01—Abstract
Summary
Summary of the 10-K filed February 23, 1995. Cited figures are marked; the original filing is the authoritative source.
Public Service Enterprise Group Incorporated (Enterprise) is a New Jersey public utility holding company whose principal subsidiary, Public Service Electric and Gas Company (PSE&G), provides electric and gas service to about 5,500,000 people, roughly 70%a of New Jersey's population.
PSE&G accounted for 85% of Enterprise's assets and 93% of its revenues in 1994, and 91% of net income. For 1994, Enterprise reported total operating revenues of $5.92 billionb, net income of $679.0 million, and earnings of $2.78 per share, up from $2.50 in 1993. Dividends were $2.16 per share, unchanged from 1993.
PSE&G's operating revenues were $5.5 billionc, with 68% from electric and 32% from gas operations. The filing emphasizes a competitive transition in the energy industry. Enterprise announced a reorganization effective March 1, 1995, creating a new ventures and services subsidiary and three business units (fossil generation; transmission and distribution; customer services).
PSE&G's nuclear operations were reorganized as a business unit in fall 1994. The filing flags stranded-cost risk, a BPU Energy Master Plan calling for regulatory flexibility, and the phase-out of rate-base/rate-of-return pricing as possible future developments. Construction expenditures for 1995 through 1999 are expected to total about $3.2 billiond for PSE&G, and total capital requirements for 1995 through 1999 are $5.94 billion including EDHI and debt retirements.
The filing also highlights operating risks at PSE&G's nuclear units. The NRC gave Salem a "3" rating in Operations and Maintenance following a decline in performance, and requested a meeting with the Boards of Directors in mid-March 1995. PSE&G was fined $500,000 over the April 1994 Salem 1 shutdown.
Nonutility subsidiary EDHI had net income of $60 million in 1994. Its results were affected by lower EDC gas prices and by the Continental Airlines aircraft leases, where Continental missed a February 1995 payment and proposed reducing rentals by approximately 50%.
02—Key points
Key Highlights
- Enterprise 1994 net income of $679.0 million, or $2.78 per share, versus $600.9 million, or $2.50 per share, in 1993
- Total operating revenues of $5.92 billion in 1994; PSE&G generated 93% of Enterprise revenues and 91% of net income
- Dividends paid of $2.16 per share in 1994, unchanged from 1993; book value per share of $21.70 at year-end 1994
- Construction expenditures of about $3.2 billion projected for PSE&G over 1995-1999; total Enterprise capital requirements of $5.94 billion for 1995-1999
- Salem nuclear station received a "3" NRC rating in Operations and Maintenance areas, and the NRC requested a March 1995 meeting with the Boards of Directors
- Continental Airlines failed to make its February 1, 1995 payment on PSRC's leases and intends to reduce rentals by approximately 50%; the filing states the company expects Continental's full obligations to be satisfied
- Enterprise announced a corporate reorganization effective March 1, 1995, creating a ventures subsidiary and three new business units in response to competition
03—Questions
Frequently Asked Questions
How did Public Service Enterprise Group perform financially in 1994?
Net income rose to $679.0 million, or $2.78 per share, from $600.9 million, or $2.50 per share, in 1993. Total operating revenues were $5.92 billion, up from $5.71 billion. Return on average common equity was 12.94%, compared with 11.91% in 1993.
What drives the company's earnings?
PSE&G, the regulated New Jersey electric and gas utility, supplies 91% of Enterprise's net income. PSE&G's 1994 earnings available to Enterprise increased $42 million, primarily because of higher electric commercial sales and firm gas residential and commercial sales, along with a nontaxable insurance benefit that reduced federal income tax expense.
What are the main risks to investors identified in the filing?
The filing identifies competition from nonutility generators, the possibility of retail wheeling, and potential stranded costs if regulators do not allow recovery of certain costs. Nuclear performance at Salem, the Continental Airlines lease dispute at PSRC, and the potential consequences of an unfavorable IRS ruling on the Hope Creek nuclear unit's tax in-service date are also cited. Enterprise cannot predict the BPU's treatment of consolidated tax benefits.
How much will the company spend on capital projects?
PSE&G expects construction expenditures of about $3.2 billion over 1995 through 1999, including $484 million for nuclear fuel and $78 million of AFDC. Total capital requirements for Enterprise over the same period, including EDHI and mandatory debt and preferred retirements, are $5.94 billion, and PSE&G expects to generate most of its capital needs internally.
What is the status of the company's nonutility businesses?
EDHI, the parent of the nonutility businesses, reported 1994 net income of $60 million. Its focus is on CEA, which is expected to drive growth, and EDC, an oil and gas producer. PSRC will limit new investments, and EGDC will exit the real estate business in a prudent manner. EDHI's debt-to-equity ratio was 1.15:1 at year-end 1994, within covenant requirements.
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