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PSEG Announces 2019 Third Quarter Results

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NEWARK, N.J., Oct. 31, 2019 /PRNewswire/ -- Public Service Enterprise Group (NYSE:PEG) reported today Net Income for the third quarter of 2019 of $403 million, or $0.79 per share as compared to Net Income of $412 million, or $0.81, in the third quarter of 2018.  Non-GAAP Operating Earnings for the third quarter of 2019 were $495 million, or $0.98 per share, compared to non-GAAP Operating Earnings for third quarter 2018 of $481 million, or $0.95 per share.  Non-GAAP Operating Earnings for third quarter 2019 exclude the recognition of net unrealized losses on Nuclear Decommissioning Trust equity securities, Mark-to-Market losses, and an incremental, pre-tax loss associated with the disposition of the company's interests in two fossil generation plants.  

Public Service Enterprise Group (PSEG) is a publicly traded diversified energy company. Its operating subsidiaries are: PSEG Power, Public Service Electric and Gas Company (PSE&G) and PSEG Long Island.

Ralph Izzo, chairman, president and chief executive officer, said "PSEG delivered solid operating performance for the third quarter, and posted financial results that benefited from PSE&G's ongoing investment in New Jersey's energy infrastructure, which continues to offset the headwinds in the power business from lower energy prices.  During the quarter, the New Jersey Board of Public Utilities (NJBPU) approved PSE&G's Energy Strong II settlement that authorizes investment in electric and gas system reliability and resiliency improvements over the next four years.  We continue to eagerly pursue the Clean Energy Future filing, consistent with Governor Murphy's clean energy goals, to advance these important programs to cost-effectively reduce emissions." 

"PSEG Power closed on the sale of its interests in the Keystone and Conemaugh generating units during the quarter, which continues the elimination of coal from PSEG Power's fuel mix by mid-2021. Earlier this week, PSEG exercised an option on Ørsted's Ocean Wind project, resulting in a period of exclusive negotiation for PSEG to potentially acquire a 25% equity interest in the project, subject to negotiations toward a joint venture agreement, advanced due diligence and any required regulatory approvals.  The Ocean Wind project was the winner of New Jersey's recent offshore wind solicitation, to be built off the coast of Atlantic City and scheduled to come on-line in 2024.  I am pleased for the opportunity to apply our expertise in developing energy infrastructure in New Jersey and expanding the state's resources of zero carbon generation toward our mutual goal of reducing carbon emissions.  I am also pleased to report that PSEG was again named to the Dow Jones Sustainability Index – North America for the 12th consecutive year, one of only seven U.S. utility companies to be included."

The following table provides a reconciliation of PSEG's Net Income to non-GAAP Operating Earnings for the third quarter.  See Attachment 10 for a complete list of items excluded from Net Income in the determination of non-GAAP Operating Earnings.

 

PSEG CONSOLIDATED RESULTS (unaudited)

Third Quarter Comparative Results

2019 and 2018



Income


Diluted Earnings


($ millions)


Per Share








2019

2018


2019

2018

Net Income

$403

$412


$0.79

$0.81

  Reconciling Items*

92

69


0.19

0.14

Non-GAAP Operating Earnings

$495

$481


$0.98

$0.95



Avg. Shares

507M

      507M

*See Attachment 10





Ralph Izzo went on to say, "Strong results at PSE&G helped to offset the decline at PSEG Power that resulted from lower power prices.  We are narrowing our forecast of full-year, non-GAAP Operating Earnings to $3.20 to $3.30 per share from the prior $3.15 to $3.35 per share.  We are affirming the mid-point of 2019 full-year guidance, and updating the contribution ranges from PSE&G and PSEG Power to reflect our financial results through the first three quarters of the year.  Utility earnings continue to benefit from rate relief and a mid-year change to the pension plan has raised PSE&G's expected full-year results above the upper end of PSE&G's original guidance range to $1,225 million - $1,250 million.  Weak power prices have negatively impacted PSEG Power's results toward the lower end of the original guidance, which has been updated to $395 million - $420 million.  Guidance for Enterprise/Other is also updated to $5 million."

The following table outlines PSEG's updated expectations for non-GAAP Operating Earnings by subsidiary for 2019.


Original 2019E

Updated 2019E

   PSE&G

$1,200 - $1,230

$1,225 - $1,250

   PSEG Power

$395 - $460

$395 - $420

   PSEG Enterprise/Other

  $5 - $10

$5

Non-GAAP Operating Earnings

      $1,600 - $1,700       

      $1,625 - $1,675      

   Non-GAAP Operating EPS

 $3.15 - $3.35

 $3.20 - $3.30

  E = Estimate 



Non-GAAP Operating Earnings Review and Outlook by Operating Subsidiary

See Attachments 10 and 11 for detail regarding the third quarter and year-to-date reconciliations for each of PSEG's businesses.

PSE&G

PSE&G reported Net Income of $344 million ($0.68 per share) for the third quarter of 2019 compared with Net Income of $278 million ($0.54 per share) for the third quarter of 2018.

The increase in PSE&G's Net Income for the third quarter reflects expanded investment in transmission and distribution investment programs, rate relief, and changes to pension plans that had a favorable impact in the quarter. 

PSE&G's growth in transmission investment added $0.06 per share to quarter-over-quarter Net Income comparisons.  The increase in transmission included a $0.01 per share positive adjustment for the 2019 estimated year end true up booked in the quarter.  Electric margin was $0.03 higher than the year-ago quarter, driven by rate relief and higher weather normalized volume.  Gas margin was $0.03 higher than the prior-year quarter driven by rate relief.  Weather was lower by $0.01 per share compared to the significantly warmer summer experienced in 2018's third quarter. An increase in depreciation and interest expense of $0.01 per share each, related to PSE&G's expanded capital base, reduced Net Income comparisons versus the prior year's third quarter.  Lower operation and maintenance (O&M) expense was a $0.01 per share favorable comparison.  Changes to post-retirement benefit (OPEB) expenses, as well as a split and re-measurement of the pension plan that began on July 1, had a combined $0.03 per share positive impact on Net Income compared to the year-ago quarter.  The effective tax rate for the quarter, recorded based on the average annual effective tax rate, resulted in a positive $0.01 per share impact. This is the result of timing between quarters, is related to the flow back of excess deferred taxes, and will reverse in the fourth quarter.

The New Jersey economy continues to experience positive growth in employment, as evidenced by the lowest unemployment rate in the last twenty years.  PSE&G reached a 2019 system peak of 9,753 MW this past July compared to 2018's system peak of 9,978 MW.  The temperature-humidity index, which is used to measure the impact of summer weather on sales, was 10% lower in the 2019 third quarter than one year ago, but nearly 12% higher than a normal summer.  Weather normalized sales for the trailing 12 months, which provides longer-term trending data, remained relatively flat for electric and was 1% higher for gas.  Residential electric and gas customer growth continues to trend higher at approximately 1% per year.

In October, PSE&G filed its annual transmission formula rate update with the Federal Energy Regulatory Commission.  Residential customer bills will increase by approximately 2%, reflecting increased investment in transmission, changes in cost allocation and the completion of certain tax flow backs to customers which occurred in 2019. 

PSE&G received final NJBPU approval of its Energy Strong II settlement in mid-September and will begin investing under this electric and gas resiliency enhancement program starting in the fourth quarter of 2019 and extending over the coming four years. 

PSE&G invested approximately $2 billion for the nine months ended September 30 in electric and gas transmission and distribution capital projects.  For the year, PSE&G expects to invest $2.7 billion of capital in its infrastructure.

PSE&G's Net Income for 2019 has been updated to a range now forecast to be $1,225 million - $1,250 million.

PSEG Power

PSEG Power reported Net Income of $53 million ($0.10 per share) for the third quarter of 2019 compared with Net Income of $125 million ($0.25 per share) for the third quarter of 2018.  PSEG Power's non-GAAP Operating Earnings and non-GAAP Adjusted EBITDA for the third quarter of 2019 were $145 million ($0.29 per share) and $322 million, respectively, compared to non-GAAP Operating Earnings of $194 million ($0.39 per share) and non-GAAP Adjusted EBITDA of $360 million for the third quarter of 2018.  PSEG Power closed on the sale of its interests in the Keystone and Conemaugh generating plants during the third quarter, which resulted in a pre-tax loss of $402 million in the nine months ended September 30. 

PSEG Power's Net Income in the third quarter was impacted by a decline in lower realized energy prices and lower capacity revenues that were partly offset by Zero Emission Certificate (ZEC) revenue earned in New Jersey since mid-April 2019. 

Net Income comparison for the third quarter reflects a significant reduction in capacity revenues in PJM and ISO-New England of $0.10 per share.  A full quarter of ZEC revenues contributed $0.07 per share.  Re-contracting and the impact of lower spark spreads, which reduced results by $0.05 per share, were offset by lower costs to serve load, resulting in no net impact.  Generation volumes were lower by $0.01 per share on cooler weather and weaker prices than last summer.  Lower off-system gas sales reduced gas operations by $0.01 per share.  Lower outage costs offset higher O&M expense related to the commercial in-service of Bridgeport Harbor 5.  Higher depreciation and higher interest expense related to the addition of Bridgeport Harbor 5, combined with the elimination of depreciation expense related to the sale of Keystone and Conemaugh, reduced Net Income by $0.01 per share.  Of note, the absence of tax benefits associated with a nuclear carryback claim and the settlement of two IRS audits in third quarter 2018 lowered the year over year

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