Ladies and gentlemen, thank you for standing by. My name is Ginger, and I am your event operator today. I'd like to welcome everyone to today's conference, Public Service Enterprise Group's Third Quarter 2016 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session from members of the financial community. [Operator Instructions] As a reminder, this conference is being recorded today, Monday, October 31, 2016 ,and will be available for telephone replay beginning at 2:00 PM Eastern today until 11:30 PM. Eastern on November 7, 2016. It will also be available as an audio webcast on PSEG's corporate Web site at www.pseg.com. I'd now like to turn the conference over to Kathleen Lally. Please go ahead.

Thank you, Ginger. Good morning. Thank you for participating in PSEG's call this morning. As you are aware, we released third quarter 2016 earnings statements earlier this morning. The release and attachments as mentioned are posted on our Web site, www.pseg.com, under the Investor section. We also posted a series of slides that detail operating results by company for the quarter. Our 10-Q for the period ended September 30, 2016 is expected to be filed later today. As you know, the earnings release and other matters that we will discuss in today's call contain forward-looking statements and estimates that are subject to various risks and uncertainties. And although we may elect to update those forward-looking statements from time to time, we specifically disclaim any obligation to do so, even if our estimate changes unless required to do so. Our release also contains non-GAAP operating earnings. Please refer to today's 8-K or our other investor filings for a discussion of factors that may cause results to differ from management's projections, forecast, and expectations, and for a reconciliation of non-GAAP operating earnings to GAAP results. I would now like to turn the call over to Ralph Izzo, Chairman, President, and Chief Executive Officer of Public Service Enterprise Group; and joining Ralph on the call is Dan Cregg, Executive Vice President and Chief Financial Officer. At the conclusion of their remarks there will be time for your questions. Thanks, Ralph.

Thank you, Kathleen, and thank you everyone for joining us today. PSEG reported strong results for the third quarter. Earlier this morning, we reported net income for the quarter of $0.64 per share versus $0.87 per share last year. Non-GAAP operating earnings for the third quarter of 2016 were $0.88 per share compared with non-GAAP operating earnings for the third quarter of 2015 of $0.80 per share. For the nine months, we reported net income of $1.94 per share versus $2.70 per share, but non-GAAP operating earnings for the nine months ended September 30, 2016, are $2.36 per share, which compares with non-GAAP operating earnings of $2.41 per share earned during the nine months ended September 30, 2015. Slides four and five contain the details on the results for the quarter and the nine months. We remain committed to our core operating philosophy of operational excellence, investing in a disciplined manner, and maintaining a strong financial position to support the growth expected by our shareholders. PSE&G continues to earn its return on an expanded capital investment program. PSE&G Power continues to manage through very difficult energy markets, and we continue to take strong actions to optimize both businesses in this environment. PSE&G Power has decided to retire the Hudson and Mercer coal fire generation stations in 2017. This is sooner than we would have forecasted just a few short years ago, but became inevitable in the face of changes in the energy market, which were amply demonstrated this summer. While we experienced very warm weather conditions, the abundance of low-cost gas supply, which is a benefit for our customers kept energy prices low, and is expected to keep power prices lower for longer. Careful analysis indicated it would be uneconomic to invest the capital necessary to assure the units would…

Great. Thank you, Ralph, and thank you everybody for joining us on the call this morning. As Ralph mentioned, PSEG reported net income for the third quarter of 2016 of $0.64 per share versus net income of $0.87 per share in the last year's third quarter. Non-GAAP operating earnings for the third quarter of 2016 were $0.88 per share versus non-GAAP operating earnings of $0.80 per share in last year's third quarter, and a reconciliation of non-GAAP operating earnings to net income for the quarter and year-to-date can be found on slides four and five. We've also provided you with a waterfall chart on slide nine that takes you through the net changes in quarter-over-quarter non-GAAP operating earnings by major business. And a similar chart on slide 10 provides you with the changes to non-GAAP operating earnings by each business on a year-to-date basis. And I'll now review each company in more detail, starting PSE&G. PSE&G reported net income of $0.50 per share for the third quarter of 2016, compared with $0.44 per share of the third quarter of 2015, for a 14% improvement. Results for the quarter are shown on slide 12. The improvement in PSE&G's net income for the third quarter reflects growth from its expanded investment in electric and gas transmission and distribution facilities. Returns on PSE&G's expanded investment in Transmission added $0.03 per share to net income in the quarter. And incremental revenue associated with PSE&G's Energy Strong infrastructure program added $0.02 per share to net income in the quarter. Third quarter net income comparisons also benefitted by an increase in electric demand associated with weather conditions, which were approximately 30% warmer than normal and 9% warmer than conditions experienced in the third quarter of 2015. The increase in demand associated with the warmer than normal…

Ladies and gentlemen, we will now begin the question-and-answer session for members of the financial community. [Operator Instructions] Your first question is from Neel Mitra from Tudor, Pickering. Please go ahead with your question.

Hi, good morning.

Good morning, Neel.

Just based off of some of your peers' commentary, could you comment if you're seeing any cost inflation at your nuclear plants or any upwards pressure on pricing which you're having to contain?

Yes, Neel, so we have been commenting and participating in industry efforts to reverse the trend of some of the escalations in both O&M and capital being driven by the considerations emanating from the NRC. So we're part of an effort called Delivering the Nuclear Promise, to take the average industry cost structure of $35 a megawatt hour down to $30 a megawatt hour. We haven't released our specific cost structure, but suffice to say that we operate slightly below the industry average. So yes, there are cost pressures, but there's an active industry effort that we are front and center in participating to both control that escalation and reverse it.

Got it. And then just moving to the Keys center, some of your recent commentary is based off of the fact that you like the location in Southwest MAAC [ph] within PJM. Could you comment on why that's a good location compared to some other locations in PJM for a new build?

Sure. It's a couple of reasons. First of all, it is part of PJM-West hub where we do all of our hedging. So it does lend some balance to the portfolio, which is primarily PJM-East for where most our assets are located. It is a load pocket that is experiencing some modest degree of growth. There have been years where it looked like it was going to be about 4%. And it's been consistently the strongest pricing region from an energy market point of view in PJM for the past few years.

Okay, perfect. Thank you.

Your next question is from Travis Miller from Morningstar. Please proceed with your question.

Good morning. Thank you.

Hi, Travis.

Looking at a high level, I know you guys like to have a strong balance sheet. Where you are right now with the growth projects that you have over the next two to three years, especially on the power side, how do you see that leverage changing? And to the extent that it stays in this kind of range, what's the opportunity to add leverage, perhaps up at the parent co or some other place on the balance sheet?

So I think our numbers are looked in, so when -- remained on average above 40% for the next three years given current market expectations. Our floor at Power is an FFO to debt of 30%, and as it's been the case in the past, Travis, our top priority is reinvesting in the business. That predominantly means reinvesting in regulated utility assets, although we continue to look for opportunities to acquire assets in Power that have allowed our portfolios in competitive markets that were interested in that being New York, New England, and PJM. But number one use of the balance sheet is reinvesting in the business. Number two is, given the cyclicality of the merchant generation business to provide support for the dividend in some of those ups and downs so that we can provide a consistent growth rate in that dividend. And last would be to repurchase shares if we were not seeing those growth opportunities, primarily in utility or had earnings that just dwarfed the growth in the dividend. But Dan, I don't know if you want to add some color to those specific numbers.

Yes, what I would say Travis is we have had a lot of success in finding opportunities to deploy capital. And we even referenced today an excess of $600 million at the utility. So rough reference is reinvesting the capital on the businesses as opportunity number one, and that's what we have been able to do. And having a strong cash flow coming from the Power side of the business, and the ability to provide financing there at the parent is enabling of that growth that we have throughout the business.

Okay. And on those generation projects, would you expect to have a higher percentage share of debt or leverage there such that your entire balance sheet, certainly in a small way given the relative size, would move toward more leverage is –- the question there simply is, is there going to be extra leverage at those projects as you go through the construction phase?

Yes, I mean, I think if you take a look at what we're investing in to the business on the power side of the business, and you take a look at what our cash flow is coming from the business, it pretty well supports the ability to build that, a, without any equity at the parent, but without growing that leverage capacity or that leverage utilization at Power.

And to Dan's point, Travis, both Power and the utility can support that capital program without any equity issuance in any of the forecasts that we're able to come up with.

Okay, great. Thanks a lot.

Your next question is from Angie Storozynski from Macquarie. Please proceed with your question.

Thank you. So first on the Power side. Can you comment on what you're seeing on the power base, not the gas bases, but the power bases for your combined cycle gas front? It seems like the output from your New York and New Jersey units have come down slightly over the year despite this hot summer. And we are hearing from other power producers -- gas-fired producers in PJM that they're seeing some expansion in a negative power base as due to some congestion on transmission line as well as the gas plants are running now -- well, often 24/7. Is this a phenomenon you are actually seeing at your units?

Yes, Angie, that is correct. So we're, as you know, the basis differentials are very seasonal in nature. They tend to be somewhat strongly negative in the off seasons, the spring and the fall, less negative in the summer, and they turn positive in the winter. It's driven by two factors, you've identified both of them, one is our gas basis differentials, and transmission congestion. I forget the name of the transmission asset down in the PG&E area that is undergoing some renewal. It's Bagley Grayston [ph] which I believe according to PJM is scheduled for completion sometime next spring. That's all public information; you should check the PJM Oasis board for confirmation that -- in case I have the date wrong. And then obviously from a gas point of view, there's a much healthier degree of infrastructure that's brining gas from the Marcellus to the New York-New Jersey region than there is going to the PJM West region, which is a bit of a misnomer. It's actually south of here. And until the infrastructure corrects that arbitrage opportunity you'll continue to see gas-based generation being less expensive to operate up here than it is down there. But we remain confident that over time the market does correct any anomalies that exist and arbitrage opportunities that exist. And there's no shortage of projects that are either in permitting or in construction to move gas to the south. And as I said, there is a specific transmission project underway to correct congestion project underway to correct the congestion that we're seeing in the PG&E area.

Great. And now on the utility side, in your prepared remarks you mentioned the double-digit growth rate and then you mentioned something about 8%. Can you actually or just remind me or repeat your comments about the -- was that about the rate base growth or was that about the longevity of the current double-digit earnings growth?

Yes. So, as you know we don't forecast earnings growth. And what we've been forecasting is that for the next five years the utility capital program for approved programs, which support an 8% rate base growth and for programs that are fairly straight forward extensions of existing programs that 8% becomes 10%. But they've not been approved by the BPU yet. Of course as you know rate base growth is a good indicator of earnings growth, but then one has to add load growth and subtract O&M growth and those are two parts that are tougher to predict. We do a good job of controlling O&M. But I would not want to promise that we will be able to control O&M at a level of zero which is about the load has been growing, that's like 0.1%, 0.2%. So, it's suffice to say that the earnings growth would probably be a net subtraction from that net based growth, but we don't give an exact number, what that is.

Okay, thank you.

You are welcome.

Your next question is from Praful Mehta from Citigroup. Please proceed with your question.

Thank you. Hi, guys.

Hi, Praful.

Hi, sorry -- first question was on the separation - the generation separation side, the PEG Power side, I know we we've talked about this before. But given how ITP's are trading today, they really seem to struggle and I was wondering in that market context, does it make sense to think about PEG Power being separated or do you now reconsider and think more keeping PEG Power as part of the whole, PSE&G family?

I really don't have a lot new, to say about this subject. If we may - if and when or we were to make such a decision, it would be a market timing decision, it would have to do with the strength of the strategic arguments in favor of separation dwarfing the tactical benefits, that we continue to believe dominate the picture today in terms of staying together. So sure, you wouldn't try and do something in the middle of economic instability or major macroeconomic you can have like disruptions, but we're not market timers, the real question is, do we still have the financial synergies between the business, do we still have the build synergy between the business, do we still have a long-term investors who see the attractiveness of both, that's kind of strategic flexibility questions that we've talked about before.

Fair enough. Thank you. And then, growing has been the nuclear discussion that we were having earlier, there is obviously discussion in New York to support nuclear with through this X program. Do you see other states looking to implement something like this or do you see that as a possibility in New Jersey or Pennsylvania in terms of support from nuclear or carbon free generation?

I do. I think, that a lot of states are realizing that these are long-lived assets these mean the nuclear plants that provides enormous benefits both from a carbon point of view, from a fuel diversity point of view, from a reliability point of view, and most of our markets are fairly short-term in nature, even three your capacity prices don't capture the full benefit of what I expect to be fairly extensive debate on how carbons to be priced in the future. So they -- every state may not come up with its own remedy, and regrettably the right remedy would be a national remedy, but we don't seem to have a lot of traction in that regard right now. So I do see most of the action focused at state-by-state level.

I appreciate it. Thank you.

[Operator Instructions] Your next question is from Gregg Orrill from Barclays. Please proceed with your question.

Yes. Thank you. I guess two questions. First, are you able to provide what your transmission rate base is for year-end '16 and '17? And then what are your thoughts around acquiring nuclear and/or coal asset?

Good morning, Greg. It's good to hear from you. So I'm going to do a little. People scurry around to find the rate base number, I do know that by '18 it's 50% of the rate base price -- by the end of 2018, but I don't know what it is. Now Dan has the magic numbers, where he's going to take you through?

I think we are -- I think what we've done historically as we put out numbers for particular years and then given some ranges in between those years. So I think you're heading towards about $7 billion, as you approach '16, and then with the overall growth in capital, you would see increases there, but we will provide kind of our normal set of numbers within our next update like…

I knew you are going to make it up, Dan, I wouldn't refer to. Gregg, your second question on interest on acquiring coal, we are believers in nuclear, but at the right price of course we would be interested, but we are not -- we have no interest in adding coal to our fleet, nor would you see us be a large fleet acquirer, I do think that in general, we signaled through our investors that our primary investors in the regulated utility and that's what we continue put our emphasis.

Thank you.

Your next question is from Mitchell Moss from Lord Abbett. Please proceed with your question.

Hey, guys, just quick questions on, first, just a follow-up on Angie's question regarding the combined cycle. How they are running with due to transmission gas supply issues. Do you see some of these issues being resolved by 2017 in terms of just gas takeaway in transmission or do you see it in longer terms, sort of a 2018 and beyond type of an issue.

Yes. So Mitchell, of course we are operating with the same crystal ball as you are, which without being too critical of your crystal ball, ours is pretty cloudy. Having said that, it's more of an '18 to '19 timeframe that these projects we think will have a takeaway capacity impact.

And regarding the REMA leases that you mentioned, you took a charge on. Have you been involved in any of the negotiations that NRG has mentioned with bondholders or with leaseholders as part of the any, I guess restructuring discussion?

No we haven't, Mitchell. I mean, we are obviously aware as you are of where the current situations are and certainly ready for discussions when the time is right, but not as yet.

Do you guys have a view on whether or not the REMA lease could be broken or restructured in a bankruptcy or is it a bankruptcy proof, I guess?

I think we are going to let that play out and let time tell what's going to happen. I think it's a fairly complicated situation and we'll let time become our best estimate. We got some disclosures within our 10-Q, that give you a little bit of sense as to, some thoughts on it. But I think, where it ends is ahead of us, yes.

Okay, great, Thank you so much.

[Operator Instructions]

Thanks, Ginger. We can give back 15 minutes to folks if there are no further questions.

Yes. So, there are no further questions. Presenters, please -- for any closing remarks.

Sure. So just to summarize, hopefully what you heard is that Power capital program remains on-budget, on-schedule, and based on current prices is still expected to create strong value for us. The utility continues to identify new customer-driven investment opportunities that fuel its growth. Lastly, there is no question we have a relentless focus on cost control. It's part of everyday life at PSEG. So with that, I'll just wish everyone a happy Halloween. We look forward to seeing you next week in Phoenix, and thanks for joining us this morning, take care everyone.

Ladies and gentlemen, that does conclude your conference call for today. Thank you for participating. You may now disconnect.