Public Service Enterprise Group Incorporated

Ladies and gentlemen, thank you for standing by. My name is Rob, and I'll be your operator of event today. I would like to welcome everyone to today's conference, Public Service Enterprise Group's first quarter 2023 earnings conference call on webcast. At this time, all participants are in listen-only mode. Later, we'll conduct a question and answer session for members of the financial community. At that time, if you have a question, you'll need to press the star and the number one on your telephone keypad To withdraw your question, please press star and the number 2. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded today, May 2, 2023, and will be available for replay as an audio webcast on PSEG's Investor Relations website at https://investor.pseg.com. I would now like to turn the conference over to Carlotta Chan. Please go ahead.

Good morning, and welcome to PSEG's first quarter 2023 earnings presentation. On today's call are Ralph LaRosa, Chair, President, and CEO, as well as 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 10Q will be filed shortly. PSEG's 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 or GAAP 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 30-minute question and answer session. I will now turn the call over to Ralph La Rosa.

Thank you, Carlotta. Good morning to everyone, and thanks for joining us to review PSEG's first quarter results. As indicated in our release, PSCG reported first quarter 2023 net income of 1.287 billion dollars, or $2.58 a share, compared to a net loss of 2 million, or less than 1 cent a share, for the first quarter of 2022. Non-GAAP operating earnings for the first quarter were 695 million, or $1.39 per share, compared to 672 million, or $1.33 per share for the first quarter of 2022. The non-GAAP results for first quarter 2023 and 2022 exclude items shown in attachments 7 and 8 provided in the release. PSEG delivered solid operating and financial performance to begin the year, and we are on track to achieve our full year 2023 non-GAAP operating earnings guidance of $3.40 to $3.50 per share. We are executing our plan to grow PSCG while also increasing its predictability, which we outlined in our March 10th investor conference. In addition to introducing PSCG's 10-year capital spending forecast during the conference, we announced the decision to retain our five-unit nuclear generating fleet and exit offshore wind generation. The utility invested approximately $800 million during the first quarter of 2023, consistent with its full-year capital plan of $3.5 billion. These investments will be directed to modernizing T&D infrastructure, clean energy future programs, and the last mile projects in the infrastructure advancement program that support New Jersey's policies for energy transition. The 2023 capital spending program also represents PSE&G's largest investment plan to date. and drives PSEG's long-term growth outlook for non-GAAP operating earnings of 5 to 7 percent over the five-year period through 2027. PSEG completed the second phase of its gas system modernization program in February, and in order to continue these critical infrastructure investments, proposed a third phase with the New Jersey Board of Public Utilities, or the BPU, to invest $2.5 billion over a three-year period. This effort will reduce methane leaks and carbon emissions as we work to expand clean energy options for our customers. Also in February, the BPU approved an accounting order allowing PSE&G to modify its methodology for amortizing a component of pension expense for rate-making purposes. This is consistent with our request to reduce the impact of pension accounting on our reported results. Additionally, during the first quarter, PSEG achieved several milestone metrics in customer satisfaction and nuclear operations, ratified new labor agreements with all of our New Jersey unions, and implemented back-to-back gas supply cost reductions that helped on the customer affordability front. On the customer satisfaction measures, PSEG achieved top quartile performance overall among large utilities in the east in J.D. Power's first quarter, 2023 residential electric and gas studies. This follows our full year 2022 J.D. Power recognition of ranking number one in customer satisfaction with both residential electric and gas service among large utilities in the East. On the customer affordability front, PSE&G implemented two basic gas supply service commodity charge reductions during the 2023 heating season, resulting in a total bill reduction of approximately 14% per month for a typical residential gas customer. Our nuclear fleet demonstrated strong performance in the first quarter, operated at 100% capacity factor and maintained a strong ranking on the Institute for Nuclear Power Operations Performance Indicator Index. We have also authorized the funding required to transition our 100% owned Hope Creek unit from an 18 month to a 24-month fuel cycle starting in 2025 and are monitoring NRC approval of a fuel change that would enable the transition of our co-owned Salem units to a 24-month fuel cycle in the future. We also continue to evaluate power upgrade options for our Salem units to increase their generation capacity in the back half of this decade. Salem Unit 2 has completed a scheduled refueling outage and was synchronized to the regional power grid last Friday. Turning to our union contracts, following constructive discussions, PSEG recently reached new four-year labor agreements with all of our unions representing employees in New Jersey. This provides all parties with visibility and predictability on compensation and benefits into 2027. During 2022, PSEG also hired over 1000 new employees and maintained and created thousands of essential good paying jobs for the New Jersey economy. Like PSEG's award winning Clean Energy Jobs Training Program, which is focused on employment opportunities for underserved communities. According to Governor Murphy's three executive orders issued in February to combat climate change and power the next New Jersey, We are developing proposals to help support and advance the state's updated and expanded energy policy goals, which we also believe can represent a $3 to $7 billion incremental investment opportunity for PSE&G through 2032. BPU is expected to be the primary implementation agency for all three executive orders over the next 12 to 18 months. We anticipate that the BPU will update their energy master plan with specific short and long term proposals to achieve the state's accelerated target of 100% of electricity sold in the state coming from carbon free resources by 2035. Introducing a strategic roadmap with strategies to achieve the goals of having 400,000 homes, 20,000 commercial properties, and an additional 10% of all low to moderate income properties electrification ready by 2030 and convene a stakeholder process for the future of natural gas utilities aimed at reducing emissions all consistent with the state goals while also considering impacts on costs and jobs on the esg front forbes recently added pseg to its 2023 list of america's best employers for diversity in addition PSEG continues to work towards developing and submitting for validation our emissions targets for scope 1, 2, and 3 to the UN-backed science-based target initiative this fall. We are off to a solid start in 2023. We are on track with PSEG's full year 2023 non-GAAP operating earnings guidance of $3.40 to $3.50 per share. and with PSE&G's $3.5 billion planned capital spend for 2023. The five-year capital spending program over 2023 to 2027, $15.5 billion to $18 billion drives our 6% to 7.5% compound annual growth rate in rate base over that same five-year period. These utility investments and the cash generation from our nuclear fleet position us to continue supporting growth in our common dividend, which we recently raised by 12 cents to the indicative annual rate of $2.28 per share. It enables funding our capital investment program through 2027 without the need to issue new equity or sell parts of our company in order to grow. The month of May marks the 120th anniversary of public service. We thank our 12,000 dedicated employees and the ones before us for carrying forward the company's proud legacy of safe and reliable service. As we look to the next 120 years, I see a long runway of opportunity in the energy transition. We are seeing trends like the new business request trickle in for behind-the-charger infrastructure work, policymakers pushing ahead on the next phase of offshore wind transmission, and future investment opportunities in New Jersey's accelerated and expanded clean energy policy goals. In fact, just last week, the BPU, in keeping with their stated intentions, opened the next solicitation window for offshore wind transmission solutions in 2024. The board staff and PJM recommended the PSE&G Dean's 500 kV substation as the preferred interconnection point to facilitate the additional injection of 3,500 megawatts of power, part of New Jersey's goal of adding 11,000 megawatts of offshore wind resources. We fully intend to continue pursuing regulated offshore wind transmission investment opportunities both at our utility and separately at PSEG Power and Other. This ongoing investment in the New Jersey economy and its energy infrastructure improves the reliability of our networks, as well as the predictability of the business, which we hope our stakeholders find to be a compelling value proposition. I'll now turn the call over to Dan for more details on the operating results, and we'll be available for your questions after his remarks.