PSEG Power LLC

We base the stable outlook on PSEG Power on that on parent Public Service Enterprise Group Inc. (PSEG) because we consider PSEG Power a core subsidiary. This incorporates our view of a gradually improving business risk profile, and our expectation that PSEG will continue to effectively manage regulatory risk at its utility operations, maintaining funds from operations (FFO) to debt of 18%-20%. We could lower the ratings on the parent, PSEG, and its subsidiaries if consolidated credit measures weaken such that its FFO-to-debt ratio remains less than 18%. We could also lower the rating if its business risk increases without a corresponding improvement in credit metrics. Additionally, even absent a downgrade of the parent, we could lower the rating on

...ZECs for New Jersey nuclear plants will increase cash flow over next few years.PSEG Power LLC will receive $10 per megawatt hour (MWh) for the next three years, which should boost EBITDA by about $200 million and cash flows by $150 million annually. PSEG has a robust hedging strategy. To mitigate the volatility of cash flows, it continues to hedge a majority of electricity output, capacity, and fuel needs over the next 2-3 years, reducing the impact of market price fluctuations on cash flow. The company enjoys geographical and asset diversity. A majority of PSEG Power's generation assets are in the Pennsylvania-Jersey-Maryland (PJM) Interconnection regional transmission organization (RTO), New York, and New England. Its generation mix primarily has gas and nuclear based both in terms of capacity (megawatts; MW) and generation (megawatt hours; MWh). The producer will be completely out of coal generation in 2021, supporting environmental and social goals....

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