March 7, 2014
Public Service Enterprise Group (PSEG) announced that it will spend approximately $12 billion in capital investments during the next five years, primarily driven by increased investments in transmission to maintain reliability.
Speaking at the company's Annual 2014 Investor Conference in New York, Ralph Izzo, PSEG chairman and CEO, told the financial community that Public Service Electric and Gas (PSE&G) is implementing a 5-year capital program of $10 billion, a 20 percent increase in the level of spending over the prior five years. The additional investment is primarily due to PJM-mandated transmission upgrades to relieve projected system overloads and maintain reliability for millions of customers.
'The strategy we have put in place over the past several years is transforming the profile of our company,' Izzo said. 'We are reaffirming our operating earnings guidance for 2014 of $2.55 to $2.75 per share. This year, operating earnings from our company's stable, regulated business will represent about 55 percent of earnings as we make critical infrastructure investments. Combined with the flexibility of a solid merchant generation business, we are providing shareholders with the opportunity for consistent and sustainable dividend growth.
'Transmission lines and switching stations are the backbone of our electric grid, ensuring that we can transport power to where it's needed safely and reliably,' Izzo added. 'The utility has five major projects under way, with an additional 345-kilovolt line slated to be in service by June 2018.' PSE&G's capital spending program is expected to lead to double-digit earnings growth at the utility over the 2013-2016 period.
Izzo noted that the company is poised to make additional investments under its proposed Energy Strong program that would harden New Jersey's electric and gas delivery systems against severe weather. If approved, the plan would protect substations that were heavily damaged by water during Hurricane Irene in 2011 and Superstorm Sandy in 2012, among other resiliency improvements. Hearings on the proposal at the New Jersey Board of Public Utilities are set to conclude today (March 7), with a decision expected as early as April. Settlement discussions are also continuing. The investment dollars associated with Energy Strong are not included in the utility's capital expenditures and would be incremental once approved.
Ralph LaRossa, PSE&G president and COO, said the utility's transmission investments of $6.8 billion - up about $2 billion -- account for about 70 percent of PSE&G's capital investments and represent 60 percent of PSEG's total capital expenditures during the next five years.
'Companies have a choice in where to invest their capital,' LaRossa said. 'We have chosen to invest our capital in upgrading and maintaining infrastructure that is critical to New Jersey's economic health - and the more than 2 million electric and gas customers who rely on us to provide them with heat and light day in and day out.'
Bill Levis, president and COO of PSEG Power, said the generation subsidiary is continuing to focus on adding capacity in an economically efficient manner by increasing the output at its nuclear facilities by 130 megawatts and at its combined cycle power plants by 150 megawatts. 'Our fleet's fuel diversity and dispatch flexibility - together with access to lower cost Marcellus shale gas - allow Power to generate free cash flow and meet our commitments,' Levis said.
'Our corporate balance sheet is in excellent shape, thanks to the ability of PSE&G and PSEG Power to generate strong cash flows from operations,' said Caroline Dorsa, executive vice president and chief financial officer. 'As a result, we can fund our capital programs without the need to issue additional equity. Ongoing cost control efforts, including effective pension fund management, are expected to result in declining O&M expenses during the next several years.'
LaRossa also noted that on January 1, PSEG began operating the Long Island Power Authority's electric system under a 12-year operating services agreement. Led by seasoned utility professionals, PSEG Long Island is expected to provide $0.03 earnings in 2014, growing to $0.07 in 2016.
Public Service Enterprise Group (NYSE:PEG) is a publicly traded diversified energy company with annual revenues of $10 billion, and three principal subsidiaries: PSEG Power, Public Service Electric and Gas Company (PSE&G) and PSEG Long Island.
Certain of the matters discussed in this communication 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 the 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 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,
- 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,
- 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 coverage or recover proceeds of insurance with respect to such events, cybersecurity attacks or intrusions that could adversely impact our businesses,
- increases in competition in energy supply markets as well as competition from certain transmission projects,
- any inability to realize anticipated tax benefits or retain tax credits,
- 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 funding requirements, and
- changes in technology, such as distributed generation and micro grids, and greater reliance on these technologies and changes in customer behaviors, including energy efficiency, net metering and demand response.
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.
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Public Service Enterprise Group (PSEG)