ML18107A187
| ML18107A187 | |
| Person / Time | |
|---|---|
| Site: | Salem, Hope Creek  |
| Issue date: | 12/31/1998 |
| From: | Ferland E Public Service Enterprise Group |
| To: | |
| Shared Package | |
| ML18107A186 | List: |
| References | |
| NUDOCS 9904210119 | |
| Download: ML18107A187 (28) | |
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HOW PSEG DID IN 1998 FOR SIX PEOPLE WHO REALLY MATTER TOUS PSEG Summary Annual Report 1998
"We make things work for you" With the onset of competition, energy utilities are faced with the challenge of demonstrating the qualities that make us better - more efficient, more innovative, more technically skilled -
than competitors.
In 1998, Public Service Enterprise Group (PSEG) reminded our current and potential customers that energy plays a major role in all of our lives... and that the PSEG family of companies provides essential services to the community. Through a series of tele-vision and radio commercials in the New York, New Jersey and Philadelphia markets, we introduced the new tagline "We make things work for you" to create an emotional connection to our work and the constantly improving standard ofliving made pos-sible through reliable energy and energy services.
FINANCIAL HIGHLIGHTS Dollars in millions, where applicable Total Operating Revenues Total Operating Expenses Net Income Common Stock Shares Outstanding - Average (Thousands)
Earnings per Average Share Dividends Paid per Share Book Value per Share - Year-end Market Price per Share - Year-end Ratio of Earnings to Fixed Charges - PSEQ(A)
Ratio of Earnings to Fixed Charges - PSE&Q(A)
Gross Additions to Utility Plant Total Gross Utility Plant (A) Includes Preferred Securities Dividend Requirements.
Also, last June, we renamed ou better reflect their affiliation to and to more accurately describe evolved. As you review our 199 for the future, please keep the fol
- PSEG Energy Holdings Inc.,
unregulated subsidiaries, was E
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solutions company, was Energis
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1998
$ 5.931
$ 4,745 644 230,974
$ 2.79
$ 2.16
$ 22.51
$ 40.00 2.86 3.15 547
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1997
$ 6,100
$ 4,985 560 231,986
$ 2.41
$ 2.16
$ 22.47
$ 31.81 2.61 2.70 557
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(5) 15 16 (2) 2 The detailed Consolidated Financ1al Statemems and related d1scuss10n appear m Appendix A of the Proxy Statement.
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Chairman's Letter Six People Who Matter to Us At a Glance Operational Highlights Consolidated Financial Statistics
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On Our Cover As the energy industry Public Service Enterprise shareholders, customers, ei ronment. ln this report, we who benefit from the com people of PSEG.
Condensed Consolidated Directors and Officers Stockholder Information Meeting the Year 2000 Ch
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The year 1998 marked the close of one era for Public Service Enterprise Group (PSEG) and the beginning of a dynamic new one. The long-anticipated restructuring of the energy industry is under way in New Jersey, as it is across the nation and around the world. Your company is in a strong position to pur-sue the unprecedented opportunities those changes bring. We are executing strategies that position us for continued growth and success, both in the home territory of our largest sub-sidiary, Public Service Electric and Gas Company (PSE&G), as well as in other markets around the world.
PSEG reported consolidated earnings of $2.79 per share in 1998, up from $2.41 in 1997. The comparatively higher earn-ings in 1998 stemmed primarily from two factors. First, the increase in revenues from wholesale power activities of our utility subsidiary, PSE&G, offset the effects of moderate weather on the sale of natural gas. Second, 1997 results reflect a one-time charge of 27 cents per share resulting from the set-tlement of lawsuits related to the refurbishment outage of the Salem nuclear station, which is now back in service. Excluding this charge, 1997 results were $2.68 per share.
In addition to reduced operating and maintenance costs related to our nuclear operations, PSE&G enjoyed higher elec-tric sales in 1998 thanks to a comparatively warm summer and a healthy New Jersey economy.
PSEG Energy Holdings, the parent company of our unregulated ventures, contributed 21 cents per share, largely attributable to the overall strong performance of PSEG Resources' invest-ment portfolio.
PSEG common stock finished 1998 at a closing price of $40, up more than $8 from the closing price of 1997. Your company has continued to outperform key industry stock indices on a total return basis, which is a combination of price appreciation and reinvested dividends. PSEG's 33 percent return exceeded the Standard & Poor's index of 26 electric utilities by nearly 18 per-cent and the Dow Jones Utilities index of 15 electric and gas companies by almost 15 percent in 1998. PSEG also outpaced the strong performance of the Standard & Po or's 500 Index by more than 5 percent.
Separately, two major rating agencies, Standard and Poor's an Moody's Investors Service, elevated their outlooks o PSE&G's bonds from negative to stable following the restart o our Salem units.
In anticipation of the regulatory approval of a technique know as securitization in conjunction with the deregulation of the utility industry in New Jersey, we announced our intention to repurchase up to 10 million shares of PSEG common stock o the open market. At year end, we had completed just over ha!
of this program.
In this period of unprecedented change in the utility industry, New Jersey legislators labored through the fall and into 1999 o the Electric Discount and Energy Competition Act. Enacted i early 1999, this law permits the New Jersey Board of Public Utilities (BPU) to restructure the state's electric and gas utilit industries, in effect "unbundling" our service into distinc components: gas and electric cornrnodity sales, energy deliv-ery, metering, billing and energy services. The new law has REVENUE PER KWH (cents per kwh)
Average revenue per kwh adjusted for inflation. Base year 1996.
PSE&G supplies electricity at the lowest cost per kwh of all the major utilities in New Jersey and intends to continue the trend.
granted the BPU the authority to implement these changes, and as this letter is being written, PSE&G is working to assure positive decision by the regulatory agency on our restructurin plan. We expect a decision before the end of the second quarter. '
As we await the outcome of the BPU proceeding, I ca describe to you the broad outline of the competitive retai energy marketplace the legislation has established in the
Garden State. Under the legislation, starting in August 1999, consumers will gain the opportunity to shop for energy while SE&G will continue to operate and maintain the pipes and ires that bring gas and electricity to our New Jersey cus-omers. Mandates have been made on the electric side of the usiness for a 10 percent reduction from our April 1997 rates.
ter an initial rate reduction of 5 percent in August, the bal-ance of the mandated reduction will be phased in over a hree-year period.
Provisions are also made for continued service reliability and he continuation of energy conservation measures and other societal benefit programs. Customers will have the option to form buying groups to negotiate prices with energy suppliers.
For at least the first year after restructuring, PSE&G and other utilities will continue to handle customer metering, billing and account administration. The BPU will determine whether customers will have the option to choose an alternate provider for these services after that first year.
While the new law does not specifically require retail gas sales to be separated from delivery, it enables the BPU to order that separation and requires that customers gain full retail choice of gas suppliers by the end of 1999.
One of the key outcomes of deregulation that will affect your investment in PSEG is the treatment of stranded assets. This term relates to the difference in the value of PSE&G's generating PSEG ANNUAL EARNINGS AND DIVIDEND PAYOUT PER SHARE (dollars) 94 95 Earnings per Share
.,,.., Annual Dividend Payout 2.79 96 97 98 stations in a regulated market, where historically the BPU has included all of the stations' costs plus a profit in the rates we charge our customers, versus the lower expected value in a deregulated market, where the price of electricity will be determined by market forces. While the legislation permits the recovery of 100 percent of the stranded assets approved by the BPU, including the recovery of up to 75 percent through secu-ritization, the ultimate level of recovery will be determined by the BPU.
Viewed collectively, we believe the many elements of tlihi" -
islation offer the BPU the means to construct a reg decision that can provide desired rate reductions, ma the financial viability of your company and assure New Jersey residents the same high quality service and reliability they have come to expect.
In New Jersey and nationally, PSE&G has played a key role in ensuring that restructuring does not create an unfavorable impact on the environment. The leadership of PSE&G President Larry Codey and the work of the corporate envi-ronmental and federal affairs teams, with partners in the environmental community, have helped to ensure that new competitors in New Jersey's energy market are required to meet the same stringent emissions standards as industries that currently operate here.
Business in Redefined Markets Energy market restructuring will present new opportunities, new risks and new rewards. Historically, the majority of your company's assets, revenues and earnings have been under the regulatory jurisdiction of the New Jersey BPU. In the future, that will not be the case. Electric and gas distribution activi-ties in New Jersey will continue to operate under BPU regula-tion as electric generation and gas supply activities become competitive, non-regulated businesses. While we w-*
tinue to invest in PSE&G's energy delivery infrastru maintain its world-class status, we will devote signi i nt resources to our other businesses that operate largely in com-petitive, non-regulated markets. The risks in unregulated businesses are greater, yet the potential rewards and growth prospects increase as well. We are continuing to execute plans to pursue those opportunities by capitalizing on your company's strongest competencies.
Our efforts of the past several years to revitalize our nuclear program are paying dividends. In 1998 our five plants operated at a combined 85 percent capacity factor, a record for our com-pany. Our Salem, Hope Creek and Peach Bottom units oper-ated reliably over the summer, a time of peak demand. We received further endorsement of our efforts last July when the Nuclear Regulatory Commission removed the Salem units from its Watch List.
Our domestic generation fleet has an opportunity to partici-pate in the Pennsylvania-New Jersey-Maryland Interconnection (PJM), as well as adjacent power pools. Our energy marketing capability, operating under strong risk management controls, is designed to participate in the wholesale and retail marketplace while protecting the company from volatile price fluctu As demands for reliable energy grow in economies arou world, PSEG Global is making significant inroads in key regions
ALLOCATION OF ASSETS AT DECEMBER 31, 1998 PSEG TOTAL ASSETS- $18.0 BILLION PSE&G 82%
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Resources 10%
Energy Holdings Global 6%
Energy Technologies 1 %
- Other 1%
~ Resources S.24 Energy Holdings C-Global S.03 Energy Technologies (S.06) through acquisition or development of generation and distri-bution facilities. Working with carefully selected partners, PSEG Global has established itself in more than a dozen key markets that, in total, represent more than half of the world's projected new power needs.
PSEG Resources will continue to capitalize on our energy exper-tise to structure financial investments in energy-related proj-ects that provide attractive earnings and cash flows.
PSEG Energy Technologies, your company's newest sub-sidiary, is laying the groundwork for PSEG's participation in ll ail energy marketplace. This is a brand new market for for consumers. I~s development will be challenging but s to have significant potential.
As our non-regulated businesses have grown over the past sev-eral years, we have demonstrated our ability to consistently earn money in the competitive energy marketplace. Because of the regulatory changes described above, your future company will include a larger component of competitive businesses. As the unregulated component of our business continues to grow, our earnings volatility will likely increase. Required changes to regulatory accounting that result from the BPU restructur-ing decision could also have an impact on PSEG's financial results in the short term. The business experience we have acquired in operating our non-utility businesses, and our con-tinued commitment to a stable regulatory base, will be signifi-cant components in achieving future success.
While my letter has necessarily focused on New Jersey's restructuring process, I encourage you to review the remain-der of this report, which highlights the exciting accomplish-ments and opportunities of your PSEG companies.
Our People ility to compete in a changing operating environment is rge part to the strong foundation created by the people G, from our board of directors and executive officers to the employees who serve our customers every day. Their talents, contributions and perspectives differentiate you company in increasingly more competitive markets, and I a grateful for their enthusiasm, commitment and drive.
Of special note, the people of PSE&G have worked hard to ensure a fair and reasonable outcome to New Jersey's restruc-turing effort. In an outstanding display of mutual concern, rep-resentatives of our labor unions joined company managemen in testifying before legislative and regulatory bodies durin deliberation on restructuring. Their counsel and suppor underscore our shared commitment toward preserving fai opportunities for our skilled and talented work force to serve our customers and compete in the new marketplace.
We're also committed to a very basic - and crucial - part of ou current and potential success: the health and safety of ou employees. Through an atmosphere of trust, mutual respect an open communication, we are striving to create an accident-free workplace.
Individually and in teams, our employees have laid the founda-tion for PSEG's success in the new energy marketplace - and we're counting on them to explore new opportunities to gro and prosper in the years to come. I speak on their behalf an mine when I thank you for your continued support and confi-dence in our commitment to provide you with outstandin value for your investment.
E. James Ferland Chairman of the Board, President and Chief Executive Officer Public Service Enterprise Group Incorporated February 12, 1999
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Regional Growth... and Possibilities New Jersey is home to PSEG's corporate headquarters, and our largest subsidiary, Pul:Jlic Service Electric and Gas Company (PSE&G), is the state's leading energy company. We serve the state's largest cities, and we're an integral part of what makes New Jersey a great place to live and do business.
PSE&G serves a mature, developed territory. In a regulated world, the prospects for growth were slim. Tuday, nothing could be further from the truth.
Possibilities are arising as never before. As northeastern states move through the energy deregulation process, PSEG continues to explore new opportunities to profit from our understanding of the regional market and our nearly 100 years of expertise in providing energy and related services.
Exploring the Potential in Power Production Our domestic generation fleet is well-situated to take advan-tage of opportunities in the Northeast market. Anchoring the Pennsylvania-New Jersey-Maryland Interconnection (PJM) and bordering the New York Power Pool, we can capitalize on opportunities in two major power grids. Industry restructur-ing is creating a burgeoning wholesale trading market, where utility-affiliated electricity generators and independent power producers can sell bulk quantities of electricity to other utili-ties and a growing number of third parties - like power mar-keters and traders - who do not generate power themselves.
The winners are likely to be those who can offer customers the most reliable, lowest price energy.
PSEG's internal risk management controls help our profession-als monitor and limit our exposure to fluctuations in the price of electricity and gas while enabling us to determine suitable counterparties that will meet their supply obligations. During the summer months of 1998, when many utilities and power 1 I DURING THE STOCK MARKET VOLATILITY OF 1998, PSEG WAS A I
NATURAL CHOICE FOR JOANNE AND OTHER PEOPLE SEEKING
~TEADY PER~ORMERS FD' THEIR INVESTMENT PORTFOLIOS. FOR
~HE SECOND $TR~IG~T Y~AR, PSEG TOTAL SHAREHOLDER
~E'.JURN EXCEEDED T~E STANDARD & POOH'S ELECTRIC UTILITIES rNQEl AN' THE DOW~ON~S UTILITIES INDEX.
2.000%
1.500 1,000 500 0
- 500 80 82 84 86 88 I! PSEG
- Dow Jones Utilities Index iil S&P 500 Index 90 92 94 96 98
arketers experienced large losses in the wholesale market, our trading operations performed well.
- 1!Industry restructuring has created significant opportunities for merchant power producers. Consequently, PSEG is explor-jing new markets with an eye on selectively acquiring genera-j tion facilities in the Northeast region.
- ' Delivering Energy to New Jersey Homes and Businesses
- iDeregulation gives our customers the freedom to shop for
- ~ower, but they'll still be served through PSE&G's electric and zlgas distribution system. While this part of the business will
- 'lstay regulated, its long-term profitability will depend on the
!efficiency and quality of our service, now more than ever.
t*erowth in our domestic energy delivery business relies in part on
!Productivity improvements. In 1998, the people of PSE&G con-Jtinued long-standing efforts to improve productivity and service l;ality and, ultimately, customer satisfaction. Combining gas
~nd electric delivery under a unified distribution organization
- 1 as created new efficiencies. In concert with the unions that rep-rresent our work force, we are also investigating new ways to use
- tjproductivity improvements to restore service to our customers fiore quickly following severe weather outages.
PSE&G's energy delivery system may also grow geographi-cally through merger or acquisition. We will seek to combine DAN SMITH with or purchase energy delivery companies that share our commitment to quality service, safety and reliability.
We're also actively considering ways to draw on the skills of distribution employees to expand the "wires" portion of the business. Wireless and fiber optic communications are grow-ing rapidly in the heavily-developed New York-to-Philadelphia corridor that PSE&G serves, and telecommunications compa-nies seek economical, time-saving alternatives to building their own infrastructure. Available space for new towers and wiring is scarce, and local governments and residents often balk at the prospect of locating new large wireless towers in their neighborhoods. In response, we are exploring opportuni-ties to provide installation and maintenance services for com-munications equipment on our own transmission towers and distribution network.
Giving Customers What They Want Our customers count on safe, reliable PSE&G energy service, and more and more New Jerseyans are counting on us to make sure their appliances work just as reliably.
In 1998, our appliance service business received regulatory approval to add more service offerings, including repair and service contracts to businesses for heating and cooling equip-ment. We also added refrigerators, dishwashers and washing THE PEOPLE OF PSE&.G HAVE BUILT THE ENGINE THAT POWERS NEW JERSEY-AND THEY'RE ALWAYS LOOKING FOR NEW WAYS TO IMPROVE I
THE SYSTEM TO MEET CUSTOMERS' CHANGING NEEDS. DURING THE RESTRUCTURING OF OUR INDUSTRY, CHIEF LINEMAN DAN SMiTH AND OTHER PSE&G UNION REPRESENTATIVES JOINED MANAGEMENT IN URGING THE NEW JERSEY LEGISLATURE FOR A f AIR OPPORTUNnY TO CONTINUE PROVHHNG CUSTOMERS WITH RELIABLE ENERGY SERVICE.
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machines to the roster of major home appliances we repair.
We hired new staff - more than 650 service technicians are currently on board - and have purchased additional equipment and vans.
State regulators are currently reviewing our statewide expan-sion and have halted additional service contract sales outside our utility service territory. During this review, we are continu-ing to service the contracts that we sold in the interim and hope to proceed with our business plans after receiving a final ruling from the BPU.
With the Strength of Our People on Our Side Succeeding in a changing marketplace demands changes in the way we work: That's been an enduring message at PSEG since industry restructuring began several years ago. We continue to develop new skills and institute dynamic culture change efforts to enhance productivity and build internal strength.
Grassroots ownership and accountability for workplace safety encourages employees to preserve the well-being of our great-est resource - our people. From bargaining unit members to executive management, employees have taken on that respon-sibility in a shared commitment to health and safety.
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. I 100 1 I nesses*an -sepous m1unes per emp oy,ees per year, dropped nearlyj201 percent in 1998, compared, with the year
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and counseling skills that enhance team productivity, while other programs focus on teamwork and individual initiative at all levels of the company.
New systems and technology improvements are being put into place to help employees work more efficiently and effectively, reduce costs and improve customer service. PSEG's Business Integration initiative is well under way, using SAP R/3 software and activity-based management to provide an integrated view of all of the process.es involved in getting work done, including maintenance, supply chain management, project management, scheduling, staffing and budgeting. First implemented in our Fossil Generation business unit in January 1998, Business Integration is being introduced throughout the rest of the busi-ness in 1999.
Providing Energy Solutions Aggressive energy service companies stand to benefit from the opportunities opened up through industry restructuring.
PSEG Energy Technologies provides a full menu of energy man-agement solutions for businesses in the Northeast corridor.
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Hope Creek 26.4% D.
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Salem 2 3.9% D Nuclear Generation Peach Bottom 2 2.2% El Peach Bottom 3 2.3% D 38.9%
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Participation in energy choice pilot programs, such as those in Pennsylvania and New York, brought us nearly 1,700 new elec-tricity customers. These programs have also helped PSEG Energy Technologies gain name recognition and develop opportunities to sell business solutions to commercial and industrial customers. Despite the challenges of a continually changing regulatory environment, we have made inroads in these markets.
In Pennsylvania, PSEG Energy Technologies exceeded sales projections fourfold. Among its customers are the School District of Philadelphia, which includes 260 schools, and the Municipal Utility Alliance, an association of nearly 20 munici-palities in eastern Pennsylvania. In 1998, PSEG Energy Tuchnologies made its first venture into a residential-only pilot program in Bucks County, Pennsylvania.
We also participated in a retail choice pilot in New York City and Westchester County, New York, securing 1,000 customers who represent some 90 megawatts of electric capacity, includ-ing International Paper in Purchase, New York, as well as sev-eral Manhattan landmarks.
Two key acquisitions helped PSEG Energy Technologies expand the energy construction and management services we provide to commercial and industrial customers. Early in 1998, we acquired Fluidics, Inc., a Philadelphia-based mechanical contracting company, and in January 1999, we completed the acquisition of Arden Engineering, Inc., a premier Rhode Island-based mechanical contractor. Both companies, operating as subsidiaries of PSEG Energy Technologies, will help expand our business in the Northeast.
One example of how PSEG Energy Technologies provides energy solutions is its partnership with United Water Resources, the nation's second largest investor-owned water services firm. Combined, the two companies expect to provide several New Jersey municipalities with services that will reduce costs and improve efficiencies in water and waste-water operations.
PSEG Energy Technologies expects to begin marketing AlliedSignal's TurboGenerator rnicroturbines this year. We have the exclusive right to sell and service these compact, portable generators throughout the Northeast, as well as in Argentina and parts of Canada. The TurboGenerator can create enough power to meet the energy needs of many small businesses effi-ciently and cost-effectively.
Emerging Markets... Globally Opportunity in the energy industry extends far beyond the borders of the United States, to nations all over the globe, where the potential for growth is substantial. Rapidly develop-ing nations need reliable energy to fuel the industrialization of th~ir economies and to improve the quality of life for their citizens. PSEG is capitalizing on its energy expertise to take part in those opportunities, whether by dedicating funds through passive investments, or by building, purchasing and operating generation and energy delivery systems in select areas of the world.
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- G Global held interests in private power ies and six U.S. states. The company international network of experts, with ters in Miami, London and Hong Kong, nine additional offices. PSEG Global's by our commitment to getting the best kills close to customers and partners.
PSEG Global achieved a milestone in December with the financial closure of our first project in India, a 330 MW power plant to be constructed in the coastal village of Pillaiperumalnallur (PPN) in the state-of Tu.mil Nadu. The com-pany holds a 20 percent equity share in the project and will be the operations and maintenance contractor. This majo~ com-mitment of time and resources by PSEG Global is expected to serve as a model for others. PPN is the first of several projects PSEG Global plans for India.
In the fall, PSEG Global announced the purchase of a 30 per-cent interest in the Argentine electric distribution company, Empresa Distribuiqora La Plata S.A. (Edelap). This transaction increases PSEG Global's asset portfolio in the highly competi-tive Argentine power market. Combined with two other distri-bution systems acquired in 1997, the Edelap acquisition makes PSEG Global and our partner the third largest power distributor in Argentina, providing over 6,500 gigawatt hours to a population of nearly two million in a service territory more than eight times the size of New Jersey.
PSEG Global's earlier distribution acquisition in Argentina, the combined EDEN/EDES system, has made significant strides in performance. The operation received an 85 percent approval rating in customer satisfaction, significantly reduced outages and improved operating practices and facilities.
PSEG Global's largest investment, the Brazilian distribution system, Rio Grande Energia (RGE), serves 870,000 customers in a territory nearly six and a half times the size of New Jersey.
The company is instituting improvements in its customer service and reliability similar to those initiated in Argentina. In 1998, the duration of customer outages dropped 28 percent and the frequency of outages fell 30 percent from the previous year. At the same time, 84 percent of the system's customers ranked service as good to excellent, an improvement of more than 5 percent from a 1997 survey.
The current downturn in the Brazilian economy will require adjustment to the carrying value of this asset on the balance sheet, based on the relationship of the Brazilian currency, the real, to the U.S. dollar. However, RGE's projected revenues are more than adequate under present conditions to sustain it as a profitable investment.
Strengthening our pipeline of development projects for future growth, PSEG Global advanced our Brazilian strategy when we were selected in August by Petrobras, the Brazilian national oil company, as its partner to jointly develop a 480 MW power plant at the REPAR refinery in Southern Brazil. With Rio Grande Energia, PSEG Global established a presence in the Brazilian distribution business. With the REPAR project, we expect to do the same in the Brazilian generation market.
When assessing development and purchase opportunities, PSEG Global identifies regions that demonstrate an increas-ing need for energy infrastructure and prospects for incre-mental growth that we believe will withstand short-term economic turbulence.
PSEG Global's potential for further growth is strong. Our port-folio includes four distribution companies, 21 operating plants totaling nearly 2,300 MW, and four projects under construction totaling nearly 500 MW. With projects in the United States, China, Brazil, Argentina, India and Venezuela, and a healthy
WHEN YOUR PRODUCT IS SOMETHING AS FUNDAMENTAL AS RE IT'S A GIVEN THAT YOU'RE PART OF YOUR NEIGHBORS' LIVES, A UNEXPECTED WAYS. IN PARTS OF ARGENTINA, CHILDREN LIKE OFTEN SENT HOME FROM SCHOOL DUE TO RECURRING POWER OUR PARTNERSHIP IN THE EDEN/EDES SYSTEM TERRITORY, RE HAS HELPED KEEP SCHOOLS IN SESSION.
backlog of prospects in active development or preliminary screening, PSEG Global continues its focus on worldwide expansion, exploring additional generation and distribution opportunities in those countries and in regions of Europe, Africa, the Middle East, Asia, and North and South America.
Investing for Growth Investments in energy infrastructure around the globe also create dynamic opportunities for knowledgeable energy com-panies to increase shareholder value through their industry acumen and deal-making capabilities.
PSEG Resources does just that, making investments that are designed to produce immediate, predictable earnings to bal-ance the corporation's overall portfolio. Other parts of the cor-poration can then focus on longer-term growth initiatives with more distant earnings horizons.
PSEG Resources makes financial investments, primarily in energy and infrastructure-related assets. Since its inception in November 1985, the subsidiary has produced consistent earnings and dividends for PSEG shareholders. Our successful track record is built on solid investment experience and the ability to structure transactions that create additional value for the corporation.
The year 1998 was one of the most successful in PSEG Resources' 13 years of activity as the corporation's investment arm. Despite a turbulent securities market, PSEG Resources generated earnings of $56 million, managing a diverse portfo-lio of some $1.8 billion and closing on new investments total-ing $255 million. The new investments included leases of energy facilities in the United States, the Netherlands and the United Kingdom, which, when combined with liquidations of
$119 million, resulted in a net increase of $136 million in invested capital for the year.
While the forward-looking statements about PSEG's expecta-tions made throughout this report are based on information cur-rently available and on reasonable assumptions, actual results could be materially different. For more information, please refer to PSEG reports that are filed periodically with the Securities and Exchange Commission.
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PUBLIC SERVICE ENJERPRISE GROUP*
INCORPORATED AJA:GlANOE
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~lie Servi~~ Ente~nise Group Incorporated
.. ~llplic Ser;Vl.qeEledtr1! and Gas Company"'
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group PSEG PSEG PSE&G PS~G PSEG Energy Holdings Inc.
PSEG Energy Holdings PSEG Energy Tuchnologies Inc.
PSEG Energy Technologies PSEG Global Inc.
PSEG Global PSEG Resources leadership E. James Ferland Chairman of the Board President and Chief Executive Officer 80 Park Plaza, T4B Newark, NJ 07102 973-430-7000 www.pseg.com Lawrence R. Codey President and Chief Operating Officer 80 Park Plaza, T4B Newark, NJ 07102 973-430-7000 www.pseg.com Robert J. Dougherty, Jr.
President and Chief Operat
- 80 Park Plaza, T4B Newark, NJ 07102 973-430-7750 www.pseg.com Frank Cassidy President 499 Thornall Street Edison, NJ 08837 888-336-3744 www.pseg.com Michael J. Thomson President 1200 East Ridgewood Avenue Ridgewood, NJ 07450 201-652-2772 www.pseg.com Eileen A. Moran President 80 Park Plaza, T22 Newark, NJ 07102 973-456-3560 www.pseg.com
Publicly-traded diversified energy and energy services holding com-pany located in New Jersey with annual revenues of nearly $6 billion, consisting of two main sub-sidiaries: Public Service Electric and Gas Company and PSEG Energy Holdings Inc.
Serves more than 5.5 million New Jersey residents in more than 300 urban, suburban and rural commu-nities with electricity, gas and energy alternatives in a 2,600-square-mile diagonal corridor across the state. PSE&G is one of the 10 largest combined electric and gas companies in the United States.
Operates PSEG's noncutility busi-eeking to maintain and ex energy services in the w
sists of three primary subs ries: PSEG Global, PSEG Energy Tuchnologies and PSEG Resources.
Provides a full menu of energy management solutions for businesses in the Northeast.
Develops, acquires, owns and oper-ates independent power production and distribution facilities through-out the world.
Enhances PSEG Energy Holdings' trength with a strong, di tfolio of more than 60 se vestments across a wide spectrum of industry sectors and asset types, with a focus on energy infrastructure.
business scope Collectively, PSE&G and PSEG Global, a subsidiary of PSEG Energy Holdings, have more than 90 years of power plant operating experience, with active invest-ments in more than 50 power plants fueled by coke, natural gas, oil, petroleum coke and nuclear.
PSE&G provides the lowest cost, most reliable electric and gas serv-ice of any major New Jersey utility. It maintains a staff of over 650 highly trained service technicians on call 24 hours2.777778e-4 days <br />0.00667 hours <br />3.968254e-5 weeks <br />9.132e-6 months <br /> a day, 365 days a year to repair a broad range of gas and electric appliances and HVAC equip-ment, and backs up its performance with nine service guarantees.
PSEG Energy Holdings builds on the nearly 100-year tradition of PSE&G by seeking out and devel-oping additional energy-related services as deregulation of the industry progresses.
PSEG Energy Tuchnologies offers a wide variety of services to custom-ers in order to help them reduce costs and improve related energy efficiencies. Along with offering several new services, PSEG Energy Tuchnologies also brings the expertise of functions previously performed by a number of PSEG subsidiaries to northeastern mar-kets that it knows well.
More than 200 experts in project development and financing, engi-neering and facility operations, and maintenance create effective teams that understand the dynam-ics of the areas they serve.
PSEG Resources' well-balanced portfolio provides diversification, earnings stability and continued incremental earnings growth to shareholders.
products I services
- Electricity and Gas
- Industrial and Commercial Gas
- Industrial, Commercial and Residential Electric
- Energy Consulting and Planning
- Integrated Energy Management Services
- Operations and Maintenance Support
- Residential Gas Products and Services
- Electricity and Gas
- Industrial and Commercial Electric
- Energy Consulting and Planning
- Industrial and Commercial Gas
- Residential Gas Products and Services
- Tl:adelink Export Assistance Program
- Business Enhancement Program
- Residential Electric
- Electricity and Gas
- International Electric Distribution
- Energy Consulting and Planning
- Integrated Energy Management Services
- Operations and Maintenance Support
- Energy Investments
- Electricity and Gas
- Energy Consulting and Planning
- Integrated Energy Management Services
- Operations and Maintenance Support
- Financing Solutions
- Electric Generation
- Electric Distribution Services
- Investments in assets which pro-vide funds for future growth and incremental earnings.
market outlook Success in meeting our strategic objectives will be measured in terms of earnings per share growth.
The objective for PSEG is a com-pound growth rate of five percent annually over the next five years.
While new business ventures will play a vital role in PSEG's long-term growth and strength, PSE&G remains the corporation's core busi-ness and currently comprises more than 90 percent of its total revenues.
PSEG Energy Holdings will enter new markets in the energy arena when its experience and knowl-edge can be brought to bear and when market needs and opportuni-ties can be pursued on a sound and profitable basis.
PSEG Energy Tuchnologies serves industrial and commercial custom-ers in the Mid-Atlantic and New England region through three prod-uct platforms: energy supply; con-sulting, engineering and operations services; and financing solutions.
PSEG Global pursues investments in generation and distribution in strategic markets.
PSEG Resources plans to build on its expertise in risk management and mitigation, transaction analy-sis and closing, and investment management to exploit new oppor-tunities that arise from energy industry deregulation.
This shows the value on December 31 of each year of $100 invested in PSEG on December 31, 1993 (assumes reinvested dividends).
RETURN ON AVERAGE COMMON EQUITY (percent) 12.9 12.3 95 12.4 97 98 Return on Average Common Equity for 1998was12.4%.
PSEG ENERGY HOLDINGS NET INCOME (dollars in millions)
Income from Cominuing Operations
~
Income including Discominued Operations 79.6 81.5 PSEG Energy Holdings net income grew in 1998 due to strong performance by PSEG Resources.
CONSOLIDATED FINANCIAL STATISTICS<A)
Dollars in millions where applicable 1997 1996 1995 1994 Selected Income Information Operating Revenues Electric
$ 3,918
$ 3,944
$ 4,021
$ 3,740 Gas 1,937 1,881 1,686 1,778 Non-utility Activities 245 216 186 177 Total Operating Revenues
$ 6,100
$ 6,041
$ 5,893
$ 5,695 Income from Continuing Operations 560 588 627 667 Income from Discontinued Operations 24 35 12 Net Income 560 612 662 679 Earnings per Average Share (Basic and Diluted):
Income from Continuing Operations
$ 2.41 2.42 2.57 2.73 Income from Discontinued Operations 0.10 0.14 0.05 Total Earnings per Average Share 2.41 2.52 2.71
$ "2.78 Dividends Paid per Share 2.16 2.16 2.16 2.16 Payout Ratio 90%
86%
80%
78%
Rate of Return on Average Common EquitylB) 10.8%
11.3%
12.3%
12.9%
Ratio of Earnings to Fixed Charges<c) 2.61 2.68 2.78 2.84 Book Value per Common Share
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NotestoConsolidatedFinancialStatements
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- d' For the full text of Organization and Summary of Significant Accounting Policies refer to Note 1 to Consolidated Financial Statements in Appendix A of the Proxy Statement.*
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- FINANCIAL STATEMENT OF RESPONSIBILITY To the Stockholders of Public Service Enterprise Group Incorporated:
- dated financial statements and our report thereon dated February 12, 1999, expressing an unqualified opinion (which are not presented herein) are included in Appendix A of the Proxy Statement for the 1999 Annual Meeting of Stockholders.
- n~e R. Codey has been a director since 1991.
- Has been an engineering.
- 1 Was'tommfssioner of the 1Jniteci states* N\\1c;:l_ear
- Was.Associate Vice President-Re'se'aich and Profos~or 0£ * ** :
- Peni{sylV'ari1c{ sfate'uillv~rsity,
- Richard J.*.Swift h,l:s beeri a'director since 1994:-
- ,Has beer\\ Chaifrnarr of the'
- .WheeleP,Corporatjon, oL..
- 'providing design;e:iigineering,-'
- since* April *199,4. 1
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- HasbeE)n Honorary.. Chairmeyp.". ;,,
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- Automatic 8ata Rrocessingt.
- .' 1'998 an& Wa's Chief Executive
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- l Form 10-K: A copy ~f'PSEG's 1998'AimuaI Report to the Securities and Exctlahge Corllinission, filed on Form 10-K, I,
- I PUblic Service *le~tric and Gas Coclpany 80 Park Plaza, 'F6B Newark, NJ 07lo2 The copy so provide~:wfll b~. ~thout er**.
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