01—Abstract
Summary
Summary of the 10-K filed February 26, 2016. Cited figures are marked; the original filing is the authoritative source.
Public Service Enterprise Group Incorporated (PSEG) reports 2015 net income of $1.68 billiona, or $3.30 per diluted share, up from $1.52 billion, or $2.99 per diluted share, in 2014.
Operating revenues were $10.42 billionb, down from $10.89 billion. The increase was driven primarily by higher transmission revenues at PSE&G, higher mark-to-market gains and lower fuel costs at Power, and insurance recoveries of Superstorm Sandy costs, primarily at Power. These were partially offset by lower capacity revenues and higher pension and OPEB costs.
PSEG describes its two principal operating subsidiaries as PSE&G, a New Jersey regulated transmission and distribution utility, and Power, a merchant generator with 11,678 MW of nuclear and fossil capacity. The company reports cash on hand of $394 millionc at year-end 2015, solid investment grade credit ratings, and a 2016 indicative annual dividend rate of $1.64 per share. Management states it expects to fund its planned transmission, Energy Strong, GSMP and generation projects without issuing new equity.
Planned 2016-2018 capital expenditures total $4.44 billiond, $4.09 billion and $2.96 billion for PSEG overall in the three years shown. Key risks include continued low natural gas and electricity prices, a pending FERC staff investigation into errors in Power's cost-based bids for its New Jersey fossil units, with potential disgorgement and penalties that the filing says could be material if PSEG's legal arguments do not prevail, and pending capacity market and environmental rules, including the Clean Power Plan, which the U.S. Supreme Court stayed in February 2016.
02—Key points
Key Highlights
- Net income rose to $1,679 million ($3.30 per diluted share) in 2015 from $1,518 million ($2.99 per diluted share) in 2014.
- Operating revenues declined to $10,415 million from $10,886 million, while operating income increased to $2,962 million from $2,623 million.
- PSE&G transmission revenues increased $164 million due to increased investments in transmission projects; PSE&G 2016 formula rate update provides $146 million in increased annual transmission revenues.
- Power recognized $102 million of after-tax Superstorm Sandy insurance recovery in 2015, and all Sandy insurance claims are now fully resolved according to the filing.
- Year-end 2015 cash and cash equivalents were $394 million; the company had $3.6 billion of available liquidity under credit facilities.
- Quarterly dividend approved at $0.41 per share for Q1 2016, an indicative annual rate of $1.64 per share, up from $1.56 in 2015.
- A FERC staff investigation into errors in Power's New Jersey fossil unit bids could result in disgorgement and penalties; the filing says Power would record losses that would be material if its legal arguments do not prevail.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2015filed February 26, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $10.41B$10.89B | −4.3% |
| Operating Expenses | $7.45B$8.26B | −9.8% |
| Operating Income | $2.96B$2.62B | +12.9% |
| Interest Expense | $393.00M$389.00M | +1.0% |
| Net Income | $1.68B$1.52B | +10.6% |
| EPS (Basic) | $3.32$3.00 | +10.7% |
| EPS (Diluted) | $3.30$2.99 | +10.4% |
| Shares Outstanding (Basic) | 505.00M506.00M | −0.2% |
| Shares Outstanding (Diluted) | 508.00M508.00M | 0.0% |
05—Questions
Frequently Asked Questions
How did PSEG's earnings change in 2015?
Net income increased $161 million to $1,679 million, or $3.30 per diluted share, from $1,518 million, or $2.99 per diluted share, in 2014. The filing attributes the increase primarily to higher PSE&G transmission revenues, higher mark-to-market gains and lower fuel costs at Power, and Superstorm Sandy insurance recoveries. Lower capacity revenues and higher pension and OPEB costs partially offset these gains.
What is the outlook for PSE&G's transmission business?
The filing states that PSE&G's 2016 Annual Formula Rate Update provides $146 million in increased annual transmission revenues effective January 1, 2016, with the 2016 adjustment expected to reduce that increase by approximately $27 million due to bonus depreciation extension. PSE&G also has a planned 2016-2018 transmission capital spend of $4.7 billion, though the filing notes that Order 1000 may allow third parties to build some projects in its service territory.
What are the main risks to Power's earnings?
The filing identifies low wholesale natural gas and electricity prices, capacity market design and pending FERC proceedings, the FERC investigation into Power's New Jersey fossil unit bids, nuclear operating and regulatory risks, and environmental rules including the Clean Power Plan. The filing also notes that if Power lost its investment grade credit rating, it may have had to provide approximately $864 million in additional collateral as of December 31, 2015.
Is PSEG planning to issue new equity?
No. Management states it expects to fund its transmission projects required under PJM's reliability program, Energy Strong, the Gas System Modernization Program, Keys Energy Center, Sewaren 7, Bridgeport Harbor Station 5 and other planned projects without issuing new equity. The company also reports it effectively deployed capital without additional equity during 2015.
What new generation projects is Power building?
Power is developing the Keys Energy Center, a 755 MW gas-fired combined cycle plant in Maryland expected in service in 2018 at an estimated investment of $825 million to $875 million. It is also building Sewaren 7, a 540 MW dual-fueled plant in New Jersey, expected in service in summer 2018 at $625 million to $675 million, and Bridgeport Harbor Station 5, a 485 MW gas-fired plant in Connecticut, expected in service in summer 2019 at more than $550 million.
06—Continue