Long-Term Investments

12 Months Ended

Dec. 31, 2011

Long-Term Investments

Note 7. Long-Term Investments

Long-Term Investments as of December 31, 2011 and 2010 included the following:

	As of December 31,
	2011		2010
	Millions
Power
Partnerships and Corporate Joint Ventures (Equity Method Investments)	$	32	$	25
PSE&G
Life Insurance and Supplemental Benefits		162		161
Solar Loan Investments		111		62
Other Investments		7		7
Energy Holdings
Leases		881		1,255
Partnerships and Corporate Joint Ventures:
Equity Method Investments (A)		106		105
Cost Method Investments (B)		4		7
Other Investments		0		1
Total Long-Term Investments	$	1,303	$	1,623

(A) During the three years ended December 31, 2011, 2010 and 2009, the amount of dividends from these investments was $3 million, $5 million and $10 million, respectively. Energy Holdings' share of income and cash flow distribution percentages ranged from 40% to 50% as of December 31, 2011.

(B) Energy Holdings has investments in certain companies in which it does not have the ability to exercise significant influence. Such investments are accounted for under the cost method.

Leases

Energy Holdings 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. The table below shows Energy Holdings' gross and net lease investment as of December 31, 2011 and 2010, respectively. The net investment in leases was comprised of the following:

	As of December 31,
	2011			2010
	Millions
Lease Receivables (net of Non-Recourse Debt)	$	763		$	896
Estimated Residual Value of Leased Assets		553			905
		1,316			1,801
Unearned and Deferred Income		(435	)		(546	)
Gross Investments in Leases		881			1,255
Deferred Tax Liabilities		(716	)		(899	)
Net Investments in Leases	$	165		$	356

The above table does not include $264 million of Gross Investments in Leases to subsidiaries of Dynegy Incorporated (Dynegy) as of December 31, 2011 as Energy Holdings wrote off its fully-reserved gross investment in these leases in December 2011. See Note 8. Financing Receivables for further discussion.

The pre-tax income and income tax effects, excluding gains and losses on sales, related to investments in leases were as follows:

	Years Ended December 31,
	2011			2010		2009
	Millions
Pre-Tax Income (Loss) from Leases	$	(228	)	$	45	$	23
Income Tax Expense (Benefit) on Pre-Tax Income from Leases	$	(77	)	$	14	$	23

Equity Method Investments

Power and Energy Holdings had the following equity method investments as of December 31, 2011:

			%
Name	Location		Owned
Power
Keystone		PA		23%
Conemaugh		PA		23%
Energy Holdings
Kalaeloa		HI		50%
GWF		CA		50%
Hanford L. P. (Hanford)		CA		50%
Bridgewater		NH		40%
Turboven		Venezuela		50%

Power [Member]

Long-Term Investments

 

Note 7. Long-Term Investments

Long-Term Investments as of December 31, 2011 and 2010 included the following:

	As of December 31,
	2011		2010
	Millions
Power
Partnerships and Corporate Joint Ventures (Equity Method Investments)	$	32	$	25
PSE&G
Life Insurance and Supplemental Benefits		162		161
Solar Loan Investments		111		62
Other Investments		7		7
Energy Holdings
Leases		881		1,255
Partnerships and Corporate Joint Ventures:
Equity Method Investments (A)		106		105
Cost Method Investments (B)		4		7
Other Investments		0		1
Total Long-Term Investments	$	1,303	$	1,623

(A) During the three years ended December 31, 2011, 2010 and 2009, the amount of dividends from these investments was $3 million, $5 million and $10 million, respectively. Energy Holdings' share of income and cash flow distribution percentages ranged from 40% to 50% as of December 31, 2011.

(B) Energy Holdings has investments in certain companies in which it does not have the ability to exercise significant influence. Such investments are accounted for under the cost method.

Leases

Energy Holdings 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. The table below shows Energy Holdings' gross and net lease investment as of December 31, 2011 and 2010, respectively. The net investment in leases was comprised of the following:

	As of December 31,
	2011			2010
	Millions
Lease Receivables (net of Non-Recourse Debt)	$	763		$	896
Estimated Residual Value of Leased Assets		553			905
		1,316			1,801
Unearned and Deferred Income		(435	)		(546	)
Gross Investments in Leases		881			1,255
Deferred Tax Liabilities		(716	)		(899	)
Net Investments in Leases	$	165		$	356

The above table does not include $264 million of Gross Investments in Leases to subsidiaries of Dynegy Incorporated (Dynegy) as of December 31, 2011 as Energy Holdings wrote off its fully-reserved gross investment in these leases in December 2011. See Note 8. Financing Receivables for further discussion.

The pre-tax income and income tax effects, excluding gains and losses on sales, related to investments in leases were as follows:

	Years Ended December 31,
	2011			2010		2009
	Millions
Pre-Tax Income (Loss) from Leases	$	(228	)	$	45	$	23
Income Tax Expense (Benefit) on Pre-Tax Income from Leases	$	(77	)	$	14	$	23

Equity Method Investments

Power and Energy Holdings had the following equity method investments as of December 31, 2011:

			%
Name	Location		Owned
Power
Keystone		PA		23%
Conemaugh		PA		23%
Energy Holdings
Kalaeloa		HI		50%
GWF		CA		50%
Hanford L. P. (Hanford)		CA		50%
Bridgewater		NH		40%
Turboven		Venezuela		50%

PSE&G [Member]

Long-Term Investments

Note 7. Long-Term Investments

Long-Term Investments as of December 31, 2011 and 2010 included the following:

	As of December 31,
	2011		2010
	Millions
Power
Partnerships and Corporate Joint Ventures (Equity Method Investments)	$	32	$	25
PSE&G
Life Insurance and Supplemental Benefits		162		161
Solar Loan Investments		111		62
Other Investments		7		7
Energy Holdings
Leases		881		1,255
Partnerships and Corporate Joint Ventures:
Equity Method Investments (A)		106		105
Cost Method Investments (B)		4		7
Other Investments		0		1
Total Long-Term Investments	$	1,303	$	1,623

(A) During the three years ended December 31, 2011, 2010 and 2009, the amount of dividends from these investments was $3 million, $5 million and $10 million, respectively. Energy Holdings' share of income and cash flow distribution percentages ranged from 40% to 50% as of December 31, 2011.

(B) Energy Holdings has investments in certain companies in which it does not have the ability to exercise significant influence. Such investments are accounted for under the cost method.

Leases

Energy Holdings 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. The table below shows Energy Holdings' gross and net lease investment as of December 31, 2011 and 2010, respectively. The net investment in leases was comprised of the following:

	As of December 31,
	2011			2010
	Millions
Lease Receivables (net of Non-Recourse Debt)	$	763		$	896
Estimated Residual Value of Leased Assets		553			905
		1,316			1,801
Unearned and Deferred Income		(435	)		(546	)
Gross Investments in Leases		881			1,255
Deferred Tax Liabilities		(716	)		(899	)
Net Investments in Leases	$	165		$	356

The above table does not include $264 million of Gross Investments in Leases to subsidiaries of Dynegy Incorporated (Dynegy) as of December 31, 2011 as Energy Holdings wrote off its fully-reserved gross investment in these leases in December 2011. See Note 8. Financing Receivables for further discussion.

The pre-tax income and income tax effects, excluding gains and losses on sales, related to investments in leases were as follows:

	Years Ended December 31,
	2011			2010		2009
	Millions
Pre-Tax Income (Loss) from Leases	$	(228	)	$	45	$	23
Income Tax Expense (Benefit) on Pre-Tax Income from Leases	$	(77	)	$	14	$	23

Equity Method Investments

Power and Energy Holdings had the following equity method investments as of December 31, 2011:

			%
Name	Location		Owned
Power
Keystone		PA		23%
Conemaugh		PA		23%
Energy Holdings
Kalaeloa		HI		50%
GWF		CA		50%
Hanford L. P. (Hanford)		CA		50%
Bridgewater		NH		40%
Turboven		Venezuela		50%