PEG: Awaiting Regulatory Greenshoots in the Garden State. Initiating Coverage at Sector Perform, $81 PT

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PEG: Awaiting Regulatory Greenshoots in the Garden State. Initiating Coverage at Sector Perform, $81 PT

2% 14.0% 14.4%

refunds, GSMP III was carried forward intact, and a new BPU president was Consol Rate Base 34,027 36,795 39,617 42,266

nominated with a mandate to lower costs.

All values in USD unless otherwise noted.

A July 20 BPU consultant study on utility business model reform is an Priced as of prior trading day's market close, EST (unless otherwise noted).

important near-term catalyst, but we believe it is not a full derisking

event. We expect the study to be relatively bare & look to a subsequent

BPU rulemaking for real regulatory reform. In the meantime, we see

higher regulatory lag at PSE&G than historical levels, owing to a smaller

percentage of capital covered by interim mechanisms. We think clarity on

regulatory modernization could unlock +4-7% to our estimates in '27 & '29

(peak lag years), improving linearity at the utility.

We see similar consolidated growth to consensus but a very different

mix profile. We are surprised by how ratable consensus projects utility

EPS growth, with annual rates clustered between 7-9%. Given the '26

rate freeze and limited interim mechanism coverage, we see increased

regulatory lag and a more "stair-step" trajectory — consistent with recent

history ('24 ~1% YoY, '25 ~13% YoY on GRC outcome).

We believe the current environment in NJ warrants a small discount to

regulated peers, but this implies the nuclear assets trade in line with

Constellation (ticker: CEG) - this math is very sensitive to the '29 peer

group EBITDA multiple. At a CEG '29 EBITDA multiple of 9.6x, we see

PSE&G utility/parent at a ~(2.3)% implied discount (~4.6% to ~(6.3)% range

depending on the IPP peer multiple). We think uncertainty around future