$1.15 per Share From Continuing Operations NEWARK, N.J., Aug. 1 /PRNewswire-FirstCall/ -- Public Service Enterprise Group (PSEG) reported today (August 1, 2007) income from continuing operations for the second quarter of 2007 of $293 million or $1.15 per share compared to a loss of $8 million or $0.03 per share for the comparable period in 2006. Excluding merger-related costs of $3 million or $0.01 per share, and a loss from the sale of RGE of $177 million or $0.70 per share, PSEG reported operating earnings of $172 million or $0.68 per share for the 2006 second quarter. Losses from discontinued operations of $18 million or $0.07 per share reduced net income for the second quarter of 2007 to $275 million or $1.08 per share. Income (losses) from discontinued operations, including a gain on the sale of discontinued operations raised net income for the second quarter of 2006 by $217 million or $0.86 per share to $209 million or $0.83 per share. Ralph Izzo, chairman, president and chief executive officer of PSEG, said that he was extremely pleased with the financial results reported for the quarter, as well as a number of other accomplishments that allowed the company to meet its commitments as it begins to address opportunities for growth. "Earnings at PSEG Power during the quarter are the result of an improvement in realized prices and lower costs," Izzo said. "Public Service Electric and Gas Company's (PSE&G) earnings benefited from the impact of the gas and electric rate settlements effective in the fourth quarter of 2006 and more normal weather conditions." Operating earnings exclude the impact of the sale of certain non-core domestic and international assets and costs stemming from the merger agreement with Exelon Corporation that was terminated in September 2006. The table below provides a reconciliation of PSEG's net income to operating earnings (a non-GAAP measure) for the second quarter. PSEG CONSOLIDATED EARNINGS Second Quarter Comparative Results 2007 and 2006 Income Diluted Earnings ($M) Per Share 2007 2006 2007 2006 Net Income $ 275 $ 209 $ 1.08 $ 0.83 Discontinued Operations 18 (217) 0.07 (0.86) Income From Continuing Operations 293 (8) 1.15 (0.03) Add: Merger Costs, net of tax -- 3 -- 0.01 Loss from Sale of RGE, net of tax -- 177 -- 0.70 Operating Earnings (Non- GAAP) $ 293 $ 172 1.15 $ 0.68 Avg. Shares 254M 252M 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 financial trends. Izzo said that PSEG Energy Holdings moved its investment in Electroandes (Peru) to discontinued operations during the second quarter. "We are getting strong interest in PSEG Energy Holdings' $166 million investment in Electroandes," he said. "We expect a sale to be consummated around year-end." Izzo also said "our distribution businesses (primarily in Chile and Peru) are performing well and showed growth in the quarter". He added that "the markets in Latin America are strong, and PSEG is more actively exploring its strategic options for these investments." Izzo noted several key highlights during the second quarter: -- The Pennsylvania-New Jersey-Maryland (PJM) regional transmission organization approved construction of a 500 kilovolt transmission line from Susquehanna, PA to Roseland, NJ. -- PSEG Power announced that it was proceeding with installation of advanced emissions controls at its Hudson Generating Station coal-fired unit 2 in Jersey City under terms of an amended environmental agreement reached last fall with state and federal regulators. -- Standard & Poor's revised its outlook to stable for PSEG, PSE&G and Power, and upgraded credit ratings for commercial paper. These developments, Izzo said, are clear signs that PSEG can make disciplined investments that ensure reliability and protect the environment. Izzo said PSEG's strong year-to-date operating performance supports 2007's operating guidance of $4.90-$5.30 per share. The mid-point of the guidance represents a 37% increase over 2006's operating earnings of $3.71 per share. Higher prices for contracted power and the implementation of pricing on capacity under the PJM's Reliability Pricing Model provide support for projected growth in 2008 of 15% to $5.60-$6.10 per share. Operating earnings guidance by subsidiary for 2007 has been modestly adjusted as follows: 2007 Operating Earnings ($millions) Current Prior PSEG Power $840 - $920 $825 - $905 PSE&G 340 - 360 340 - 360 PSEG Energy Holdings 120 - 135 130 - 145 PSEG Parent (55)- (45) (50)- (40) Operating Earnings $1,245 - $1,370 $1,245 - $1,370 Earnings Per Share $4.90 - $5.30 $4.90 - $5.30 Operating Earnings Review and Outlook by Operating Subsidiary See Attachment 8 for detail regarding the quarter over quarter reconciliations for each of PSEG's businesses. PSEG Power PSEG Power reported operating earnings of $187 million ($0.73 per share) for the second quarter compared with operating earnings of $86 million ($0.34 per share) reported during the second quarter of 2006. PSEG Power's margins benefited from higher pricing in all markets (particularly PJM), an increase in output and lower operating costs. Higher realized power prices and stronger operations added $0.37 per share to earnings. A quarter over quarter improvement in output of 2.6% was derived from stronger performance from the combined cycle fleet. The nuclear fleet operated at a level comparable to the 90.0% capacity factor recorded in the second quarter of 2006. Lower operating costs added $0.04 per share to earnings. Power's earnings also benefited from favorable market conditions which aided margins on the BGSS contract by $0.03 per share largely offsetting the recognition of a mark-to-market loss during the quarter of $0.04 per share. PSEG Power announced in July that it will proceed with the installation of advanced emissions controls at its Hudson Generating Station coal-fired Unit 2 in Jersey City. Completion of the retrofits by 2010 will allow long-term, continued operation of the unit. William Levis, president and chief operating officer of PSEG Power, said. "This decision is consistent with the company's commitment to provide New Jersey and the region with reliable and environmentally responsible energy supplies." PSEG Power's expenditures associated with retrofitting Hudson as well as meeting other environmental commitments will increase its capital commitments for the 2007-2011 period by $100 million as part of a total capital program of $2.7 billion during this timeframe. PSEG Power's operating earnings for 2007 are expected to continue to reflect higher electric power prices and the successful auction of capacity in PJM. Power raised its full year 2007 operating earnings guidance range by $15 million to $840-$920 million based on the strength of year-to-date earnings. "We expect continued strong operating performance in the remainder of the year" Levis said. PSE&G PSE&G reported operating earnings in the second quarter of 2007 of $62 million ($0.24 per share) versus $34 million ($0.13 per share) for the second quarter of 2006. PSE&G's quarterly operating earnings benefited from a number of factors. Higher revenue from electric and gas rate adjustments implemented in November 2006 represented an increase in earnings of $0.07 per share. Earnings comparisons also benefited from more normal weather in 2007 compared to mild conditions experienced a year ago. This added $0.03 per share to earnings. An increase in electric and gas demand by residential and commercial customers added $0.03 per share to earnings. Several other items including an increase in depreciation expense resulted in a $0.02 per share reduction to earnings in the quarter. PSE&G announced that it will take part in the construction of a new 500 kilovolt transmission line from Susquehanna, PA to Roseland, NJ approved by PJM in June. This line will coexist with a 230 kilovolt transmission line along this route. Permitting activity with construction to follow is expected to begin in 2008 with the new line in-service during 2012. It is one of three 500 kilovolt lines that PSE&G has endorsed to improve long-term electric reliability in N.J. If all three lines are constructed, PSE&G would increase its investment in transmission by approximately $1 billion over 5-8 years. PSE&G's earnings during the second half of 2007 will continue to reflect the impact of a full year of the electric and gas rate agreements implemented in November 2006 and more "normal weather" for the balance of the year. The anticipated contribution from these sources of revenue, coupled with the strength of earnings year-to-date, continues to support 2007 operating earnings guidance for PSE&G of $340 million to $360 million. PSEG Energy Holdings PSEG Energy Holdings reported operating earnings in the second quarter of 2007 of $59 million ($0.24 per share) versus $70 million ($0.28 per share) recorded in the second quarter of 2006. Holdings' subsidiary, PSEG Global, reported a modest decline in operating earnings due to softness in the Texas market and an extended outage at its Italian bio-mass generation facility. The operating earnings for Holdings' 2000-Mw of combined cycle generating capacity in Texas were reduced by a decline in spark spreads ($0.03 per share) as a result of very mild weather conditions. This decline in operating earnings was partially offset by an increase in mark-to-market of $0.01 per share. Global's international generation results were hurt by a lengthy outage at the San Marco bio-mass generation facility which reduced earnings by $0.06 per share. The cost of the outage more than offset improved earnings from SAESA and modest income from other small investments. Global's results during the quarter were supported by a reduction in administrative costs and lower interest expense which added $0.04 per share to earnings. Holdings' other subsidiary, PSEG Resources, experienced a $0.01 per share decline in operating earnings for the second quarter of 2007. The results for the quarter were influenced by a decline in lease income, resulting from the impact of new accounting standards. PSEG Energy Holdings moved its investment in Electroandes, a hydro- electric generation and transmission company located in Peru, to discontinued operations. Initial bids for this $166 million investment have been strong, and Holdings expects to complete the sale of the asset around year-end. PSEG is lowering full year 2007 operating earnings guidance range for PSEG Energy Holdings to $120 million to $135 million from $130 million to $145 million, as a result of reclassifying Electroandes as discontinued operations. The full year earnings contribution from PSEG Energy Holdings will be influenced by the sale of assets, Texas power markets, the implementation of new accounting standards and lower operating expenses. For a list of attachments please visit: http://www.pseg.com/ FORWARD-LOOKING STATEMENT Readers are cautioned that statements contained in this press release about our and our subsidiaries' future performance, including 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 reasonable assumptions, we can give no assurance they will be achieved. The results or events predicted in these statements may differ materially from actual results or events. Factors which could cause results or events to differ from current expectations include, among other things: the effects of weather; the performance of generating units and transmission systems; the availability and prices for oil, gas, coal, nuclear fuel, capacity and electricity; changes in the markets for electricity and other energy-related commodities; changes in the number of participants and the risk profile of such participants in the energy marketing and trading business; the effectiveness of our risk management and internal controls systems; the effects of regulatory decisions and changes in law; changes in competition in the markets we serve; the ability to recover regulatory assets and other potential stranded costs; the outcomes of litigation and regulatory proceedings or inquiries; the timing and success of efforts to develop generation, transmission and distribution projects; continued market based rate authority, including any necessary mitigation; environmental regulations and responses to global climate change; ability to realize tax benefits and favorably resolve tax audit claims; conditions of the capital markets and equity markets; advances in technology; changes in accounting standards; changes in interest rates and in financial and foreign currency markets generally; the economic and political climate and growth in the areas in which we conduct our activities; and changes in corporate strategies. For further information, please refer to 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. 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 release. 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 DATASOURCE: Public Service Enterprise Group CONTACT: Karen Johnson of Public Service Enterprise Group, +1-973-430-7734 Web site: http://www.pseg.com/

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