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  • 1. Public Service Enterprise Group Merrill Lynch Power & Gas Leaders Conference New York City September 25, 2007
  • 2. Forward-Looking Statement The statements contained in this communication about our and our subsidiaries’ future performance, including, without limitation, future revenues, earnings, strategies, prospects and all other statements that are not purely historical, are forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Although we believe that our expectations are based on information currently available and on reasonable assumptions, we can give no assurance they will be achieved. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements made herein. A discussion of some of these risks and uncertainties is contained in our Annual Report on Form 10-K and subsequent reports on Form 10-Q and Form 8-K filed with the Securities and Exchange Commission (SEC), and available on our website: http://www.pseg.com. These documents address in further detail our business, industry issues and other factors that could cause actual results to differ materially from those indicated in this communication. In addition, any forward-looking statements included herein represent our estimates only as of today and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements from time to time, we specifically disclaim any obligation to do so, even if our estimates change, unless otherwise required by applicable securities laws. 1
  • 3. GAAP Disclaimer PSEG presents Operating Earnings in addition to its Net Income reported in accordance with accounting principles generally accepted in the United States (GAAP). Operating Earnings is a non-GAAP financial measure that differs from Net Income because it excludes the impact of the sale of certain non-core domestic and international assets and costs stemming from the terminated merger agreement with Exelon Corporation. PSEG presents Operating Earnings because management believes that it is appropriate for investors to consider results excluding these items in addition to the results reported in accordance with GAAP. PSEG believes that the non-GAAP financial measure of Operating Earnings provides a consistent and comparable measure of performance of its businesses to help shareholders understand performance trends. This information is not intended to be viewed as an alternative to GAAP information. The last slide in this presentation includes a list of items excluded from Net Income to reconcile to Operating Earnings, with a reference to that slide included on each of the slides where the non-GAAP information appears. These slides are only intended to be reviewed in conjunction with the oral presentation to which they relate. 2
  • 4. PSEG Strategic Overview Ralph Izzo Chairman of the Board, President and Chief Executive Officer
  • 5. PSEG Overview 2007E Operating Earnings(4): $1,245M - $1,370M 2007 EPS Guidance(4): $4.90 - $5.30 Assets (as of 06/30/07): $28.5B Market Capitalization (as of 9/18/07): $22.25B Regional Traditional T&D Wholesale Energy Electric Customers: 2.1M Nuclear Capacity: 3,500 MW Domestic/Int’l Leveraged Gas Customers: 1.7M Total Capacity: 13,600 MW Energy Leases 2006 Operating Earnings: $262M(1) $515M(2) $227M(3) 2007 Guidance: $340M - $360M $840M - $920M $120M - $135M Operating Earnings = Earnings Available and Excludes: (1) Merger Costs of $1M (2) Loss from Discontinued Operations of $239M (3) Loss on Sale of RGE of $178M and Income from Discontinued Operations of $226M Includes Operating Earnings from Global of $167M, Resources of $63M and Energy Holdings of $(3)M 4 (4) Includes the parent impact of $(55)M –$(45)M
  • 6. PSEG over the past year … • Smooth transition in operations – Management in place – PSEG Power to resume independent operation of nuclear capacity by year-end – PSE&G national ReliabilityOne Award winner, two years running • Partnering with NJ to meet environmental objectives in cost effective manner – Investing in energy efficiency – Investing in renewable energy resources • Redeploying capital at PSEG Energy Holdings • Balance sheet strengthened … has positioned itself to be ready for the future. 5
  • 7. The current business environment … • Convergence of market forces and policy creates the need to address: – Environmental challenges • A carbon constrained future – Critical infrastructure needs • Reliability and aging plant – Capacity requirements in constrained markets … creates opportunities for PSEG’s long-term growth. 6
  • 8. Climate change is the preeminent issue of our time … • The issue cuts across the PSEG group of companies • Three critical strategies are required to meet carbon reduction goals: • Conservation • Renewables • Clean, zero and low-carbon central station electric generating capacity … with our response defining the future of the company. 7
  • 9. Business as usual GHG emissions increase… U.S. GHG Emissions 2004 – 2030 9,000 8,000 34% Increase in CO2 emissions by 2030 7,000 Residential Million Metric Tons CO2-e 6,000 Commercial Industrial The Energy Information 34 5,000 Administration projects a 34% Transportation increase in CO2 emissions from Electric Power 2004 levels in the business as 4,000 Total usual case (no climate policy) 3,000 2,000 1,000 0 2027 2028 2029 2030 2026 2025 2004 2005 2006 2007 2009 2010 2011 2012 2013 2014 2015 2016 2018 2019 2020 2021 2022 2023 2024 2008 2017 … to unacceptably high levels based upon recent findings of the Intergovernmental Panel on climate change. 8 GHG: Greenhouse Gas
  • 10. EPRI has assessed reduction opportunities in the US Power sector, … … carefully noting that a multifaceted approach is needed. Source: Electric Power Research Institute (EPRI): Electric Technology in a Carbon Constrained Future CCS: Carbon Capture and Sequestration PHEV: Plug-in Hybrid Electric Vehicles 9 DER: Distributed Energy Resource
  • 11. States are not waiting for federal action … Western Regional Regional Greenhouse Powering the Plains Climate Action Initiative Gas Initiative • RPS • standards (plus California VT (goal), motor vehicle MA, RI, CT, CO2 emissions NJ, DE, Climate States standards (plus MD, DC) developing Action Plans VT, MA, RI, CT, NJ, ME) greenhouse (includes all states in regional programs gas registries except N & S Dakota) … with NE and California leading the way to cap greenhouse gas emissions. 10 RPS: Renewable Portfolio Standard
  • 12. Twenty-two states have Renewable Portfolio Standards … U.S. RPS Requirements by Region Planned Renewable Generation 2006 - 2015 Share of US power demand 5% 14 Northwest Waste Coal* Rockies 12 Other 4% 0.6 10 Solar Capacity (GW) California Southwest 3% 8 Water Midwest Wind 6 0.5 2% 10.7 Texas 0.9 4 Mid-Atlantic 0.6 0.5 5.6 1% 2 New York 2.7 0.4 2.4 1.0 New England - 0% 2006 2007 2008 2009 2010 2011 2004 2006 2008 2010 2012 2014 Year Online * Waste coal meets Pennsylvania renewable standards Source: GE Energy Financial Services Source: Platts NewGen, December 2006 … and developers are responding to these Standards. 11
  • 13. Regional Greenhouse Gas Initiative (RGGI) for the power sector is real … • Agreement between 10 northeast states to cap CO2 emissions from power plants • Emissions capped at 2000-2004 baseline levels in 2009 - NJ cap = 22.9 million tons • Reduce CO2 emissions by a total of 10% during 2015 – 2018 • Allowance distribution methodology, “Leakage”, and harmonizing with a national program are major concerns • NJ RGGI legislation and regulations are planned for Nov 2007 … and on schedule to go into effect January 1, 2009. 12
  • 14. A key element of any Cap and Trade approach is the allowance distribution methodology. • Different approaches have been debated: – Grandfathered (Historical) – Updated – Input – Output – Auction • RGGI states are going down path of 100% auction The price of the credits, however, is independent of the allocation method and determined primarily by the level of the CO2 cap. 13
  • 15. Leakage needs to be addressed … 6,000,000 (6,000,000) Leakage - Emissions Increases at Out of State Plants Caused by RGGI NJ Emissions Reduced Caused by RGGI 5,000,000 (5,000,000) NJ Emission Reductions (tons of CO2) Leakage Emissions (tons of CO2) 4,000,000 (4,000,000) RGGI Will Result in 3,000,000 (3,000,000) a Net Increase in CO2 Emissions 2,000,000 (2,000,000) 1,000,000 (1,000,000) - - 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Based on RGGI State Workgroup data, RGGI results in a net increase in emissions when comparing the RGGI Reference Case versus RGGI Package Case 10/2006 Model Runs. Leakage offsets any benefits of the RGGI program for NJ. … or RGGI states risk increased consumer costs AND increased CO2 emissions. 14
  • 16. New Jersey climate initiatives … • Energy Master Plan – No explicit CO2 target, but: – 20% energy efficiency by 2020 – Calls for 20% renewables by 2020 • NJ Global Warming Response Act: – Stabilization of economy-wide greenhouse gas emissions at 1990 levels by 2020. – Reduction of economy-wide greenhouse gas emissions to 80% below 2006 levels by 2050. – Establishes emissions portfolio standard for suppliers of power into NJ … present numerous opportunities for PSE&G and PSEG Power. 15
  • 17. New Jersey emissions differ significantly from national norms… 250 Business as Usual 200 GHG Emissions. Millions of Tons 150 1990 Level 17.7% 46.1% 100 15.1% Transportation Residential 50 21.1% Industrial Note: 2006 Emissions from transportation 80% Below 2006 Level Commercial sector, and electric power generation attributed to end user - 1990 1994 1998 2002 2006 2010 2014 2018 2022 2026 2030 2034 2038 2042 2046 2050 … with a large contribution from the transportation sector. 16
  • 18. PSE&G has proposed a 3-pronged approach to help meet State targets … … with energy efficiency as the top priority. 17 Source: Global Energy Partners, LLC
  • 19. NJ greenhouse gas emissions and goals … 200 Business as Usual 180 PSEG Reductions 160 Energy Master Plan Goal 140 NJ Global Warming Response Act (1990 levels by PSEG Conceptual Reductions 120 2020) 185 BAU 100 Annual tons of CO2 Reductions in 2020 180 Energy Efficiency (4.75 MM tons) 175 13.3 80 Solar Program (0.32 MM tons) 170 New Nuclear Plant (8.2 MM tons) PSEG 165 60 160 40 155 150 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 20 - 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 … represent a formidable challenge to achieve in the absence of additional nuclear power. 18
  • 20. CO2 Emission Rate (lbs/MWh) 0 500 1,000 1,500 2,000 2,500 Goldman Sachs ArcLight Reliant Resources Edison International restrictions. NRG Allegheny Energy Inc Mirant Corp WPS Resources Corp. DPL Inc Cinergy Corp Buckeye Power Inc Pepco Holdings, Inc AEP industry to reduce CO2 emissions. AES Corp 2004 Emission Rate Ranking Old Dominion Elec. Coop Dominion (24 largest Generating Companies in PJM) PPL Corp Constellation International Paper Co Calpine Corp FPL Group, Inc PSEG’s generation carbon intensity is lower than many PSEG competitors and benefits from virtually any form of carbon Cogen Technologies Policymakers are looking to Cap and Trade for the power Exelon Corporation 19
  • 21. The potential impact of CO2 on PSEG Power… By Fuel Type Coal CTs CC Carbon tons/MWh 1.0 0.6 0.4 Price ($/MWh) PSEG Power Generation by Fuel @$5 $5.0 $3.0 $2.0 Total GWh: 53,617 @$10 $10.0 $6.0 $4.0 @$30 $30.0 $18.0 $12.0 Nuclear 55% Pumped Dispatch curve implication @ $10/ton* Storage On margin $/MWh Impact 1% (approximate) 16% Gas Coal 50% $10.0 $5.00 27% CTs 10% $6.0 $0.60 Oil 1% Gas CC 40% $4.0 $1.60 Coal Nuclear 0% $0.0 $0.00 Total 100% $7.20 … is mitigated by a low-carbon generation portfolio. * For illustration purposes – potential impact of CO2 on power prices with current dispatch – not an indication of net effect on income. 20
  • 22. PSE&G – Responding to environmental challenges … • Conservation through energy efficiency improvements and investment in hybrids, electric-drive bucket trucks and alternative fuels will cut carbon emissions by 140,000 tons over 10 years • Proposed investing $100 million in solar initiative that would meet 30 MW (50%) of renewable requirements over 2009-2010 • Advocating for direct investment by utilities in customer efficiency programs – Most cost effective means of meeting State goals … and playing a key role in designing programs to meet State goals. 21
  • 23. Summary • States are not waiting for federal government to take action on climate issues • Key policy focus on electric sector is: – Energy efficiency – Renewables – New nuclear – Carbon capture/storage • PSEG is well positioned: – Generating fleet less carbon intensive than many competitors – Policymakers need utility patient capital for investments in energy efficiency and renewables – With a carbon constrained future, PSEG’s Salem/Hope Creek a good location for new nuclear in latter part of next decade 22
  • 24. PSEG – Meeting commitments • Results on track to meet earnings guidance • Meeting commitment to system reliability with major expansion of transmission system • Addressing NJ’s clean energy commitments – Solar initiative – PSE&G to use more energy efficient equipment and vehicles • Focus on core businesses – Transmission investment – Hudson environmental commitment – Electroandes sale • Meeting our balance sheet goals – S&P outlook revised to stable; commercial paper ratings upgraded 23
  • 25. Strong earnings growth in 2007 and 2008 … Operating Earnings by Subsidiary 15% $5.60 - $6.10 37% $4.90 - $5.30 $3.77* $3.71** 840-920 Power 446 515 PSE&G 347 262 340-360 Holdings 227 196 120-135 ≈0 (71) (55)-(45) (66) Parent 2005 2006 2007E 2008E … with reduced international risk. * 2005, as reported: Excludes ($0.14) Merger Costs, ($0.07) Cumulative Effect of an Accounting Change and ($0.85) Discontinued Operations 24 ** 2006, as reported: Excludes ($0.03) Merger Costs, ($0.70) Loss on Sale of RGE, and ($0.05) Discontinued Operations
  • 26. Improved earnings causes our dividend payout ratio to decline below 50% ... $2.60 70 Payout 65 Ratio $2.50 Dividend Payout Ratio (%) ? Dividend per Share 60 $2.40 $2.34 * 55 $2.28 $2.30 $2.24 50 $2.20 $2.20 45 $2.10 40 $2.00 35 2004 2005 2006 2007 2008 *Indicated annual dividend rate … providing us the flexibility to raise our dividend above recent levels. 25
  • 27. Creating shareholder value for the long-term … Total Comparative Returns (8/31/97 – 8/31/07) 500 400 Total Returns (%) 300 200 100 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 PEG S&P Electrics … has been and will continue to be our focus. 26
  • 28. Public Service Enterprise Group
  • 29. APPENDIX
  • 30. PSEG Power – Solidly positioned … • Nuclear and fossil fleet operating at historically high levels with opportunity for incremental improvement • Near-term growth fueled by strong markets and roll-off of below market contracts • Long-term growth influenced by: – Tightening reserve margins – Expansion capability at existing sites – Carbon advantaged portfolio • Debate on energy policy will influence investment – Environmental compliance driving current investment – New nuclear capacity represents a partial solution to carbon reduction goals … to provide strong growth for PSEG. 29
  • 31. Power’s assets reflect a diverse blend of fuels and technologies … Fuel Diversity – 2007 • Low-cost portfolio Total MW: 13,600 • Strong cash generator Oil Nuclear 8% • Regional focus with demonstrated 26 % Pumped BGS success Storage 1% 18% 47 % • Assets favorably located Coal Gas – Many units east of PJM constraint – Southern NEPOOL/ Connecticut constraint Energy Produced - 2006 Total GWh: 53,617 – Near customers/load centers Nuclear • Integrated generation and portfolio management optimizes asset- 55% Pumped Storage based revenues 1% 16% Gas 27% Oil 1% Coal … which provides for risk mitigation and strong returns. 30
  • 32. Power’s assets are located in attractive markets near load centers … Current plant locations, site expansion capability Bethlehem Energy Center (Albany) System Interface New Haven Hudson Bridgeport Keystone Bergen Kearny Conemaugh Mercer Essex Linden Peach Bottom Sewaren Edison Hope Creek Burlington Salem National Park ... which experience higher prices during periods of high demand. 31
  • 33. Our environmental response… Emissions Control Technology Projects Hudson Unit 2 (608 MW) Mercer (648 MW) – Units 1&2 - NOx control – SCR - NOx control – SCR installation complete - SO2 control – Scrubber - SO2 control – Scrubbers - Hg and particulate matter control - - Hg and particulate matter control – Baghouse Baghouse Environmental Capital Requirements • Power’s New Jersey coal units are 2007 – 2010 Completion mid-merit, with capacity factors Total Date ($ million) averaging 50% to 60% • As markets tighten, increased Hudson Unit $700 - $750 2010 production is anticipated 2 $490 2010 Mercer … will help preserve the availability of our fossil fleet. 32
  • 34. Long-term market prices … $/mmbtu $/MWh $70 $ 12 Natural Gas Henry Hub (right scale) PJM Western Hub RTC $6 0 $9 Electricity (left scale) $50 $6 $4 0 Coal(1) (right scale) $3 $3 0 $2 0 $0 2002 2003 2004 2005 2006 2007 2008 2009 Es t Fwd Fwd (2) (2) (2) (1) Central Appalachian coal (2) Forward prices as of August 20, 2007 … influenced by market dynamics. 33
  • 35. RPM Capacity Auction – Transparent Pricing Model • PJM released results on July 13 from its second capacity auction under the Reliability Pricing Model (RPM) for the 2008-2009 delivery year. 2007- 2009 Capacity Auction Results Unit Price Load Price CTR Value* 2007/ 2008/ 2007/ 2008/ 2007/ 2008/ ($/MW-day) 2008 2009 2008 2009 2008 2009 Eastern MAAC $197.67 $148.80 $177.51 $143.51 $20.16 $5.29 Southwest MAAC $188.54 $210.11 $140.16 $180.58 $48.38 $29.53 Rest of Pool $40.80 $111.92 N/A N/A N/A N/A • Auctions scheduled in the next six months provide transition through the 2010-2011 delivery year. Planning Year Auction Date (6/1 to 5/31) 2009 – 2010 October 2007 2010 – 2011 January 2008 2011 – 2012 May 2008 Annual base auction in May of each subsequent year • Future auction pricing to be influenced by increase in number of zones (2010 – 2011 delivery year), load growth, avoided cost for units, and capacity available (unit capability, retirements, new build). 34 * CTR Value: Capacity Transfer Rights Allocated to Load Serving Entities (LSE) in constrained zones to provide them with access to supply from outside the zone
  • 36. Capacity Position • Only a portion of PSEG Power’s capacity was open to realize prices in the recent PJM-RPM auctions. Increasing amounts are open to realize prices in future years. • A significant percent of Power’s capacity was contracted as part of New Jersey’s 3-year BGS* auction (Power currently serving 11 tranches from the 2005 auction, 20 tranches from 2006 and 19 tranches from 2007), as well as other contracting activity. • The balance of Power’s PJM capacity has obtained price certainty through May 31, 2009 from the first two RPM auctions. • All of Power’s New England capacity has obtained price certainty through May 31, 2010 as a result of the fixed price nature of the transitional FCM auction. • Existing capacity hedges support our forecast year-over-year improvement in capacity margin for 2007 of $125 - $175 million with similar improvement in 2008. 35 * Delivery year runs from June 1 – May 31
  • 37. Power’s hedging strategy aims to balance stable earnings … PJM RTC GWh 6,000 5,000 4,000 GWh 3,000 2,000 1,000 - 2007 2008 2 0 02 0 0 2 0 02 0 0 2 0 02 0 0 2 0 02 0 02 0 0 2 0 02 0 0 2 0 02 0 0 2 0 02 0 02 0 0 2 0 02 0 0 2 0 02 0 0 2 0 02 0 02 0 0 2 0 02 0 0 2 0 02 0 02 0 0 2 0 02 0 0 2 0 02 0 0 2 0 02 0 02 0 0 2 0 0 2 0 10 0 10 0 10 0 10 0 10 0 10 0 10 0 10 0 10 0 10 0 10 0 10 7 7 7 7 7 7 7 7 7 7 7 7 8 8 8 8 8 8 8 8 8 8 8 8 9 9 9 9 9 9 9 9 9 9 9 9 2 2 2 2 2 2 2 2 2 2 2 2009 2010 Nuclear / Pumped Storage Coal CC Steam / CT Existing Load + Hedges + Future BGS Existing Load + Hedges Existing Hedges 2007 2008 2009 2010 Percent of Power’s coal and nuclear energy output ~100% ~100% ~50% ~10% hedged (total portfolio)* … while preserving market growth opportunities. 36 *As of August 2007
  • 38. Power’s hedging of coal and nuclear fuel … Coal and Nuclear Output Coal and Nuclear Fuel 50,000 50,000 Gas supply secured based on sales of output MWhr equivalent (000's) 40,000 40,000 MWhr (000's) 30,000 30,000 20,000 20,000 10,000 10,000 - - 2007 2008 2009 2010 2007 2008 2009 2010 Year Year Nuclear and Coal output Contracted sales Coal Uranium Contracted sales Power has contracted for 100% of its nuclear uranium fuel through 2011 and approximately 90% of its coal needs through 2009. … is aligned with its low-cost generating output and our hedging strategies. 37
  • 39. Power’s fleet diversity and location ... Market Perspective – BGS Auction Results Increase in Full Requirements Component Due to: $102 Full Requirements $99 Increased Congestion (East/West Basis) • Capacity Increase in Capacity Markets/RPM • Load shape Volatility in Market Increases Risk Premium ~ $32 ~ $41 • Transmission • Congestion $66 • Ancillary services $55 $55 • Risk premium ~ $21 ~ $18 ~ $21 Round the Clock $58-$60 $67 - $70 PJM West $44 - $46 $36 - $37 $33 - $34 Forward Energy Price 2003 Auction 2004 Auction 2005 Auction 2006 Auction 2007 Auction … has enabled successful participation in each BGS auction. 38
  • 40. Operational improvements and recontracting in current markets … Realized Gross Margin ($/MWh) $70 $60 $50 $40 $30 $20 $10 $0 2005 2006 2007 Est 2008 Est 2009 Est Energy Capacity … are expected to drive significant increases in Power’s gross margin. 39 *Presented at March 26, 2007Financial Conference
  • 41. PSE&G – A consistent, strong performer … • Regulatory agreements provide opportunity to earn reasonable returns over 2007-2009 • Investment in transmission fuels long-term growth – Energy Master Plan (EMP) initiatives provide a secondary source of growth • Continued top quartile/top decile performance – National ReliabilityOne Award winner – two years running – American Customer Satisfaction Index (ACSI) Customer Satisfaction Survey … providing financial stability and multiple platforms for growth. 40
  • 42. PSE&G’s base investment plan … • Regulated electric transmission, electric and gas distribution system • Characteristics • FERC regulation for electric transmission; NJ BPU regulation for electric and gas distribution • Electric and Gas distribution rates frozen through November 2009 PSE&G Rate Base 2011 Base Plan 2006 Actual Rate Base = $8.7 B Rate Base = $6.5 B Gas Distribution Gas 31% Electric Distribution Transmission Electric 34% 12% Transmission 22% Electric Distribution 54% Electric Distribution Equity Ratio ~ 48% 47% … coupled with fair regulatory treatment provides a solid base for future earnings growth. 41
  • 43. PSEG Energy Holdings - Reducing risk … • Diverse asset base with improved stability and growing markets – Latin American distribution assets in stable economies – Gas-fired combined cycle generation in Texas • A source of capital – Asset sales have reduced risk and contributed to an improved balance sheet at PSEG – Agreement reached to sell Electroandes – Exploring potential sale of Chilquinta and Luz del Sur • A source of growth – Texas generating assets benefit from location, low cost structure and opportunity for expansion – Returned $150M from SAESA financing … with redeployment of capital. 42
  • 44. Improved risk profile by reducing capital invested in non-strategic assets … Global’s Invested Capital Composition of Global’s Pre-tax Contribution by Region* $2.6B $317M** 4% $13 $2.0B Other $900M 35% $1.9B $150M 7% $129 41% $150M 7% $195M** $180M-$200M** $1.6B 26% $100M 7% Other $50 63% $1.4B hile & $1.3 B 50% 68% Peru $1.3B 67% $1B 63% Chile & 55% 53% $104 $175 Peru 39% 21% US $41 -2% $500M 25% $500M 26% $500M 30% $(22) $(35) G&A $400M 15% US $(40) 2007 2004 2006 Projected 12/31/07 2004 06/30/07 2006 Projected … while increasing returns and sharpening focus on G&A. *Includes both consolidated and unconsolidated investments after project debt, before allocation of parent debt 43 **Excludes interest, taxes, G&A and other corporate items to arrive at Global’s Operating Earnings, includes Electroandes
  • 45. Strong operations and markets … Six months ended June 30, Operating Earnings Per Share $ Millions (except EPS) 2007 2006 2007 2006 PSE&G $ 193 $ 111 $ 0.76 $ 0.44 PSEG Power 406 208 1.60 0.82 PSEG Energy Holdings 61 95 0.24 0.38 Enterprise (33) (32) (0.13) (0.12) PSEG $ 627 $ 382 $ 2.47 $ 1.52 … supported first-half EPS growth of 63%. 44 * See page 51 for Items excluded from Net Income to reconcile to Operating Earnings
  • 46. The capital program has been expanded … 2007 2008 2009 2010 2011 TOTAL Capital Spending Update ($ Millions) PSE&G $616 $803 $765 $919 $971 $4,074 PSEG Power* 655 816 580 441 176 2,668 PSEG Energy Holdings 38 31 40 30 31 170 Parent 34 31 23 24 23 135 TOTAL $1,343 $1,681 $1,408 $1,414 $1,201 $7,047 Change from 2006 10-K PSE&G $11 $175 $134 $359 $396 $1,075 PSEG Power* 71 190 64 (86) (22) 217 PSEG Energy Holdings 1 - - - - 1 Parent (1) 3 (1) - 1 2 TOTAL $82 $368 $197 $273 $375 $1,295 … to support reliability, environmental commitments and growth. 45 * Figures for PSEG Power exclude Nuclear Fuel
  • 47. Liquidity is available with favorable terms and conditions … Available Expiration Total Liquidity Company Facility Date Facility 6/30/07 ($ Millions) PSEG 5-year Credit Facility Dec-11 $ 1,000 $ 949 PSE&G 5-year Credit Facility Jun-11 600 330 Energy Holdings 5-year Credit Facility Jun-10 150 135 Power 5-year Credit Facility Dec-11 1,600 1,402 Bilateral Credit Facility Mar-10 100 46 Bilateral Credit Facility Mar-08 200 200 Total $ 3,650 $ 3,062 … thereby supporting our credit profile. 46
  • 48. Our forecasted cash flows remain intact… • We remain comfortable with a forecast improvement in cash - Operating income in line with expectations - Electroandes sale to close in October - Planned rate mechanisms for transmission investments would provide cash recovery during construction • Excess cash between $1.5 billion and $2.0 billion should be available through 2011 … with excess cash expected to be used to retire debt through first half of 2008, thereafter for incremental growth and/or share repurchase. 47
  • 49. PSEG – Excellent position for today … Right set of assets… • Large, diverse mix of low-cost, base-load, load-following generating assets • Reliable electric and gas distribution and transmission systems • Stable portfolio of investments in domestic generation, international distribution and leases Right markets… • Generation assets operate in tightly constrained and growing markets • Nuclear and coal base-load capacity operate in markets where the price for power is set by gas • Transmission and distribution assets provide service in a modest growth market with reasonable regulation At the right time… • Mid-Atlantic, New England and Texas recognizing the value of capacity in constrained areas • A move to control carbon benefits our nuclear-based fleet • Power has opportunity for brownfield development at existing sites • Values are improving for international assets • T&D set to benefit from capital investment for new infrastructure … ready for tomorrow 48
  • 50. Public Service Enterprise Group dedicated to … • Meeting commitments – Earnings on track to meet guidance – System reliability enhanced with expansion of transmission system • Turning challenges into opportunities – Addressing NJ’s Clean Energy goals • Solar initiative • PSE&G to use more energy efficient equipment and vehicles • NJ support for emissions portfolio standard • Building foundation for growth – Monetizing non-core assets – Meeting targets for debt reduction – Capital program expanded … operational excellence, financial strength and disciplined investment. 49
  • 51. Why invest in PSEG? • Growing and visible stream of earnings – Hedging and RPM – Regulated utility operations Earnings Per P/E Share* • Strong balance sheet 2007E 2008E 2007E 2008E Yield % PSEG $5.10 $5.85 16.4 14.3 2.8% • Cash available for growth Merrill Lynch $3.03 $3.40 16.8 14.9 3.1% Index** • Competitive dividend yield • Opportunities to invest in markets we know … And, we still sell at a discount! *Mid-point of guidance range Priced as of August 27, 2007 50 **Merrill Lynch Index of Less-Regulated Utilities
  • 52. New Officers Izzo – PSEG - Chairman, President & CEO O’Flynn – PSEG - EVP/ Selover – PSEG Levis – PSEG Power - LaRossa – PSE&G Simpson – PSEG Svcs CFO, PSEG Holdings - Svcs - EVP & Gen President, CNO, COO – President & COO - President & COO President Counsel Joyce – SVP Byrd – SVP Finance, Falck – SVP Operations – Business Development Latka Moran Paszynsky Law Salem/Hope Creek & Strategy / M&A Barnes – Site VP – Dickens MacDonald Kahrer Pego McAuliffe Hope Creek Fricker – VP – Cardenas DiRisio Jennings Hallerdin Leyden Operations Support Braun – Site VP - Forline Krueger Quinn Seabrook Bonnifield Salem Quinn Lark Metzger VP – M&A McLaughlin Black Wohlfarth Sundheim Cregg Plawner Svenson Linde Frank – VP DePillo Brooks Smith Supply Chain Lally – VP – Investor Relations Lopriore – President Hoskins – VP – Chouthai – PSEG Fossil Fed Affairs &Policy Thigpen – VP – Ameo McGrath State Gov Affairs VP Fossil Garcez Ops KEY: Pastor New Officers Matos 51
  • 53. Items excluded from Net Income to reconcile to Operating Earnings Impact to PSEG EPS $ Millions (except EPS) Quarter Ended June 30, Six Months Ended June 30, Quarter Ended June 30, Six Months Ended June 30, 2007 2006 2007 2006 2007 2006 2007 2006 Merger related Costs: $ - $ (1) $ - $ (1) PSE&G - (1) - (2) Power - (1) - (5) Enterprise $ - $ (3) $ - $ (8) $ - $ (0.01) $ - $ (0.03) Total Merger Related Costs Loss on sale of RGE (Holdings) $ - $ (177) $ - $ (177) $ - $ (0.70) $ - $ (0.70) Discontinued Operations: $ (3) $ (8) $ (9) $ (17) $ (0.02) $ (0.03) $ (0.04) $ (0.07) Power - Lawrenceburg Holdings: $ - $ 223 $ - $ 227 Elcho and Skawina (15) 2 (14) 5 Electroandes $ (15) $ 225 $ (14) $ 232 $ (0.05) $ 0.89 $ (0.05) $ 0.92 Total Holdings $ (18) $ 217 $ (23) $ 215 $ (0.07) $ 0.86 $ (0.09) $ 0.85 Total Discontinued Operations Please see Slide 2 for an explanation of PSEG’s use of Operating Earnings as a non-GAAP financial measure and how it differs from Net Income. 52