The operator welcomes everyone to the Public Service Enterprise Group's First Quarter 2024 Earnings Conference Call and Webcast. The conference is being recorded and will be available for replay. Carlotta Chan introduces the speakers and mentions that the press release and other materials are available on the company's Investor Relations website. She also mentions that the discussion will include forward-looking statements and non-GAAP operating earnings. Ralph LaRossa thanks everyone for joining and begins to review the company's first quarter 2024 results.

PSEG's first quarter financial results are in line with expectations for the full year and the company is reaffirming its earnings guidance. They are also continuing to execute their long-term strategy of growing non-GAAP operating earnings by investing in energy infrastructure and efficiency programs. In the first quarter of 2024, PSEG reported a decrease in net income compared to the previous year due to the absence of mark to market gains. Non-GAAP operating earnings also decreased but this was mainly due to higher investment-related expenses. These expenses are expected to continue as the company awaits the resolution of a pending distribution rate case. The nuclear production tax credit, which went into effect in 2024, will provide downside price protection for PSEG's nuclear fleet through 2032. The company expects to see most of the increase in margin contribution during the second half of the year.

PSEG's utility and nuclear businesses have shown operational excellence, with PSE&G and PSEG Long Island quickly restoring service after severe storms and the nuclear fleet achieving a high capacity factor. The pending rate case for a 9% revenue increase is progressing as expected and is expected to be settled later in 2024. PSE&G has a focus on reliability, affordability, and customer satisfaction while managing costs. The company is on track to execute its $19 billion to $22.5 billion capital plan through 2028.

PSE&G has a regulated program focused on infrastructure replacement and clean energy. They have installed 1.8 million smart meters and are on track to complete the program by the end of the year. This is projected to result in a growth in rate base of 6% to 7.5% through 2028. PSEG is also pursuing potential investment opportunities, including competitive transmission solicitations and bids for offshore wind infrastructure projects. The company is also evaluating two upcoming regulated transmission solicitations in July. At Power, the nuclear fleet is pursuing growth with minimal capital spending needs.

PSEG has plans for thermal up rates at the Salem nuclear station, which could add 200 megawatts of capacity and qualify for clean hydrogen tax credits. They also plan to pursue subsequent 20-year license renewals for their three reactors in New Jersey, extending their operational capabilities. PSEG has had discussions about direct power sales to data centers and sees potential for creating a nexus between economic development and energy policy. Their nuclear units could provide reliable, carbon-free baseload power for data centers and align with New Jersey's goal of creating an AI hub. These opportunities in nuclear would be in addition to their forecasted growth rate of 5% to 7% through 2028.

In the first quarter of 2024, PSEG reported net income of $1.06 per share and non-GAAP operating earnings of $1.31 per share. PSE&G, the main driver of the company's earnings, had non-GAAP operating earnings of $0.98 per share, with growth and rate-based investments being offset by higher expenses. Margin was $0.07 higher, driven by transmission, gas, and other utility margin.

In the first quarter of 2023, Distribution O&M expenses increased due to gas meter inspections, corrective maintenance, and tree trimming. Appreciation and interest expenses also increased, while pension and OPEB income decreased. The timing of taxes had a net favorable impact. The quarter was 17% warmer than normal, but 9% colder than the first quarter of 2023. The conservation incentive program limits the impact of weather on electric and gas margins and promotes energy efficiency programs. The number of customers continues to grow. PSE&G invested $800 million in the first quarter and is on track to execute their 2024 regulated capital investment plan.

PSEG plans to invest $18 billion to $21 billion in upgrades and replacements for their T&D facilities, infrastructure advancements, and clean energy initiatives. They also reported a net income of $0.08 per share for the first quarter of 2024, with non-GAAP operating earnings of $0.33 per share. The net energy margin increased by $0.03 per share, mainly due to the nuclear production tax credit. However, the shape of their results may vary throughout the year due to the implementation of the PTC.

In the first quarter of 2024, PSEG Power saw an increase in O&M costs due to scheduled refueling at their Oak Creek nuclear plant and higher interest rates. Taxes were also higher due to a higher effective tax rate. The nuclear fleet ran at a capacity factor of 96.8%, but the Hope Creek unit is currently undergoing a scheduled outage. PSEG had $5 billion in available liquidity at the end of March, including $1.2 billion in cash. Their revolving credit facilities were extended by one year and they had $1.75 billion in outstanding term loans, which were swapped from variable to fixed rate. Overall, PSEG had minimal variable rate debt in early March.

PSE&G recently issued $1 billion in secured medium term notes and $1.25 billion in senior notes. They also reaffirmed their full-year 2024 non-GAAP operating earnings guidance and forecasted long-term growth. They are currently awaiting resolution of their pending distribution rate case and are exploring direct power sales opportunities with their nuclear facilities. The timing and potential EPS contribution of these opportunities have not been announced.

The speaker discusses the state's role in attracting AI jobs and infrastructure in data centers to New Jersey, and mentions that the timing of these developments will depend on the state's policy initiatives. They also mention providing an update in the fall and discussing potential financial outlooks and opportunities for data centers in the future.

The speaker discusses the company's plans for data centers and their impact on the transmission system. They mention the importance of keeping an eye on the PJM process and how the location of data centers can affect the topology. They also mention smaller edge computing solutions and their impact. The speaker encourages listeners to look at the tech process for more information.

Jeremy Tonet is discussing the potential impact of offshore wind generation on the grid and how it may affect other rate payers. He believes that behind-the-meter solutions will not burden other rate payers, as there are already mechanisms in place to handle new generation. Each state will handle this issue differently. There is still no update on the nuclear PTC guidance from the IRS.

The speaker acknowledges that the PTC began on January 1st and states that the most important definition is the definition of gross receipts. They mention that they are trying to position themselves against the uncertainty of the treasury and have not received an estimated date for the PTC. They are planning for different scenarios and have baked the risk and opportunity into their 2024 guidance. They mention a chart showing their balance sheet capacity and the potential for more capital without issuing equity, but state that it will come off of the FFO to debt.

The speaker discusses the implications of different types of capital investments on FFO to debt ratio, with energy efficiency programs having a shorter recoverable life and therefore less impact on FFO to debt. They also mention the potential for power investments to be FFO positive. When asked about the scalability of the nuclear opportunity in New Jersey, the speaker suggests that it may be more of a one-off opportunity rather than a scalable one.

The speaker is discussing the potential grid dependence of data centers and how it is being addressed by regulators. They mention that electrification is a growing trend and needs to be handled correctly to minimize the burden on customers. The speaker also mentions that data centers are likely to be built at a large scale and will grow over time. They defer to another team member for more details on how they are addressing scalability.

The speaker, Constantine, asks a question about the company's ability to scale and back up supply due to its unique location with three units. The speaker, Shar Pourreza, acknowledges this and brings up the topic of power prices being higher than expected, potentially affecting guidance and credit metrics. The other speaker, Dan Cregg, explains that they will update guidance if there is a significant change in the market, but they want to remain grounded and not make assumptions until they are certain. The third speaker, Ralph LaRossa, adds that the PJM West top is not indicative of the entire PJM marketplace. The next question is from Carly Davenport with Goldman Sachs.

Carly Davenport asks a question about the Hope Creek outage and Ralph LaRossa explains that there are small upgrades being done during the outage in preparation for a fuel cycle shift in 2025. He also mentions the increased O&M costs due to the outage and storm activity earlier in the year. Dan Cregg adds that O&M costs may be slightly higher for the full year due to the weather and storms.

The speaker discusses the impact of the Hope Creek outage on the company's power side and mentions that some years they have it and some years they don't. They also mention that storms were a contributing factor to the first quarter's impact on O&M. The next question from a participant asks about the potential for nuclear capacity to be committed to new customers, to which the speaker responds that the entire portfolio could be available for long-term contracts. They also mention that their state plan ends in May of '25 and they don't expect any power to be flowing into a data center before then. The speaker then clarifies that the company's energy efficiency program filed in December calls for $3.1 billion of spending, which is much larger than their first program at $1 billion.

Ralph LaRossa explains that the cost per megawatt hour saved has gone up due to the more extensive measures being taken, such as upgrading HVAC units. However, there has been minimal pushback from the BPU or stakeholders as this was part of their triennial plan and is viewed as necessary. The BPU aims to target things that would not happen otherwise, in order to expand the reach of the program, even if it may cost more. Steve Fleishman then asks another question about nuclear.

The New Jersey Economic Development Authority has made progress in building a port for offshore wind developers, and there is additional land available for other potential uses such as data centers or hydrogen units. The decision on which use is best will depend on the rules and policies set by the state. PSEG is considering all options and will optimize their use of electricity from the units in alignment with state policies.

Dan Cregg and Steve Fleishman discuss the potential for an upgrade on the hydrogen front, which would meet both additionality and hourly matching requirements. They feel confident about their ability to do this without limitations. They also touch on the topic of reliability in New Jersey and how they are prepared for potential issues. Ryan Levine asks about the duration of contracts that counterparties may be willing to sign.

During a conference call, a representative from a company was asked about their long-term plans for a data center investment. They did not give a specific timeline, but stated that it would be a significant and long-term investment. They also discussed the state's readiness for potential transmission constraints and stated that there are already policies in place to attract businesses to the area.

Travis Miller asks about the details of a potential contract for a co-located facility and who would take the risk for non-performance. Ralph LaRossa and Dan Cregg state that it is too early to discuss any specifics and that they do not want to take on commodity risk. They also mention that the redundancy of a 3-unit site would help mitigate any potential issues. Travis Miller also asks about the potential impact of a second round of offshore wind projects on their bids and proposals, to which Ralph LaRossa responds that the PBI opportunity does not depend on it.

The speaker discusses the upcoming transmission policy agenda at FERC and states that they are staying informed on the 5 or 6 items that are being discussed. They do not expect any major changes under the current administration. The speaker also mentions the potential impact of grid enhancing technologies on their operations in the future.

The speaker discusses upgrades to the grid, including the installation of new conductors and transmission upgrades. They mention the cost-benefit for consumers and the potential for future upgrades to address gaps in the system caused by electrification. The speaker thanks employees, customers, and investors and looks forward to meeting with them at a conference in May.

This summary was generated with AI and may contain some inaccuracies.