Executive Summary / Key Takeaways

• Robust Financial Performance Driven by Regulated Growth: Public Service Enterprise Group (PSEG) delivered strong third-quarter and year-to-date 2025 results, with non-GAAP operating earnings of $1.13 per share and $1.667 billion, respectively, propelled by new distribution rates and strategic regulated investments. The company narrowed its 2025 non-GAAP operating earnings guidance to the upper half of $4.00 to $4.06 per share, reaffirming its 5% to 7% compound annual growth rate (CAGR) through 2029.
• Strategic Capital Allocation for Infrastructure Modernization: PSEG is executing a substantial $22.5 billion to $26 billion capital investment program through 2029, with the majority directed towards its regulated utility, PSE&G, to enhance reliability, expand energy efficiency, and meet surging demand, including a significant pipeline of large load inquiries. This program is expected to drive a 6% to 7.5% regulated rate base CAGR.
• Nuclear Fleet as a Carbon-Free Anchor and Growth Catalyst: PSEG Power's nuclear assets provide reliable, carbon-free baseload energy, supported by the Production Tax Credit (PTC) and strategic operational enhancements like the Hope Creek fuel cycle extension and Salem uprate project. These assets are increasingly viewed as a valuable resource for economic development, particularly for energy-intensive sectors like data centers, and offer potential for incremental revenue opportunities.
• Navigating a Complex Regulatory and Competitive Landscape: PSEG operates within a dynamic environment characterized by evolving PJM market structures, increasing affordability concerns, and new state leadership in New Jersey. The company is actively engaging with policymakers to shape long-term solutions for resource adequacy and customer affordability, while leveraging its strong customer satisfaction and operational excellence as competitive differentiators.
• Solid Balance Sheet and Shareholder Returns: PSEG's strong balance sheet enables the funding of its ambitious capital program without the need for new equity or asset sales, supporting consistent and sustainable dividend growth, as evidenced by its fourteenth consecutive annual dividend increase.

Setting the Stage: A Utility's Evolution in a Transforming Energy Landscape

Public Service Enterprise Group (PSEG) stands as a cornerstone of energy delivery in the Northeastern and Mid-Atlantic United States, primarily through its regulated electric and gas utility, Public Service Electric and Gas Company (PSE&G), and its carbon-free nuclear generation fleet under PSEG Power. Founded in 1903, PSEG has evolved into a predominantly regulated infrastructure company, strategically aligning its operations with the dual imperatives of decarbonization and energy security. This strategic pivot, emphasizing regulated investments and the value of its nuclear assets, positions PSEG at the forefront of a rapidly transforming energy landscape.

The broader industry is experiencing significant shifts, notably driven by the "nuclear renaissance" and the exponential growth of artificial intelligence (AI) and data centers. Morgan Stanley analysts project nuclear energy investments to reach $2.2 trillion by 2050, underscoring the increasing demand for stable, reliable, and carbon-free power. AI's immense energy consumption is leading hyperscalers to seek stable power sources, often willing to pay premiums for nuclear power, especially for collocated data centers. This trend, coupled with a growing demand for power and load growth across the PJM region, is creating resource adequacy concerns and driving the need for new generation and modernized infrastructure. PSEG's strategy is deeply intertwined with these macro trends, aiming to leverage its foundational strengths and technological advancements to meet these evolving demands.

A History of Adaptation: Shaping Today's Strategic Imperatives

PSEG's journey from its 1903 founding to its current form reflects a continuous adaptation to market and regulatory forces. A pivotal shift occurred with the divestment of its fossil generation portfolio in 2022, solidifying its focus on regulated utility operations and nuclear power. This move underscored a commitment to a cleaner energy future and a more predictable earnings profile.

Key regulatory milestones have further shaped PSEG's strategic direction. The 2023 approval of the Gas System Modernization Program II (GSMP II) extension and the October 2024 settlement of PSE&G's first electric and gas rate case, which established a $17.80 billion rate base, provided a clear pathway for sustained utility investment and cost recovery. The same month, the New Jersey Board of Public Utilities (BPU) approved the Clean Energy Future – Energy Efficiency II (CEF-EE II) program, authorizing a substantial $2.90 billion investment in energy efficiency projects. These initiatives, alongside the completion of the Advanced Metering Infrastructure (AMI) program in 2024, highlight PSEG's commitment to modernizing its grid and supporting New Jersey's clean energy goals. The implementation of the federal Nuclear Production Tax Credit (PTC) in January 2024 further de-risked PSEG Power's nuclear generation, providing crucial downside price protection.

Operational Excellence and Technological Edge

PSEG's operational strategy is centered on delivering safe, reliable, and increasingly clean energy, underpinned by significant technological investments and a focus on efficiency.

PSE&G: Modernizing the Grid for Future Demands

PSE&G, the company's regulated utility arm, is a testament to continuous infrastructure enhancement. The completion of the Advanced Metering Infrastructure (AMI) program in 2024, with approximately 2.2 million smart meters installed, represents a foundational technological upgrade. This system enhances grid management, enables more efficient response to outages, and provides customers with better tools to manage their energy consumption. The Clean Energy Future – Energy Efficiency II (CEF-EE II) program is another significant technological differentiator. With a planned investment of $2.9 billion through June 2027, this program is designed to help customers reduce energy usage, lower bills, and decrease carbon emissions. It has already delivered impressive results, with nearly 465,000 participating customers saving over $720 million annually on utility bills and receiving approximately $740 million in rebates. These efforts are projected to save approximately 2.8 million megawatt-hours (MWh) of electricity and 75 million therms of natural gas annually, avoiding 2.1 million metric tons of carbon emissions. This program not only benefits customers but also provides a stable, regulated investment channel for PSEG.

Operational resilience is a hallmark of PSE&G. The utility successfully managed a summer peak load of 10,229 megawatts in June 2025, the highest since 2013, restoring service to 99% of interrupted customers within 24 hours during severe heat storms. Similarly, during challenging cold spells in early 2025, PSE&G maintained high reliability, demonstrating the robustness of its modernized transmission and distribution (T&D) system.

PSEG Power: The Enduring Value of Carbon-Free Nuclear

PSEG Power's nuclear fleet is a critical asset, providing reliable, carbon-free baseload power. In Q3 2025, the nuclear units generated approximately 7.9 terawatt hours (TWh) with a strong capacity factor of 92.4%. Year-to-date through September 30, 2025, nuclear generation reached 23.8 TWh with a 93.7% capacity factor.

The company is actively optimizing these assets through targeted technological enhancements. The Hope Creek fuel cycle extension, completed in October 2025, transitioned the unit from an 18-month to a 24-month refueling cycle. This strategic move, achieved through fuel shuffling and design changes, is expected to yield increased megawatt hours and operational and maintenance (O&M) savings by extending the operational period between outages. The Salem uprate project, slated for 2027-2029, will further boost output by adding an incremental 200 megawatts (MW) of carbon-free dispatchable power. These projects enhance the fleet's efficiency and output, reinforcing its value in a market increasingly prioritizing clean, reliable energy. The Nuclear Regulatory Commission (NRC) also reinstated the 2053 and 2054 license expiration dates for the Peach Bottom units in September 2025, following environmental analysis, providing long-term operational clarity.

Financial Strength and Growth Trajectory

PSEG's financial performance in 2025 underscores the success of its predominantly regulated strategy and operational discipline. For the third quarter of 2025, PSEG reported net income of $622 million, or $1.24 per diluted share, and non-GAAP operating earnings of $565 million, or $1.13 per share. These results surpassed analyst expectations, with EPS beating forecasts by $0.11 and revenue exceeding estimates by 17.95%, reaching $3.22 billion. Year-to-date through September 30, 2025, net income rose to $1,796 million ($3.59 per diluted share) from $1,486 million ($2.97 per diluted share) in the prior year period.

The regulated PSE&G segment was a primary driver of this growth. For the three months ended September 30, 2025, PSE&G's operating revenues increased by $396 million, largely due to a $251 million increase in electric and gas revenues from the October 2024 distribution base rate case settlement. Delivery revenues saw a total increase of $256 million, further supported by $20 million from increased Green Program Recovery Charge (GPRC) revenues and $19 million from higher transmission rate base investments. While O&M expenses increased by $79 million, primarily due to clause and renewable costs and distribution and transmission expenditures, these were largely offset by revenue mechanisms.

PSEG Power & Other also contributed, with operating revenues increasing by $166 million in Q3 2025. Generation revenues rose by $108 million, driven by higher capacity prices ($66 million) and realized energy prices ($51 million), despite a slight offset from lower mark-to-market (MTM) gains. Gas supply revenues also increased by $45 million.

PSEG's liquidity position remains robust, with $3.6 billion in available liquidity and approximately $330 million in cash on hand as of September 30, 2025. The company's variable rate debt constitutes a low 4% of its total debt. This strong financial footing enables PSEG to fund its ambitious $22.5 billion to $26 billion capital investment program through 2029 without the need for new equity or asset sales, supporting consistent and sustainable dividend growth. The Board's approval of a $0.63 per share dividend for Q3 2025, translating to an indicative annual rate of $2.52 per share, marks the fourteenth consecutive annual increase.

Competitive Landscape and Strategic Positioning

PSEG operates in a competitive yet highly regulated environment, primarily contending with other large integrated utilities such as Exelon Corporation , Duke Energy Corporation , Dominion Energy Inc. (D), and Southern Company (SO). PSEG's competitive advantage is rooted in its strong regional regulatory relationships, established transmission and distribution network, and a deep commitment to customer satisfaction. PSEG Long Island, for instance, was ranked highest in business customer satisfaction in the East Large Segment by J.D. Power in 2025, and PSE&G was named number one in residential electric and gas service in the East among large utilities by J.D. Power in 2024. This focus on customer experience and reliability, evidenced by PSE&G's 23 consecutive ReliabilityOne Awards for the Mid-Atlantic region, differentiates it from peers.

While larger competitors like Exelon (EXC) and Duke Energy (DUK) may boast broader geographic footprints and more diversified energy portfolios, PSEG's concentrated focus on New Jersey and Long Island allows for tailored energy efficiency programs and a more responsive local presence. PSEG's investments in AMI and CEF-EE II programs, with their quantifiable benefits in energy savings and emissions reductions, provide a technological edge in service delivery and align with evolving customer and regulatory demands for clean energy. This strategic adaptability in regulated environments helps PSEG maintain market share and pricing power in its core service territories.

The growing demand from AI and data centers presents a significant opportunity. PSE&G's pipeline of large load inquiries for new service connections has surged to 11.5 gigawatts (GW) as of Q3 2025, with approximately 2.8 GW representing "mature applications." While these projects are smaller than the hyperscale developments seen elsewhere, they represent a substantial growth driver for the utility. PSEG Power's nuclear assets are particularly attractive to these energy-intensive customers, with Morgan Stanley (MS) noting that hyperscalers are willing to pay a premium for nuclear power, especially for collocated data centers. This positions PSEG's nuclear fleet as a potential source of incremental revenue through long-term contracts, a strategic initiative the company is actively pursuing.

Outlook and Key Risks

PSEG's outlook is anchored by its reaffirmed long-term non-GAAP operating earnings CAGR of 5% to 7% through 2029, starting from a robust 2025 midpoint of $4.00 to $4.06 per share. This growth is supported by its $21 billion to $24 billion regulated capital investment program, which is projected to drive a 6% to 7.5% rate base CAGR through 2029. Key assumptions include the full-year benefit of new distribution rates, the effectiveness of the Conservation Incentive Program (CIP) in decoupling revenues from sales volumes, and the Production Tax Credit (PTC) serving as a downside price protection for nuclear generation.

However, PSEG operates within a dynamic and challenging environment. The PJM market structure and resource adequacy remain significant concerns. CEO Ralph LaRossa has questioned the validity of the current PJM market, highlighting the challenge of attracting sufficient new generation to the region. This supply-demand imbalance has led to higher PJM capacity auction prices, which are translating into affordability concerns for customers. The recent election of Mikie Sherrill as New Jersey's new governor, who campaigned on freezing utility rates and building clean power, introduces regulatory and legislative uncertainty. PSEG has expressed readiness to work with the new administration to address these concerns, potentially through rate concessions or increased investments in battery storage, transmission, and energy efficiency.

Other notable risks include environmental liabilities, particularly related to the Passaic River Superfund site ($66 million accrued) and former Manufactured Gas Plant (MGP) sites ($186 million recorded liability), where ultimate costs remain uncertain and could be material. The ongoing LIPA contract litigation by a competitor, despite the Board's approval of PSEG Long Island's extension, adds a layer of legal uncertainty. Furthermore, cybersecurity attacks, supply chain disruptions, and fluctuations in interest rates continue to pose operational and financial risks.

Conclusion

Public Service Enterprise Group is a compelling investment story, firmly rooted in its predominantly regulated utility operations and resilient nuclear generation fleet. The company's strategic focus on infrastructure modernization, energy efficiency, and carbon-free power is not merely a response to industry trends but a proactive stance that leverages its technological capabilities and strong customer relationships. The robust financial performance in 2025, driven by favorable rate case outcomes and operational excellence, provides a solid foundation for its ambitious capital program and reaffirmed long-term earnings growth targets.

While PSEG faces inherent challenges from evolving PJM market dynamics, affordability pressures, and regulatory shifts under new state leadership, its proactive engagement with policymakers and proven track record of operational reliability position it favorably. The increasing demand for power from data centers, coupled with the strategic value of its nuclear assets, presents a significant opportunity for incremental revenue and sustained growth. PSEG's ability to self-fund its substantial capital expenditures without external equity, alongside its consistent dividend growth, underscores a disciplined financial strategy. Investors seeking exposure to a stable, growing utility with a clear commitment to clean energy and a strong competitive moat should find PSEG an attractive proposition.