Back to top

Analyst Blog

Public Service Enterprise Group Inc.’s (PEG - Analyst Report) subsidiary Public Service Electric and Gas Company (“PSE&G”) received approval to build the North Central Reliability Project (“NCRP”), worth $300–$350 million, from the New Jersey Board of Public Utilities (“BPU”). 

Under this project, Public Service Enterprise will upgrade 35 mile-long transmission lines and substations in New Jersey from their existing capacity of 138,000-volt (138kV) to 230,000-volt (230kV). These transmission lines stretch from the Roseland Switching Station in Essex County to the West Orange Switching Station in Essex County and to the Sewaren Switching Station in Middlesex County.

The company will conduct this project on behalf of an independent regional planning organization called PJM Interconnection, L.L.C. to ensure better power supply and reduction in transmission snags, thus maintaining reliability for New Jersey’s commercial and residential customers.

The Enterprise announced the NCRP project in March last year. This project is a part of the $3.5 billion transmission upgrades program, which the company is expected to invest over the next several years to maintain its system reliability.

It is a normal practice for regulated utility providers to invest substantial amounts for infrastructure development. The company expects the demand for electricity in the region to increase gradually in the near term. This project will enable the company to provide customers safe and reliable services. We expect that the company might file for a rate increase in the near future to recover its infrastructural investments.

In addition, the project is expected to create about 6,500 jobs, thus lowering the unemployment rate in the region.  In the long run, the company will cater to increased power demand, which will contribute to its utility revenue generation.

We view Public Service Enterprise Group Inc. as an organization with a strong portfolio of regulated and non-regulated utility assets that offer a stable earnings base and substantial long-term growth potential. Key growth drivers of the company include higher levels of capital investment, hedging, a low-cost nuclear fleet, assumed rate relief and additional generating capacities.

However, the increasing cost of coal, higher pension and financial costs, and power-price volatility are areas of concern for the company.

Public Service Enterprise Group Inc. currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

Public Service Enterprise Group Inc., based in Newark, New Jersey, is a diversified utility holding company. Its operations are mostly located in the Northeastern and Mid-Atlantic parts of the U.S.  The company competes with FirstEnergy Corp. (FE - Analyst Report).

Please login to Zacks.com or register to post a comment.