PSEG Power's earnings were bolstered by the strong performance of our domestic generation fleet. Our nuclear units set records for production and safety in 2001—and our fossil plants achieved their best availability ever.
PSEG Power's domestic generation operations closely integrate power production and energy trading. Established five years ago, our trading group has carved out a unique, growing and highly profitable position— utilizing our own generation assets to reduce the risks associated with trading in volatile markets. It realized a record-setting gross margin of $140 million in 2001 — about 90% higher than its 2000 contribution.
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"We remain confident that the balance, diversity and overall strength of our businesses provide a solid foundation for sustained, long-term growth."
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Our international operations are producing increasingly significant results. PSEG Global — the major growth engine of our PSEG Energy Holdings subsidiary—nearly tripled its earnings in 2001 to $116 million from $40 million in 2000, as it brought into service or acquired 13 generation and distribution projects and received a substantial boost from its withdrawal from a generating station partnership. Over the next five years, we anticipate that PSEG Global's annual earnings will double.
PSEG's balanced portfolio also includes businesses that have contributed stable earnings. PSE&G continues to be New Jersey's most reliable and largest utility. In 2001,"PSEG has been transformed into a diversified, growing energy company through a well-managed restructuring process achieved in tandem with five consecutive years of record earnings. PSE&G earned $230 million. In January 2002, PSE&G received a $90 million gas base rate increase—its first in 10 years—to better reflect costs. It plans to file an electric base rate case—also the first in a decade— later in 2002.
Another contributor to earnings stability has been PSEG Resources, a subsidiary of PSEG Energy Holdings. PSEG Resources manages a diverse portfolio of worldwide energy investments. In 2001, it contributed $64 million to earnings.
Balance and diversification are key components of our growth strategy and better equip us to weather periods of economic volatility, mitigate risk, and pursue new opportunities. Our diversity is multifaceted. We hold strong positions in U.S. and international energy markets—in deregulated and regulated businesses—and in power generation, energy trading and distribution. We use a broad mix of fuels to power our plants. As we continue to grow, diversification will remain an important strategic consideration.
In February 2002, PSE&G secured 9,600 megawatts of peak load through the New Jersey Basic Generation Service Auction for the period August 2002 through July 2003. PSEG Power did not participate directly in the auction but entered into contracts to provide power to several of the direct suppliers of New Jersey electric utilities, including PSE&G.
Results for 2002 will also depend in part on the potential impact of the economic, political and social crisis in Argentina on PSEG Global's investments there. Our investment exposure in that country is $632 million, and our 2002 business plan anticipates an earnings contribution of approximately 16 cents per share from our position there. We are working to minimize any impact stemming from that country's current situation, including any potential asset impairment.
