01—Abstract
Summary
Summary of the 10-K filed February 27, 2012. Cited figures are marked; the original filing is the authoritative source.
Public Service Enterprise Group Incorporated (PSEG) reported 2011 Income from Continuing Operations of $1,407 milliona (diluted EPS $2.77) and Net Income of $1,503 million (diluted EPS $2.96), compared with $1,557 million and $1,564 million in 2010.
Operating revenues were $11,079 millionb versus $11,793 million in 2010. The decline was driven by lower electricity and gas prices, lower Basic Generation Service (BGS) volumes from customer migration, and a $170 million after-tax charge on leveraged leases tied to Dynegy's bankruptcy. These were partly offset by higher PSE&G distribution and transmission revenues and the absence of a 2010 $72 million after-tax Market Transition Charge refund charge.
PSEG's Power segment contributed $1,002 millionc of 2011 continuing income, PSE&G $521 million, and Energy Holdings a loss of $134 million. Cash from operations was over $3.5 billion (net cash from operating activities of $3,557 million), helped by about $900 million of cash benefits from 2010 federal accelerated depreciation provisions. Capital expenditures were about $2.1 billion, and dividends paid were $693 million.
The Board approved a first-quarter 2012 dividend of $0.3550d per share, an indicated annual rate of $1.42, and described a change in dividend policy toward one that considers the growing contribution of regulated operations. The company reported total credit facilities of $4.2 billion and cash on hand of over $800 million.
Key forward-looking issues include the continuing potential for low natural gas and electricity prices, regulatory and political uncertainty, and subsidized generation in New Jersey under the Long-Term Capacity Agreement Pilot Program (LCAPP), which the filing says could artificially depress wholesale prices. The company also disclosed a January 31, 2012 closing agreement with the IRS settling leasing disputes, and expects capital expenditures of $6.8 billion or more over the next three years, over 75% of which is at PSE&G.
02—Key points
Key Highlights
- 2011 Net Income of $1,503 million (diluted EPS $2.96), down from $1,564 million in 2010; Income from Continuing Operations was $1,407 million versus $1,557 million.
- Operating revenues fell to $11,079 million from $11,793 million, reflecting lower commodity prices and lower BGS volumes due to customer migration to third-party suppliers.
- A $170 million after-tax charge on Energy Holdings' leveraged leases related to Dynegy drove Energy Holdings to a $134 million loss in 2011.
- Power earned $1,002 million and PSE&G $521 million from continuing operations in 2011, with PSE&G's earnings rising on higher base rates and the absence of a 2010 $72 million charge.
- Cash from operations was over $3.5 billion, aided by roughly $900 million of tax benefits from accelerated depreciation provisions enacted in 2010.
- The Board approved a $0.3550 quarterly dividend for Q1 2012 (indicated annual rate $1.42) and a change in dividend policy that considers regulated earnings growth.
- Over $6.8 billion of capital expenditures are planned over the next three years, with more than 75% at PSE&G, and the company reported a January 31, 2012 IRS closing agreement settling leasing disputes.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 27, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $11.08B$11.79B | −6.1% |
| Operating Expenses | $8.34B$8.86B | −5.9% |
| Operating Income | $2.74B$2.94B | −6.6% |
| Interest Expense | $475.00M$472.00M | +0.6% |
| Net Income | $1.50B$1.56B | −3.9% |
| EPS (Basic) | $2.97$3.09 | −3.9% |
| EPS (Diluted) | $2.96$3.08 | −3.9% |
| Shares Outstanding (Basic) | 505.95M505.99M | 0.0% |
| Shares Outstanding (Diluted) | 506.98M507.05M | 0.0% |
05—Questions
Frequently Asked Questions
How did PSEG's earnings change in 2011?
Net Income was $1,503 million ($2.96 diluted EPS) in 2011, versus $1,564 million ($3.08) in 2010. Income from Continuing Operations fell to $1,407 million from $1,557 million, mainly because of lower electricity and gas prices, lower BGS volumes, and a $170 million after-tax leveraged lease charge related to Dynegy, partly offset by higher PSE&G delivery revenues.
What drove the decline in Power's results?
Power's Income from Continuing Operations fell to $1,002 million from $1,136 million. The filing cites lower average pricing and volumes under BGS contracts due to customer migration, higher O&M for planned outages, and higher depreciation from back-end technology installations, partly offset by favorable mark-to-market activity and new wholesale contracts.
What is the dividend outlook?
On February 21, 2012, the Board approved a $0.3550 per share dividend for the first quarter of 2012, an indicated annual rate of $1.42. The company said it expects to continue paying cash dividends, although future declarations remain at the Board's discretion.
What regulatory risks does the filing highlight?
The filing highlights New Jersey's LCAPP program, which subsidizes up to 2,000 MW of new gas-fired generation and which the company says could artificially depress competitive wholesale prices. It also cites FERC Order 1000 on transmission planning and right of first refusal, the Susquehanna-Roseland line's federal permitting delays, and possible closed-cycle cooling requirements under Section 316(b).
How is PSEG's liquidity position?
Total credit facilities were $4.2 billion as of December 31, 2011, with $4.0 billion available, and cash on hand exceeded $800 million. The company said it was in compliance with all debt covenants and that its credit capacity was in excess of anticipated maximum liquidity requirements through 2012.
06—Continue