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PSEG Announces 2008 Results; $1.93 Per Share From Continuing Operations; $2.92 Per Share of Operating Earnings

Posted on: Tuesday, 3 February 2009, 07:45 CST

Strong Operating Performance Underpins Results in face of Difficult Markets

Company Supports 2009 Earnings Guidance of $3.00 - $3.25 Per Share

NEWARK, N.J., Feb. 3 /PRNewswire-FirstCall/ -- Public Service Enterprise Group (PSEG) reported Income from Continuing Operations for 2008 of $983 million or $1.93 per share as compared to $1,325 million or $2.60 per share for 2007. Operating Earnings for 2008 were $1,487 million or $2.92 per share compared to 2007 Operating Earnings of $1,385 million or $2.72 per share. Including Lease Transaction reserves and other asset impairment charges ($0.99 per share) and income from discontinued operations ($0.41 per share), PSEG reported Net Income for 2008 of $1,188 million or $2.34 per share compared to Net Income for 2007 of $1,335 million or $2.62 per share.

PSEG also reported Income from Continuing Operations for the fourth quarter of 2008 of $237 million, or $0.46 per share. This compares to fourth quarter 2007 results of $219 million, or $0.42 per share. Operating Earnings for the fourth quarter of 2008 were $250 million, or $0.49 per share compared to fourth quarter 2007 Operating Earnings of $272 million, or $0.53 per share. Net Income in the fourth quarter of 2008 amounted to $234 million, or $0.46 per share, compared to Net Income for the fourth quarter of 2007 of $225 million, or $0.43 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 lease-related charges and the impact of the sale and/or impairment 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 full year and fourth quarter. See Attachment 14 for a complete list of items excluded from Income from Continuing Operations in the determination of Operating Earnings.

PSEG CONSOLIDATED EARNINGS (unaudited) Full-Year Comparative Results 2008 and 2007 Income Diluted Earnings ($millions) Per Share 2008 2007 2008 2007 Net Income $1,188 $1,335 $2.34 $2.62 Less: Income from Discontinued Ops (205) (10) (0.41) (0.02) Income From Continuing Ops $983 $1,325 $1.93 $2.60 Add: Lease Reserves 490 -- 0.96 -- Asset Sales/Impairments 14 60 0.03 0.12 Operating Earnings (Non-GAAP) $1,487 $1,385 $2.92 $2.72 Avg. Shares 508M 509M

PSEG CONSOLIDATED EARNINGS (unaudited) Fourth Quarter Comparative Results 2008 and 2007 Income Diluted Earnings ($millions) Per Share 2008 2007 2008 2007 Net Income $234 $225 $0.46 $0.43 Less: Income (Loss) from Discontinued Ops 3 (6) -- (0.01) Income From Continuing Ops $237 $219 $0.46 $0.42 Add: Asset Sales/Impairments 13 53 0.03 0.11 Operating Earnings (Non-GAAP) $250 $272 $0.49 $0.53 Avg. Shares 507M 510M

"PSEG performed well in a difficult environment" said Ralph Izzo, chairman, president and chief executive officer of PSEG. "Clearly, the sale of international assets improved our liquidity and strengthened our balance sheet during a period of unprecedented financial market turbulence. Just as importantly, the commitment of our employees to operational excellence supported PSEG Power's record output from its generation fleet, and helped PSE&G advance the state's energy policy goals."

Izzo indicated that PSEG was refining its operating earnings guidance for 2009 to $3.00-$3.25 per share in accordance with statements made in the Fall. "We indicated to the financial community in our third quarter earnings release that we were expecting earnings for 2009 to come in at the lower half of our previously stated range of $3.05-$3.35 per share. This remains our expectation. The outlook for the economy remains weak; but, with the commitment of management and the support of PSEG's employees to control costs, we expect to be able to manage through these difficult times and meet the earnings objectives we established."

Izzo said "PSEG is committed to meeting the expectations of its customers and its shareholders. In the near-term, this commitment will be met through cost vigilance to mitigate the effects of a slowing economy. In the long run, growth will be aided by collaborative efforts with government, labor and other key partners supporting the investment of capital to advance a common goal of a sustainable strong economy." He mentioned that "the capital spending program recently proposed by PSE&G is designed to jump start the economy through the creation of jobs. It is this type of effort that assures our stakeholders of PSEG's dedication to providing safe, reliable, economic and green energy."

Operating Earnings by subsidiary for 2008, and our guidance for 2009 is as follows:

2009 Operating Earnings Guidance ($millions) 2008A 2009E PSEG Power $1,050 $1,210 - $1,285 PSE&G 360 320 - 345 PSEG Energy Holdings 101 0 - 20 PSEG Parent (24) (10) - 0 Operating Earnings $1,487 $1,520 - $1,650 Earnings Per Share $2.92 $3.00 - $3.25

Operating Earnings Review and Outlook by Operating Subsidiary

See Attachments 6 and 7 for detail regarding the quarter-over-quarter and year-over-year earnings reconciliations for each of PSEG's businesses.

PSEG Power

PSEG Power reported operating earnings of $207 million ($0.40 per share) for the fourth quarter of 2008 bringing full year operating earnings to $1,050 million ($2.06 per share), a record year for Power. On a comparative basis, PSEG Power reported operating earnings of $205 million ($0.40 per share) and $949 million ($1.86 per share) for the fourth quarter and full year 2007 respectively.

PSEG Power's margins in the fourth quarter of 2008 continued to benefit from higher contracted pricing. Higher prices improved earnings comparisons by $0.07 per share during the quarter. The results for the quarter were also aided by the performance of the nuclear fleet. The nuclear fleet (including PSEG Power's interest in the Peach Bottom station) operated at a capacity factor of 91.3% in the fourth quarter compared to a capacity factor of 83.6% in the 2007 fourth quarter. Performance in the quarter was aided by the timing of year-over-year refueling outages. Power's fully-owned Hope Creek nuclear facility operated at a full capacity factor of 100% during the 2008 fourth quarter (and full year) compared to a 57.3% capacity factor during the year ago quarter when Hope Creek experienced a 33-day refueling outage.

Power's earnings comparisons in the fourth quarter of 2008 were aided by a decline in operating and maintenance expense ($0.03 per share). The benefits of higher prices and lower costs offset a decline in the value of Power's nuclear decommissioning trust fund in the quarter ($0.10 per share) due to the turbulent financial markets.

William Levis, president and chief operating officer of PSEG Power, said "2008 was a record year for PSEG Power in terms of generation output and profitability. An alignment of interest in safety, reliability and performance yielded our record results, and should support continued improvement in a very challenging environment."

PSEG Power's operating earnings forecast for 2009 reflects the expected full year benefit of the extended power uprates at Hope Creek and Salem (173 Mw) as well as higher contracted load pricing. The competitive energy market has allowed Power to hedge most of its base-load coal and nuclear output going into 2009. Capacity has been hedged through PJM's RPM auction process. A forecasted improvement in year-over-year hedged power pricing is expected to offset the impact of higher fuel costs including a renegotiated coal contract. The renegotiated agreement provides us with pricing more reflective of market levels in return for greater supply flexibility.

PSE&G

PSE&G reported operating earnings of $76 million ($0.15 per share) for the fourth quarter compared with operating earnings of $77 million ($0.15 per share) for the fourth quarter of 2007. The results for the fourth quarter brought PSE&G's operating earnings for 2008 to $360 million ($0.71 per share) as compared with 2007 results of $376 million ($0.74 per share).

Colder than normal weather conditions supported gas sales in the fourth quarter ($0.01 per share) and more than offset the impact of the economy on demand. This improvement also offset the impact of a decline in electric sales. During the quarter, electric sales for our two primary market segments (residential and commercial) declined 3.8% resulting in a 1.3% decline in sales to these segments for the year. Sales to industrial electric customers declined 18.3% in the fourth quarter resulting in an 8.6% decline for the year. This segment represents 12% of sales and contributes a smaller percentage to electric margin. Earnings comparisons benefited from PSE&G's ability to tailor its workload to match changes in operating conditions resulting in a decline in operating expenses ($0.04 per share). The decline offset an increase in taxes and depreciation expense.

Ralph LaRossa, president and chief operating officer of PSE&G, said "our employees can point to 2008 as a year of significant accomplishment. Their achievements in advancing regulatory and operational initiatives will support customer reliability and advance the goals of the state's energy master plan."

PSE&G expects to experience a decline in operating earnings in 2009. The forecast assumes a slight increase in electric sales for the year. However, an increase in pension expense as well as expenses associated with the start-up of the company's new customer information system (iPower) are expected to put pressure on PSE&G's full year return. PSE&G is planning to file a combined electric and gas rate case by mid-year that will take into consideration higher levels of operating costs, pension expense and capital investment.

PSEG Energy Holdings

PSEG Energy Holdings reported an operating loss for the fourth quarter of 2008 of $23 million ($0.04 per share) compared to operating earnings of $10 million ($0.02 per share) for the fourth quarter of 2007. The results for the fourth quarter brought Energy Holdings' full year 2008 operating earnings to $101 million ($0.20 per share) as compared with 2007's operating earnings of $123 million ($0.24 per share).

Earnings for the fourth quarter of 2008 as compared to the same period in the prior year were affected by mark-to-market losses ($0.05 per share) and higher operating and maintenance expenses associated with the Texas generating assets ($0.02 per share). Earnings comparisons were also affected by the absence of earnings from international assets sold late in 2007 ($0.03 per share) as well as a decline in the return on the leveraged lease portfolio ($0.02 per share). These items more than offset lower financing costs.

PSEG Energy Holdings expects to operate at close to break-even in 2009. Results will be influenced by a full year decline in income on the leveraged lease portfolio. The subsidiary's 2000 Mw of gas-fired Texas generating assets are also expected to be negatively affected by a forecast decline in natural gas prices (versus very high prices in the first half of 2008) as well as a decline in availability and an increase in operating and maintenance expense.

Pension Expense

PSEG estimates pension expense in 2009 will increase $0.15 per share over 2008's expense (this estimated increase reflects the amount capitalized at PSE&G) due to a decline in market value of our pension assets. This year-over-year increase in pension expense also widened from our third quarter update due to a decline in financing costs used to establish the plan's discount rate.

Common Dividend Date

The dates for the Board of Directors to declare the common dividend in 2009 have been adjusted to reflect a change in the meeting schedule. The next regularly scheduled meeting for the Board of Directors is February 17, 2009. The dividend declared on that date will be payable on or before March 31, 2009 to shareholders of record as of the March 10, 2009 record date.

The following attachments can be found on www.pseg.com:

Attachment 1 - Operating Earnings and Per Share Results by Subsidiary

Attachment 2 - Consolidating Statements of Operations

Attachment 3 - Consolidating Statements of Operations

Attachment 4 - Capitalization Schedule

Attachment 5 - Condensed Consolidated Statements of Cash Flows

Attachment 6 - Quarter-to-Quarter EPS Reconciliation

Attachment 7 - Year to Date EPS Reconciliation

Attachment 8 - Generation Measures

Attachment 9 - Retail Sales and Revenues

Attachment 10 - Retail Sales and Revenues

Attachment 11 - Statistical Measures

Attachment 12 - Non-Trading Mark-to-Market

Attachment 13 - NDT Impacts

Attachment 14 - 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.
• 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.

SOURCE Public Service Enterprise Group (PSEG)

Source: PR Newswire

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