Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - PUBLIC SERVICE ELECTRIC & GAS CO | d305842d8k.htm |
| EX-99 - PRESS RELEASE DATED FEBRUARY 23, 2012 - PUBLIC SERVICE ELECTRIC & GAS CO | d305842dex99.htm |
 Public Service Enterprise Group
PSEG Earnings Conference Call
4
th
Quarter and Year-end 2011
February 23, 2012
Exhibit 99.1 |
 1
Forward-Looking Statement
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 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.
|
 2
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 slide in this presentation 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.
|
 PSEG
2011 Q4 and Full Year Review
Ralph Izzo
Chairman, President and Chief Executive Officer |
 4
Q4 Earnings Summary
$ millions (except EPS)
2011
2010
Operating Earnings
$ 237
$ 303
Reconciling Items, Net of Tax
123
(13)
Income from Continuing Operations
360
290
Discontinued Operations, Net of Tax
-
(8)
Net Income
360
282
EPS from Operating Earnings*
$ 0.47
$ 0.60
Quarter ended December 31
* See page 37 for Items excluded from Income from Continuing Operations to
reconcile to Operating Earnings. |
 5
Full-year Earnings Summary
$ millions (except EPS)
2011
2010
Operating Earnings
$ 1,389
$ 1,584
Reconciling Items, Net of Tax
18
(27)
Income from Continuing Operations
1,407
1,557
Discontinued Operations, Net of Tax
96
7
Net Income
1,503
1,564
EPS from Operating Earnings*
$ 2.74
$ 3.12
For the twelve months ended
December
31
* See page 37 for Items excluded from Income from Continuing Operations to
reconcile to Operating Earnings. |
 6
PSEG –
2011
2011 Earnings at Top End of Guidance
Operating
earnings
of
$2.74
compared
with
guidance
of
$2.50
-
$2.75
Another Year of Accomplishment, Despite Challenging Market Conditions
Hope Creek Nuclear produced record levels of generation
Record generation from CC fleet demonstrates benefits of diverse
fuel mix
Hope Creek and Salem license extensions obtained
PSE&G won its 10
th
consecutive Reliability One Award
PSE&G received NJBPU approval for additional $368 million of capital spend,
with supportive recovery mechanisms
Transmission investments received incentive rate treatment
Holdings continues to reduce financial risk through asset sales
Awarded 10-year contract to manage the LIPA electric system
Holdings acquired 25 MW solar project in Arizona
O&M Growth Contained, Focus on Operating Efficiency
Balance Sheet Strengthened, Flexibility Preserved |
 7
PSEG –
2012
Operating
Earnings
Guidance
for
2012
of
$2.25
-
$2.50
per
share
Power’s outlook influenced by low price for natural gas
PSE&G benefits from increased investment
Responding to Market Challenges
U.S District Court action proceeding on constitutionality of LCAPP law
under Supremacy and Commerce clauses
Foundation for the Future
On pace with Capital Program over 2012-2014
Balance Sheet strong
400 MW of new peaking capacity additions for 2012 in CT and NJ
Common Dividend Raised 3.6% to $1.42 per share
Change in Dividend Policy provides opportunity for growth
|
 8
2010 Operating Earnings*
2011 Operating Earnings*
2012 Guidance
$2.25 -
$2.50E
PSEG –
Introducing 2012 Guidance
$3.12
* See page 37 for Items excluded from Income from Continuing Operations to
reconcile to Operating Earnings.
$2.74 |
 PSEG
2011 Q4 Operating Company Review
Caroline Dorsa
EVP and Chief Financial Officer |
 10
Q4 Operating Earnings by Subsidiary
Operating Earnings
Earnings per Share
$ millions (except EPS)
2011
2010
2011
2010
PSEG Power
$ 134
$ 212
$ 0.27
$ 0.42
PSE&G
99
83
0.19
0.16
PSEG Energy Holdings
(1)
5
-
0.01
Enterprise
5
3
0.01
0.01
Operating Earnings*
$ 237
$ 303
$ 0.47
$ 0.60
Quarter ended December 31
* See page 37 for Items excluded from Income from Continuing Operations to
reconcile to Operating Earnings. |
 11
Full-year Operating Earnings by Subsidiary
Operating Earnings
Earnings per Share
$ millions (except EPS)
2011
2010
2011
2010
PSEG Power
$ 845
$ 1,091
$ 1.67
$ 2.15
PSE&G
521
430
1.03
0.85
PSEG Energy Holdings
5
49
0.01
0.10
Enterprise
18
14
0.03
0.02
Operating Earnings*
$ 1,389
$ 1,584
$ 2.74
$ 3.12
For the year ended December 31
* See page 37 for Items excluded from Income from Continuing Operations to
reconcile to Operating Earnings. |
 12
$0.60
(.15)
.03
(.01)
$0.47
0.00
0.35
0.70
PSEG EPS Reconciliation –
Q4 2011 versus Q4 2010
Q4 2011
Operating
Earnings*
Q4 2010
Operating
Earnings*
Lower Pricing (.12)
Coal
Optimization .02
Lower Volume (.01)
O&M (.01)
D&A (.02)
Call Premium (.02)
Taxes and Other .01
PSEG Power
Transmission .02
Capital Infrastructure
Investments .01
Weather (.02)
D&A (.01)
Taxes
and Other .03
PSE&G
PSEG Energy
Holdings
Lower Asset
Sale Gains,
Taxes and
Other
* See page 37 for Items excluded from Income from Continuing Operations to
reconcile to Operating Earnings. |
 13
$3.12
(.48)
.18
.01
$2.74
(.09)
0.00
0.65
1.30
1.95
2.60
3.25
PSEG EPS Reconciliation –
Full-year 2011 versus Full-
year 2010
2011
Operating
Earnings*
2010
Operating
Earnings*
Interest
and Other
Lower Pricing (.36)
Coal Optimization .07
Volume (.03)
O&M (.07)
D&A (.08)
Call Premium (.02)
Taxes and Other .01
PSEG Power
Transmission .05
Capital Infrastructure
Investments .06
Rate Relief .04
O&M .06
Weather .01
D&A (.03)
Interest (.01)
PSE&G
PSEG Energy
Holdings
Enterprise
Lower Asset Sale
Gains and
Impairment (.05)
Interest, Taxes
and Other (.04)
* See page 37 for Items excluded from Income from Continuing Operations to
reconcile to Operating Earnings. |
 14
PSEG –
Meeting Challenges by:
Delivering superior results from our fleet of well
positioned assets
Achieving earnings targets with focus on attaining top
quartile performance across the enterprise
Investing in areas with attractive risk-adjusted returns
that also support system reliability
Maintaining a strong balance sheet
Increasing cash return to shareholders through the
dividend |
 PSEG
Power 2011 Q4 Review |
 16
PSEG Power –
Q4 2011 EPS Summary
$ millions (except EPS)
Q4 2011
Q4 2010
Variance
Operating Revenues
$ 1,493
$ 1,575
$ (82)
Operating Earnings
134
212
(78)
NDT Funds Related
Activity,
Net of Tax
0
15
(15)
Mark-to-Market, Net of Tax
92
(28)
120
Income from Continuing Operations
226
199
27
Discontinued Operations, Net of Tax
-
(8)
8
Net Income
226
191
35
EPS from Operating Earnings*
$ 0.27
$ 0.42
$ (0.15)
* See page 37 for Items excluded from Income from Continuing Operations to
reconcile to Operating Earnings. |
 17
$0.27
(.05)
(.11)
.01
$0.42
0.00
0.10
0.20
0.30
0.40
0.50
Lower Prices and
Lower Volume
(.06)
Lower Capacity
(.07)
Coal Optimization
.02
PSEG Power EPS Reconciliation –
Q4 2011 versus Q4 2010
Q4 2011
operating
earnings*
Q4 2010
operating
earnings*
O&M (.01)
D&A (.02)
Call Premium
(.02)
* See page 37 for Items excluded from Income from Continuing Operations to
reconcile to Operating Earnings. Taxes and
Other |
 18
29,571
30,125
10,932
7,937
16,224
15,918
0
30,000
60,000
2010
2011
PSEG Power –
Generation Measures
6,993
7,474
3,532
3,830
2,286
897
0
7,500
15,000
2010
2011
Quarter ended December 31
Total Nuclear
Total Coal*
Oil & Natural Gas
* Includes figures for Pumped Storage
PSEG Power –
Generation (GWh)
12,811
12,201
Twelve months ended December 31
56,727
53,980
-4.8%
-4.8%
+1.9%
-1.9%
+8.4%
+6.9% |
 19
Hedging Update…
…
our strategy is to hedge our base load generation long term.
Contracted Energy*
*
Hedge
percentages
and
prices
as
of
February
9,
2012.
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.
Volume TWh
34
34
34
Base Load
% Hedged
100%
85-90%
30-35%
(Nuclear and Base Load Coal)
Price $/MWh
$59
$53
$57
Volume TWh
19
18
20
Intermediate Coal, Combined
% Hedged
35-40%
0
0
Cycle, Peaking
Price $/MWh
$59
Volume TWh
53
52
54
Total
% Hedged
75-80%
55-60%
20-25%
Price $/MWh
$59
$53
$57
2012
2013
2014 |
 20
PSEG Power –
Fuel Costs
Quarter ended December 31
($ millions)
2010
2011
Coal
78
31
Oil & Gas
160
136
Total Fossil
238
167
Nuclear
41
46
Total Fuel Cost
279
213
Total Generation
(GWh)
12,811
12,201
$ / MWh
22
17
PSEG Power –
Fuel Costs
Twelve months ended
December 31
($ millions)
2010
2011
Coal
405
302
Oil & Gas
764
666
Total Fossil
1,169
968
Nuclear
164
182
Total Fuel Cost
1,333
1,150
Total Generation
(GWh)
56,727
53,980
$ / MWh
24
21 |
 21
PSEG Power –
Gross Margin Performance
$0
$25
$50
$75
2009
2010
2011
$0
$25
$50
$75
2009
2010
2011
$51
$53
Quarter ended
December 31
Twelve months ended
December 31
$60
$54
Prices declined with reduction in energy and capacity pricing
Migration volumes in line with expectations, margins influenced by
warmer-than-normal weather
Output influenced by weather and compression in dark spreads
Regional Performance
Region
2011 Gross
Margin ($M)
2011 Performance
PJM
$2,672
2011 contribution to gross margin
declined by 9.5% versus year ago
reflecting lower pricing and capacity
payments, partly offset by strong
production from nuclear units.
New
England
$92
Bridgeport Harbor hurt by low prices
offset by coal sales.
New York
$43
Lower contract prices.
PSEG Power Gross Margin ($/MWh)
$49
$52 |
 22
Full Requirements Component
Capacity Markets/RPM
Growing Renewable Energy Requirements
Component for Market Risk
Market Perspective –
2012 BGS Auction Results
Note: BGS prices reflect PSE&G Zone
3 Year Average
Round the Clock
PJM West Forward
Energy Price
Capacity
Load shape
Transmission
Congestion
Ancillary services
Risk premium
Green
2005
2006
2007
2008
2009
2010
2011
2012
$44 -
$46
$67 -
$70
$58 -
$60
$68 -
$71
$56 -
$58
$48 -
$50
$65.41
~ $21
$102.51
~ $32
$98.88
~ $41
$111.50
~ $43
$103.72
~ $47
$95.77
~ $47
$45 -
$47
~ $48
$94.30
~ $46
$37 -
$38
$83.88 |
 23
PSEG Power –
Q4 2011 Operating Highlights
Q4 2011 and full-year output declined by 4.8%
2011 capacity factor for PS share of nuclear fleet at 92.8% with
record annual
generation production for Hope Creek
Combined cycle output at record level; improvements in forced outage rate
Operations
Regulatory and Market
Environment
Financial
2012 BGS auction priced at $83.88/MWh vs. $103.72/MWh for expiring contract
2012
anticipated
coal
and
nuclear
output
hedged
at
average
price
of
$59/MWh
Customer migration expanded to approximately 34% at year-end 2011
Power redeemed early $600 million of 6.95% Senior Notes due June
2012 in
December, reducing debt at year-end 2011 to 34% of Power’s
capitalization |
 PSE&G
2011 Q4 Review |
 25
PSE&G –
Q4 Earnings Summary
$ millions (except EPS)
Q4 2011
Q4 2010
Variance
Operating Revenues
$ 1,608
$ 1,882
$ (274)
Operating Expenses
Energy Costs
827
1,083
(256)
Operation & Maintenance
358
358
-
Depreciation & Amortization
171
187
(16)
Taxes Other than Income Taxes
31
35
(4)
Total Operating Expenses
1,387
1,663
(276)
Operating Earnings / Net Income
99
83
16
EPS from Operating Earnings*
$ 0.19
$ 0.16
$ 0.03
* See page 37 for Items excluded from Income from Continuing Operations to
reconcile to Operating Earnings. |
 26
$0.19
.03
(.01)
(.02)
.03
$0.16
0.00
0.05
0.10
0.15
0.20
0.25
PSE&G EPS Reconciliation –
Q4 2011
versus Q4 2010
Q4 2011
operating
earnings*
Q4 2010
operating
earnings*
Transmission
and Other
Investments
Taxes and
Other
* See page 37 for Items excluded from Income from Continuing Operations to
reconcile to Operating Earnings. D&A
Weather |
 27
PSE&G –
Q4 Operating Highlights
Annual transmission revenue increase of $94 million effective on
January 1, 2012
North East Grid Project received incentive rate treatment and a 25 bp ROE
adder NJBPU reviewing industry response to storm restoration efforts in
2011 PSE&G’s distribution operations earned their authorized
return Operations
Regulatory and Market
Environment
Financial
Heating Degree Days 24% below level experienced in 2010 and
18% below normal
O&M remains under control
Focused on maintaining reliability |
 PSEG
Energy Holdings 2011 Q4 Review |
 29
PSEG Energy Holdings –
Q4 2011 Earnings Summary
$ millions (except EPS)
Q4 2011
Q4 2010
Variance
Operating Earnings
$ (1)
$ 5
$ (6)
Lease Transaction Loss
(3)
-
(3)
Gain on Asset Sale
34
-
34
Net Income
$ 30
$ 5
$ 25
EPS from Operating Earnings*
$ 0.00
$ 0.01
$ (0.01)
* See page 37 for Items excluded from Income from Continuing Operations to
reconcile to Operating Earnings. |
 30
$0.01
(.01)
0.00
0.05
PSEG Energy Holdings EPS Reconciliation –
Q4 2011 versus
Q4 2010
Q4 2011
operating
earnings*
Q4 2010
operating
earnings*
2009 Lease
Sales
* See page 37 for Items excluded from Income from Continuing Operations to
reconcile to Operating Earnings. Lower Asset
Sale Gains,
Taxes and
Other
$0.00 |
 31
PSEG Energy Holdings –
Q4 Operating Highlights
Financial
Definitive agreement reached with the IRS that settles the tax
treatment for challenged lease transactions (LILO/SILO) for
all tax years
Qwest building sold in December 2011 for gain of $34 million
10-year LIPA management services agreement begins January 2014
Expanded interest in solar with purchase of 25 MW facility for
$75 million
Settlement reached in December 2011 with Dynegy in regard to the
lease arrangements for the Roseton and Danskammer facilities
leased to subsidiaries of Dynegy Holdings LLC (DH) |
 PSEG |
 33
PSEG Capital Expenditures 2012 -
2014
2012E
2013E
2014E
2012-14E
PSE&G
–
Transmission
$995
$1,320
$1,200
$3,515
–
Distribution
$660
$410
$435
–
Renewables/EMP
$250
$60
$25
Total PSE&G
$1,905
$1,790
$1,660
$5,355
Power
–
Maintenance
$330
$185
$175
–
Environmental
$70
$95
$80
–
Growth
$140
$120
$120
Total Power
$540
$400
$375
$1,315
Other
$45
$40
$30
$115 Solar
$75
$0
$0
$75
Total PSEG
$2,565
$2,230
$2,065
$6,860
Spending on transmission represents 51% of total budget and 66%
of PSE&G’s forecast level of spend
Power’s environmental capital expenditures below $100 million/year
$ in Millions; E = Estimate |
 34
PSEG Financial Highlights
2012
operating
earnings
guidance
of
$2.25
-
$2.50
per
share
Guidance by operating company
Financial risk associated with LILO/SILO investments eliminated
Financial position strengthened
Dividend increase continues practice of returning cash to shareholders
Debt : Capital ratio remained strong at 41% at year-end 2011
Limited impact of higher pension expense for 2012 |
 35
PSEG 2012 Operating Earnings Guidance -
PSEG 2012 Operating Earnings Guidance -
By Subsidiary
By Subsidiary
$ millions (except EPS)
2012E
2011A
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
$2.74
* See Page 37 for Items excluded from Income from Continuing Operations to
reconcile to Operating Earnings. |
 36
PSEG Liquidity as of December 31, 2011
Expiration
Total
Available
Company
Facility
Date
Facility
Usage
Liquidity
($Millions)
PSE&G
5-year Credit Facility
Apr-16
$600
$0
$600
5-Year Credit Facility (Power)
Dec-12
$1,525
1
$75
$1,450
5-Year Credit Facility (Power)
Apr-16
$1,000
$0
$1,000
5-Year Bilateral - (Power)
Sep-15
$100
$100
$0
5-year Credit Facility (PSEG)
Dec-12
$477
2
$12
$465
5-year Credit Facility (PSEG)
Apr-16
$500
$0
$500
Total
$4,202
$4,015
$643
PSE&G ST Investment
$115
Total Liquidity Available
$4,773
Total Parent / Power Liquidity
$4,058
1
Power Facility was reduced by $75 million in 12/2011
2
PSEG Facility was reduced by $23 million in 12/2011
PSEG /
Power
PSEG Money Pool ST Investment |
 37
Items Excluded from Income from Continuing Operations to
Reconcile to Operating Earnings
Please see Page 2 for an explanation of PSEG’s use of Operating Earnings as a
non-GAAP financial measure and how it differs from Net Income.
2011
2010
2011
2010
Earnings Impact ($ Millions)
Gain (Loss) on Nuclear Decommissioning Trust (NDT)
Fund Related Activity (PSEG Power)
-
$
15
$
50
$
46
$
Gain (Loss) on Mark-to-Market (MTM) (PSEG Power)
92
(28)
107
(1)
Lease Transaction Loss (Energy Holdings)
(3)
-
(173)
-
Market Transition Charge Refund (PSE&G)
-
-
-
(72)
Gain on Sale of Qwest Building (Energy Holdings)
34
-
34
-
Total Pro-forma adjustments
123
$
(13)
$
18
$
(27)
$
Fully Diluted Average Shares Outstanding (in Millions)
507
507
507
507
Per Share Impact (Diluted)
Gain (Loss) on NDT Fund Related Activity (PSEG Power)
-
$
0.03
$
0.10
$
0.09
$
Gain (Loss) on MTM (PSEG Power)
0.18
(0.06)
0.21
-
Lease Transaction Loss (Energy Holdings)
-
-
(0.34)
-
Market Transition Charge Refund (PSE&G)
-
-
-
(0.14)
Gain on Sale of Qwest Building (Energy Holdings)
0.06
-
0.06
-
Total Pro-forma adjustments
0.24
$
(0.03)
$
0.03
$
(0.05)
$
December 31,
December 31,
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
Reconciling Items Excluded from Continuing Operations to Compute Operating Earnings
(Unaudited)
Pro-forma Adjustments, net of tax
For the Three Months Ended
For the Year Ended |