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Public Service Enterprise Group Annual Report, Year Ended Dec 31, 2003

Filing Date
Filed February 25, 2004
Period End
December 31, 2003
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 25, 2004. Cited figures are marked; the original filing is the authoritative source.

Public Service Enterprise Group Incorporated (PSEG), together with Public Service Electric and Gas Company (PSE&G), PSEG Power LLC (Power) and PSEG Energy Holdings LLC (Energy Holdings), filed this combined Form 10-K for fiscal 2003.

PSEG reported 2003 Net Income of $1.160 billiona, or $5.07 per diluted share, compared with $235 million, or $1.13 per share, in 2002, which included after-tax charges of $538 million tied largely to abandoned Argentine investments. Income from Continuing Operations was $3.72 per diluted share in 2003 versus $1.94 in 2002. Net income was boosted by a $370 million after-tax benefit from adopting SFAS 143, primarily from remeasuring nuclear decommissioning obligations.

Operating revenues rose to $11.116 billionb from $8.216 billion, largely from gas supply and Power contract volumes and changes in the BGS model. Management stated that PSEG is shifting from a vertically integrated utility toward a competitive energy company and aims to reduce earnings volatility through longer-term contracts and by monetizing Energy Holdings investments that no longer fit strategically. PSEG targets a 4% to 6% long-term earnings per share growth rate, reaffirmed 2004 guidance of $3.60 to $3.80 per share from continuing operations, and raised its quarterly dividend by one cent to $0.55 per share.

Power faces an overbuild in generation that has pushed PJM capacity prices below $10c per kW-year, and Energy Holdings faces political and economic risks in Latin America, India, Poland and Texas. Energy Holdings' senior notes were downgraded by S&P to BB- and by Moody's to Ba3. The filing also discloses restated 2002 and 2001 results at PSEG and Energy Holdings tied to foreign currency translation errors on the RGE investment, and it identifies significant internal control deficiencies at Energy Holdings and PSEG.

02—Key points

Key Highlights

  1. Net Income of $1.160 billion, or $5.07 per diluted share, for 2003, up from $235 million, or $1.13 per share, in 2002, which included after-tax charges of $538 million.
  2. Net Income included a $370 million after-tax benefit from adopting SFAS 143, mainly from remeasuring nuclear decommissioning obligations.
  3. Operating Revenues rose to $11.116 billion in 2003 from $8.216 billion in 2002, driven by gas supply, Power contract volumes and BGS model changes.
  4. PSEG reaffirmed 2004 earnings guidance of $3.60 to $3.80 per share from continuing operations and targets a 4% to 6% long-term EPS growth rate.
  5. The quarterly common dividend was raised by $0.01 to $0.55 per share, an indicated annual rate of $2.20.
  6. Energy Holdings' credit rating was downgraded by S&P from BBB- to BB- and by Moody's from Baa3 to Ba3, while PSEG's debt-to-capitalization ratio fell to 57.0%.
  7. A restatement corrected foreign currency translation errors on the Energy Holdings RGE investment for 2002 and 2001, and significant internal control deficiencies were identified at Energy Holdings and PSEG.

03—Questions

Frequently Asked Questions

  1. What drove the large swing in PSEG's net income between 2002 and 2003?

    The 2002 results included after-tax charges of $538 million, mainly related to abandoned Argentine investments and discontinued operations, along with goodwill impairments. The 2003 results benefited from the absence of the Argentine losses, a $370 million after-tax SFAS 143 benefit, and higher earnings at PSE&G and Power, partly offset by higher interest and operating costs.

  2. What is PSEG's dividend and earnings outlook?

    The quarterly common dividend increases from $0.54 to $0.55 per share for the first quarter of 2004. PSEG reaffirmed 2004 earnings guidance of $3.60 to $3.80 per share from continuing operations and targets a 4% to 6% EPS growth rate over the next five years, with a substantial portion of growth expected in later years as capacity prices are expected to improve.

  3. What are the main risks to Power's earnings?

    Power faces a generating capacity overbuild in the U.S. merchant power sector, the loss of MTC revenues that contributed approximately $111 million in 2003, and the outcome of annual New Jersey BGS auctions. Capacity prices in PJM fell to less than $10 per kW-year in 2003 from more than $25 per kW-year in 2001. Power has committed to hedging at least 75% of anticipated output over an 18- to 24-month horizon.

  4. Which Energy Holdings investments create the most risk for investors?

    Energy Holdings faces economic and political risks in several regions, including Brazil, where the RGE tariff was increased by 36.07% in April 2003, Texas, where TIE faces pressure on loan covenants, and Poland, where the government intends to terminate long-term PPAs. Resources' leveraged lease portfolio of about $1.4 billion net of deferred taxes carries credit risk, with some lessees downgraded below investment grade. Global is seeking to sell non-strategic assets, such as the Rades plant in Tunisia.

04—Continue

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