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Public Service Enterprise Group Annual Report, Year Ended Dec 31, 2002

Filing Date
Filed February 26, 2003
Period End
December 31, 2002
Security
PEG
In the record · 2016–202610-K1110-Q338-K149

PEG filed 11 annual reports (10-K), 33 quarterly reports (10-Q) and 149 current reports (8-K) between 2016 and 2026.

  1. FY2016 annual report10-K · Feb ’17Feb ’17
  2. Impairment8-K · Jun ’19Jun ’19
  3. Leadership change8-K · Apr ’22Apr ’22
  4. Leadership change8-K · Jan ’26Jan ’26

01—Abstract

Summary

Summary of the 10-K filed February 26, 2003. Cited figures are marked; the original filing is the authoritative source.

Public Service Enterprise Group Incorporated (PSEG) filed this combined Form 10-K for fiscal 2002 together with Public Service Electric and Gas Company (PSE&G), PSEG Power LLC (Power) and PSEG Energy Holdings LLC (Energy Holdings).

Net income fell to $245 milliona, or $1.17 per share, from $770 million, or $3.70 per share, in 2001. Excluding after-tax charges of $541 million, or $2.59 per share, mainly tied to Argentine investments, earnings were $786 million, or $3.76 per share. The Argentine write-down was $497 million pre-tax, and the company also recorded goodwill impairments under SFAS 142 and discontinued operations at Energy Technologies.

Operating revenues rose to $8.39 billionb from $7.06 billion, driven largely by Power's BGS-related revenues after the BGS model changed on August 1, 2002. The company's segments were Power (earnings of $468 million), PSE&G ($201 million), Resources ($78 million) and Global (a loss of $302 million). Management guided 2003 earnings to $3.70 to $3.90 per share from continuing operations, and it stated a long-term target of 7% annual EPS growth.

PSEG issued over $1.1 billionc of equity and equity-linked securities from September 2002 onward and used the proceeds mainly to reduce short-term debt. The debt-to-capitalization ratio was 0.61 to 1 at year-end, against a covenant maximum of 0.70 to 1.

Dividends were held at $2.16d per share, with a stated payout ratio of 58% excluding charges. Key risks in the filing include Global's exposure to Latin American currency devaluations and the Texas merchant plants, Resources' leveraged lease counterparties (some downgraded below investment grade), Power's credit exposure under BGS contracts, the pending BPU electric rate case seeking an approximately $250 million increase, and the Standard Market Design and PJM developments at FERC.

02—Key points

Key Highlights

  1. Net income was $245 million, or $1.17 per share, versus $770 million, or $3.70 per share, in 2001; excluding $541 million of after-tax charges, earnings were $786 million, or $3.76 per share.
  2. Charges of $497 million pre-tax wrote down all Argentine investments, and $120 million of after-tax goodwill impairments were recorded as a cumulative effect of an accounting change.
  3. Operating revenues increased to $8.39 billion from $7.06 billion, mainly from Power's BGS-related and off-system gas revenues after the BGS model changed in August 2002.
  4. Power contributed $468 million of earnings, while Global posted a loss of $302 million; PSE&G earned $201 million.
  5. PSEG issued more than $1.1 billion of equity and equity-linked securities from September 2002 and used the proceeds mainly to reduce short-term debt; leverage ended at 0.61 to 1 against a 0.70 to 1 covenant.
  6. 2003 EPS guidance is $3.70 to $3.90 from continuing operations, with a long-term target of 7% annual growth; the dividend remained $2.16 per share.
  7. PSE&G filed an electric base rate case seeking an approximately $250 million annual increase, with a proposed 11.75% return on equity; the Ratepayer Advocate recommended about $87 million.

03—Questions

Frequently Asked Questions

  1. Why did PSEG's earnings fall so sharply in 2002?

    Most of the decline came from charges at Energy Holdings. The company wrote down its Argentine investments by $497 million pre-tax, recorded goodwill impairments, and took losses on discontinued Energy Technologies operations. Excluding roughly $541 million of after-tax charges, earnings were $786 million, or $3.76 per share, which was largely consistent with the prior year.

  2. What is PSEG's outlook for 2003?

    PSEG forecast 2003 earnings of $3.70 to $3.90 per share from continuing operations, comparable to 2002 results excluding Argentine losses. The company seeks a 7% long-term annual EPS growth rate after 2003 and expects the impairment-free business plan to rely on the BGS contracts, a successful PSE&G rate case, and improvements at Global.

  3. How is PSEG's financial position and dividend?

    PSEG issued more than $1.1 billion of equity and equity-linked securities after September 2002 to reduce short-term debt. Its debt-to-capitalization ratio was 0.61 to 1 at year-end, within its 0.70 to 1 covenant. The common dividend was $2.16 per share, and the filing says future dividends depend on earnings, cash flows and other factors.

  4. What are the main risks to investors?

    The filing highlights Global's exposure to Latin American currency devaluation and the oversupplied Texas power market, and Resources' leveraged leases, several of which lessees were downgraded below investment grade. Power faces credit risk on BGS-related contracts and possible collateral calls if it loses its investment-grade rating (about $320 million was cited). Regulatory outcomes at the BPU and FERC could also materially affect results.

04—Continue

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