Public Service Enterprise Group Incorporated

Gentlemen, thank you for standing by. My name is Shamali and I am your event operator today. I would like to welcome everyone to today's conference, Public Service Enterprise Group's fourth quarter and full year 2022 earnings conference call and webcast. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session for members of the financial community. At that time, if you have a question, you will need to press the star and the number one on your telephone keypad. To withdraw your question, please press star and the number two. If anyone should require operator assistance during a conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded today, February 21, 2023, and will be available for replay as an audio webcast on PSEG's Investor Relations website at investor.pseg.com. I would now like to turn the conference over to Carlotta Chan. Please go ahead.

Thank you, Shamali. Welcome to PSEG's fourth quarter and full year 2022 earnings presentation. Joining us on the call today are Ralph LaRosa, Chair, President, and CEO of PSEG, and Dan Craig, Executive Vice President and CFO. The press release attachments and slides for today's discussion are posted on our IR 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, which differs from net income or net loss, 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 materials. Following Ralph and Dan's prepared remarks, we will conduct a question and answer session. I will now turn the call over to Ralph La Rosa.

Thank you, Carlotta, and thank you to everyone joining us on our call this morning. Since the third quarter 2022 earnings report, we have had several important updates. Dan will provide you with a full financial review later in our prepared remarks, as I will focus on some strategic highlights. We are pleased to report strong operating and financial results for both the fourth quarter and full year of 2022. We successfully navigated last year's challenges, including inflation, supply chain disruptions, energy price spikes, and the steep rise in interest rates to deliver gap earnings of $2.06 per share, and non-GAAP operating earnings of $3.47 per share, placing our results for the full year above the midpoint of our 2022 non-GAAP earnings guidance. In fact, 2022 is the 18th year in a row that PSEG has delivered non-GAAP results at or above management's original operating earnings guidance. PSE&G, which contributes the vast majority of our results, posted an 8.2% annual increase in net income from the continued investment in its T&D infrastructure, clean energy programs, and the first full year of decoupling. PSE&G invested over $3 billion of capital during 2022 in transmission upgrades, gas system modernization, energy efficiency, electric vehicle infrastructure, and launched our efforts to address the reliability of the last mile of our distribution system. At year-end 2022, PSEG's rate base topped $26.4 billion, a 7.7% increase over the year-end 2021. We know the importance shareholders place on the predictability and visibility of our financial results, and during the past 12 months, we have taken many steps to deliver just that. First, we completed the strategic alternatives process, which included the sale of PSEG fossil last February. This increased the regulated contribution to about 90% of our consolidated non-GAAP earnings. We completed a $500 million share repurchase program in May of 2022 and increased the cash return to shareholders by raising the annual dividend by 12 cents, or 5.9% for 2022. Second, the passage of the Inflation Reduction Act of 2022 will offer our nuclear generation a level of much needed stability when it goes into effect in 2024. While the industry waits for clarifications, we believe the Inflation Reduction Act is a game changer that should provide the stability required for long-term financial viability of the U.S. nuclear fleet. As a result of the nuclear production tax credits extending through at least 2032, we are now able to consider small but important value-added investments. including the potential for capacity upgrades to Salem, a fuel cycle extension at Hope Creek, and the license extension of our New Jersey units. Critical to these decisions will be our determination of how predictable and visible nuclear revenues could be beyond our current three years at window. The IRA also created valuable incentives for PSE&G's customers to accelerate their transition to electric vehicles, which will advance New Jersey's decarbonization goals and expand our opportunities to invest in last mile reliability and make ready infrastructure. This aligns with the recent state objectives to increase electrification. Just last week, Governor Murphy issued three executive orders that establish or accelerate the state's existing 2050 targets for clean sourced energy, building electrification and electric vehicle adoption goals with new target dates in 2030 and 2035. The Board of Public Utilities and other state agencies were directed to collaborate with stakeholders to develop plans to reach these goals. These include an updated energy master plan in 2024 and a new proceeding to develop a future of natural gas utility plant to consider new revenue streams, such as conversion of existing facilities to district geothermal and new technologies to meet the 2019 energy master plan goal. of 50% reduced emissions below 2006 levels by 2030. Third, we announced our strategic decision to exit our investment in offshore wind generation by selling our 25% equity stake in Ocean Wind 1 back to our joint venture partner, Ørsted. This decision to exit offshore generation was consistent with our goal to increase the predictability of our business. TSCG will continue to provide Ocean Windward onshore construction management services to ensure the onshore substations and associated onshore cabling are ready to receive the project's output when it goes in service. We also intend to continue pursuing regulated transmission projects offshore and investing in related transmission and distribution projects onshore and enabling the New Jersey wind port in Salem County. Finally, last week, the BPU approved the settlement of our pension accounting filing, retroactive to January 1st, 2023, an important step we have pursued to limit pension expense volatility. This improved business platform created by the strategic actions we have taken over the past two years, combined with our efforts to increase the predictability of our results, positions us to narrow our 2023 non-GAAP operating earnings to a range of $3.40 to $3.50 per share, from our original guidance of $3.35 to $3.55 a share provided last November. This new 10-cent range compares to the 20-cent range we have provided in previous years. These strategic moves also drive our outlook for long-term compound annual earnings growth rate of 5 to 7 percent through 2027. enable us to pursue this growth path without the need to issue new equity during this five-year period moving to 2023 we extended our 2022 dividend increase of 12 cents per share to set the 2023 indicative annual rate at 2.28 cents per share marking our 116th year of paying the dividend to shareholders pseng has begun executing its capital investment plan of over 3.4 billion for 2023 which is expected to be the largest single year spend in the utility's 120 year history. This will be directed primarily towards infrastructure replacement, energy efficiency, and last mile reliability. The good news is that additional headroom was created in our gas and combined customer bill as the recent decline in natural gas prices has enabled PSEG to reduce its residential default gas supply rate by 15 cents the $0.15 per therm for the balance of the winter 2022-2023 heating season. This decrease in the pass-through commodity charge will reduce the typical residential winter gas bill by $13 per month annualized, or 11.5%. Speaking of our customers, they rated PSE&G number one in the 2022 J.D. Power Customer Satisfaction Studies for both residential electric and natural gas service in the East among large utilities. This is the first time we have achieved both number one rankings in the same year. This honor culminated a year that saw PSEG recognized by the Edison Electric Institute with the Edison Award, the industry's highest honor for leadership and innovation. And speaking of leadership, PSEG's environmental, social, and governance credentials continue to be recognized. In addition to our MSCI upgrade to AAA, its highest ESG rating, PSEG was also named to the Dow Jones Sustainability North America Index for the 15th year in a row, as well as to the Just 100 list of America's Most Just Companies for 2023, recognizing our commitment to serving our customers, workforce, communities, the environment, and shareholders. Now, none of this could be accomplished without our employees, who remain PSEG's most important resource. Together, we continue to be guided by PSEG's longstanding commitment to operational excellence, disciplined investment, and financial strength. As I recognize our employees, I must take a moment to honor one that lost his life in a tragic act of violence. Some of you may have heard about the horrible loss when a member of the PSEG team was killed by a former employee. It was one of the saddest days in our company's history. Our condolences and prayers go out to all of those that have been impacted by this event. I also want to thank our employees who have supported each other during this difficult time. We will continue to provide resources to protect the health, safety, and well-being of all PSEG employees, including grief counseling for any employees seeking it. In closing, and as I mentioned earlier, we know the importance stakeholders place on predictability and visibility of our financial results and goals. I have made increasing both factors a key focus of PSEG's strategic plan. We intend to share the details of this plan at our upcoming investor conference on March 10th, as we continue to build a practical path for decarbonizing the New Jersey economy. I'll now turn the call over to Dan and return after his remarks for Q&A. Thank you, Ralph.