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PSEG Reports Results For Competitive Power Segment

February 27,2019



PSEG today reported fourth quarter and full year earnings.

The PSEG Power segment reported non-GAAP Operating Earnings of $57 million ($0.11 per share) for the fourth quarter of 2018 and non-GAAP Adjusted EBITDA of $176 million bringing full year non-GAAP Operating Earnings to $502 million ($0.99 per share) and non-GAAP Adjusted EBITDA to $1,059 million. On a comparative basis, PSEG Power reported non-GAAP Operating Earnings of $100 million ($0.20 per share) and non-GAAP Adjusted EBITDA of $196 million for the fourth quarter of 2017 and non-GAAP Operating Earnings of $505 million ($1.00 per share) and non-GAAP Adjusted EBITDA of $1,172 million for the full year 2017.

PSEG Power reported a Net Loss of $35 million ($0.07 per share) in the fourth quarter of 2018 versus Net Income of $610 million ($1.20 per share) in the fourth quarter of 2017. For the full year 2018, PSEG Power reported Net Income of $365 million ($0.72 per share) versus Net Income for the full year 2017 of $479 million ($0.94 per share).

Power's fourth quarter Net Loss includes net unrealized losses in NDT equity securities, MTM activity, and a gain related to the sale of the retired Hudson and Mercer generating units.

A scheduled increase in capacity prices in New England and PJM improved fourth quarter Net Income comparisons by $0.04 per share. The average price received on energy hedges declined in the quarter, as re-contracting led to a $0.09 reduction in results compared to last year's fourth quarter. The increase in generation output for the quarter improved Net Income comparisons by $0.03 per share. Gas operations declined by $0.02 per share, as higher natural gas prices lowered commodity margin and impacted off-system sales following the start-up of the Atlantic Sunrise gas pipeline that has enabled price convergence of Leidy gas with higher prices at Henry Hub. A decline in Power's O&M expense improved Net Income comparisons by $0.01 per share. Interest expense ($0.03 per share) and depreciation expense ($0.02 per share) both rose as a result of the two new combined cycle units in service at mid-year. Higher taxes reduced Net Income comparisons by $0.01 over the prior year's fourth quarter, as the absence of investment tax credits and other items offset the benefit of tax reform.

Output from Power's generating facilities in the fourth quarter increased by 19% over fourth quarter 2017, mainly from new capacity additions at Sewaren and Keys and from higher output at our other New Jersey combined cycle units. Quarterly comparisons were also influenced by increased demand in response to an extended period of cold weather that ran from mid-November to mid-December. Output of 56 TWh was at the high end of our forecast provided at the end of the third quarter, which called for full year output of 54 – 56 TWh. The nuclear fleet operated at an average capacity factor of 86.9% in the quarter, resulting in a full year capacity factor of 91.4%. For the year, nuclear production totaled 31.2 TWh. Power's gas-fired CCGT fleet operated at an average capacity factor of approximately 51% in the quarter resulting in a full-year capacity factor of 52%, producing 18.5 TWh of electricity for the year, up approximately 36% year-over-year. For the quarter, output from the coal fleet was up 10%, primarily from the Pennsylvania units, in response to higher weather related demand. For the full year, output from the coal fleet increased 7% to 5.7 TWh as an increase in gas prices improved its competitiveness.

Power is forecasting an increase in output for 2019 to 60 - 62 TWh, up 2 TWh since the third quarter 2018 update. Following completion of the recent Basic Generation Service (BGS) auction in New Jersey, approximately 80% - 85% of production for the year is hedged at an average price of $37 per MWh. For 2020, Power has hedged 55% - 60% of forecast production of 60 – 62 TWh at an average price of $38 per MWh. Power is also forecasting output for 2021 of 60 – 62 TWh. Approximately 15% - 20% of Power's output in 2021 is hedged at an average price of $42 per MWh. The forecast for 2019 – 2021 includes generation associated with the full-year production contribution of 1,300 MWs of gas-fired combined cycle capacity at the Keys Energy Center in Maryland and Sewaren in New Jersey; the mid-2019 commercial operation of the 485 MW gas-fired combined cycle generating unit in Bridgeport Harbor, Connecticut; and the mid-2021 retirement of the 383 MW Bridgeport Harbor coal-fired generating station.

For 2019, non-GAAP Operating Earnings and non-GAAP Adjusted EBITDA at PSEG Power are forecast to be $395 million - $460 million and $1,030 million - $1,130 million, respectively. The Operating Earnings guidance for 2019 reflects the benefits of including a partial year of ZECs and the contribution from three new CCGT units, offset by lower pricing on re-contracting, lower capacity revenues, higher interest expense due to the absence of capitalized interest on construction, and higher taxes due to the absence of the nuclear carryback benefit in 2018.

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