PSEG's Growth Built on Clean Energy, Reliability, and Safety

Strategist

Travis Miller

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For the first time in more than two decades, almost all of Public Service Enterprise Group's earnings are from its regulated transmission and distribution businesses in New Jersey, giving it a risk profile similar to most U.S. utilities.

PSEG's exit from the wholesale power generation business in early 2022 reduces risk, improves its environmental profile, and should attract more income-oriented investors. We expect the company to invest $20 billion in energy infrastructure and clean energy at its rate-regulated New Jersey utility and merchant nuclear fleet during the next five years, leading to 6% annual earnings growth.

PSEG must maintain political and regulatory support for its planned infrastructure investments. New Jersey has raised its clean energy goals since the state's 2018 Clean Energy Act. That means more potential growth investment but also more regulatory risk.

Public Service Electric and Gas has achieved a series of constructive regulatory decisions going back to an electric and gas rate settlement in 2018, its first since 2010. Those relationships face another test in 2024-25.

PSEG's foray into merchant generation following energy market deregulation in New Jersey and the Northeast had hits and misses. The fossil fuel plants benefited from tight electricity markets and access to low-cost natural gas. But tepid energy demand growth, generation overcapacity, renewable energy growth, and scattershot policymaking resulted in a $2.7 billion write-off when the company sold the portfolio for $1.92 billion.

PSEG still owns three nuclear plants that sell into wholesale energy markets, but they are backed by state and federal policies that ensure they earn reasonable returns regardless of commodity price movements at least until 2025. The nuclear fleet keeps PSEG's carbon emissions profile lower than other U.S. utilities'.

Now that it has exited its Ocean Wind partnership, we expect the company to take a leading role in building the onshore infrastructure to support New Jersey's goal to reach 11 gigawatts of offshore wind projects by 2040. This could be a $3 billion capital investment opportunity.

Business Strategy & Outlook

We think Public Service Enterprise Group's regulated electricity and natural gas distribution utility, which serves about 75% of New Jersey and contributes 90% of consolidated earnings on a normalized basis, is the foundation for its efficient scale narrow economic moat.

State and federal regulators grant PSE&G exclusive rights to charge customers rates that allow it to earn a fair return on and return of the capital it invests to build, operate, and maintain its distribution networks. In exchange for PSE&G's service territory monopolies, state and federal regulators set returns at levels that aim to minimize customer costs while offering fair returns for capital providers.

Regulation in New Jersey is constructive. State regulators have approved favorable terms for most of PSE&G's planned distribution investments during the next five years. Although Public Service Enterprise Group's base allowed return on equity fell to 9.6% from 10.3% as part of a 2018 rate settlement, we expect constructive rate structures and public policy support to enable PSEG to continue producing shareholder value from its capital investment plan, which is set to average nearly $4 billion annually.

Wide-moat interstate transmission has become a substantial source of earnings, making up nearly half of PSE&G's regulated asset base. Despite a cut in its transmission business' allowed return on equity in 2021, Public Service Enterprise Group still is positioned to earn greater than a 10% return on equity, well above its cost of equity.

The company owns a large stake in three nuclear plants in New Jersey and Pennsylvania. These plants generate the lowest-cost source of reliable electricity in the region and face virtually no substitution threat because no other power generation source can match their low cost or scale. Land constraints and Nimbyism are key barriers to entry in Public Service Enterprise Group’s densely populated service territory where its nuclear plants operate. The New Jersey plants receive state subsidies that ensure returns on capital stay above the plants' cost of capital. The plants also are a critical piece of New Jersey's zero-carbon emissions policy goal.

Narrow

Economic Moat

Public Service Enterprise Group

Public Service Enterprise Group, Inc. is a holding company, which engages in the provision of electric and gas services. The firm operates through the following two segments: Public Service Electric & Gas Co. (PSE&G) and PSEG Power. The PSE&G segment engages in the transmission of electricity and distribution of electricity and natural gas. The PSEG Power segment wholesales energy, fuel supply, and energy transacting functions. Its products and services include energy, capacity, ancillary services, and emissions allowances and congestion credits. The company was founded in 1903 and is headquartered in Newark, NJ.

Earnings data Q2 2021

Earnings data Q3 2021

Earnings data Q4 2021

Earnings data Q1 2022

Earnings data Q2 2022

Earnings data Q3 2022

Earnings data Q4 2022

Earnings data Q1 2023

Earnings data Q2 2023

Earnings data Q3 2023

Earnings data Q4 2023

Earnings data Q1 2024

PSEG reports robust Q1 earnings, eyes significant investment opportunities

PSEG delivered strong financial performance, particularly in its non-GAAP operating earnings and utility operations. The company faces challenges in adapting to the changing energy landscape but has opportunities for significant investment and federal support for renewable energy.

PSEG reports robust Q2 earnings, eyes growth in clean energy

PSEG's strong financial performance, strategic initiatives, and alignment with public policy position the company for continued growth. While preparing for regulatory challenges, the company is focused on leveraging opportunities in clean energy and efficiency investments.

PSEG reports mixed Q3 results, reaffirms guidance, eyes growth opportunities

PSEG's performance showed mixed results with a slight increase in net income but a decrease in non-GAAP operating earnings. The company faces challenges in the power sector but maintains strong liquidity and reaffirms its full-year earnings guidance. Opportunities lie in aligning with state policies and pursuing long-term growth in the Northeast region.

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Public Service Enterprise Group, Inc. is an energy company, which engages in the business of regulated electric and gas utility, and nuclear generation. Its products and services include energy, capacity, ancillary services, and emissions allowances and congestion credits. The firm operates through the Public Service Electric and Gas Company (PSE&G) and PSEG Power segments. The PSE&G segment focuses on the transmission of electricity and distribution of electricity and natural gas. The PSEG Power segment wholesales energy, fuel supply, and energy transacting functions. The company was founded in 1903 and is headquartered in Newark, NJ.

Public Service Enterprise (PEG) Q3 results are expected to reflect favorable weather pattern impacts. However, storm activities might have pushed up its quarterly costs.

What Awaits Public Service Enterprise (PEG) in Q3 Earnings?

PSEG (PEG) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.

Earnings Preview: PSEG (PEG) Q3 Earnings Expected to Decline

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Why Is PSEG (PEG) Down 0.4% Since Last Earnings Report?

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Public Service Enterprise Group Set for 35% Price Move

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Public Service Enterprise Group, Inc. (PEG) CEO Ralph Izzo on Q2 2020 Results - Earnings Call Transcript

Public Service Enterprise's (PEG) Residential Electric sales volumes were 3,236 million kilowatt-hours in Q2, while Commercial and Industrial Electric sales volumes were 5,572 million kilowatt-hours.

Public Service Enterprise (PEG) Q2 Earnings Beat Estimates

PSEG (PEG) delivered earnings and revenue surprises of 33.90% and -10.77%, respectively, for the quarter ended June 2020. Do the numbers hold clues to what lies ahead for the stock?

PSEG (PEG) Q2 Earnings Top Estimates

NEWARK, N.J., July 31, 2020 /PRNewswire/ -- Public Service Enterprise Group (NYSE: PEG) reported Net Income for the second quarter of 2020 of $451 million, or $0.89 per share, compared to Net Income of $153 million, or $0.30 per share, in the second quarter of 2019.

PSEG Announces 2020 Second Quarter Results

NEWARK, N.J., July 31, 2020 /PRNewswire/ -- Public Service Enterprise Group (NYSE: PEG) announced today that it is exploring strategic alternatives for PSEG Power's non-nuclear generating fleet, which includes more than 6,750 megawatts of fossil generation located in New Jersey,.

PSEG To Explore Strategic Alternatives For PSEG Power's Non-Nuclear Fleet

Public Service Enterprise's (PEG) Q2 earnings are expected to have been driven by impressive margin growth

What Awaits Public Service Enterprise (PEG) in Q2 Earnings?

PSEG (PEG) Q2 Earnings Preview: What's in the Cards?

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NEWARK, N.J., July 21, 2020 /PRNewswire/ -- The Board of Directors of Public Service Enterprise Group (NYSE:PEG) today declared a $0.49 per share dividend on the outstanding common stock of the company for the third quarter of 2020.

PSEG Declares Regular Quarterly Dividend For Third Quarter Of 2020

PEG has declined 7% this year in-line with the general weakness in utilities.

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Public Service Enterprise Group, Inc. (PEG) CEO Ralph Izzo on Q1 2020 Results - Earnings Call Transcript

Public Service Enterprise's (PEG) Q1 revenues of $2,781 million miss the Zacks Consensus Estimate by 14.1% and decline 6.7% year over year.

Public Service Enterprise (PEG) Posts In-Line Q1 Earnings

PSEG (PEG) delivered earnings and revenue surprises of 0.00% and -14.09%, respectively, for the quarter ended March 2020. Do the numbers hold clues to what lies ahead for the stock?

PSEG (PEG) Matches Q1 Earnings Estimates

Shares of Public Service Enterprise (NYSE:PEG) were unchanged in pre-market trading after the company reported Q1 results.

News for Public Service Enterprise Group Stock (PEG)