PEG Public Service Enterprise Group Inc

Performance Reflects Strong Operations in Difficult Markets NEWARK, N.J., May 4 /PRNewswire-FirstCall/ -- Public Service Enterprise Group (PSEG) (NYSE:PEG) reported today First Quarter 2009 Income from Continuing Operations of $444 million or $0.88 per share as compared to $435 million or $0.85 per share for the First Quarter of 2008. Operating Earnings for the first quarter of 2009 were $482 million or $0.95 per share compared to the First Quarter of 2008 Operating Earnings of $438 million or $0.86 per share. Including the impact of net losses on investments in our nuclear decommissioning trust funds (NDT) of $0.04 per share and the recognition of non-trading mark-to-market (MTM) losses of $0.03 per share, PSEG reported Net Income for the first quarter of 2009 of $444 million or $0.88 per share. Including the impact of net losses on investments in NDT funds of $0.02 per share and the recognition of non-trading MTM gains of $0.01 per share and income from discontinued operations of $0.03 per share, PSEG reported Net Income for the first quarter of 2008 of $448 million or $0.88 per share. PSEG believes that the non-GAAP financial measure of "Operating Earnings" provides a consistent and comparable measure of performance of its businesses to help shareholders understand performance trends. Operating Earnings exclude the impact of the sale and/or impairment of certain non-core domestic assets and the impact of returns/(losses) associated with NDT and MTM accounting. The table below provides a reconciliation of PSEG's Net Income to Operating Earnings (a non-GAAP measure) for the first quarter. See Attachment 10 for a complete list of items excluded from Income from Continuing Operations in the determination of Operating Earnings. PSEG CONSOLIDATED EARNINGS (unaudited) First Quarter Comparative Results 2009 and 2008 Income Diluted Earnings ($millions) Per Share 2009 2008 2009 2008 Net Income $444 $448 $0.88 $0.88 Less: Income from Discontinued Ops -- 13 -- 0.03 Income From Continuing Ops $444 $435 $0.88 $0.85 Less: Excluded Items (38) (3) (0.07) (0.01) Operating Earnings (Non-GAAP) $482 $438 $0.95 $0.86 Avg. Shares 507M 510M "PSEG's results for the first quarter of 2009 demonstrate the strength of operations and the diversity of our asset base in the face of difficult market conditions," said Ralph Izzo, chairman, president and chief executive officer of PSEG. Izzo indicated that "the market remains challenging, with power prices down and demand softening. But, effective portfolio management and cost control efforts give us the confidence to manage through these difficult times." He went on to say, "We continue to support our operating earnings guidance for 2009 of $3.00-$3.25 per share." Operating Earnings Guidance (which remains unchanged) by subsidiary for 2009 is as follows: 2009 Operating Earnings Guidance ($millions) PSEG Power $1,210 - $1,285 PSE&G 320 - 345 PSEG Energy Holdings 0 - 20 PSEG Parent (10) - 0 Operating Earnings $1,520 - $1,650 Earnings Per Share $3.00 - $3.25 Operating Earnings Review and Outlook by Operating Subsidiary See Attachment 5 for detail regarding the quarter-over-quarter reconciliations for each of PSEG's businesses. PSEG Power PSEG Power reported operating earnings of $359 million ($0.71 per share) for the first quarter of 2009 compared with operating earnings of $279 million ($0.55 per share) for the first quarter of 2008. PSEG Power's margins in the first quarter of 2009 benefited from higher contracted pricing and lower fuel costs ($0.18 per share). Higher average prices in the first quarter of 2009 reflect the positive impact of the June 2008 BGS contract on revenue as well as the re-pricing of a below-market wholesale contract which expired at the end of 2008. Cold weather supported demand in January; however, more normal weather during the remainder of the quarter coupled with a contraction in economic activity led to a reduction in overall demand for the quarter. Power was able to take advantage of an increase in output from its nuclear fleet as well as the availability of low-cost gas supply to meet load requirements in the quarter while generation from its coal-fired stations declined quarter-over-quarter. Included in Power's first quarter margin improvement is income associated with the termination of positions with counterparties which accelerated the recognition of income which would have been realized later in the year. This item represented $0.03 per share of the $0.18 per share improvement in first quarter margin. The nuclear fleet continued its strong operations with an average capacity factor of 97.8% in the quarter. This compares with an average capacity factor of 94.1% during the year-ago quarter. Production from the nuclear fleet also benefited from an uprate in the capacity of Hope Creek and Salem 2 (173MW) completed during the second quarter of 2008. Power's earnings saw an increase in margin under the BGSS contract ($0.01 per share). Quarter-over-quarter earnings comparisons were also affected by an anticipated increase in operating and maintenance expense in 2009 associated with planned outage work at the fossil stations ($0.01 per share) and nuclear stations ($0.01 per share). An increase in depreciation and interest expense reduced earnings comparisons by $0.01 per share. For the year, PSEG Power's operating earnings forecast reflects the benefit of higher electric power pricing. The operation of competitive energy and capacity markets has allowed Power to hedge 100% of its expected coal and nuclear output in 2009. The improvement in margins during the remainder of the year, however, is not expected to be as strong as that experienced in the first part of the year. PSE&G PSE&G reported operating earnings of $123 million ($0.24 per share) for the first quarter compared with operating earnings of $136 million ($0.26 per share) for the first quarter of 2008. The results for the quarter were affected by several factors. Colder than normal weather increased the demand for gas. Degree Days were 8.5% higher than the level experienced in 2008's first quarter, and 3.3% greater than normal causing gas sales to increase by 3.1% in the quarter versus last year. The quarter-over-quarter increase in sales was led by a 7.8% increase in gas sales to the residential sector. The weather-related increase in sales contributed $0.03 per share to earnings. Growth in demand continues to be constrained by poor economic conditions. This reduced demand negatively affected non-firm sales to the commercial and industrial sectors and hurt earnings by $0.01 per share in the quarter. Earnings were aided by an increase in transmission revenues effective on October 1, 2008 ($0.01 per share). The increase in margin was offset by higher pension and operating and maintenance expense ($0.01 per share). Depreciation expense increased with a higher level of capital spending ($0.01 per share). Earnings comparisons were also affected by the absence of tax benefits recognized in the first quarter of 2008 ($0.02 per share). PSE&G is expected to experience a decline in 2009 operating earnings. Demand is expected to remain weak in response to a contraction in economic growth. Results will also reflect an increase in pension expense as well as higher levels of depreciation expense associated with the start-up of PSE&G's new customer information system and an increase in financing costs associated with increased capital outlays. PSE&G is preparing to file a combined electric and gas rate case by mid-year. The request will primarily address the company's increased level of capital spending and pension related costs. The quarter was marked by the New Jersey BPU's approval of PSE&G's proposal to accelerate capital spending as a means of meeting the Governor's call for programs to stimulate the economy. PSE&G plans to spend $694 million on electric and gas programs over 24 months with approximately $190 million to be spent in 2009. These amounts will be recovered through a new capital adjustment charge (approved separate from base rates) designed to provide immediate recovery of a return on the program expenditures plus depreciation of the assets. PSEG Energy Holdings PSEG Energy Holdings reported operating earnings of $4 million ($0.01 per share) versus operating earnings of $28 million ($0.06 per share) during the first quarter of 2008. The decline in operating earnings for the quarter was influenced by several factors. A reduction in gas prices reduced the profitability of the combined cycle gas assets in Texas ($0.01 per share). The Texas generating units performed better than a year ago in what remains a difficult market. The absence of tax benefits recorded in 2008 ($0.02 per share) also hurt earnings. Earnings from Resources were hurt by a reduction in income on the lease portfolio ($0.02 per share) and an increase in taxes ($0.03 per share). These items more than offset the gain recorded on the termination of leases during the quarter ($0.03 per share). The termination of leases during the quarter reduced Resources investment in international leases to $924 million at the end of March 2009 from $1.0 billion at the end of 2008. PSEG Energy Holdings' operating income is expected to decline in 2009. The outlook reflects difficult market conditions in Texas for the gas-fired assets with a decline in power prices and spark spreads year over year. The results will also be affected by a full-year decline in the return on Resources leveraged lease portfolio. These items will more than offset the benefits of a reduction in interest expense associated with the redemption, in February 2009, of $280 million of non-recourse debt on the Texas assets. The following attachments can be found on http://www.pseg.com/ Attachment 1 - Operating Earnings and Per Share Results by Subsidiary Attachment 2 - Consolidating Statements of Operations Attachment 3 - Capitalization Schedule Attachment 4 - Condensed Consolidated Statements of Cash Flows Attachment 5 - Quarter-to-Quarter EPS Reconciliation Attachment 6 - Generation Measures Attachment 7 - Retail Sales and Revenues Attachment 8 - Retail Sales and Revenues Attachment 9 - Statistical Measures Attachment 10 - Reconciling Items Excluded from Continuing Operations to Compute Operating Earnings 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. -- New energy legislation. -- 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 investment performance of our decommissioning and defined benefit plan trust funds and changes in discount rates and funding requirements. -- 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: Jenn Kramer for PSEG, +1-973-430-6027 Web Site: http://www.pseg.com/

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