EX-99 2 d398488dex99.htm EX-99

EX-99

Forward-Looking Statements

Certain of the matters discussed in this report about our and our subsidiaries' future performance, including, without limitation, future revenues, earnings, strategies, prospects, consequences and

all other statements that are not purely historical constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking

statements

are

subject

to

risks

and

uncertainties,

which

could

cause

actual

results

to

differ

materially

from

those

anticipated.

Such

statements

are

based

on

management's

beliefs

as

well

as

assumptions made by and information currently available to management. 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. Factors that may cause actual results to differ are often

presented with the forward-looking statements themselves. Other factors that could cause actual results to differ materially from those contemplated in any forward-looking statements made by us

herein are discussed in filings we make with the United States Securities and Exchange Commission (SEC) including our Annual Report on Form 10-K and subsequent reports on Form 10-Q and

Form 8-K and available on our website: http://www.pseg.com. These factors include, but are not limited to:

•

adverse changes in the demand for or ongoing low pricing of the capacity and energy that we sell into wholesale electricity markets,

•

adverse changes in energy industry law, policies and regulations, including market structures and transmission planning,

•

any inability of our transmission and distribution businesses to obtain adequate and timely rate relief and regulatory approvals from federal and state regulators, including prudency reviews,

disallowances

and changes in authorized returns,

•

any deterioration in our credit quality or the credit quality of our counterparties,

•

changes in federal and state environmental regulations and enforcement that could increase our costs or limit our operations,

•

adverse

outcomes

of

any

legal,

regulatory

or

other

proceeding,

settlement,

investigation

or

claim

applicable

to

us

and/or

the

energy

industry,

•

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 or increase the cost 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 manage our energy obligations, available supply and risks,

•

delays or unforeseen cost escalations in our construction and development activities, or the inability to recover the carrying amount of our assets,

•

availability of capital and credit at commercially reasonable terms and conditions and our ability to meet cash needs,

•

increases in competition in energy supply markets as well as for transmission projects,

•

changes in technology, such as distributed generation, storage and micro grids, and greater reliance on these technologies,

•

changes in customer behaviors, including increases in energy efficiency, net-metering and demand response,

•

adverse performance of our decommissioning and defined benefit plan trust fund investments and changes in funding requirements,

•

any equipment failures, accidents, severe weather events or other incidents that impact our ability to provide safe and reliable service to our customers, and any inability to obtain sufficient

insurance coverage or recover proceeds of insurance with respect to such events,

•

acts of terrorism, cybersecurity attacks or intrusions that could adversely impact our businesses,

•

delays in receipt of necessary permits and approvals for our construction and development activities,

•

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

•

changes in the cost of, or interruption in the supply of, fuel and other commodities necessary to the operation of our generating units,

•

an extended economic recession,

•

an inability to realize anticipated tax benefits or retain tax credits,

•

challenges associated with recruitment and/or retention of a qualified workforce, and

•

changes in the credit quality and the ability of lessees to meet their obligations under our domestic leveraged leases.

All of the forward-looking statements made in this report are qualified by these cautionary statements and we cannot assure you that the results or developments anticipated by management will be

realized or even if realized, will have the expected consequences to, or effects on, us or our business prospects, financial condition or results of operations. Readers are cautioned not to place

undue reliance on these forward-looking statements in making any investment decision. Forward-looking statements made in this report apply only as of the date of this report. While we may elect

to update forward-looking statements from time to time, we specifically disclaim any obligation to do so, even if internal estimates change, unless otherwise required by applicable securities laws.

The

forward-looking

statements

contained

in

this

report

are

intended

to

qualify

for

the

safe

harbor

provisions

of

Section

27A

of

the

Securities

Act

of

1933,

as

amended,

and

Section

21E

of

the

Securities Exchange Act of 1934, as amended.

EXHIBIT 99

2

GAAP Disclaimer

These materials and other financial releases can be found on the pseg.com website under

the investor tab, or at http://investor.pseg.com/

PSEG presents Operating Earnings and Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) in

addition to its Net Income reported in accordance with accounting principles generally accepted in the United States (GAAP).

Operating Earnings and Adjusted EBITDA are non-GAAP financial measures that differ from Net Income. Operating Earnings exclude

gains or losses associated with Nuclear Decommissioning Trust (NDT), Mark-to-Market (MTM) accounting, and material one-time

items.  Adjusted EBITDA excludes the same items as our Operating Earnings measure as well as income tax expense, interest

expense, depreciation and amortization and major maintenance expense costs at Power’s fossil generation facilities. The last two

slides in this presentation (Slides A and B) include a list of items excluded from Net Income to reconcile to Operating Earnings

and

Adjusted EBITDA with a reference to that slide included on each of the slides where the non-GAAP information appears.

Management uses Operating Earnings and Adjusted EBITDA in its internal analysis, and in communications with investors and

analysts, as a consistent measure for comparing PSEG’s financial performance to previous financial results. The presentation of

Operating Earnings and Adjusted EBITDA is intended to complement, and should not be considered an alternative to, the

presentation of Net Income, which is an indicator of financial performance determined in accordance with GAAP. In addition,

Operating Earnings and Adjusted EBITDA as presented in this release may not be comparable to similarly titled measures used by

other companies.

Due to the forward looking nature of Operating Earnings and Adjusted EBITDA guidance, PSEG is unable to reconcile these non-

GAAP financial measures to the most directly comparable GAAP financial measure.  Management is unable to project certain

reconciling items, in particular MTM and NDT gains (losses), for future periods due to market volatility.

3

Operational Excellence:  Maintaining

reliability and improving performance as we

control costs in low price environment

Financial

Strength:  Strong financial position

supports investment program and dividend

growth

Disciplined Investment:

•

Balanced business mix

•

Robust pipeline of opportunities

Results:

•

3

rd

year of Operating EPS* growth

•

Continued dividend growth

•

Best in class utility growth rate

•

Addition of efficient CCGT capacity

enhances market position

DISCIPLINED

INVESTMENT

DISCIPLINED

INVESTMENT

OPERATIONAL

EXCELLENCE

OPERATIONAL

EXCELLENCE

FINANCIAL

STRENGTH

FINANCIAL

STRENGTH

ENGAGED

WORKFORCE

ENGAGED

WORKFORCE

PSEG’s Strategy 

Investment program delivering results

* SECOND YEAR OF EPS GROWTH.

6

PSE&G’s investment program

Meeting public policy goals and customer needs

PSE&G Rate Base and Earnings

* DISTRIBUTION RATE BASE INCLUDES SOLAR AND ENERGY EFFICIENCY

2011-2015

EPS

CAGR:  11%

PSE&G Earnings

11

Operating Earnings

Disciplined investment program and focus on operational

excellence have supported growth

Power’s

diverse fuel

mix and dispatch

flexibility continue to

generate strong

earnings and free cash

flow in low price

environment

PSE&G’s

investment

program has resulted

in an increased

contribution to PSEG’s

earnings

*SEE SLIDE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/NET INCOME TO RECONCILE TO OPERATING

EARNINGS.  E=ESTIMATE   ** 2016 PERCENTS USE MIDPOINT OF 2016 OPERATING EARNINGS GUIDANCE.

Operating Earnings* Contribution by Subsidiary

**

**

14

$2.76

Achieved ~11% annual earnings growth

over the past four years through implementation of supportive rate

mechanisms on our expanded capital program and cost control

$1.03

$1.04

$1.21

$1.43

$1.55

2011

2012

2013

2014

2015

PSE&G Earnings Per Share

24

Increasing investment across our portfolio 

Transmission

•

Large portfolio of projects to meet ongoing reliability and life-cycle

requirements

Electric Distribution

•

Base spending

•

Infrastructure investment programs with clause recovery

Energy Strong (ES) and related programs

Electric System Modernization Program (ESMP)

Gas Distribution

•

Base spending

•

Infrastructure investment programs with clause recovery

Energy Strong (ES) and related programs

Gas System Modernization Program (GSMP)

Solar and Energy Efficiency

•

Recently filed with NJBPU to extend our successful Solar 4 All program, with a

request to invest an additional ~$240 million to develop an additional 100 MW

dc

of grid-connected solar capacity on landfills and brownfields by year-end 2021

26

Solar –

Investment supports New Jersey

policy objectives which have evolved with

focus on utility-scale landfill solar

Program

•

Solar Loan I, II & III

•

Solar 4 All (S4A)

•

S4A Extension

•

Solar Loan III

•

S4A Extension

Requested S4A Extension

(for additional 100 MW

dc

) focused

on landfill and brownfield sites

Investment

~$545M

~$140M

May 2016 request to invest

~$240M in a multi-year program

ROE /

Recovery

mechanism

9.75% -

10.3%

Clause recovery

9.75%

Clause recovery

TBD

Clause recovery

2011 –

2015           

2016 –

2020

(base)

Incremental to base –

Emergent and ongoing

31

PSE&G’s 2016 earnings updated to reflect

first-half 2016 results, expanded investment programs and cost

control over the balance of the year

$725

$787

2014

2015

2016 Guidance

PSE&G Earnings

($ Millions)

$900 --

$935E

E =ESTIMATE.  UPDATED AS OF JULY 29, 2016,

37

Nuclear is a critical element of our

success

Hope Creek

•

Operated by PSEG Nuclear

•

PSEG Ownership: 100%

•

Technology: Boiling Water

Reactor

•

Total Capacity: 1,176 MW

•

Owned Capacity: 1,176 MW

•

License Expiration: 2046

•

Next Refueling

Fall 2016

•

Uprate 18MW Spring 2018

Salem

Units 1 and 2

•

Operated by PSEG Nuclear

•

PSEG Ownership: 57%

•

Technology: Pressurized

Water Reactor

•

Total Capacity: 2,294 MW

•

Owned Capacity: 1,317 MW

•

License Expiration: 2036

and 2040

•

Next Refueling

Unit 1 –

Fall 2017

Unit  2 –

Spring 2017

Peach Bottom

Units 2 and 3

•

Operated by Exelon

•

PSEG Ownership: 50%

•

Technology: Boiling Water

Reactor

•

Total Capacity: 2,502 MW

•

Owned Capacity: 1,251 MW

•

License Expiration: 2033

and 2034

•

Next Refueling

Unit 2 –

Fall 2016

Unit 3 –

Fall 2017

•

Uprate:  130 MW (PS Share)

Unit 2 –

March 2015

Unit 3 –

December 2015

52

Power’s 2016 operating earnings range

adjusted to incorporate results from the first half of 2016

Power Operating Earnings*

($ Millions)

2014

2015

2016 Guidance

$642

$653

$460 –

$525E

*SEE SLIDE A FOR ITEMS EXCLUDED FROM NET INCOME TO RECONCILE TO OPERATING EARNINGS.      E = ESTIMATE.

UPDATED AS OF JULY 29, 2016.

Net Income

$760

Net Income

$856

58

Market Review:

YTD 2016 impacted by weather but forward gas and electric

prices retain seasonal volatility

FORWARDS AS OF JULY 25, 2016

PJM West vs. PS Zone Spark Spreads (2015-2019)

2016 -

2019 Z6

2016  -

2019 PJM West RTC

62

HEDGE PERCENTAGES AND PRICES AS OF JUNE 30, 2016. UPDATED WITH 2016 BGS AUCTION RESULTS.  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. 

Hedging Strategy:  Designed to protect gross margin while

leveraging the portfolio

70

Jul-Dec

2016

2017

2018

Volume TWh

17

36

36

Base Load

% Hedged

100%

80-85%

40-45%

(Nuclear and Base Load Coal)

Price $/MWh

$50

$48

$46

Volume TWh

8

18

23

Intermediate Coal, Combined

% Hedged

30-35%

0%

0%

Cycle, Peaking

Price $/MWh

$50

-

-

Volume TWh

25-26

53-55

58-60

Total

% Hedged

75-80%

55-60%

25-30%

Price $/MWh

$50

$48

$46

PSEG Operating Results

$ Millions (except EPS)

2012

2013

2014

2015

2016E Guidance

PSE&G

$528

$612

$725

$787

$900 -

$935

PSEG Power*

$663

$710

$642

$653

$460 -

$525

Enterprise/Other

$45

($13)

$33

$36

$65

Operating Earnings*

$1,236

$1,309

$1,400

$1,476

$1,425 -

$1,525

Operating EPS*

$2.44

$2.58

$2.76

$2.91

$2.80 -

$3.00E

Net Income

$1,275

$1,243

$1,518

$1,679

EPS

$2.51

$2.45

$2.99

$3.30

% YOY Increase –

PSE&G

15.9%

18.5%

8.6%

16.6%

1

% Regulated Earnings

43%

47%

52%

53%

62%

1

A higher regulated earnings mix due

to

growth in PSE&G earnings with a significant contribution from Power

*SEE SLIDE A FOR ITEMS EXCLUDED FROM NET INCOME TO RECONCILE TO OPERATING EARNINGS.

1 -

BASED

ON

MID-POINT

OF

2016

OPERATING

EARNINGS

GUIDANCE.

E=

ESTIMATE

UPDATED

AS

OF

JULY

29,

2016.

77

Strong financial position to support our

business initiatives in 2016 and beyond

2016 and Beyond

Earnings

Continuing strong earnings trend in 2016 with guidance

of $2.80 to $3.00 per share

Investment

Deploying significant capital at PSE&G for projects with

contemporaneous returns

Pursuing Power projects that satisfy risk adjusted return

targets

Cash Flow and Credit

Metrics

Continuing strong internal cash flow aided by bonus

depreciation

Funding investment program without equity issuance

Dividends

Providing $0.08 per share dividend increase in 2016 with

opportunity for consistent and sustainable growth

78

PSE&G

EPS

Annual Dividend Per Share

(2011-2016 CAGR: 3.7%)

Opportunity

for

meaningful and sustainable

dividend growth given significant contribution from PSE&G

earnings and Power’s strong financial profile

Payout

Ratio

50%

58%

56%

54%

54%

57%

(1)

88

$1.84E

$1.77E

$1.64

$1.37

$1.42

$1.44

$1.48

$1.56

$0.80

$1.00

$1.20

$1.40

$1.60

$1.80

$2.00

2011

2012

2013

2014

2015

2016E

(1)

THE 2016 PAYOUT RATIO IS BASED ON THE MIDPOINT OF PSEG'S 2016 OPERATING EARNINGS GUIDANCE

OF $2.80-$3.00E PER SHARE. SEE SLIDE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING

OPERATIONS/NET INCOME TO RECONCILE TO OPERATING EARNINGS.   E=ESTIMATE

PSEG Summary

•

2015 Operating Earnings of $2.91 were at the upper end of our upwardly revised

guidance of $2.85 -

$2.95 per share

•

Forecast high single-digit rate base growth at PSE&G on five year basis from

2015 to 2020, driven by investment in transmission and approved programs

•

Power’s investment program and continued focus on operational excellence with

financial strength delivers value in current price environment

•

Strong Balance Sheet and Cash Flow support current capital program and

investment in new opportunities without the need for equity

•

Our indicative $0.08 dividend per share increase for 2016 is consistent with our long

history of returning cash to the shareholder through the common dividend, with

opportunity for consistent and sustainable growth

90

PSEG Financial Highlights

* SEE SLIDE B FOR ITEMS EXCLUDED FROM NET INCOME TO RECONCILE TO OPERATING EARNINGS.

Maintaining full-year 2016 Operating Earnings guidance of $2.80 -

$3.00

per share*

Reaching the upper end of our guidance range in 2016 will be difficult even with

improvements seen in the power markets, expectations for warm summer weather,

normal operations and management of O&M

Focused on meeting customer needs for clean, reliable, efficient delivery of energy

Infrastructure Spend

PSE&G capital spending on T&D for 2016 expected to top $3 billion

PSE&G’s Gas System Modernization Program (GSMP) and Energy Strong continue

Keys and Sewaren CCGTs construction is on schedule and on budget

PSE&G has identified more than $500 million of additional infrastructure spend over

the current capital spending plan of $12 billion in the 2016-2020 period

Financial position remains strong

Positive cash from Power and increasing cash flow from operations at PSE&G supports

dividend growth and funds capital spending program without the need to issue equity

Debt as a percentage of capitalization was 45% at June 30

99

June 30, 2016

$ Billions 

PSEG

PSE&G

Power

Cash and Cash Equivalents

$0.6

$0.2

$0.0

Short Term Debt

$0.0

$0.0

N/A

Long Term Debt

(2)

10.9

7.5

2.9

Common Equity

13.3

8.0

6.3

Total Capitalization

$24.2

$15.5

$9.2

Total Debt / Capitalization

45%

48%

32%

PSE&G Regulated Equity Ratio

(1)

51.4%

Our balance sheet remains strong

(1)

REGULATED EQUITY RATIO INCLUDES CUSTOMER DEPOSITS OF ~$96 MILLION AND EXCLUDES SHORT-TERM DEBT.

(2)   INCLUDES L-T DEBT DUE WITHIN 1 YEAR; EXCLUDES  NON-RECOURSE DEBT OF $7 MILLION.

102

PSEG Energy Holdings

Investment Portfolio

Equipment

Investment  Balance *            

at 06/30/16

($millions)

Merchant Energy Leases

NRG  REMA

Keystone, Conemaugh & Shawville (PA)

3 coal-fired plants (1,162 equity MW)

$ 355

NRG Energy, Inc. / Midwest Gen**

Powerton & Joliet Generating Stations (IL)                             

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

$ 218

Regulated Energy Leases

Merrill Creek

Reservoir in NJ  (PECO, MetEd, Delmarva Power & Light)

$ 159

Grand Gulf

Nuclear station in Mississippi (175 equity MW)

$  13

Real Estate Leveraged Leases

GM Renaissance Center; Wal-Marts

$ 58

Real Estate Operating Leases

Office Towers, Shopping Centers -

26 properties

$ 32

Other

Land

$ 5

Total Holdings Investments

$840

* BOOK BALANCE EXCLUDING  DEFERRED TAX ACCOUNTS

**EME AND ITS SUBSIDIARIES FILED CHAPTER 11 BANKRUPTCY ON 12/17/2012.

EME WAS ACQUIRED BY NRG ON APRIL 1 2014.  

104

Items Excluded from Income from Continuing

Operations/Net Income to Reconcile to Operating Earnings

PLEASE SEE PAGE 3 FOR AN EXPLANATION OF PSEG’S USE OF OPERATING EARNINGS AS A NON-GAAP FINANCIAL MEASURE

AND HOW IT DIFFERS FROM NET INCOME.

A

2015

2014

2013

2012

Operating Earnings

1,476

$        

1,400

$        

1,309

$        

1,236

$        

Gain (Loss) on Nuclear Decommissioning Trust (NDT)

Fund Related Activity, pre-tax (PSEG Power)

24

138

86

104

Gain (Loss) on Mark-to-Market (MTM), pre-tax

(a)

(PSEG Power)

157

111

(125)

(18)

Storm O&M, net of insurance recoveries, pre-tax (PSEG Power)

172

(27)

(54)

(66)

Lease Transaction Activity, pre-tax (PSEG Enterprise/Other)

-

-

-

61

Income Taxes related to Operating Earnings reconciling items

(b)

(150)

(104)

27

(42)

Net Income

1,679

$        

1,518

$        

1,243

$        

1,275

$        

Fully Diluted Average Shares Outstanding (in Millions)

508

508

508

507

Operating Earnings

2.91

$          

2.76

$          

2.58

$          

2.44

$          

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

0.05

0.27

0.17

0.21

Gain (Loss) on Mark-to-Market (MTM), pre-tax

(a)

(PSEG Power)

0.31

0.22

(0.25)

(0.04)

Storm O&M, net of insurance recoveries, pre-tax (PSEG Power)

0.34

(0.05)

(0.11)

(0.13)

Lease Transaction Activity, pre-tax (PSEG Enterprise/Other)

-

-

-

0.12

Income Taxes related to Operating Earnings reconciling items

(b)

(0.31)

(0.21)

0.06

(0.09)

Net Income

3.30

$          

2.99

$          

2.45

$          

2.51

$          

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

(b) Income tax effect calculated at 40.85% statutory rate, plus 20% tax on income (losses) from qualified NDT funds.

($ Per Share Impact -

Diluted, Unaudited)

Consolidated Operating Earnings Reconciliation

PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

Reconciling Items

For the Year Ended

December 31,

($ Million, Unaudited)

Items Excluded from Income from Continuing

Operations/Net Income to Reconcile to Operating Earnings

PLEASE SEE PAGE 3 FOR AN EXPLANATION OF PSEG’S USE OF OPERATING EARNINGS AS A NON-GAAP FINANCIAL MEASURE

AND HOW IT DIFFERS FROM NET INCOME.

B

2016

2015

2016

2015

2015

2014

Operating Earnings

289

$        

289

$     

752

$        

818

$     

1,476

$     

1,400

$   

Gain (Loss) on Nuclear Decommissioning Trust (NDT)

Fund Related Activity, pre-tax (PSEG Power)

-

3

(8)

10

24

138

Gain (Loss) on Mark-to-Market (MTM), pre-tax

(a)

(PSEG Power)

(171)

48

(149)

14

157

111

Storm O&M, net of insurance recoveries, pre-tax (PSEG Power)

-

45

-

172

172

(27)

Income Taxes related to Operating Earnings reconciling items

(b)

69

(40)

63

(83)

(150)

(104)

Net Income

187

$        

345

$     

658

$        

931

$     

1,679

$     

1,518

$   

Fully Diluted Average Shares Outstanding (in Millions)

508

508

508

508

508

508

Operating Earnings

0.57

$       

0.57

$    

1.48

$       

1.61

$    

2.91

$       

2.76

$    

Gain (Loss) on NDT Fund Related Activity, pre-tax (PSEG Power)

-

0.01

(0.01)

0.02

0.05

0.27

Gain (Loss) on MTM, pre-tax

(a)

(PSEG Power)

(0.34)

0.09

(0.29)

0.02

0.31

0.22

Storm O&M, net of insurance recoveries, pre-tax (PSEG Power)

-

0.09

-

0.34

0.34

(0.05)

Income Taxes related to Operating Earnings reconciling items

(b)

0.14

(0.08)

0.12

(0.16)

(0.31)

(0.21)

Net Income

0.37

$       

0.68

$    

1.30

$       

1.83

$    

3.30

$       

2.99

$    

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

(b) Income tax effect calculated at 40.85% statutory rate, plus 20% tax on income (losses) from qualified NDT funds.

($ Millions, Unaudited)

($ Per Share Impact -

Diluted, Unaudited)

PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

Consolidated Operating Earnings Reconciliation

Year-Ended

June 30,

December 31,

Six Months Ended

June 30,

Three Months Ended

Reconciling Items