PEG Q2 2025: 9.4GW Data Center Pipeline; 9% EPS Outlook
- Strong Data Center Demand: The Q&A highlighted a pipeline of 9,400 MW of large load inquiries—over 90% from data centers—with a healthy conversion rate of 10–20%, signaling significant growth potential for future business [document 10].
- Supportive Regulatory & Tax Environment: Executives emphasized that favorable developments—such as preserved nuclear production tax credits and permanent bonus depreciation—help reinforce earnings stability and support nuclear capacity expansion, positioning the utility well for sustained margins [document 6][document 12].
- Active Policy Engagement: The management’s proactive involvement in discussions with state regulators and policymakers regarding resource adequacy and affordability demonstrates a commitment to shaping a more favorable operating environment, which could enhance long-term revenue opportunities [document 7][document 8].
- Regulatory and policy uncertainty: There is uncertainty around New Jersey’s future generation build and resource adequacy initiatives, with unresolved legislative issues and a reliance on the existing PJM process that may continue to delay or negatively impact long‐term generation investments.
- Affordability pressure and customer bill risk: Rising customer bills due to higher peak loads and capacity price increases, combined with ongoing debates over affordability measures, could lead to regulatory or political pushback that may constrain rate recoveries.
- Reliance on uncertain data center pipeline and merchant solutions: A substantial portion of new business growth is based on data center inquiries, which are subject to low conversion rates and reliance on merchant solutions (e.g., battery storage remains merchant-based), posing risks to consistent future revenue growth.
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Earnings Guidance
Q: Is 2025 earnings on track?
A: Management expressed strong confidence in staying within the 9% non‐GAAP earnings guidance despite the later Hope Creek outage, noting current 1H performance supports full‐year targets. -
NJ Generation
Q: What is the outlook for NJ generation build?
A: They stressed ongoing policy discussions on regulated generation in New Jersey to balance reliability, affordability, and environmental needs, with no immediate new merchant generation planned. -
Nuclear Upgrades
Q: What about nuclear plant opportunities?
A: Management highlighted a strategic shift at Hope Creek, planning its first 24‐month run post-outage and a future 200 MW Salem upgrade to add incremental carbon-free capacity. -
Large Load Pipeline
Q: How is the data center pipeline performing?
A: They reported that over 90% of the current 9,400 MW load inquiries are data center driven, with an expected 10–20% conversion rate aligning with new business targets. -
Resource Adequacy Policy
Q: How are resource adequacy challenges being managed?
A: The team emphasized that tackling PJM’s capacity process hurdles remains a major focus, as ongoing regulatory dialogues seek to ensure affordability and maintain system reliability. -
Battery Storage Role
Q: What role might battery storage play?
A: They see battery storage as a potential, though still a merchant, opportunity; its revenue model is under review without a committed utility rate-based path at present. -
Deferral Mechanism & FERC
Q: Will deferrals extend and require FERC approval?
A: Management indicated there are no plans to extend customer deferrals, and any shift toward regulated generation would not necessitate FERC intervention. -
CoreWeave Relationship
Q: What’s the status on CoreWeave and cogeneration?
A: They confirmed that the only existing relationship is at the utility level with CoreWeave, and details on the cogeneration facility remain undisclosed.
Research analysts covering PUBLIC SERVICE ENTERPRISE GROUP.