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Public Service Enterprise (PEG) Eyes PSEG Fossil Sale, Ups View

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  • PEG

Public Service Enterprise Group Incorporated PEG has entered into a definite agreement to sell 6,750-megawatt (MW) fossil fuel-based generating portfolio to ArcLight Energy Partners Fund VII, L.P. — a fund controlled by ArcLight Capital Partners, LLC — for $1.92 billion. This transaction is expected to be completed by fourth-quarter 2021 or first-quarter 2022, subject to necessary approvals.

Courtesy of its decision, the company has accelerated its net-zero climate vision by two decades - from 2050 to 2030. It has been working to lower carbon emission by lowering fossil fuel usage and focusing on carbon free generation.

The transition toward cleaner energy sources in quite evident in the utility space, with operators coming up with net-zero emission targets on their own. Utilities like Duke Energy Corporation DUK, The Southern Company SO and Xcel Energy XEL, among others, have already announced plans to achieve net-zero carbon emissions by 2050.

Earnings Guidance Updated

The company has increased its 2021 operating earnings guidance to $3.50-$3.65 per share from $3.40-$3.55, reflecting the cessation of depreciation expense and lower interest cost related to the sale of PSEG Fossil assets and repayment of PSEG Power's outstanding debts.

Long-term Investments

Public Service Enterprise has a solid portfolio of regulated and non-regulated utility assets that offer stable earnings as well as significant long-term growth potential. For the 2021-2025 period, the company expects to invest $13-$15 billion, with compound annual rate base growth of 6.5-8%. Its planned capital spending for transmission for 2021-2023 is $2.5 billion.

Price Performance

The company’s shares have outperformed the industry in the past year.

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Zacks Rank

Public Service Enterprise currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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