01—Abstract
Summary
Summary of the 10-K filed February 22, 2023. Cited figures are marked; the original filing is the authoritative source.
Public Service Enterprise Group Incorporated (PSEG) reported 2022 net income of $1,031 milliona, or $2.06 per diluted share, compared with a net loss of $648 million in 2021.
The improvement was driven primarily by the absence of the 2021 impairment tied to the sale of PSEG Power's fossil generation assets, higher earnings from continued T&D investment at PSE&G ($1,565 millionb net income in 2022 versus $1,446 million in 2021), and the favorable Conservation Incentive Program. PSEG Power & Other posted a net loss of $534 million in 2022, reflecting lower generation revenues, net unrealized losses on NDT Fund equity securities, and $457 million of after-tax non-trading mark-to-market losses. The February 2022 sale of the 6,750 MW fossil portfolio closed the company's transition toward a more regulated earnings mix.
PSE&G's capital investment program for 2023-2027 is estimated at $15.5 billion to $18 billionc, with an expected compound annual rate base growth of 6% to 7.5% from year-end 2022 to year-end 2027. Total projected PSEG capital expenditures are $3.64 billion in 2023, $3.05 billion in 2024 and $3.06 billion in 2025. The nuclear fleet, with 3,766 MW of owned capacity, operated at a 92.2% capacity factor in 2022, and the Inflation Reduction Act's nuclear production tax credit, expected to be up to $15/MWh from 2024 through 2032, is expected to provide downside price protection.
PSEG Power's collateral postings rose from $343 million in June 2021 to $1.5 billiond at year-end 2022, and were about $700 million as of February 17, 2023. Key risks include PJM capacity auction uncertainty (results for the 2024-2025 delivery year were not announced), FERC proceedings on the transmission ROE adder, volatile collateral requirements, pension funding pressure from 2022 asset losses, and potential state policy shifts away from natural gas. The company declared a $0.57 quarterly dividend, an indicative annual rate of $2.28 per share, and completed a $500 million share repurchase program during 2022.
02—Key points
Key Highlights
- Net income of $1,031 million ($2.06 diluted EPS) in 2022, versus a net loss of $648 million ($1.29 loss per share) in 2021, which included a large fossil-asset impairment.
- PSE&G net income rose to $1,565 million in 2022 from $1,446 million in 2021, driven by T&D investment and the favorable Conservation Incentive Program.
- PSEG Power & Other net loss of $534 million in 2022, including $457 million of after-tax non-trading mark-to-market losses.
- Completed the sale of the 6,750 MW fossil generation portfolio in February 2022, simplifying the business mix toward a higher PSE&G earnings share.
- PSE&G projects capital investment of $15.5 billion to $18 billion for 2023-2027, with expected rate base compound annual growth of 6% to 7.5%.
- Nuclear fleet of 3,766 MW ran at a 92.2% capacity factor in 2022; the IRA nuclear production tax credit (up to $15/MWh, 2024-2032) is expected to provide downside price protection.
- Cash collateral postings at PSEG Power rose to $1.5 billion at year-end 2022, and the Board approved a $0.57 per share first-quarter 2023 dividend ($2.28 indicative annual rate).
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 22, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $9.80B$9.72B | +0.8% |
| Operating Expenses | $8.42B$10.58B | −20.4% |
| Operating Income | $1.38B-$856.00M | +261.3% |
| Interest Expense | $628.00M$571.00M | +10.0% |
| Net Income | $1.03B-$648.00M | +259.1% |
| EPS (Basic) | $2.07$-1.29 | +260.5% |
| EPS (Diluted) | $2.06$-1.29 | +259.7% |
| Shares Outstanding (Basic) | 498.00M504.00M | −1.2% |
| Shares Outstanding (Diluted) | 501.00M504.00M | −0.6% |
05—Questions
Frequently Asked Questions
Why did PSEG swing from a net loss in 2021 to net income in 2022?
The 2021 results included an impairment loss and related charges tied to the sale of PSEG Power's fossil generation assets. In 2022, net income of $1,031 million reflected the absence of that charge, higher PSE&G earnings from T&D investment, and a favorable Conservation Incentive Program. These gains were partially offset by net unrealized losses on NDT Fund equity securities and realized losses in 2022 versus realized gains in 2021.
How much capital does PSE&G plan to invest, and what growth does it expect?
For 2023-2027, PSE&G's capital investment program is estimated at $15.5 billion to $18 billion, resulting in an expected compound annual growth in rate base of 6% to 7.5% from year-end 2022 to year-end 2027. Total projected PSEG capital expenditures are $3.64 billion in 2023, $3.05 billion in 2024 and $3.06 billion in 2025.
What are the main uncertainties for PSEG Power's merchant nuclear earnings?
Key uncertainties include the PJM capacity market, where results for the June 2024 through May 2025 delivery year were not yet announced pending FERC action, and collateral requirements that rose sharply with forward price volatility. Energy realizations are also limited by forward sales contracted in prior years. More than 90% of expected 2023 gross margin relates to hedging, capacity revenues, ZEC revenues and certain gas and ancillary payments. The ZEC program runs through May 2025, and nuclear PTC guidance from the U.S. Treasury is still pending.
How did the 2022 pension performance affect future costs?
The filing states that 2022 pension assets produced negative returns, and that pension costs in 2023 and future years are expected to be materially affected by those returns. PSE&G received a BPU accounting order, effective for 2023 and later, that modifies how actuarial gains and losses are amortized for ratemaking. This is expected to reduce 2023 pension expense, net of amounts capitalized, by $59 million, resulting in a pension credit of $16 million.
What shareholder returns did PSEG provide in 2022?
PSEG paid cash dividends of $2.16 per share in 2022, totaling $1,079 million. It completed a $500 million share repurchase program authorized in September 2021, repurchasing approximately 7.4 million shares in aggregate. On February 14, 2023, the Board approved a $0.57 per share first-quarter 2023 dividend, an indicative annual rate of $2.28 per share.
06—Continue