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Public Service Enterprise Group Reports Operating Results (10-Q)

August 02, 2012 | About:
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10qk

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Public Service Enterprise Group (PEG) filed Quarterly Report for the period ended 2012-06-30.

Public Service Enterprise Group Inc. has a market cap of $17.07 billion; its shares were traded at around $32.31 with a P/E ratio of 12.3 and P/S ratio of 1.5. The dividend yield of Public Service Enterprise Group Inc. stocks is 4.2%. Public Service Enterprise Group Inc. had an annual average earning growth of 3.5% over the past 10 years.

Highlight of Business Operations:

The expiration date of the longest-dated cash flow hedge at Power is in 2014. Powers after-tax unrealized gains on these derivatives that are expected to be reclassified to earnings during the next 12 months are $19 million. There was no ineffectiveness associated with qualifying hedges as of June 30, 2012.

Powers derivative contracts reflected in the preceding tables include contracts to hedge the purchase and sale of electricity and natural gas and the purchase of fuel. Not all of these contracts qualify for hedge accounting. Most of these contracts are marked to market. The tables above do not include contracts for which Power has elected the normal purchase/normal sales exemption, such as its BGS contracts and certain other energy supply contracts that it has with other utilities and companies with retail load. In addition, PSEG has interest rate swaps designated as fair value hedges. The effect of these hedges was to reduce interest expense by $5 million and $7 million for the three month periods and $11 million and $13 million for the six month periods ended June 30, 2012 and 2011, respectively.

As of December 31, 2011, the effective date of the Dynegy lease rejections, the leases of the Roseton and Danskammer generation facilities were effectively terminated and no longer qualified for leveraged lease accounting under the guidance for leases. As the owner of the facilities, Energy Holdings was required to recognize the underlying assets and nonrecourse notes payable (Notes Payable) associated with these leases at their respective fair values on the effective date of the rejection. Energy Holdings has elected to record the Notes Payable at fair value each reporting period under the fair value option in accordance with guidance for Financial Instruments. The fair value option permits the irrevocable fair value election for selected eligible financial assets or liabilities. Any changes in the fair value of the Notes Payable will be included in earnings each period. The $550 million of contractual principal outstanding on the Notes Payable is valued at $50 million as of December 31, 2011. Energy Holdings elected this option to eliminate certain complexities in applying the effective interest method of amortization given the uncertain payment streams between the election date and the expected foreclosure date. There were no other debt instruments of this type eligible for the fair value option as of December 31, 2011. The $50 million fair value of these Notes Payable is included on PSEGs Condensed Consolidated Balance Sheet as of December 31, 2011. The fair values of the Notes Payable include significant internal assumptions based on expected cash flows and the fair values of the underlying collateral. Changes to projected capacity factors, capacity and energy prices, fuel costs and other required cash outflows could significantly impact the fair value of the collateral which would increase or decrease the fair value of the Notes. These Notes Payable are classified as Level 3 in the fair value hierarchy as a result of mainly unobservable inputs. As of the June 5, 2012 effective date of the amended settlement agreement, the Notes Payable and related assets were written off.

Powers operating cash flow decreased $294 million from $1,146 million to $852 million for the six months ended June 30, 2012, as compared to the same period in 2011, primarily resulting from lower earnings, partially offset by a decrease of $86 million in benefit plan funding.

PSE&Gs operating cash flow increased $180 million from $279 million to $459 million for the six months ended June 30, 2012 as compared to the same period in 2011, due primarily to higher earnings combined with

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