Public Service Enterprise Group Unveils 5-Year Capital Budget - Analyst Blog

Public Service Enterprise Group Inc. PEG or PSEG has provided its capital investment projection for the coming five years. The company plans to invest around $12 billion, including $10 billion which is expected to be allocated for its unit Public Service Electric and Gas Company (“PSE&G”).

Public Service Enterprise Group intends to spend the funds primarily to upgrade transmission facility, which was authorized by the PJM Interconnection L.L.C.

Of the projected investment of $10 billion, PSE&G plans to spend $6.8 billion for transmission projects. Currently, PSE&G is in the middle of five vital ventures. Post completion, the company can add 345-kilovolt line by Jun 2018. These initiatives will enable the company to provide uninterrupted services to its customers while managing estimated system overloads.

We believe that a stable cash position and capacity to improve cash inflow through operating activities support Public Service Enterprise Group's steady infrastructure upgrade and expansion ventures. As of Dec 31, 2013, the company's cash balance was around $0.5 billion, up 31.6% from $0.38 billion as of Dec 31, 2012. For 2013, cash flow from operating activities increased 13.3% to $3.16 billion from the prior-year comparable figure.

In addition to investment in transmission ventures, Public Service Enterprise Group is also expanding its scale of power generation. The company plans to raise output capacity by 130 megawatts MW at its nuclear facilities and by 150 MW at its combined cycle power plants. These will help the company to meet increased customer demand.

Public Service Enterprise Group is expected to invest more under its Energy Strong Program to solidify its delivery assets. This program is subject to the New Jersey Board of Public Utilities' approval. If approved, the program will enable the company to guard its substations which were affected by water as a result of Hurricane Irene in 2011 and Superstorm Sandy in 2012.

Apart from announcing its five-year capital spending program, Public Service Enterprise Group also reported its 2014 earnings estimates. The company reiterated earnings guidance in the range of $2.55 to $2.75 per share. As per the Zacks Consensus Estimate, the company's earnings in 2014 were $2.70 per share. The company's regulated business is expected to provide 55% of the annual bottom line. Public Service Enterprise Group's Long Island operations will contribute earnings of 3 cents in 2014.

Public Service Enterprise Group currently has a Zacks Rank #1 (Strong Buy). Some other stocks worth considering in the utility industry include Exelon Corporation EXC, OGE Energy Corp. OGE and CMS Energy Corporation CMS. While Exelon holds a Zacks Rank #1 (Strong Buy), OGE Energy and CMS Energy carry a Zacks Rank #2 (Buy).