Public Service Enterprise Group Incorporated (PEG) | The Buildout — AI Infrastructure
The Verdict
PSEG is a public utility holding company. Its PSE&G subsidiary operates New Jersey's franchised electric and gas utility, providing transmission, distribution, and related services. Its PSEG Power subsidiary owns and operates nuclear generation that sells energy, capacity, and ancillary services into PJM. In the AI infrastructure buildout, PSEG sits at the delivery and supply layer: it interconnects and delivers power to large loads in New Jersey, and its nuclear fleet benefits from tightening PJM capacity markets as data-center demand grows.
| Market Cap | — |
| Revenue (TTM) | $12.8B |
| Revenue Growth | +19.0% |
| EBITDA Margin (TTM) | 35.7% |
| Net Debt | $16.4B |
| Earnings Beats | 6 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Five-year regulated capital plan of $22.5B–$25.5B at PSE&G, part of a $24B–$28B total PSEG plan through 2030, fundable without new equity or asset sales.
- Rate base CAGR of 6%–7.5% and non-GAAP operating earnings CAGR of 6%–8% through 2030, reaffirmed in August 2026.
- PSEG Nuclear cleared approximately 3,600 MW in the July 2026 PJM Base Residual Auction at $325/MW-day for the 2028–2029 delivery year.
- Operational reliability: 95.5% Q1 and 92% Q2 capacity factors; second consecutive breaker-to-breaker run at Salem Unit 2.
- FERC transmission cost allocation win estimated at >$100 million refunds and approximately $65 million prospective annual customer benefit.
What We’re Watching
- Base rate case filing now expected by year-end 2026, with no requested increase disclosed; EO1 Phase 2 comments due September 18, 2026.
- PSEG Power submitted RBP project proposals but no size, fuel, location, or counterparty disclosed; awards hinge on FERC rules and utility-like structure.
- RTO incentive elimination effective January 2027: estimated $40 million annual net income headwind, or about $0.08/share.
- Data-center inquiry pipeline of roughly 11 GW to 11.8 GW with management estimating 10–20% historical conversion; New Jersey interest has leveled off.
The regulated base plan is intact and reaffirmed after first-half execution. The AI-adjacent story remains optional: PSEG's nuclear output benefits from a tightening PJM market, but New Jersey data-center load growth is subdued and new generation proposals are conditional. The open question is whether the RBP proposals or multiyear nuclear PPAs convert into contracted, utility-like commitments.
Earnings Beat
For the March 2026 quarter, consolidated revenue reached $3,848 million with gross margin of 75.6% and EBITDA of $1,404 million; net income was $741 million. Management highlighted a 95.5% nuclear capacity factor and 8 TWh of nuclear generation in the same period.
| Metric | Q1 FY2026 | Q4 FY2025 | Q1 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $3.8B | $2.9B | $3.2B | +19.4% |
| Gross margin | 75.6% | 171.1% | 34.7% | +4090bps |
| EBITDA | $1.4B | $829M | $1.2B | +20.0% |
| EPS | $1.48 | $0.63 | $1.18 | +25.8% |
| Non-GAAP operating EPS | $1.55 | n/a | $1.43 | +8.4% |
We’re also reaffirming our 6% to 8% compound annual growth rate for non-GAAP operating earnings outlook through 2030 based on our confidence of executing our 5-year regulated capital investment plan that also supports a 6% to 7.5% compound annual growth in rate base over the same period.— Dan Cregg, CFO, August 4, 2026
Management tone: Management shifted from a prior procedural posture to a collaborative, team-oriented approach with state policymakers, saying in Q1 it hoped the team approach was clear. In Q2, management led with storm-restoration and operational metrics before moving to regulatory alignment and guidance reaffirmation.
Management Guidance
Management reaffirmed full-year 2026 non-GAAP operating earnings guidance of $4.28 to $4.40 per share and the 6% to 8% non-GAAP operating earnings CAGR through 2030. The plan assumes no new equity or asset sales and includes 2026 PSE&G capital spending of approximately $4.2 billion.
Trajectory
Reported revenue in the March 2026 quarter rose to $3,848 million from $3,222 million a year earlier, a 19.4% increase heavily driven by commodity pass-through revenue in gas and electric supply. Reported gross margin was 75.6% and EBITDA margin was 36.5%. At PSE&G, growth is driven by capital roll-ins; at PSEG Power, higher generation, capacity prices, and gas operations offset the absence of ZECs and LIPA fees.
The Model
The model projects FY+1 revenue of $13,300 million and EBITDA of $4,815 million (36.2% margin), stepping to FY+2 revenue of $14,000 million and EBITDA of $5,166 million (36.9%). Near-term revenue is anchored by regulated capex roll-ins and PJM capacity revenue; FY+2 assumes continued rate-base growth and stable nuclear output.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $12.2B | $13.3B | $14.0B |
| YoY Growth | — | +9.3% | +5.3% |
| EBITDA | $4.3B | $4.8B | $5.2B |
| EBITDA Margin | 35.7% | 36.2% | 36.9% |
Projections are the median of 5 independent model runs. The model’s revenue sits 7.7% above analyst consensus.
Management reaffirmed full-year 2026 non-GAAP operating earnings guidance of $4.28 to $4.40 per share and the 6% to 8% non-GAAP operating earnings CAGR through 2030. The plan assumes no new equity or asset sales and includes 2026 PSE&G capital spending of approximately $4.2 billion.
What Could Go Right — and Wrong
- PSEG Power's RBP proposals convert into contracted, utility-like generation commitments with disclosed size.
- A multiyear nuclear PPA is signed for existing output or upgrades, adding contracted earnings to the 6–8% base CAGR.
- New Jersey adopts large-load incentives or policy changes that reaccelerate the 11 GW-plus data-center inquiry pipeline.
- PSE&G wins a competitive transmission project in the summer 2026 PJM open window beyond the current five-year plan.
- NRC approves the 20-year license extension and the nuclear uprate completes on schedule in 2027 or 2029.
- The year-end 2026 base rate case or EO1 Phase 2 produces adverse ROE, decoupling, or sharing outcomes.
- New Jersey large-load demand stays subdued and only the low end of the 10–20% inquiry conversion materializes.
- RBP structure remains close to merchant risk, and management walks away rather than accepting unfavorable risk allocation.
- A nuclear operational event or fuel-fabrication interruption occurs, given three-plant concentration and single fuel fabrication provider per unit.
- PJM capacity or energy prices weaken if new supply arrives faster than load, reducing PSEG Power earnings.
Looking Ahead
The next 12 months concentrate regulatory and market risk. PSE&G is expected to file a base rate case by year-end 2026 while EO1 Phase 2 comments and decisions play out. The December 2026 PJM Base Residual Auction tests whether capacity pricing remains at the collar, and the RBP bilateral phase may clarify PSEG Power's generation proposals. Management also expects to file an EE2 extension by September 30, 2026 and to decide nuclear uprate timing in 2027 or 2029.
- Sep 18, 2026EO1 Phase 2 comments due — Tests which ratemaking reforms PSE&G supports.
- Sep 30, 2026EE2 Triennium extension filing — Tests energy-efficiency recovery framework under BPU.
- Dec 2026PJM Base Residual Auction — Tests whether capacity clears at $325/MW-day collar again.
- By year-end 2026PSE&G base rate case filing — Tests cost recovery for expanded distribution rate base.
- Jan 2027RTO incentive elimination effective — Realizes $40M net income headwind, about $0.08/share.
- 2027 or 2029Nuclear uprate outage — Determines uprate in-service date and capital deployment.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $10.3B | $12.2B | $12.8B | +18.3% |
| Gross Margin | 34.4% | 70.5% | 79.6% | +3,612bps |
| EBITDA | $3.7B | $4.3B | $34.2B | +16.4% |
| EBITDA Margin | 36.2% | 35.7% | 35.7% | 56bps |
| Net Income | $1.8B | $2.1B | $2.3B | +19.1% |
| Free Cash Flow | −$1.2B | $276M | −$6.0B | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)79.6%
- EBITDA Margin (TTM)35.7%
- Net Margin (TTM)17.7%
- ROIC7.6%
- FCF Conversion-1.4%
- SBC / Revenue0.0%
The Company
PSEG is a public utility holding company. Through PSE&G, it operates New Jersey's franchised electric and gas utility, providing transmission, distribution, and gas service to residential, commercial, and industrial customers. Through PSEG Power, it owns and operates nuclear generation at Hope Creek, Salem, and Peach Bottom, selling energy, capacity, and ancillary services primarily into PJM spot markets. In the AI infrastructure buildout, PSEG matters because its nuclear fleet and regulated grid sit between data-center load growth and the PJM market.
PSEG operates through wholly owned subsidiaries. PSE&G's revenues come from regulated rate tariffs under which it provides electric transmission and electric and natural gas distribution. PSEG Power sells wholesale natural gas to PSE&G under a full-requirements BGSS contract and operates three nuclear plants with a PSEG-owned share of about 3,758 MW. It holds an NRC Early Site Permit at Salem County, and management says the five-year capital plan is funded without new equity or asset sales.
Business Segments
Competitive Landscape
PSEG's stated competitive set is broad: merchant generators, utility generators, energy marketers, retailers, private equity firms, and other financial entities, per the 10-K. Within New Jersey, management describes PSEG as the only operator of existing nuclear generating facilities and holds one of only six NRC Early Site Permits, which management frames as a differentiated position for new nuclear procurement.
- Merchant generators10-K broad competitor category
- Utility generators10-K broad competitor category
- Energy marketers10-K broad competitor category
- Retailers10-K broad competitor category
- Private equity firms and other financial entities10-K broad competitor category
Supply Chain
PSEG is an incumbent nuclear operator and regulated delivery utility. The 10-K discloses single fuel fabrication provider per nuclear unit and limited suppliers; no neighbor transcript mentioned PSEG by name.
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