PUBLIC SERVICE ELECTRIC & GAS CO - FORM 8-K - EX-99 - SELECTED PRESENTATION SLIDES

Attached files

file	filename
8-K - FORM 8-K - PUBLIC SERVICE ELECTRIC & GAS CO	d347512d8k.htm

Forward-Looking Statement

EXHIBIT 99

Readers are cautioned that statements contained in this presentation about our 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 “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 the demand for or price of the capacity and energy that we sell into wholesale electricity markets,

• 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,

• any inability to achieve or continue to sustain, our expected levels of operating performance,

• increase in competition in energy supply markets as well as competition for certain rate-based transmission projects,

• 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.

GAAP Disclaimer

PSEG presents Operating Earnings in addition to its Net Income reported in

accordance with generally accepted accounting principles

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

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 page in this presentation (Page A)

includes 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.

Our 2012 earnings guidance is influenced by a

decline in energy prices and increased investment

at PSE&G

2012 Operating Earnings Forecast

*See page A for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings; All periods reflect Texas in

Discontinued Operations. E=Estimate.

2011 Operating Earnings*

2012 Guidance

$2.25 to $2.50E

$2.74

Guidance

$1.31

$1.13

PSEG’s 2012 earnings guidance of $2.25 to $2.50

reflects continued improvement at PSE&G and a

decline in margins at Power

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

2011 Operating Earnings*

2012E Earnings Guidance*

PSE&G Earnings Per Share

2012 Assumptions

PSE&G

Growth in investments that provide

contemporaneous returns

—

Transmission

—

Distribution economic stimulus programs

—

Programs supporting NJ’s Energy Master

Plan

Power

Impacted by lower energy prices

Near term effects minimized by hedges in place

~400MW new Peaking capacity in-service mid

2012

Energy Holdings / Parent

Operating earnings guidance of $0.07 to $0.09

$0.00

$0.50

$1.00

$1.50

$2.00

2011 Operating Earnings*

2012E Earnings Guidance*

Power Earnings Per Share

Guidance

$1.10

$1.05

*See

page

for

Items

excluded

from

Income

from

Continuing

Operations

reconcile

Operating

Earnings;

2011

reflects

Texas

Discontinued

Operations. E = Estimate

The

business

PSEG:

Returning

cash

investors

through common dividends and preserving flexibility to

invest for future growth

PSEG Annual Dividend Rate

$1.08

$1.10

$1.12

$1.14

$1.17

$1.29

$1.33

$1.37

$1.42

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Payout

Ratio

111%

62%

70%

63%

66%

43%

44%

43%

44%

50%

60%*

5-year Rate of Growth 3.95%

10-year Rate of Growth 2.78%

*Based on mid-point of 2012 operating earnings guidance.

Actively managing our fleet in a volatile commodity

market, with an asset profile that provides diverse

opportunities for value creation

•

Steep natural gas decline has had a major impact on US power prices and Dark Spreads

•

Coal prices have been supported by long-term contracting and international demand

•

Decline in Dark Spread has led to reduced coal-fired generation in the last 15 months

•

Power’s investments in dual-fuel capability at Hudson and Mercer coal units have made

them more attractive than many other coal units in this environment, and we have switched

to gas generation as economics dictate

2014

Forward

Prices

Dark

Spread*

2013

Forward

Prices

Dark

Spread*

* As of April 27, 2012.

•

Low power prices are not a good environment for any merchant generator, although Power is

more of a hybrid with long-term contracting through BGS sales as well as forward hedging

•

Forward markets signal continued strength in Spark Spreads and Heat Rates

•

Strong spark spreads in the Northeast have benefitted our gas-fired fleet

•

Power is well positioned with hedged nuclear output and efficient combined cycle margin

contribution

Henry

Hub

Gas

Forwards*

2013 and 2014 RTC

Forward

Prices

Spark

Spread*

2013

2014

2015

Managing our fleet to capitalize on volatility

* As of April 27, 2012.

PSEG Resources Leveraged Lease Portfolio

Lessee

Equipment

3/31/12

Invested

($ millions)

S&P

Credit

Rating*

REMA (GenOn)

Keystone, Conemaugh & Shawville (PA)

3 coal fired plants (1,162

equity MW)

334

Dynegy Holdings

Danskammer & Roseton Generating Station (NY)

370 MW coal fired and 1,200 MW oil/gas fired

Edison Mission

Energy (EME)

Powerton & Joliet Generating Stations (IL)

2 coal-fired generating facilities (1,640 equity MW)

218

CCC+

Merrill Creek –

(PECO, MetEd,

Delmarva P&L)

Reservoir in NJ

130

BBB,

BBB-,

BBB+

Grand Gulf

Nuclear station in Mississippi (154 equity MW)

A+

Renaissance Ctr.

Office towers located in Detroit, MI leased to GM

BB+

Wal-Mart

Portfolio of 6 Wal-Mart stores

E-D Centers

Portfolio of 8 shopping centers

Total Leases

$824

*Indicative recent rating as of 4/16/2012 reflecting either Lessee, additional equity collateral support or parent company unsecured

debt rating.

PSEG 2012 Operating Earnings Guidance

By Subsidiary

$ millions (except EPS)

2012E

2011

PSEG Power

$575 –

$665

$ 845

PSE&G

$530 –

$560

$ 521

PSEG Energy Holdings/Parent

$35 –

$45

$ 23

Operating Earnings*

$1,140 –

$1,270

$ 1,389

Earnings per Share

$ 2.25 –

$ 2.50

$2.74

* See page A for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings.

Tax Update

Definitive agreement reached with the IRS that settles the tax

treatment for challenged lease transactions (LILO/SILO) for all

tax years

Settlement reached with the IRS for all federal audit issues for

tax years 1997-2006

Expected net refund of ~$170M

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.

Page A

Attachment 10

2012

2011

2010

2009

Earnings Impact ($ Millions)

Gain (Loss) on Nuclear Decommissioning Trust (NDT)

Fund Related Activity (PSEG Power)

Gain (Loss) on Mark-to-Market (MTM)

(a)

(PSEG Power)

107

(1)

(11)

Lease Related Activity (PSEG Energy Holdings)

(173)

Market Transition Charge Refund (PSE&G)

(72)

Gain on Sale of Qwest Building (Energy Holdings)

Total Pro-forma adjustments

(27)

Fully Diluted Average Shares Outstanding (in Millions)

507

Per Share Impact (Diluted)

Gain (Loss) on NDT Fund Related Activity (PSEG Power)

0.01

0.05

0.10

0.09

0.02

Gain (Loss) on MTM

(a)

(PSEG Power)

0.10

0.01

0.21

(0.02)

Lease Related Activity (PSEG Energy Holdings)

0.01

(0.34)

0.05

Market Transition Charge Refund (PSE&G)

(0.14)

Gain on Sale of Qwest Building (Energy Holdings)

0.06

Total Pro-forma adjustments

0.12

0.06

0.03

(0.05)

0.05

(a) Includes the financial impact from positions with forward delivery months.

For the Three Months Ended

For the Year Ended

March 31,

PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

Reconciling Items Excluded from Continuing Operations to Compute Operating Earnings

(Unaudited)

Pro-forma Adjustments, net of tax

December 31,

PUBLIC SERVICE ELECTRIC & GAS CO - FORM 8-K - EX-99 - SELECTED PRESENTATION SLIDES - May 8, 2012

Attached files

Also read