-
by Subsidiary
$ millions (except EPS)
2011E
2010A
PSEG Power
$ 765 –
$ 855
$ 1,091
PSE&G
$ 495 –
$ 520
$ 430
PSEG Energy Holdings
$ 0 –
$ 5
$ 49
Enterprise
$ 5 –
$ 15
$ 14
Operating Earnings*
$ 1,265 –
$ 1,395
$ 1,584
Earnings per Share
$ 2.50 –
$ 2.75
$ 3.12
* See Page 63 for Items excluded from Income from Continuing Operations to
reconcile to Operating Earnings. |
 60
PSEG Resources Leveraged Lease Portfolio
Lessee
Equipment
9/30/11
Invested
($millions)
S&P
Credit
Rating*
REMA (GenOn)
Keystone, Conemaugh & Shawville (PA)
3 coal fired plants (1,162
equity MW)
331
B
Dynegy Holdings**
Danskammer & Roseton Generating Station (NY)
370 MW coal fired and 1,200 MW oil/gas fired
0
NA
Edison Mission
Energy (EME)
Powerton & Joliet Generating Stations (IL)
2 coal-fired generating facilities (1,640 equity MW)
219
B-
Merrill Creek –
(PECO, MetEd,
Delmarva P& L)
Reservoir in NJ
129
BBB, BBB-,
BBB+
Grand Gulf
Nuclear station in Mississippi (154 equity MW)
100
A+
US West/Qwest***
Qwest headquarters located in Denver, CO
119
NR
Renaissance Ctr.
GM headquarters located in Detroit, MI
41
BB+
Wal-Mart
Portfolio of 17 Wal-Mart stores
29
AA
E-D Centers
Portfolio of 8 shopping centers
23
NR
Total Leases
$991
*Indicative recent rating reflecting either Lessee, additional equity collateral support or parent
company unsecured debt rating. ** In Q3 2011, Energy Holdings fully reserved its $264 million
gross investment in a lease receivable from Dynegy resulting in an after-tax charge of $170 million, or $0.34 per share.
*** Qwest was acquired by Century Link. NR – Not Rated, NA – Not Applicable. |
 61
PSEG Consolidated Debt / Capitalization
(1)
Long-Term Debt includes Debt due within one year; excludes Securitization Debt
and Non-Recourse Debt. December 31, 2009
December 31, 2010
September 30, 2011
PSE&G Short-Term Debt
-
$
-
$
-
$
PSEG Money Pool Short-Term Debt
530
64
-
Total Short-term Debt
530
64
-
Long-Term Debt
(1)
:
Power
3,121
3,455
3,350
PSE&G
3,571
4,283
4,535
Holdings
127
-
-
Parent / Services
(38)
10
40
Total Long-Term Debt
6,781
7,748
7,925
Preferred Stock
80
-
-
Total Common Stockholders' Equity
8,788
9,633
10,159
TOTAL CAPITALIZATION
16,179
$
17,445
$
18,084
$
December 31, 2009
December 31, 2010
September 30, 2011
Debt
7,311
$
7,812
$
7,925
$
Preferred
Stock 80
-
-
Total Common Stockholders' Equity
8,788
9,633
10,159
Debt Plus Equity
16,179
$
17,445
$
18,084
$
Debt Ratio
45.2%
44.8%
43.8% |
  62
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. Pro-forma Adjustments, net
of tax 2011
2010
2011
2010
Earnings Impact ($ Millions)
Gain (Loss) on Nuclear Decommissioning Trust (NDT)
Fund Related Activity (PSEG Power)
7
$
10
$
49
$
30
$
Gain (Loss) on Mark-to-Market (MTM) (PSEG Power)
8
16
16
28
Lease Transaction Reserves (Energy Holdings)
(170)
-
(170)
-
Market Transition Charge Refund (PSE&G)
-
-
-
(72)
Total Pro-forma adjustments
(155)
$
26
$
(105)
$
(14)
$
Fully Diluted Average Shares Outstanding (in Millions)
507
507
507
507
Per Share Impact (Diluted)
Gain (Loss) on NDT Fund Related Activity (PSEG Power)
0.01
$
0.02
$
0.10
$
0.06
$
Gain (Loss) on MTM (PSEG Power)
0.02
0.03
0.03
0.05
Lease Transaction Reserves (Energy Holdings)
(0.34)
-
(0.34)
-
Market Transition Charge Refund (PSE&G)
-
-
-
(0.14)
Total Pro-forma adjustments
(0.31)
$
0.05
$
(0.21)
$
(0.03)
$
September 30,
September 30,
For the Three Months Ended
For the Nine Months Ended
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
Reconciling Items Excluded from Continuing Operations to Compute Operating Earnings
(Unaudited) |
 63
Items Excluded from Income from Continuing
Operations to Reconcile to Operating Earnings
Pro-forma Adjustments, net of tax
2010
2009
Earnings Impact ($ Millions)
Gain (Loss) on Nuclear Decommissioning Trust (NDT)
Fund Related Activity (PSEG Power)
46
$
9
$
Gain (Loss) on Mark-to-Market (MTM) (PSEG Power)
(1)
(11)
Net Reversal of Lease Transaction Reserves (Energy Holdings)
-
29
Market Transition Charge Refund (PSE&G)
(72)
-
Total Pro-forma adjustments
(27)
$
27
$
Fully Diluted Average Shares Outstanding (in Millions)
507
507
Per Share Impact (Diluted)
Gain (Loss) on NDT Fund Related Activity (PSEG Power)
0.09
$
0.02
$
Gain (Loss) on MTM (PSEG Power)
-
(0.02)
Net Reversal of Lease Transaction Reserves (Energy Holdings)
-
0.05
Market Transition Charge Refund (PSE&G)
(0.14)
-
Total Pro-forma adjustments
(0.05)
$
0.05
$
December 31,
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
Reconciling
Items
Excluded
from
Continuing
Operations
to
Compute
Operating
Earnings
(Unaudited)
For the Twelve Months Ended
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. |