01—Abstract
Summary
Summary of the 10-K filed February 26, 2020. Cited figures are marked; the original filing is the authoritative source.
Public Service Enterprise Group Incorporated (PSEG) reported 2019 net income of $1.69 billiona, or $3.33 per diluted share, up from $1.44 billion ($2.83 per diluted share) in 2018, on operating revenues of $10.08 billion.
The increase was driven primarily by higher earnings from distribution rate relief and T&D investments at PSE&G, mark-to-market gains and nuclear decommissioning trust gains at PSEG Power, and ZEC revenues starting in April 2019. These gains were partially offset by a $286 millionb after-tax loss on the September 2019 sale of PSEG Power's interests in the Keystone and Conemaugh coal plants. PSE&G plans to invest between $11.5 billion and $15 billion over the five years ending December 31, 2024, with an expected compound annual rate base growth of 6.5% to 8%.
Much of that range depends on unapproved programs, most notably the proposed $3.5 billionc Clean Energy Future program, which is still under BPU review. PSEG Power is moving its fleet away from coal, having exited or retired over 2,400 MW since 2017, and expects more than 70% of its 2020 expected gross margin to come from hedging, capacity market revenues, ZEC revenues and certain ancillary services.
The filing highlights several material uncertainties: the outcome of the Salem 1, Salem 2 and Hope Creek ZEC awards, which are under appeal and could trigger retirement of those plants; FERC's December 2019 expansion of the PJM minimum offer price rule; the Passaic River superfund matter, where the EPA's Record of Decision for the lower 8.3 miles carries an estimated $2.3 billiond remediation cost; and the potential impact of the Regional Greenhouse Gas Initiative after New Jersey's re-entry in January 2020. The company declared a first-quarter 2020 dividend of $0.49 per share, an indicative annual rate of $1.96.
02—Key points
Key Highlights
- Net income rose to $1,693 million ($3.33 diluted EPS) in 2019 from $1,438 million ($2.83) in 2018.
- PSE&G net income was $1,250 million in 2019 versus $1,067 million in 2018, driven by distribution rate relief and T&D investment.
- PSEG Power net income was $468 million in 2019 versus $365 million in 2018, aided by MTM gains of $374 million, NDT Fund gains and $129 million in ZEC revenues, partly offset by a $286 million after-tax loss on the Keystone and Conemaugh sale.
- PSE&G expects to invest $11.5 billion to $15 billion over 2020-2024, with a targeted rate base growth of 6.5% to 8%, subject to approval of unapproved programs including the $3.5 billion Clean Energy Future program.
- The Salem 1, Salem 2 and Hope Creek nuclear plants received ZEC awards in April 2019 covering about three years through May 2022; the awards have been appealed, and an adverse outcome could lead to retirement of those plants.
- Total liquidity was $2,864 million of available credit as of December 31, 2019, against $4.2 billion of total facilities, and the company stated it expects to fund planned capital needs without issuing new equity.
- The Board approved a $0.49 per share dividend for the first quarter of 2020, an indicative annual rate of $1.96 per share, up from $1.88 declared for 2019.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Public Service Enterprise Group kept $0.17.
- Revenue$10.08B100.0%
- Cost of revenue−$3.37B33.5%
- Gross profit$6.70B66.5%
- Operating costs−$4.76B47.3%
- Operating income$1.94B19.3%
- Interest, other & tax−$250.0M2.5%
- Net income$1.69B16.8%
Where FY2019 revenue went
$10.08B- Operating costs: $4.76B, 47% of revenue
- Cost of revenue: $3.37B, 33% of revenue
- Net income: $1.69B, 17% of revenue
- Interest, other & tax: $250.0M, 2.5% of revenue
Kept 17% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 26, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $10.08B$9.70B | +3.9% |
| Cost of Revenue | $3.37B$3.23B | +4.6% |
| Gross Profit | $6.70B$6.47B | +3.6% |
| Operating Expenses | $8.13B$7.40B | +9.9% |
| Operating Income | $1.94B$2.30B | −15.4% |
| Interest Expense | $569.00M$476.00M | +19.5% |
| Net Income | $1.69B$1.44B | +17.7% |
| EPS (Basic) | $3.35$2.85 | +17.5% |
| EPS (Diluted) | $3.33$2.83 | +17.7% |
| Shares Outstanding (Basic) | 504.00M504.00M | 0.0% |
| Shares Outstanding (Diluted) | 507.00M507.00M | 0.0% |
05—Questions
Frequently Asked Questions
What drove the increase in PSEG's 2019 earnings?
Net income increased to $1,693 million from $1,438 million. The filing attributes the increase primarily to higher earnings from distribution rate relief and T&D investments at PSE&G, mark-to-market gains and NDT Fund gains at PSEG Power versus losses in 2018, ZEC revenues starting in April 2019, and pension credits from retiree medical plan changes. These were partly offset by the loss on the sale of the Keystone and Conemaugh interests.
How much is PSE&G planning to invest, and what is at risk?
PSE&G expects to invest between $11.5 billion and $15 billion over the five years through 2024, with a targeted compound annual rate base growth of 6.5% to 8%. The filing notes these ranges depend partly on unapproved programs, including the $3.5 billion Clean Energy Future program, which the BPU is still reviewing. If programs are approved only in part or not at all, rate base and future earnings would be lower than anticipated.
What is the main regulatory risk to PSEG Power's nuclear plants?
Salem 1, Salem 2 and Hope Creek were awarded ZECs for approximately three years through May 2022, but the award has been appealed by the Division of Rate Counsel. If the ZEC program is overturned or materially modified, or if the plants are not awarded ZEC payments, PSEG Power would take steps to retire all three plants after the initial ZEC period. The filing says such retirements would be material to both PSEG and PSEG Power.
What dividend is PSEG paying and how is it funded?
On February 18, 2020, the Board approved a $0.49 per share first-quarter 2020 dividend, an indicative annual rate of $1.96 per share. Dividends declared in 2019 totaled $1.88 per share, or $950 million. The company says it expects to continue paying cash dividends, subject to Board discretion, and expects to fund its planned capital requirements without issuing new equity.
06—Continue