Public Service Enterprise Group Incorporated

Ladies and gentlemen, thank you for standing by and welcome to the PSEG 4QN Full Year 2020 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to Carlotta Chan, BP Investor Relations. Thank you. Please go ahead, ma'am.

Good morning, and thank you for participating in our earnings call. PSEG's fourth quarter and full year 2020 earnings release attachments and slides detailing operating results by company are posted on our website at investor.pseg.com, and our 10-K will be filed shortly. The earnings release and other matters discussed during today's call contain forward-looking statements, and estimates that are subject to various risks and uncertainties. We will also discuss non-GAAP operating earnings and non-GAAP adjusted EBITDA, which differ from net income, as reported in accordance with generally accepted accounting principles in the United States. We include reconciliations of our non-GAAP financial measures and a disclaimer regarding forward-looking statements on our IR website and in today's earnings materials. I will now turn the call over to Ralph Izzo, Chairman President and Chief Executive Officer of PSEG. Joining Ralph on today's call is Dan Craig, Executive Vice President and Chief Financial Officer. At the conclusion of their remarks, there will be time for your questions. Ralph?

Thank you, Carlotta. Good morning, everyone, and thank you for joining us for our 2020 review and future outlook. PSEG reported non-GAAP operating earnings for the fourth quarter of $0.65 per share. Non-GAAP operating earnings for the full year rose by 4.6% to $3.43 per share and marked the 16th year in a row that PSEG delivered results within our original earnings guidance. PSEG's GAAP results were 85 cents per share for the fourth quarter of 2020, compared with 86 cents per share for the fourth quarter of 2019. In addition, for the full year, PSEG reported 2020 net income of $3.76 per share compared with $3.33 per share in 2019. Details on the results for the quarter and the full year can be found on slides 12 and 14. I am pleased to report that PSEG's fourth quarter and full year results reflected solid contributions from both PSE&G and PSEG Power. and are particularly proud of the achievements of our employees during this past year, as it was one of the most challenging in recent memory. Their efforts have kept our customers connected to essential energy services to power their homes, businesses, and vitally important institutions. We have also made steady progress on several key business priorities, the most important of which is our transition to becoming primarily a regulated utility with contracted generation comprised of our zero-carbon nuclear fleet and future investments in regional offshore wind. In the past six months, we've announced the exploration of strategic alternatives for PSEG Power's 7,200-plus megawatts of non-nuclear generating assets and have received initial indications of interest for both the fossil and solar source assets. successfully initiated its landmark Clean Energy Future program, securing approval to spend nearly $2 billion in energy efficiency, smart meter installations, and electric vehicle charging infrastructure, all of which will enhance New Jersey's environmental profile for years to come. In addition, the New Jersey Board of Public Utilities, I'll refer to them as the BPU, recently concluded public hearings regarding PSEG nuclear's application to extend the zero emission certificate, I think I'll shorten that to ZEC from now on, through May 2025. Our service area experienced milder than normal weather during the fourth quarter, bookending the weak heating season of the first quarter in 2020. Regarding weather normalized sales for the year, while total electric sales volume declined by 2%, gas sales rose by 1%. In both the electric and gas businesses, higher residential usage of approximately 5% largely offset declines in commercial and industrial sales, resulting in stable margins overall. Working with COVID-19 health and safety protocols since last March, PSE&G was able to execute on its planned $2.7 billion capital spending program in 2020. These capital programs provided critical investment to support the New Jersey economy, particularly in the early months of the pandemic, and preserve essential jobs while replacing vitally important energy infrastructure and generating customer benefits of improved reliability and resiliency, as well as methane reduction. In January of 2021, the BPU approved two settlements with PSE&G and other parties in the Clean Energy Future energy cloud and electric vehicle proceedings. The Energy Cloud Investment Program is estimated to be approximately $707 million over the next four years and will result in the replacement of over 2 million electric meters with smart meters. The Electric Vehicle Program will direct $166 million into EV charging infrastructure over the next six years. With these recent settlements, the BPU has constructively addressed the vast majority of the clean energy future filings. and has approved nearly $2 billion of investment to help realize New Jersey's clean energy goals. The Energy Efficiency Program will also establish clean energy job training for over 3,200 direct jobs while enabling the avoidance of 8 million metric tons of carbon emissions through the year 2050. Investing in energy efficiency programs is the most cost-effective solution to reducing carbon emissions. Importantly, the conservation incentive of the settlement encourages the broad adoption of energy efficiency, with certain programs focusing on low and moderate income customers that will lower bills for participating customers. We expect the balance of the Clean Energy Future filing, which includes our request to spend under $200 million on energy storage and a few remaining EV programs, will be addressed following future stakeholder proceedings. PSE&G continues to engage with the BPU staff and rate council to advance confidential discussions toward a settlement of the return on equity related to PSE&G's formula rate for transmission overseen by the Federal Energy Regulatory Commission. The annual update under PSE&G's existing formula rate filed last October was implemented this past January and together With cost reallocations of our revenue requirements for certain transmission projects, candidly, to customers outside of our zone, this resulted in a net reduction in PSE&G customer costs. For 2020, PSE&G once again achieved top quartile OSHA scores. We also achieved the top quartile J.D. Power ranking in the Eastern Large Company category for both residential, electric, and gas companies. And PSE&G posted its best-ever J.D. Power scores for electric and gas customer satisfaction, outpacing the average industry results on metrics that consider total monthly costs, bill clarity, fairness of pricing and options, and ability to manage monthly usage among residential customers. Also, for the 19th year in a row, PA Consulting recognized PSE&G with its Reliability I award as the most reliable electric utility in the Mid-Atlantic region, and for the first time with their 2020 Outstanding Customer Engagement Award. New Jersey has recently made solid progress in lowering its COVID-19 positivity rate and continues a phased reopening of businesses, schools, and other activities. We have a long history of partnering with the state to support the economy and we continue to work with them on investment programs that can spur economic development and employment recovery, all while being quite thoughtful about managing customer rate impacts. Regarding collection activities, the moratorium on shutoffs for residential electric and gas service is currently scheduled to conclude in March. Recognizing the economic hardship that many of our customers continue to face, PSE&G, in partnership with the BPU and community groups, is working hard to enroll customers in customer payment support programs such as LIHEAP and deferred payment arrangements. When the moratorium is lifted, we will work closely with the BPU, other stakeholders, and our customers to ensure a collections process that supports our customers' individual situations. Turning now to PSEG Power, we're continuing all activities related to the exploration of strategic alternatives we announced last July. In the fourth quarter of last year, we launched the formal sales processes of the 467 megawatt solar source and over 6,750 megawatt fossil portfolios. We are currently evaluating indications of interest and believe we are on track to announce an outcome in the second half of 2021. As we launched the Strategic Alternatives Initiative last year and throughout the process thus far, PSEG Power has continued to deliver on expectations for non-GAAP operating earnings and adjusted EBITDA. Last year, PSEG Fossil posted one of its best operational performance records ever and completed its entire maintenance outage schedule without any OSHA safety violations. In addition, PSEG Nuclear completed two complex refueling outages in 2020 with new COVID-19 safety protocols. and continue its overall outstanding operating performance. These achievements speak volumes about the professionalism of our dedicated workforce that exemplifies our focus on safety and operational excellence. PSEG nuclear's zero-emission certificate application and the extension of the current ZEC is currently under consideration at the BPU. Last month, the BPU staff's consultant released their preliminary findings. The consultant found that all three of our New Jersey units were eligible, recognizing that each unit had a financial need for ZECs. There were other aspects of the preliminary findings that we view as inconsistent with the ZEC law, and we look forward to upcoming hearings where we will have the opportunity to address those items. It is clear that New Jersey recognizes the need for nuclear power in order to achieve its short- and long-term clean energy goals. as laid out in the State's Own Energy Master Plan and DEP's 80 by 50 report. The recent weather-related power and market failures in Texas and California further underscore the importance of maintaining New Jersey's reliable resource mix. Over the next few weeks, you will hear us mention that our confidential filings show that these units are actually in need of more than $10 per megawatt hour, partly due to the fact that PGM forward market prices are lower versus 2018, which was the year of our first ZEC application. As stated in the 2018 ZEC law, nuclear operating risk and market risk must be recognized as a cost in any economic determination of ZEC eligibility. We have responded to all information requests and have shared confidential financial information with rate counsel and the PJM independent market monitor. in order to support transparency around this important proceeding. In the absence of an extension of the current ZEC, we would not continue to operate the plants. While the direction of public policy, both in New Jersey and in the nation, is the increased recognition of carbon-free energy to mitigate climate change, that realization in the form of a future price on carbon is highly uncertain at best. With the final decision on the ZEC application expected on April 27th, we are hopeful that the BPU will act to extend the $10 per megawatt hour attribute payment to preserve the nuclear units and their 3,400 megawatts of zero carbon base load generation through May of 2025. The BPU is also moving forward with its investigation of resource adequacy and the potential for the creation of a fixed resource requirement service area within New Jersey. I'm just going to call that FRR in the future. We have maintained a mutual stance on the potential of an alternative capacity procurement paradigm, but remain supportive of accommodations that enable state supported resources to qualify as capacity that can satisfy both the state's capacity obligations and its clean energy goals. As we've previously stated, the current minimum offer Floor prices are not expected to prevent either our nuclear or gas-fired units from clearing in the upcoming PJM capacity auction scheduled for this May. Now let me turn my attention to 2021 guidance. We are introducing non-GAAP operating earnings guidance of $3.35 to $3.55 per share, with the utility expected to contribute between $1,410,000,000 and $1,470,000,000. PSEG power, between $280,000,000 and $370,000,000. And parent-other is expected to post a loss of $15,000,000. This year, we expect PSEG to contribute just over 80% of consolidated non-GAAP operating earnings at the midpoint of guidance. Going forward, we expect that the utility earnings will represent 80% to 90% of PSEG's non-GAAP results with the remaining balance expected to be comprised of long-term agreements for zero carbon offshore wind generation and our ZEC-supported New Jersey nuclear units. For PSEG Power, over 70% of its 2021 gross margin has been secured by way of energy hedges, capacity revenues established in prior auctions, zero emission certificates, and ancillary service payments. However, for 2021, Recontracting at lower market prices, higher costs tied to a Hope Creek refueling outage, and the absence of tax benefits realized in 2020 result in the lower non-GAAP operating earnings guidance for 2021. Our PSEG five-year capital spending forecast has been updated to $14 billion to $16 billion for 2021 through 2025. and includes approximately $2 billion of clean energy future investments, as well as the expected extension of the gas system modernization program and energy efficiency program at their average annual run rates for the last two years of the period, that being 2024 and 2025. Consistent with past years, approximately 90% or $13 billion to $15 billion of this capital program will be directed to grow regulated operations at PSE Energy. This ongoing investment in essential energy infrastructure and clean energy programs is expected to produce 6.5% to 8% compound annual growth in rate base over the five-year period, starting from $22 billion at year-end 2020. On slide 10, we've provided you with an alternate view of our updated capital program for 2021 through 2025. We've classified it by investments in decarbonization, energy transition, climate adaptation for resilience and reliability, and methane reduction. As a sidebar, any spend for offshore wind will be incremental to these totals and is not included in the $14 to $16 billion capital plan numbers. We also expect that our strong cash flow will enable us to fund our entire five-year capital spending program, as well as our planned offshore wind investments during the 21 through 25 period, without the need to issue new equity. As we continue to plan for the responsible reentry to our offices and facilities currently targeted for this July, I have to thank our dedicated employees for their professionalism, persistence, and flexibility over the past year. Whether responding to a myriad of COVID-19 challenges or their excellent injury-free response to the nor'easter that we just experienced this past month, employees across our organization have embodied operational excellence as they provide our New Jersey, New York, Connecticut, and Mid-Atlanta customers with reliable essential energy services. Before moving to Dan's financial review, I will summarize the new initiatives in place for future growth and areas of our continued strategic focus. These range from the new clean energy future investments behind the meter to infrastructure opportunities supporting electrification of transportation and a growing mix of renewables in the distribution system to expanding the existing aging infrastructure replacement programs to assist the New Jersey economic recovery. In addition, we are advancing the strategic alternative exploration through a robust bidding process, pursuing near-term opportunities to expand our offshore wind investments in the Mid-Atlantic, and are engaged in ongoing efforts to preserve the New Jersey nuclear fleet, the most cost-effective and most reliable source of baseload supply to reduce emissions. Each of these actions serves to further PSEG's already strong ESG leadership position, which we continuously strive to improve. In 2020, we moved to decarbonize our generating fleet, announced an investment in New Jersey offshore wind, and initiated a landmark energy efficiency investment to bring universal access to a broad range of clean energy opportunities. In 2021, we joined the company network of the CERES organization, that's C-E-R-E-S, to advance our climate advocacy. We will achieve a coal-free generating fleet in June, and we recently published our first ESG performance report. PSEG is getting recognized for our ESG initiatives by Standard & Poor's, who has included us in their 2021 Sustainability Yearbook, and by the Dow Jones Sustainability Index, who has named PSEG to the North American Index for 13 years in a row. We are also gratified to be named to the 2021 Listing of America's Most Responsible Companies by Newsweek Magazine. and the Forbes list of best employers for diversity in 2020 and best employers for veterans in 2020. The Board of Directors' recent decision to increase the company's common dividend to the indicative annual level of $2.04 per share is the 17th increase in the last 18 years and reflects our ongoing commitment to returning capital to our shareholders to enhance our total return profile as we also pursue growth. There is no lack of opportunity for PSEG as we continue the transformation to a primarily regulated electric and gas utility focused on clean energy infrastructure complemented with contracted zero carbon generation. We are working towards a sustainable future where customers universally use less energy, the energy they use is cleaner, and its delivery is more reliable and more resilient. We are confident that pursuing this strategy will enhance our ability to provide our customers with essential energy services, which has been our core mission for the last 118 years. I'll now turn the call over to Dan for more details on our operating results, and I'll be available with them for your questions after his remarks.