PEG Public Service Enterprise Group Inc

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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