PSEG Announces 2008 First Quarter Results: $0.85 Per Share From Continuing Operations
May 06 2008 - 8:45AM
PR Newswire (US)
Reflecting Strong Performance of PSEG Power, Company Reaffirms 2008
Guidance of $2.80-$3.05 Per Share NEWARK, N.J., May 6
/PRNewswire-FirstCall/ -- Public Service Enterprise Group (PSEG)
(NYSE:PEG) reported today First Quarter 2008 Income from Continuing
Operations of $434 million or $0.85 per share as compared to $321
million or $0.63 per share for the First Quarter of 2007. Excluding
the premium on bond redemptions of $1 million (related to asset
sales) recognized during the first quarter of 2008, Operating
Earnings for the first quarter were $435 million or $0.85 per
share. Operating earnings were the same as Income from Continuing
Operations for the first quarter of 2007. Including Income from
Discontinued Operations, PSEG reported Net Income for the First
Quarter of 2008 of $448 million or $0.88 per share compared to Net
Income for the First Quarter of 2007 of $329 million or $0.65 per
share. Operating Earnings exclude the impact of the sale of certain
non-core domestic and international assets. The table below
provides a reconciliation of PSEG's Net Income to Operating
Earnings (a non-GAAP measure) for the first quarter. PSEG
CONSOLIDATED EARNINGS (unaudited) For the Quarter Ending March 31,
2008 and 2007 Income Diluted Earnings ($millions) Per Share 2008
2007 2008 2007* Net Income $448 $329 $0.88 $0.65 Less: Income from
Discontinued Ops (14) (8) 0.03 0.02 Income From Continuing Ops $434
$321 $0.85 $0.63 Add: Impact of Asset Sales (Bond Premiums) 1 - - -
Operating Earnings (Non-GAAP) $435 $321 $0.85 $0.63 Avg. Shares
510M 507M * Results adjusted to reflect 2:1 stock split effective
February 4, 2008. 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. "Our first quarter results highlight
our continued focus on strong operations across the system," said
Ralph Izzo, chairman, president and chief executive officer of
PSEG. "Our operational focus allows PSEG to maintain a competitive
cost structure and provide a reliable product to our customers.
This operational success was complemented by achieving positive
outcomes for several regulatory/policy initiatives that help to
clarify the role of PSE&G in providing investments in clean,
efficient and reliable energy resources." Izzo also reaffirmed
operating earnings guidance for 2008 of $2.80-$3.05 per share,
which represents an 8% improvement (at the mid-point of the range)
over 2007's operating earnings. "The first quarter leads the way.
Strong operations and a continuation of supportive energy markets
are behind our forecast of solid earnings growth in 2008." Our
operating earnings guidance by subsidiary for 2008 follows. 2008
Operating Earnings Guidance ($millions) 2008 PSEG Power $1,040 -
$1,140 PSE&G 350 - 370 PSEG Energy Holdings 45 - 60 PSEG Parent
(15) - (10) Operating Earnings $1,420 - $1,560 Earnings Per Share
$2.80 - $3.05 Operating Earnings Review and Outlook by Operating
Subsidiary See Attachment 5* for detail regarding the
quarter-over-quarter earnings reconciliations for each of PSEG's
businesses. PSEG Power PSEG Power reported operating earnings for
the first quarter of 2008 of $275 million ($0.54 per share)
compared to operating earnings of $219 million ($0.43 per share) in
the first quarter of 2007. PSEG Power's margins in the first
quarter of 2008 benefited from recontracting at higher prices, and
an increase in generation in response to strong market
fundamentals. These factors added $0.15 per share to earnings. The
nuclear fleet operated in line with expectations at an average
capacity factor of 94% during the quarter. Salem no. 2, 57%-owned
and operated by PSEG Power, began its refueling and steam generator
replacement outage on March 11 and is scheduled to return to
service this month. The unit's operating capacity will increase by
15MW upon its return to service. Results for the quarter were
impacted by a slight decline in margin under the BGSS contract
against very strong results reported in the year ago period. More
mild winter weather reduced demand which more than offset the
effect of higher natural gas prices. This resulted in a $0.01 per
share decline in earnings for the quarter. In addition, equity
market turmoil in the first quarter resulted in a lower value for
some securities held by Power's nuclear decommissioning trust.
Lower trust earnings reduced Power's earnings by $0.03 per share.
Earnings in the quarter were also lower as a result of higher
interest expense. This increase in finance costs reduced earnings
by $0.01 per share. PSEG Power's operating earnings forecast for
2008 reflects the benefit of higher electric power pricing with the
expiration of below market contracts. The operation of the
competitive energy and capacity auctions has allowed Power to hedge
most of its base load coal and nuclear output in 2008. The February
2008 BGS auction contract for $111.50 per MWh will replace the 2005
contract expiring on June 1. This improvement in pricing will be
offset somewhat by higher fuel costs, and an anticipated decline in
BGSS-related margins for the full year following very strong
results in 2007. William Levis, president and chief operating
officer of PSEG Power, indicated that he's "extremely pleased with
work by PSEG Power's employees. This focus and dedication support
existing operations, and represent critical elements of success as
Power looks to pursue growth in the business." PSE&G PSE&G
reported operating earnings of $136 million ($0.26 per share) for
the first quarter compared with operating earnings of $131 million
($0.26 per share) for the first quarter of 2007. The results for
the quarter were affected by a number of factors. Weather
conditions during the quarter were mild relative to normal, and
relative to a year ago. Degree Days were 6.6% warmer than normal
during the first quarter versus 1.9% colder than normal last year.
More mild weather conditions reduced demand for gas and lowered
earnings comparisons by $0.02 per share. The abnormal weather
conditions had only a nominal impact on electric demand and
earnings. PSE&G's results were also affected by a slight
increase in operating and maintenance expense of 2.3% which reduced
earnings comparisons by $0.01 per share. These items were fully
offset by a decline in the tax rate during the quarter. PSE&G's
tax rate was lower during the quarter as a result of an IRS
approved refund claim at PSEG for earlier tax years. This
adjustment added $0.04 per share to PSE&G's earnings. PSE&G
is expected to experience a modest decline in 2008's operating
earnings. A forecast decline in transmission peak revenues is
expected to have an impact on revenue and earnings. Results will
also reflect an increase in financing costs associated with higher
capital outlays, and operating and maintenance costs tied to
training-related expenses. The quarter was marked by the successful
resolution of three key regulatory initiatives. The Federal Energy
Regulatory Commission (FERC) approved PSE&G's incentive rate
request on its planned $600-$650 million investment in the 500kV
Susquehanna to Roseland transmission line. FERC, in March 2008,
also supported PSE&G's filing to classify as transmission
(rather than distribution) certain 69kV transmission facilities
that PSE&G will construct. PSE&G also recently received
approval from the NJ Board of Public Utilities (BPU) for its $105
million solar initiative. This program will support the
installation of 30MW of solar capacity over a two-year period.
Ralph LaRossa, president and chief operating officer of PSE&G,
said, "The support shown by our key regulatory agencies for these
important initiatives lays the groundwork for our long-term capital
programs." PSEG Energy Holdings PSEG Energy Holdings reported
operating earnings of $29 million ($0.06 per share) versus an
operating loss of $11 million (($0.02) per share) during the first
quarter of 2007. Operating earnings exclude the impact of SAESA
which was discontinued for accounting purposes in the fourth
quarter of 2007. The improvement in operating earnings for the
quarter was largely influenced by factors affecting the earnings
comparisons for Holdings' Global subsidiary. A decline in forward
spark spreads, as compared to the prior year, led to MTM gains of
$1.8 million in the first quarter of 2008 versus a loss of $19.0
million in the first quarter of 2007, improving reported earnings
by $0.04 per share. The Texas generating units performed in line
with year ago results. Global's earnings comparisons were also
affected by international asset sales which closed during 2007. The
absence of this income in 2008 reduced earnings comparisons by
$0.03 per share. These items were offset by a decline in interest
expense during the first quarter which improved earnings by $0.02
per share. Global also experienced a benefit from an IRS approved
refund claim at PSEG for earlier tax years. This reduction in taxes
improved Global's earnings comparisons by $0.06 per share. Earnings
from Holdings' Resources subsidiary were flat against year ago
results. PSEG Energy Holdings' operating income is expected to
decline in 2008. The outlook reflects the loss of earnings from the
sale of Chilquinta and Luz del Sur in 2007. Holdings' operating
earnings could also be affected by the need to reverse a portion of
the cumulative mark to market gain booked under the Texas
generating assets long term contract which expires at the end of
2010. Holdings continues to move forward on plans to exit its
international businesses. The sale of Global's investment in SAESA,
announced in December 2007, is expected to close in the third
quarter of 2008. Regarding income tax claims relative to certain of
Holdings' leveraged lease investments, there have been two recent
court decisions involving other entities. One case, which was on
appeal, has been decided in favor of the government. The other case
involves a jury verdict that is currently in dispute. Based on
these developments, PSEG anticipates that, absent reaching an
agreement with the IRS to resolve the issue, a decision to proceed
to litigation may occur in 2008. It is also possible that we will
revisit our reserve levels for these lease transactions which could
result in a material charge to earnings. PSEG expects that it could
have $3 billion of cash available through the end of 2011 to pursue
disciplined growth of its businesses through acquisition,
construction or other development projects or to re-purchase common
stock. It is possible, however, that the amount of cash flow
required to pursue resolution of Holdings' tax claims may occur
sooner and may be larger than initially contemplated in our long
range forecast of cash available through 2011. Management believes
that any financing activity that may be required to pursue
resolution of these claims can occur with manageable impact to
PSEG's key credit metrics. * Attachments can be found at
http://www.pseg.com/ . FORWARD-LOOKING STATEMENT Readers are
cautioned that statements contained in this press release about our
and our subsidiaries' future performance, including future
revenues, earnings, strategies, prospects 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. Although we believe that our
expectations are based on reasonable assumptions, we can give no
assurance they will be achieved. The results or events predicted in
these statements may differ materially from actual results or
events. Factors which could cause results or events to differ from
current expectations include, but are not limited to: -- Adverse
Changes in energy industry, policies and regulation, including
market rules that may adversely affect our operating results. --
Any inability of our energy transmission and distribution
businesses to obtain adequate and timely rate relief and/or
regulatory approvals from federal and/or state regulators. --
Changes in federal and/or state environmental regulations that
could increase our costs or limit operations of our generating
units. -- Changes in nuclear regulation and/or developments in the
nuclear power industry generally, that could limit operations of
our nuclear generating units. -- Actions or activities at one of
our nuclear units that might adversely affect our ability to
continue to operate that unit or other units at the same site. --
Any inability to balance our energy obligations, available supply
and trading risks. -- Any deterioration in our credit quality. --
Any inability to realize anticipated tax benefits or retain tax
credits. -- Increases in the cost of or interruption in the supply
of fuel and other commodities necessary to the operation of our
generating units. -- Delays or cost escalations in our construction
and development activities. -- Adverse capital market performance
of our decommissioning and defined benefit plan trust funds. --
Changes in technology and/or increased customer conservation. 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 release. 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
estimates change, unless otherwise required by applicable
securities laws. DATASOURCE: Public Service Enterprise Group (PSEG)
CONTACT: Paul Rosengren, Public Service Enterprise Group,
+1-973-430-5911 Web site: http://www.pseg.com/
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