PSEG Power LLC

We view the sale of fossil assets favorably because it improves the quality of Power's cash flows even as it comes at the expenses of lower scale and scope. From 2022 on, most of the company's gross margins will come from a combination of hedged energy margins, capacity market revenue, and zero emission certificate (ZEC) revenue (the balance is certain gas operations and ancillary service revenue). While we view these payments supporting Power's credit quality, they need to be reapproved by the NJBPU every three years. We see the continued support for the ZECs payments as important for Power's financial risk profile. Given the hedged position of its expected generation, we believe the company's cash flow is highly predictable this

...We view Power's quasi-regulated cash flows after the sale of fossil generating assets as favorable. Power completed the sale of its solar units in June 2021. In February 2022, the company divested 6.75 gigawatts of its fossil portfolio of 13 generation units in New Jersey, Connecticut, Maryland, and New York. The sale of the assets resulted in total gross proceeds of about $2.5 billion. We view the sale of fossil assets favorably because it improves the quality of Power's cash flows even as it comes at the expenses of lower scale and scope. From 2022 on, most of the company's gross margins will come from a combination of hedged energy margins, capacity market revenue, and zero emission certificate (ZEC) revenue (the balance is certain gas operations and ancillary service revenue). Power's hedging strategy helps mitigate volatility. Even though power prices have significantly risen since January 2022, we expect only a modest uplift to cash flows because much of Power's generation is already...

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