NEWARK, N.J., July 31, 2020 /PRNewswire/ -- Public Service Enterprise Group (NYSE: PEG) announced today that it is exploring strategic alternatives for PSEG Power's non-nuclear generating fleet, which includes more than 6,750 megawatts of fossil generation located in New Jersey, Connecticut, New York and Maryland, as well as the 467-megawatt Solar Source portfolio located in various states. PSEG Chairman, President and CEO Ralph Izzo, said, "Our intent is to accelerate the transformation of PSEG into a primarily regulated electric and gas utility -- a plan we have been executing successfully for more than a decade."
"A separation of the non-nuclear assets would reduce overall business risk and earnings volatility, improve our credit profile, and enhance an already compelling ESG position driven by pending clean energy investments, methane reduction, and zero-carbon generation," Izzo said. "We recognize the shift in investor preference toward owning regulated utility businesses without commodity exposure to merchant generation and related earnings volatility. We believe PSE&G is among the best utilities in the country and that our valuation should align with that profile."
Looking Ahead: Focusing on New Jersey's Clean Energy Agenda
PSE&G already is expected to comprise approximately 80% of PSEG's 2020 Operating Earnings mix, and that percentage should increase as the company allocates the majority of its capital spend to meet system infrastructure needs and growing policy and customer expectations for clean energy investments. PSE&G's $3.5 billion Clean Energy Future filing is built around helping New Jersey achieve the goals of the 2018 Clean Energy Act by expanding customer access to energy efficiency programs, enabling full access to electric vehicle infrastructure, enhancing services through Advanced Metering Infrastructure and Energy Cloud services and fulfilling the promise of energy storage.
PSEG continues to evaluate potential investments in offshore wind and expects to make a decision regarding the opportunity to invest in Ørsted's Ocean Wind project later this year. In addition, the company is evaluating participation in upcoming offshore wind solicitations in New Jersey and other Mid-Atlantic states.
PSEG intends to retain ownership of PSEG Power's existing nuclear fleet. The nuclear fleet is necessary for New Jersey to meet its long-term carbon reduction goals, and helps satisfy the state's capacity obligations for resource adequacy with a cost-effective source of zero-carbon electricity.
While the company is in the preliminary stage of this evaluation, the marketing of a potential transaction in one or a series of steps, anticipated to launch in the fourth quarter, is expected to be completed sometime in 2021. PSEG has engaged Goldman Sachs and Wachtell, Lipton, Rosen & Katz as advisors for this strategic evaluation.
An exit from the fossil generation business would accelerate PSEG's transition to a primarily regulated and contracted business, with a zero-carbon generation platform. Given the relatively small part of PSEG that the non-nuclear business represents, this decision will not have an impact on the company's current shareholder dividend policy, which will continue to be subject to approval by the PSEG Board of Directors. PSEG will manage this process taking into account the interests of its diverse stakeholders, including its 13,000 valued employees. Any decision regarding the non-nuclear assets will not impact PSE&G or PSEG Long Island customers, operations or tariffs and would be subject to customary regulatory approvals.
"We are proud to have served the needs of our customers and key stakeholders for the last 117 years, and are excited to explore the opportunities that will shape PSEG's future," Izzo said. "It is a future focused on advancing our business as a sustainable, customer-focused provider of essential electricity and natural gas service, delivered by a primarily regulated utility and contracted businesses."
Public Service Enterprise Group Inc. (PSEG) (NYSE: PEG) is a publicly traded diversified energy company with approximately 13,000 employees. Headquartered in Newark, N.J., PSEG's principal operating subsidiaries are: Public Service Electric and Gas Co. (PSE&G), PSEG Power and PSEG Long Island. PSEG is a Fortune 500 company included in the S&P 500 Index and has been named to the Dow Jones Sustainability Index for North America for 12 consecutive years (https://corporate.pseg.com).
The statements contained in this press release that are not purely historical are "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 current beliefs and expectations as well as assumptions made by and information currently available to management. Factors that may cause actual results to differ materially from those contemplated by these forward-looking statements include the fact the strategic review could result in various potential outcomes, including, without limitation, the sale or other disposition of all or a portion of the businesses that are the subject of the review or that the Company will determine not to dispose of some or all of such businesses; if one or more transactions is initiated or entered into, the terms of any such transaction and its favorability to the Company; the completion of any such transaction might not delayed or might not be completed at all, due to the failure to satisfy the applicable conditions to closing or otherwise; the consequences to the Company, including its financial profile, following the potential disposition of some or all of the applicable business as well as those additional factors discussed in our Annual Report on Form 10-K and subsequent reports on Form 10-Q and Form 8-K filed with the Securities and Exchange Commission (SEC), and available on our website: https://investor.pseg.com. All of the forward-looking statements made in this press release 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, results of operations or cash flows. Readers are cautioned not to place undue reliance on these forward-looking statements in making any investment decision. Forward-looking statements made in this press release apply only as of the date hereof. While we may elect to update forward-looking statements from time to time, we specifically disclaim any obligation to do so, even in light of new information or future events, unless otherwise required by applicable securities laws.
Non-GAAP Financial Measures
Management uses non-GAAP Operating Earnings in its internal analysis, and in communications with investors and analysts, as a consistent measure for comparing PSEG's financial performance to previous financial results. Non-GAAP Operating Earnings exclude the impact of returns (losses) associated with the Nuclear Decommissioning Trust (NDT), Mark-to-Market (MTM) accounting and material one-time items such as the revaluation of deferred tax liabilities.
Due to the forward looking nature of non-GAAP Operating Earnings as presented in this release, PSEG is unable to reconcile non-GAAP Operating Earnings to Net Income, the most directly comparable GAAP financial measure. Management is unable to project certain reconciling items, in particular MTM and NDT gains (losses), for future periods due to market volatility.
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