Long-Term Investments

Long-Term Investments as of December 31, 2018 and 2017 included the following:




	As of December 31,
	2018		2017
	Millions
PSE&G
Life Insurance and Supplemental Benefits	$	121	$	130
Solar Loans	149		150
Power
Partnerships and Corporate Joint Ventures (Equity Method Investments) (A)	86		87
Energy Holdings
Lease Investments	540		565
Total Long-Term Investments	$	896	$	932


(A)	During the three years ended December 31, 2018, 2017 and 2016, dividends from these investments were $16 million, $18 million and $18 million, respectively.

Leases

Energy Holdings, through several of its indirect subsidiary companies, has investments in domestic energy and real estate assets subject primarily to leveraged lease accounting. A leveraged lease is typically comprised of an investment by an equity investor and debt provided by a third-party debt investor. The debt is recourse only to the assets subject to lease and is not included on PSEG’s Consolidated Balance Sheets. As an equity investor, Energy Holdings’ equity investments in the leases are comprised of the total expected lease receivables over the lease terms plus the estimated residual values at the end of the lease terms, reduced for any income not yet earned on the leases. This amount is included in Long-Term Investments on PSEG’s Consolidated Balance Sheets. The more rapid depreciation of the leased property for tax purposes creates tax cash flow that will be repaid to the taxing authority in later periods. As such, the liability for such taxes due is recorded in Deferred Income Taxes on PSEG’s Consolidated Balance Sheets.

Due to liquidity issues facing NRG REMA, LLC (REMA) prior to its emergence from bankruptcy protection, economic challenges facing coal generation in PJM as discussed in Note 4. Early Plant Retirements, and based upon ongoing reviews of available alternatives as well as certain discussions with REMA management leading up to and in connection with REMA’s bankruptcy, Energy Holdings recorded pre-tax charges of $20 million, $77 million and $147 million in 2018, 2017 and 2016, respectively. Included in these charges were residual value impairments of $7 million and $137 million in 2017 and 2016, respectively. Pre-tax charges were reflected in Operating Revenues in each year and are included in Gross Investment in Leases as of December 31, 2018.

In December 2018, REMA emerged from its in-court proceeding under Chapter 11 of the Bankruptcy Code. Upon emergence, PSEG received $31.5 million in cash in exchange for transferring the ownership interests in Keystone and Conemaugh to the debtholders of REMA and satisfaction of all other claims asserted against REMA, as well as certain amendments to the Shawville lease. The Shawville lease amendments, among other things, will allow REMA to express interest in a renewal on or after November 24, 2019. In addition, REMA has agreed to fund qualifying credit support up to $36 million. As a result of the restructuring, Energy Holdings recognized a pre-tax gain in Operating Revenues of approximately $12 million ($9 million after tax). In addition, the remaining deferred tax liabilities related to these lease investments were reclassified to current tax liabilities. PSEG expects to pay approximately $120 million to taxing authorities in 2019 resulting from this restructuring activity.

The following table shows Energy Holdings’ gross and net lease investment as of December 31, 2018 and 2017.




	As of December 31,
	2018			2017
	Millions
Lease Receivables (net of Non-Recourse Debt)	$	504		$	546
Estimated Residual Value of Leased Assets	326			326
Total Investment in Rental Receivables	830			872
Unearned and Deferred Income	(290		)	(307		)
Gross Investments in Leases	540			565
Deferred Tax Liabilities	(354		)	(480		)
Net Investments in Leases	$	186		$	85

In December 2017, new tax legislation was enacted (Tax Act), reducing the statutory U.S. corporate income tax rate from a maximum of 35% to 21%, effective January 1, 2018. PSEG is subject to ASC 740, which requires that the effect on deferred tax assets and liabilities of a change in tax rates be recognized in the period the tax rate was enacted. The impact of the reduced tax rate is the primary reason for the decrease in Deferred Tax Liabilities. For additional information, see Note 21. Income Taxes.

The pre-tax income (loss) and income tax effects related to investments in leases, excluding gains and losses on sales and the impacts of the Tax Act, were as follows:




	Years Ended December 31,
	2018		2017			2016
	Millions
Pre-Tax Income (Loss) from Leases	$	17	$	(69	)	$	(135	)
Income Tax Expense (Benefit) on Income from Leases	$	6	$	(26	)	$	(51	)

Equity Method Investments

Power had the following equity method investments as of December 31, 2018 and 2017:




	As of December 31,
Name	2018		2017		Location	% Owned
	Millions
Power
Keystone Fuels, LLC	$	9	$	8	PA	23%
Conemaugh Fuels, LLC	8		8		PA	23%
Kalaeloa	69		71		HI	50%
Total	$	86	$	87

Long-Term Investments [Line Items]

Long-Term Investments [Text Block]

Long-Term Investments

Long-Term Investments as of December 31, 2018 and 2017 included the following:




	As of December 31,
	2018		2017
	Millions
PSE&G
Life Insurance and Supplemental Benefits	$	121	$	130
Solar Loans	149		150
Power
Partnerships and Corporate Joint Ventures (Equity Method Investments) (A)	86		87
Energy Holdings
Lease Investments	540		565
Total Long-Term Investments	$	896	$	932


(A)	During the three years ended December 31, 2018, 2017 and 2016, dividends from these investments were $16 million, $18 million and $18 million, respectively.

Leases

Energy Holdings, through several of its indirect subsidiary companies, has investments in domestic energy and real estate assets subject primarily to leveraged lease accounting. A leveraged lease is typically comprised of an investment by an equity investor and debt provided by a third-party debt investor. The debt is recourse only to the assets subject to lease and is not included on PSEG’s Consolidated Balance Sheets. As an equity investor, Energy Holdings’ equity investments in the leases are comprised of the total expected lease receivables over the lease terms plus the estimated residual values at the end of the lease terms, reduced for any income not yet earned on the leases. This amount is included in Long-Term Investments on PSEG’s Consolidated Balance Sheets. The more rapid depreciation of the leased property for tax purposes creates tax cash flow that will be repaid to the taxing authority in later periods. As such, the liability for such taxes due is recorded in Deferred Income Taxes on PSEG’s Consolidated Balance Sheets.

Due to liquidity issues facing NRG REMA, LLC (REMA) prior to its emergence from bankruptcy protection, economic challenges facing coal generation in PJM as discussed in Note 4. Early Plant Retirements, and based upon ongoing reviews of available alternatives as well as certain discussions with REMA management leading up to and in connection with REMA’s bankruptcy, Energy Holdings recorded pre-tax charges of $20 million, $77 million and $147 million in 2018, 2017 and 2016, respectively. Included in these charges were residual value impairments of $7 million and $137 million in 2017 and 2016, respectively. Pre-tax charges were reflected in Operating Revenues in each year and are included in Gross Investment in Leases as of December 31, 2018.

In December 2018, REMA emerged from its in-court proceeding under Chapter 11 of the Bankruptcy Code. Upon emergence, PSEG received $31.5 million in cash in exchange for transferring the ownership interests in Keystone and Conemaugh to the debtholders of REMA and satisfaction of all other claims asserted against REMA, as well as certain amendments to the Shawville lease. The Shawville lease amendments, among other things, will allow REMA to express interest in a renewal on or after November 24, 2019. In addition, REMA has agreed to fund qualifying credit support up to $36 million. As a result of the restructuring, Energy Holdings recognized a pre-tax gain in Operating Revenues of approximately $12 million ($9 million after tax). In addition, the remaining deferred tax liabilities related to these lease investments were reclassified to current tax liabilities. PSEG expects to pay approximately $120 million to taxing authorities in 2019 resulting from this restructuring activity.

The following table shows Energy Holdings’ gross and net lease investment as of December 31, 2018 and 2017.




	As of December 31,
	2018			2017
	Millions
Lease Receivables (net of Non-Recourse Debt)	$	504		$	546
Estimated Residual Value of Leased Assets	326			326
Total Investment in Rental Receivables	830			872
Unearned and Deferred Income	(290		)	(307		)
Gross Investments in Leases	540			565
Deferred Tax Liabilities	(354		)	(480		)
Net Investments in Leases	$	186		$	85

In December 2017, new tax legislation was enacted (Tax Act), reducing the statutory U.S. corporate income tax rate from a maximum of 35% to 21%, effective January 1, 2018. PSEG is subject to ASC 740, which requires that the effect on deferred tax assets and liabilities of a change in tax rates be recognized in the period the tax rate was enacted. The impact of the reduced tax rate is the primary reason for the decrease in Deferred Tax Liabilities. For additional information, see Note 21. Income Taxes.

The pre-tax income (loss) and income tax effects related to investments in leases, excluding gains and losses on sales and the impacts of the Tax Act, were as follows:




	Years Ended December 31,
	2018		2017			2016
	Millions
Pre-Tax Income (Loss) from Leases	$	17	$	(69	)	$	(135	)
Income Tax Expense (Benefit) on Income from Leases	$	6	$	(26	)	$	(51	)

Equity Method Investments

Power had the following equity method investments as of December 31, 2018 and 2017:




	As of December 31,
Name	2018		2017		Location	% Owned
	Millions
Power
Keystone Fuels, LLC	$	9	$	8	PA	23%
Conemaugh Fuels, LLC	8		8		PA	23%
Kalaeloa	69		71		HI	50%
Total	$	86	$	87