NEWARK, N.J., July 31, 2015 /PRNewswire/ -- (NYSE: PEG) - Public Service Enterprise Group (PSEG) reported Second Quarter 2015 Net Income of $345 million or $0.68 per share as compared to Net Income of $212 million or $0.42 per share reported for the Second Quarter of 2014. Operating Earnings for the Second Quarter of 2015 were $289 million or $0.57 per share compared to the Second Quarter of 2014 Operating Earnings of $245 million or $0.49 per share.
"We reported strong results for the second quarter," said Ralph Izzo, chairman, president and chief executive officer. He went on to say, "Our businesses performed well. PSE&G's expanded investment program is successfully translating into improvements in customer satisfaction at the same time operational improvements at PSEG Power supported increased output. We are updating our full year guidance to $2.80 - $2.95 per share from $2.75 - $2.95 per share based on the strength of results for both businesses for the first half of the year."
PSEG believes that the non-GAAP financial measure of "Operating Earnings" provides a consistent and comparable measure of performance of its businesses to help shareholders understand performance trends. Operating Earnings exclude the impact of returns/(losses) associated with Nuclear Decommissioning Trust (NDT), Mark-to-Market (MTM) accounting and other material one-time items. The table below provides a reconciliation of PSEG's Net Income to Operating Earnings for the second quarter. See Attachment 12 for a complete list of items excluded from Net Income in the determination of Operating Earnings.
PSEG CONSOLIDATED EARNINGS (unaudited)
Second Quarter Comparative Results
2015 and 2014
"Our success is a testament to the hard work and dedication of our employees," said Ralph Izzo who also stated, "our strategy is meeting the challenges of today's low energy price environment. PSEG Power's construction of the new 755MW gas-fired Keys Energy Center in Maryland will expand our footprint in our core PJM market and serve as a strong operational and financial fit for our portfolio. We remain confident in our ability to meet the needs of stakeholders as we focus on providing safe and reliable energy in a cost-efficient manner."
Operating Earnings guidance by company has been adjusted to reflect the update of the forecast for the full year:
($ millions, except EPS)
$760 - $775
$620 - $680
$40 - $45
$1,420 - $1,500
Earnings Per Share
$2.80 - $2.95
Operating Earnings Review and Outlook by Operating Subsidiary
See Attachment 6 for detail regarding the quarter-over-quarter reconciliations for each of PSEG's businesses.
PSE&G reported operating earnings of $167 million ($0.33 per share) for the second quarter of 2015 compared with operating earnings of $151 million ($0.30 per share) for the second quarter of 2014.
PSE&G's operating results for the second quarter reflect the benefits of an increase in revenue associated with an expansion of its capital program and the impact of warmer than normal temperatures on demand.
Returns from PSE&G's expanded investment in transmission added $0.04 per share to earnings in the quarter. More favorable weather conditions during the quarter and the recovery of PSE&G's investment under its distribution-related capital infrastructure programs improved quarter-over-quarter earnings by $0.01 per share. Continued growth in demand for gas increased quarter-over-quarter earnings by $0.01 per share. An increase in pension expense as well as higher storm-related and other expenses reduced quarter-over-quarter earnings comparisons by $0.02 per share. An increase in taxes and other items reduced quarter-over-quarter earnings by $0.01 per share.
Economic indicators in the service area such as employment and housing are showing signs of improvement, reflecting the slowly recovering economy. Modest growth in electric demand is reflective of this improvement in economic conditions. On a weather-normalized basis, total electric sales grew 0.2% for the quarter and year-to-date. Growth in residential and commercial sales was partially offset by a decline in sales to industrial customers. Gas deliveries on a weather-normalized basis for the first half of 2015 grew 2.7%. Demand for the first six months of the year represents the trend in gas demand in response to sustained low prices.
On June 1, 2015, PSE&G made its Annual BGSS filing with the New Jersey Board of Public Utilities (BPU) requesting a reduction of $70 million in annual BGSS revenues. When effective, the BGSS rate would be reduced from approximately 45 cents per therm to 40 cents per therm effective October 1, 2015. Including this proposed reduction, the typical residential customer has experienced a 47%, or $792, decline in their annual gas bill since January 2009.
PSE&G's capital program remains on schedule. PSE&G invested $1.3 billion in the first half of the year as part of its planned capital investment for 2015 of $2.6 billion in upgrades to the electric and gas distribution and transmission system. PSE&G was recently assigned work at Artificial Island as part of PJM's approved upgrades to the transmission system. This program will increase PSE&G's investment in transmission by $100 - $130 million over 4 years through 2019.
The forecast of PSE&G's operating earnings for 2015 is now $760 - $775 million versus $735 - $775 million. Operating earnings for the full year will be influenced by summer weather and the recovery of costs associated with higher levels of capital spending.
PSEG Power reported operating earnings of $110 million ($0.22 per share) for the second quarter of 2015 and adjusted EBITDA of $301 million compared with operating earnings of $87 million ($0.17 per share) and adjusted EBITDA of $276 million for the second quarter of 2014.
PSEG believes that the non-GAAP financial measure of "Adjusted EBITDA" is useful in evaluating Power's operating performance because it provides investors with additional information to compare our business performance to other companies and to understand performance trends.
Adjusted EBITDA excludes the same items as our Operating Earnings measure as well as income tax expense and interest expense, depreciation and amortization and major maintenance at Power's fossil generation facilities. See Attachment 12 for a complete list of items excluded from Net Income in the determination of Adjusted EBITDA.
Power's operating results for the second quarter reflect an improvement in operations at its nuclear and fossil generating facilities, higher prices on its hedged energy output and a decline in the cost of its gas supply which together helped offset the impact on earnings from an expected decline in capacity revenue and lower wholesale market prices for energy.
The lower average price received on PJM capacity as well as the retirement of peaking capacity combined to reduce Power's quarter-over-quarter earnings by $0.08 per share. This decline in revenue was more than offset by higher average prices received on energy hedges as well as a reduction in the cost of supply. These two items combined to increase quarter-over-quarter earnings comparisons by $0.10 per share. A 10% improvement in output over the prior year increased quarterly earnings comparisons by $0.02 per share. Higher levels of O&M and depreciation expense reduced quarterly earnings comparisons by $0.02 per share, as a decline in taxes and other items improved earnings by $0.03 per share.
Output at Power's generation facilities increased 10% in the quarter over year-ago levels to 13.2 TWh. An improvement in operations at Power's nuclear generating plants and the gas-fired CCGTs more than offset the effect of lower wholesale energy prices on the dispatch of the coal-fired generating fleet. The nuclear fleet operated at an average capacity factor of 86%, producing 7.1 TWh of output or 54% of generation, a 9% improvement from year-ago levels. The performance of the nuclear fleet reflects the absence of major repairs at Salem 2 in 2014 which led to 58 fewer outage related days in the second quarter of 2015 compared to 89 days in the year-ago quarter. Production from the combined cycle gas fleet (CCGT) increased 26% to 4.6 TWh of generation, or 34% of total generation. An improvement in the availability of the Linden Station following uprate and maintenance related work in the year ago quarter and improved spark spreads led to the increased level of output from the fleet. Dispatch of the coal fleet was affected by a decline in the price of gas and lower wholesale energy prices. Output during the quarter declined to 1.3 TWh, or 10% of generation, as output from the peaking fleet responded to the market to make-up the balance.
Power's fleet is expected to produce energy at the upper end of its forecast of output for 2015 of 55 – 57 TWh, a 1% - 5% increase over 2014's output of 54.2 TWh. Approximately 70% - 75% of anticipated production for the second half of the year is hedged at an average price of $53 per MWh. For 2016, Power has hedged 55% - 60% of its forecast generation of 55 – 57 TWh at an average price of $51 per MWh; for 2017, Power has hedged 30% - 35% of its forecast generation of 55 – 57 TWh at an average price of $50 per MWh.
PSEG Power announced in the quarter that it has acquired the rights to develop the 755-MW Keys Energy Center. The plant, which represents an investment of $825 - $875 million, is targeted to be completed in 2018. The combined cycle plant will use state-of-the art generating technology, including a full complement of emissions controls and run on clean, efficient natural gas.
The forecast range of Power's operating earnings for 2015 remains $620 - $680 million. The forecast of operating earnings represents adjusted EBITDA for the full year of $1,545 - $1,645 million. Results for the remainder of the year will be heavily influenced by the expected decline in year-over-year capacity revenue, an increase in the average price of hedged energy and lower wholesale energy prices.
PSEG Enterprise/Other reported operating earnings of $12 million ($0.02 per share) for the second quarter of 2015 versus operating earnings of $7 million ($0.02 per share) during the second quarter of 2014. The improvement in operating income for the second quarter reflects higher PSEG Long Island earnings, lower operating & maintenance expense and higher interest income at Parent.
The forecast of PSEG Enterprise/Other full year operating earnings for 2015 remains $40 million - $45 million.
PSEG closed the quarter ended June 30, 2015 with $597 million of cash on its balance sheet with debt at the end of the quarter representing 41.9% of consolidated capital. PSE&G, during the quarter, issued $350 million of 10-year secured medium-term notes at 3.00% and $250 million of 30-year secured medium term notes at 4.05% and redeemed $300 million of 2.7% secured medium term notes.
Attachment 1 - Operating Earnings and Per Share - Results by Subsidiary Attachment 2 - Consolidating Statements of Operations – 3 months Attachment 3 - Consolidated Statements of Operations – 6 months Attachment 4 - Capitalization Schedule Attachment 5 - Condensed Consolidated Statements of Cash Flows Attachment 6 - Quarter-over-Quarter EPS Reconciliation Attachment 7 - Year-over-Year EPS Reconciliation Attachment 8 - Retail Sales and Revenues (electric) Attachment 9 - Retail Sales and Revenues (gas) Attachment 10 - Generation Measures Attachment 11 - Statistical Measures Attachment 12 - Reconciliation of Operating Earnings to GAAP Net Income
Certain of the matters discussed in this report 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 transmission planning,
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 and enforcement 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 manage our energy obligations, available supply and risks,
adverse outcomes of any legal, regulatory or other proceeding, settlement, investigation or claim applicable to us and/or the energy industry,
any deterioration in our credit quality or the credit quality of our counterparties,
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 insurance coverage or recover proceeds of insurance with respect to such events,
acts of terrorism, cybersecurity attacks or intrusions that could adversely impact our businesses,
increases in competition in energy supply markets as well as for 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,
changes in technology, such as distributed generation and micro grids, and greater reliance on these technologies, and
changes in customer behaviors, including increases in 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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