Public Service Enterprise Group Incorporated

Ladies and gentlemen, thank you for standing by. My name is Rob, and I'm your event operator today. I would like to welcome everyone to today's conference, Public Service Enterprise Group's Fourth Quarter and Full Year Results, 2024 Earnings Conference Call and 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 will need to press the star and a number one on your telephone keypad. To withdraw your question, please press star and the number two. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded today, February 25, 2025, 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 fourth quarter and full year 2024 earnings presentation. On today's call are Ralph LaRosa, Chair, President, and CEO, 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 later today. 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, 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 our 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. And thank you, everyone, for joining us this morning to review PSEG's 2024 results and our outlook for the business going forward. Let's start with our strong results. PSEG reported net income of $0.57 per share for the fourth quarter of 2024. and $3.54 per share for the full year. For non-GAAP operating earnings, PSEG reported results of $0.84 per share for the fourth quarter and $3.68 per share for the full year, which was at the top of our 2024 guidance range. Our reported results for 2024 also mark the 20th consecutive year that we have met or exceeded management's non-GAAP operating earnings guidance to investors. We are proud of this track record and confident that our team will continue to build on it. We were also successful in achieving our strategic and regulatory objectives for 2024. First, we settled PSE&G's first electric and gas distribution rate case in six years, all with a balanced outcome that recovers prudent investments, maintains our favorable affordability profile, and mitigates variability for our customers. Second, PSE&G received approval to invest $2.9 billion in its Clean Energy Future Energy Efficiency II program over the upcoming six-year period. This second phase of the BPU's statewide energy efficiency framework has resulted in a meaningful increase to the program, which will enable us to make investments at more customer premises to reduce energy usage, improve affordability, and reduce carbon emissions. Third, we efficiently executed the utility's planned $3.6 billion capital spending program and notably completed the advanced metering infrastructure program on time and on budget, installing approximately 2.2 million smart meters in customers' homes and businesses. And fourth, and I'm very happy to say, we implemented new deferral mechanisms for pension and storm expense coming out of the rate case. This increases the predictability of PSE&G's future financial results and stabilizes rates for customers. Speaking of customer rates, the new base rates that were placed into effect last October represented an annual increase of about 1% per year since our last rate case in 2018. Also, last October, PSE&G lowered its gas commodity charge to 33 cents per therm for the winter of 2025. the third supply charge reduction since January of 2023. All of these steps will serve to moderate the recent outcome of the BGS auction result, which will increase customer electric bills this June 1st. PSE&G's record of reliability, affordability, and customer satisfaction continues to be a valuable combination. We were recently named number one in customer satisfaction with residential electric and gas service in the east among large utilities, by J.D. Power in 2024. The utility also received the PA Consulting 2024 Reliability I Award for the Mid-Atlantic Region for the 23rd consecutive year. I want to take a moment to recognize and thank all of our over 13,000 employees for the incredible teamwork and individual efforts that delivered 2024's strategic objectives and financial results. So let's turn to our outlook for 2025, starting with slides 5 and 6. For the current year, we have initiated PSEG's non-GAAP operating earnings guidance at $3.94 to $4.06 per share, which is up by 9% at the midpoint over our 2024 reported results. Our 2025 guidance midpoint is the new base year for PSEG's 5% to 7% non-GAAP operating earnings CAGR at the nuclear production tax credit threshold for the 2025 to 2029 period. I would also note this CAGR, while unchanged as we pursue incremental revenue opportunities at PSEG nuclear, starts from a $4 midpoint of 2025 guidance that is 9% higher than our 2024 non-GAAP results. For 2025, we plan to invest $4 billion across enterprise, driven by regulated investments. We also raised PSEG's 2025 to 2029 capital spending plan to $22.5 billion to $26 billion, which is up by $3.5 billion from the prior plan. This increase is largely comprised of incremental investments at PSE&G that will meet growing customer demand. modernize infrastructure, and further execute on the previously mentioned energy efficiency programs. Please see slides 14 and 15 for the updated regulated capital spending plan and rate-based projections for the 2025 to 2029 period. This updated five-year capital spending program is expected to support a PSE&G rate-based category that continues at 6% to 7.5% over the upcoming five-year period which grows from a starting point of approximately $34 billion, which is notably 12% higher than the year-end 2023 balance. Something new for PSE&G this year has been a significant increase in inquiries from large load and data center customers. Last year at this time, these totaled under 400 megawatts. Today, the interest has grown to 4,700 megawatts, which includes both mature leads and initial inquiries. This pipeline represents an over 12-fold increase over the last year. The average size of these project leads is in the 100 megawatt range, which can often fit within PSE&G's existing robust utility transmission infrastructure. We are responding to these inquiries in under four months on average. Approximately 25% of the 4,700 megawatts of new business leads have been incorporated into PGM's 2025 system peak load forecast. As I mentioned earlier, the basic generation service auction results will raise the residential electric bill starting June 1st. This increase is being driven by the significant rise in the capacity prices coming out of PGM's latest RPM auction conducted last July. which reflects growing energy demand combined with the need for new power generation. As a reminder, electric supply is a pass-through cost that PSE&G does not earn a profit on. Even with this upcoming BGS increase, our combined bill still compares favorably to all other utilities in New Jersey, and we remain a leader across the nation on our low share of wallet comparison. PSE&G's bill remains at about 3% of total income for medium-income customers and even lower still, approximately 2%, for low-to-moderate-income customers that take advantage of payment-assistant programs. Turning to PSE&G power and other, while the PTC threshold provides sufficient support to meet PSE&G's 5% to 7% long-term growth outlook, We continue to pursue nuclear revenue growth opportunities at PSEG Nuclear that would be incremental. These opportunities to contract portions of our nuclear output under long-term contracts can also benefit the economic development interests of the state in helping to attract AI hubs to New Jersey. We had an exceptional year in 2024, continuing to execute on our business plan and in doing so have made our businesses more predictable and our earnings growth more visible. These benefits will enhance our ability to drive our future performance that prioritizes maintaining our financial strength, making disciplined investments, and delivering operational excellence. Another key PSEG distinction that we are proud to extend our ability to continue supporting another robust five-year capital program without the need to issue new equity or sell assets through 2029. even with the latest $3.5 billion increase over the prior plan. Before I conclude, I want to highlight that our Board of Directors recently announced a $0.12 per share increase in PSEG's annual common dividend to indicative annual rate of $2.52 per share for 2025. This is PSEG's 14th consecutive annual increase, made possible by a longstanding commitment to financial discipline that has enabled us to pay a common dividend to our shareholders for 118 consecutive years. I'll now turn the call over to Dan to walk you through the results for the quarter and our outlook for 2025 through 29 period, and then rejoin the call for Q&A.