UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-Q
                                   (Mark One)
                [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
                  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period ended March 31, 2001
                                       OR
                 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
                  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
                        For the transition period from to


Commission            Registrant, State of Incorporation,      I.R.S. Employer
File Number              Address, and Telephone Number        Identification No.
------------   --------------------------------------------   ------------------
 000-32503                  PSEG ENERGY HOLDINGS INC.             22-2983750
                           (A New Jersey Corporation)
                                80 Park Plaza-T22
                          Newark, New Jersey 07102-4194
                                  973-456-3581


Indicate  by  check  mark  whether the  registrant  (1)  has  filed  all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing  requirements  for  the  past 90  days.  Yes [ ] No [X]

Registrant is a  wholly-owned  subsidiary  of  Public  Service  Enterprise Group
Incorporated. Registrant meets the conditions set forth in General Instruction H
(1) (a) and (b) of Form 10-Q and is filing  this  Quarterly  Report on Form 10-Q
with the reduced disclosure format authorized by General Instruction H.

<PAGE>
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                            PSEG ENERGY HOLDINGS INC.
================================================================================
                                TABLE OF CONTENTS


                                                                     Page
                                                                     ----
PART I.  FINANCIAL INFORMATION

   Item 1. Financial Statements.....................................   2

   Item 2. Management's Discussion and Analysis of Financial
           Condition and Results of Operations......................  13

PART II.  OTHER INFORMATION

   Item 1. Legal Proceedings........................................  19

   Item 6. Exhibits and Reports on Form 8-K.........................  19

   Signature........................................................  20



<PAGE>

================================================================================
                            PSEG ENERGY HOLDINGS INC.
================================================================================

                          PART I. FINANCIAL INFORMATION

                          ITEM 1. FINANCIAL STATEMENTS




<PAGE>
================================================================================
                            PSEG ENERGY HOLDINGS INC.
================================================================================
<TABLE>
<CAPTION>

                            PSEG ENERGY HOLDINGS INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                              (Millions of Dollars)
                                   (Unaudited)


                                                                                        For the Quarters Ended
                                                                                               March 31,
                                                                                   ----------------------------------
                                                                                       2001                2000
                                                                                   --------------     ---------------
<S>                                                                                    <C>                <C>
OPERATING REVENUES
   Income from Joint Ventures and Partnerships..............................           $   33             $   30
   Energy Service Revenues..................................................               97                 70
   Energy Supply Revenues...................................................                -                 37
   Income from Capital and Operating Leases.................................               47                 38
   Gain on Withdrawal from Partnership......................................               51                  -
   Net Investment Gains (Losses)............................................              (15)                31
   Other....................................................................                7                 12
                                                                                   --------------     ---------------
       Total Operating Revenues.............................................              220                218
                                                                                   --------------     ---------------
OPERATING EXPENSES
   Cost of Energy Sales.....................................................                -                 34
   Restructuring Charge.....................................................                -                  6
   Operation and Maintenance................................................               93                 65
   Depreciation and Amortization............................................                5                  3
   Administrative and General...............................................               28                 31
                                                                                   --------------     ---------------
       Total Operating Expenses.............................................              126                139
                                                                                   --------------     ---------------
OPERATING INCOME...........................................................                94                 79
OTHER INCOME ...............................................................                2                  1
INTEREST EXPENSE-NET........................................................              (33)               (35)
                                                                                   --------------     ---------------
INCOME BEFORE INCOME TAXES, EXTRAORDINARY ITEM
   AND CUMULATIVE EFFECT OF A CHANGE IN
   ACCOUNTING PRINCIPLE.....................................................               63                 45
INCOME TAXES................................................................              (10)               (14)
                                                                                   --------------     ---------------
INCOME BEFORE EXTRAORDINARY ITEM
   AND CUMULATIVE EFFECT OF A CHANGE IN
   ACCOUNTING PRINCIPLE.....................................................               53                 31
EXTRAORDINARY LOSS ON EARLY RETIREMENT
   OF DEBT (NET OF TAX OF $1)...............................................               (2)                 -
CUMULATIVE EFFECT OF A CHANGE IN
   ACCOUNTING PRINCIPLE.....................................................                9                  -
                                                                                   --------------     ---------------
NET INCOME..................................................................               60                 31
Preferred Stock Dividend Requirements.......................................               (6)                (6)
                                                                                   --------------     ---------------
EARNINGS AVAILABLE TO PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED..........           $   54             $   25
                                                                                   ===============     ===============

See Notes to Consolidated Financial Statements.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                            PSEG ENERGY HOLDINGS INC.
                           CONSOLIDATED BALANCE SHEETS
                                     ASSETS
                              (Millions of Dollars)


                                                                                         (Unaudited)
                                                                                          March 31,              December 31,
                                                                                            2001                     2000
                                                                                     --------------------      -----------------
<S>                                                                                       <C>                       <C>
CURRENT ASSETS
   Cash and Cash Equivalents...................................................           $    45                   $    22
   Accounts Receivable:
     Trade.....................................................................               156                       137
     Allowance for Doubtful Accounts...........................................                (9)                       (5)
     Other.....................................................................                 8                         4
     Affiliated Companies......................................................                16                        64
   Notes Receivable............................................................                56                        23
   Assets Held for Sale........................................................                13                        48
   Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts.                32                        27
   Other Current Assets........................................................                 6                         7
                                                                                     --------------------      -----------------
       Total Current Assets....................................................               323                       327
                                                                                     --------------------      -----------------
PROPERTY, PLANT AND EQUIPMENT
   Real Estate.................................................................               107                       103
   Property, Plant and Equipment...............................................                63                        69
    Construction in Progress...................................................               316                       172
                                                                                     --------------------      -----------------
        Total..................................................................               486                       344
   Accumulated Depreciation and Amortization...................................               (53)                      (51)
                                                                                     --------------------      -----------------
       Net Property, Plant and Equipment.......................................               433                       293
                                                                                     --------------------      -----------------

INVESTMENTS
   Capital Leases - Net........................................................             2,279                     2,253
   Corporate Joint Ventures....................................................             1,615                     1,584
   Partnerships Interests......................................................               595                       575
   Other Investments...........................................................                77                        71
                                                                                     --------------------      -----------------
       Total Investments.......................................................             4,566                     4,483
                                                                                     --------------------      -----------------

OTHER ASSETS...................................................................               146                        95
                                                                                     --------------------      -----------------

   TOTAL ASSETS................................................................            $5,468                    $5,198
                                                                                     ====================      =================
See Notes to Consolidated Financial Statements.

</TABLE>


<PAGE>
<TABLE>
<CAPTION>


                            PSEG ENERGY HOLDINGS INC.
                           CONSOLIDATED BALANCE SHEETS
                         LIABILITIES AND CAPITALIZATION
                              (Millions of Dollars)


                                                                                       (Unaudited)
                                                                                        March 31,               December 31,
                                                                                           2001                     2000
                                                                                    -------------------      --------------------
<S>                                                                                       <C>                      <C>
CURRENT LIABILITIES
   Long-Term Debt Due Within One Year........................................             $  174                   $  267
   Short-Term Debt...........................................................                126                       91
   Accounts Payable:
     Trade...................................................................                 64                       54
     Taxes..................................................................                   6                        5
     Interest...............................................................                  46                       31
     Other...................................................................                 36                       32
     Affiliated Companies....................................................                  2                        5
   Billing in Excess of Costs and Estimated Earnings on Uncompleted Contracts                 22                       18
   Notes Payable.............................................................                  -                      392
                                                                                    -------------------      --------------------
       Total Current Liabilities.............................................                476                      895
                                                                                    -------------------      --------------------

NONCURRENT LIABILITIES
   Deferred Income Taxes and ITC.............................................              1,076                    1,071
   Other Noncurrent Liabilities..............................................                 74                       28
                                                                                    -------------------      --------------------
       Total Noncurrent Liabilities..........................................              1,150                    1,099
                                                                                    -------------------      --------------------

COMMITMENTS AND CONTINGENT LIABILITIES.......................................                  -                        -
                                                                                    -------------------      --------------------

MINORITY INTERESTS...........................................................                 26                       23
                                                                                    -------------------      --------------------

CAPITALIZATION
   LONG-TERM DEBT............................................................              2,034                    1,432
                                                                                    -------------------      --------------------

   STOCKHOLDER'S EQUITY
     Common Stock, Issued: 100 Shares........................................                  -                        -
     Preferred Stock.........................................................                509                      509
     Additional Paid-in Capital..............................................              1,090                    1,090
     Retained Earnings.......................................................                404                      353
     Accumulated Other Comprehensive Loss....................................               (221)                    (203)
                                                                                    -------------------      --------------------
       Total Stockholder's Equity............................................              1,782                    1,749
                                                                                    -------------------      --------------------

TOTAL LIABILITIES AND CAPITALIZATION.........................................             $5,468                   $5,198
                                                                                    ===================      ====================
See Notes to Consolidated Financial Statements.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                            PSEG ENERGY HOLDINGS INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (Millions of Dollars)
                                   (Unaudited)
                                                                                        For the Quarters Ended
                                                                                              March 31,
                                                                                ---------------------------------------
                                                                                     2001                    2000
                                                                                ---------------          --------------
<S>                                                                                <C>                      <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net Income.............................................................         $   60                   $   31
   Adjustments to Reconcile Net Income to Net Cash Flows from
      Operating Activities:
     Depreciation and Amortization........................................              3                        6
     Deferred Income Taxes (Other than Leases)............................            (15)                       8
     Leveraged Lease Income, Adjusted for Rents Received..................              2                      (19)
     Investment Distributions.............................................             36                       12
     Undistributed Earnings from Affiliates...............................            (25)                     (11)
     Net Gains on Investments.............................................            (37)                     (31)
     Proceeds from Withdrawal from Partnership............................             50                        -
     Change in Derivative Fair Value......................................             (1)                       -
     Cumulative Effect of a Change in Accounting Principle................             (9)                       -
     Non-Cash Portion of Restructuring Charge.............................              -                        5
     Net Changes in Certain Current Assets and Liabilities:
       Accounts Receivable...............................................               6                      (79)
       Accounts Payable...................................................             52                       36
       Interest Payable...................................................              6                       29
     Other................................................................             (9)                       6
                                                                                ---------------          --------------
     Net Cash Provided by (Used in) Operating Activities..................            119                       (7)
                                                                                ---------------          --------------

CASH FLOWS FROM INVESTING ACTIVITIES
   (Investments in) Return of Capital from Partnerships and Joint Ventures            (92)                       3
   Investments in Capital Leases..........................................              -                      (74)
   Additions to Property, Plant and Equipment.............................             (9)                      (3)
   Acquisitions, Net of Cash Provided.....................................            (18)                     (13)
   Proceeds from Sales of Capital Leases..................................              -                        8
   Other..................................................................             (5)                       6
                                                                                ---------------          --------------
     Net Cash Used in Investing Activities................................           (124)                     (73)
                                                                                ---------------          --------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Net Decrease in Short-Term Debt.......................................           (386)                    (228)
    Net Increase (Decrease) in Short-Term Intercompany Borrowings.........             29                       (2)
    Proceeds from Long-Term Debt..........................................            554                      298
    Repayment of Long-Term Debt...........................................           (160)                       -
    Cash Dividends Paid...................................................             (9)                      (8)
                                                                                ---------------          --------------
     Net Cash Provided by Financing Activities............................             28                       60
                                                                                ---------------          --------------
Net Change in Cash and Cash Equivalents...................................             23                      (20)
Cash and Cash Equivalents at Beginning of Period..........................             22                       43
                                                                                ---------------          --------------
Cash and Cash Equivalents at End of Period................................         $   45                   $   23
                                                                                ===============          ==============

Supplemental Disclosure of Cash Flow Information:
     Cash Payments During the Period for:
       Income Tax.........................................................        $     2                  $     5
       Interest...........................................................        $     7                  $     5

Non-Cash Financing Activities:
       Debt Assumed with Companies Acquired...............................        $    92                  $     9

See Notes to Consolidated Financial Statements.
</TABLE>



<PAGE>

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                            PSEG ENERGY HOLDINGS INC.
================================================================================

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

Basis of Presentation

     PSEG Energy Holdings Inc. (Energy Holdings), incorporated under the laws of
the State of New Jersey with its principal  executive offices located at 80 Park
Plaza,  Newark, New Jersey 07102 is a direct  wholly-owned  subsidiary of Public
Service  Enterprise  Group  Incorporated  (PSEG).   Energy  Holdings  has  three
principal direct  wholly-owned  subsidiaries;  PSEG Global Inc.  (Global),  PSEG
Resources  Inc.   (Resources)  and  PSEG  Energy   Technologies   Inc.   (Energy
Technologies).

     The financial statements included herein have been prepared pursuant to the
rules and regulations of the Securities and Exchange  Commission (SEC).  Certain
information  and note  disclosures  normally  included in  financial  statements
prepared in accordance with generally accepted  accounting  principles have been
condensed or omitted  pursuant to such rules and  regulations.  However,  in the
opinion of  management,  the  disclosures  are adequate to make the  information
presented not misleading.  These consolidated  financial statements and Notes to
Consolidated Financial Statements (Notes) should be read in conjunction with the
Registrant's Notes contained in the 2000 Annual Report on Form 10-K. These Notes
update and supplement matters discussed in the 2000 Annual Report on Form 10-K.

     The unaudited  financial  information  furnished  reflects all  adjustments
which are, in the opinion of  management,  necessary to fairly state the results
for the interim periods presented. The year-end consolidated balance sheets were
derived from the audited consolidated  financial statements included in the 2000
Annual Report on Form 10-K. Certain  reclassifications of prior period data have
been made to conform with the current presentation.

Note 2.  Financial Instruments and Risk Management

Equity Securities

     Resources has  investments in equity  securities and limited  partnerships.
Resources carries its investments in equity securities at their approximate fair
value  as of the  reporting  date.  Consequently,  the  carrying  value of these
investments  is  affected  by  changes  in the  fair  value  of  the  underlying
securities.  Fair value is  determined  by  adjusting  the  market  value of the
securities for liquidity and market volatility factors,  where appropriate.  The
aggregate fair values of such  investments  which had available market prices at
March  31,  2001 and  December  31,  2000  were $65  million  and $115  million,
respectively.  The decrease in fair value was  primarily  due to the sale of its
interest  in  FleetBoston  Financial  Corporation  which had a book value of $30
million on December  31, 2000 and lower  valuation  of  publicly  traded  equity
securities  within  Resources'  leveraged  buyout funds. The potential change in
fair value  resulting from a hypothetical  10% change in quoted market prices of
these  investments  amounted  to $5 million and $9 million at March 31, 2001 and
December 31, 2000, respectively.

Foreign Currencies

     As of March 31, 2001,  Global and  Resources  had  international  assets of
approximately $2.023 billion and $1.210 billion, respectively.

     Resources'  international  investments  are primarily  leveraged  leases of
assets located in the Netherlands, Australia, the United Kingdom, Germany, China
and New Zealand with associated  revenues  denominated in U.S. dollars ($US) and
therefore, not subject to foreign currency risk.

     Global's international  investments are primarily in projects that generate
or distribute  electricity in Argentina,  Brazil,  Chile,  China,  India, Italy,
Peru,  Poland,  Tunisia and Venezuela.  Investing in foreign countries  involves
certain additional risks.  Economic conditions that result in higher comparative
rates of inflation in foreign countries are likely to result in declining values
in such countries' currencies. As currencies fluctuate against the $US, there is
a corresponding  change in Global's  investment  value in terms of the $US. Such
change is reflected as an increase or decrease in the investment value and other
comprehensive  income, a separate component of stockholder's equity. As of March
31, 2001, net foreign currency  devaluations have reduced the reported amount of
Energy  Holdings' total  stockholder's  equity by $205 million,  $154 million of
which was caused by the devaluation of the Brazilian Real.

Interest Rates

     Energy Holdings is subject to the risk of fluctuating interest rates in the
normal  course of business.  Its policy is to manage  interest rate risk through
the use of fixed rate debt,  floating rate debt and interest  rate swaps.  As of
March 31, 2001, a hypothetical  10% change in market interest rates would result
in a $2  million  change in annual  interest  costs  related to  short-term  and
floating rate debt at Energy Holdings.

Credit Risk

     The  deregulation of the California  power market has produced  significant
unanticipated   results  in  the  past  year.  The  California   Public  Utility
Commission,  (CPUC) as part of deregulation,  froze the rates that utilities can
charge their retail and business  customers in  California  and  prohibited  the
utilities from buying power on a forward  basis,  while  wholesale  power prices
were not subjected to limits.  In the past year,  an increase in demand  coupled
with a reduced supply of power has caused a severe imbalance in the market. Such
imbalance has led to unprecedented wholesale prices.

     As a result of this  situation,  two major  California  utilities  that are
subject  to the retail  price  cap,  including  Pacific  Gas & Electric  Company
(PG&E),  have significantly  underrecovered from customers costs paid for power.
As a consequence,  these utilities have defaulted under a variety of contractual
obligations,  including payment obligations to three of Global's joint ventures,
GWF,  Hanford and Tracy. On April 6, 2001, PG&E filed for  reorganization  under
Chapter 11 of the U.S. Bankruptcy Code.

     GWF,   Hanford  and  Tracy  have  continued  to  honor  their   contractual
obligations to PG&E under existing qualifying facility (QF) contracts.  To date,
they have  refrained  from pursuing  collection  remedies with respect to PG&E's
default  and have  been  actively  involved  in being  part of the  solution  to
stabilize  energy prices through the  application of a long-term  energy pricing
methodology  (for a five-year  period).  On March 27, 2001,  the CPUC approved a
plan to assure  that the state's  QFs are paid for future  deliveries  of energy
within 15 days of the receipt of an invoice.  The CPUC's plan, while immediately
effective,  did not address amounts due such facilities for past due receivables
related to energy  delivered  since  December  2000.  In addition to the payment
issue,  the CPUC also  approved a 40% increase in electric  retail rates to help
the state's utilities recover significantly higher wholesale energy costs. It is
expected  further that  legislation  will be developed to enable the  California
utilities to finance,  over a longer term, the difference  between the wholesale
prices that have been paid and the retail prices received during the latter half
of 2000. On April 11, 2001, management at Global's project affiliates received a
letter from PG&E  addressed to QF owners  stating that they  intended to pay the
QFs for power delivered commencing April 6, 2001 at 9:00 A.M. (the date and time
of their  bankruptcy  petition).  On April 17, 2001 and May 2, 2001, the project
affiliates  received  $3  million  and  $5  million   respectively,   from  PG&E
representing  payments for all energy  delivered for the period from the time of
the bankruptcy petition through April 30, 2001. Global cannot predict the timing
or ultimate outcome of the legislative process, or the payment of future amounts
by PG&E.

     As of December 31, 2000,  GWF,  Hanford and Tracy had combined  receivables
due from PG&E, for all plants  amounting to approximately  $40 million.  Of this
amount,  approximately $8 million had been reserved as an allowance for doubtful
accounts  resulting in a net receivable  balance of  approximately  $32 million.
Global's pro-rata share of this net receivable was approximately $15 million.

     As of April 6, 2001,  GWF,  Hanford and Tracy had combined  receivables due
from PG&E,  for all plants  amounting  to  approximately  $62  million.  Of this
amount, approximately $20 million had been reserved as an allowance for doubtful
accounts  resulting in a net receivable  balance of  approximately  $42 million.
Global's pro-rata share of this net receivable was approximately $20 million.

Note 3.  Income Taxes

     Energy Holdings'  effective tax rate was 22% and 32% for the quarters ended
March 31,  2001 and 2000,  respectively.  Energy  Holdings'  effective  tax rate
differs from the statutory federal income tax rate of 35.0% primarily due to the
imposition  of state  taxes  and the  accruals  at the  rate of 10% of  Global's
foreign income due to the incremental  cost associated with the  repatriation of
foreign  earnings.  Energy  Holdings does not consolidate  foreign  projects and
there is no  foreign  income  tax  reflected  in income  tax  expense  in Energy
Holdings' consolidated financial statements at March 31, 2001.

<PAGE>

Note 4.  Financial Information by Business Segments

     Information  related  to the  segments  of  Energy  Holdings'  business  is
detailed below:

<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------

                                                                          Energy                     Consolidated
                                              Global      Resources    Technologies    Other (A)        Total
                                            ------------ -----------------------------------------  -------------

                                                                   (Millions of Dollars)

<S>                                            <C>          <C>            <C>           <C>           <C>
For the Quarter Ended
   March 31, 2001:
   Total Operating Revenues                    $   84       $   33         $  102        $    1        $  220
   Extraordinary Loss on
     Early Retirement of Debt.............     $   (2)      $   --         $   --        $   --        $   (2)
   Cumulative Effect of a Change in
     Accounting Principle.................     $    9       $   --         $   --        $   --        $    9
   Segment Net Income (Loss) Available to
   PSEG...................................     $   55       $    3         $   (3)       $   (1)       $   54

   For the Quarter Ended
   March 31, 2000:
   Total Operating Revenues...............     $   38       $   66         $  113        $    1        $  218
   Segment Net Income (Loss) Available to
   PSEG...................................     $    4       $   27         $   (6)       $   --        $   25

   As of March 31, 2001:
   Total Assets...........................     $2,542       $2,547         $  330        $   49        $5,468

   As of December 31, 2000:
   Total Assets...........................     $2,271       $2,564         $  312        $   51        $5,198

 ------------------------------------------------------------------------------------------------------------------
<FN>

(A)  Other  activities  include amounts  applicable to Energy  Holdings  (parent
     corporation),   Enterprise  Group  Development  Corporation,  PSEG  Capital
     Corporation and intercompany eliminations.

     Geographic information for Energy Holdings is disclosed below.

</FN>
</TABLE>


<TABLE>
<CAPTION>

                                                    Revenues (1)                        Identifiable Assets
                                             ----------------------------         ---------------------------------
                                               For the Quarters Ended                          As of
                                                     March 31,                     March 31,          December 31,
                                             ----------------------------
                                                2001            2000                 2001                2000
                                             ------------     -----------         -------------      --------------
                                               (Millions of Dollars)                   (Millions of Dollars)

<S>                                             <C>              <C>                 <C>                   <C>
United States.............................      $169             $170                $2,235                $2,208
Foreign Countries (2).....................        51               48                 3,233                 2,990
                                             ------------     -----------          ---------           ----------
Total.....................................      $220             $218                $5,468                $5,198
                                             ============     ===========          =========           ==========

Identifiable investments in foreign countries include:

   Netherlands..............................                                         $  825               $   815
   Chile and Peru (3).......................                                            550                   520
   Argentina ...............................                                            485                   470
   Brazil (4)...............................                                            293                   295
   Other....................................                                          1,080                   890
                                                                                   --------            ----------
Total.......................................                                         $3,233                $2,990
                                                                                   ========            ==========
<FN>

(1)  Revenues  are  attributed  to  countries  based  on  the  locations  of the
     investments.  Global's  revenue  includes  its share of the net income from
     joint ventures recorded under the equity method of accounting.

(2)  Total assets are net of foreign currency  translation  adjustment of $(229)
     million  (pre-tax) as of March 31, 2001 and $(225) million  (pre-tax) as of
     December 31, 2000.

(3)  Amount is net of foreign currency  translation  adjustment of $(43) million
     (pre-tax) as of March 31, 2001 and $(44)  million  (pre-tax) as of December
     31, 2000.

(4)  Amount is net of foreign currency translation  adjustment of $(171) million
     (pre-tax) as of March 31, 2001 and $(167) million  (pre-tax) as of December
     31, 2000.
</FN>
</TABLE>

Note 5.  Accounting Matters

     The  Financial  Accounting  Standards  Board  (FASB)  issued  Statement  of
Financial  Accounting  Standards  (SFAS)  No.  133,  Accounting  for  Derivative
Instruments  and Hedging  Activities,  as amended,  which  became  effective  on
January 1, 2001.  SFAS 133  establishes  accounting and reporting  standards for
derivative  instruments,  including certain derivative  instruments  embedded in
other contracts,  and for hedging  activities.  In accordance with SFAS No. 133,
all derivative instruments (including certain derivative instruments embedded in
other  contracts) are recognized in the balance sheet at their fair values.  The
accounting for changes in the fair value of a derivative depends on the intended
use of the derivative and the resulting designation. For a derivative designated
as a hedge of the exposure to changes in the fair value of a recognized asset or
liability or a firm  commitment,  the gain or loss is  recognized in earnings in
the period of change in tandem  with the  offsetting  loss or gain on the hedged
item  attributable  to the risk being hedged.  For a derivative  designated as a
hedge of future cash flows, the effective  portion of the  derivative's  gain or
loss is  initially  reported as a component  of Other  Comprehensive  Income and
subsequently  reclassified  into Earnings along with the related  effects of the
hedged item. The ineffective portion of the gain or loss is reported in Earnings
immediately.

     Additionally,  contracts  that do not in their entirety meet the definition
of a derivative  instrument,  may contain implicit or explicit terms that affect
some or all of the cash flows or the value of other  exchanges  required  by the
contract  in a manner  similar to a  derivative  instrument.  These  implicit or
explicit terms are considered "embedded  derivatives." The effect of embedding a
derivative  instrument  in another  type of  contract is that some or all of the
cash flows or other  exchanges that otherwise would be required by the contract,
will  be  modified  based  on  one  or  more  underlyings.  Embedded  derivative
instruments  are required to be  accounted  for as a  derivative  instrument  in
accordance with SFAS 133 if certain criteria are met.

     Energy  Holdings does not have any fair value hedges,  nor does it hold any
derivative that are not designated as hedges.

     The nature of Energy Holdings' business  activities involves the management
of various  financial  and market risks,  including  those related to changes in
interest rates,  equity prices,  currency  exchange rates, and commodity prices.
Energy  Holdings'  policy is to use derivative  financial  instruments to manage
certain  of  those  risks,  consistent  with  its  business  plans  and  prudent
practices. PSEG has a Risk Management Committee comprised of executive officers,
which utilizes an independent risk oversight  function to ensure compliance with
corporate  policies  and  prudent  risk  management  practices  for  all  of its
subsidiaries,  including  Energy Holdings and its  subsidiaries.  The January 1,
2001 accounting  change  described above affected only the pattern and timing of
non-cash accounting recognition.

<PAGE>

     At January 1, 2001,  Energy  Holdings'  recorded a  cumulative  effect from
adopting this accounting change, as follows:

<TABLE>
<CAPTION>

                                                                           Earnings               Other
                                                                                              Comprehensive
                                                                                                  Income
                                                                         --------------    --------------------
                                                                                (Millions of Dollars)
<S>                                                                          <C>                <C>
Fair value of derivatives................................................    $22.7              $(41.0)
Income tax effects.......................................................     (7.9)               14.4
Minority interests effects...............................................     (6.0)               11.5
                                                                           -----------      ----------------
Total cumulative effect of a change in accounting principle..............   $  8.8              $(15.1)
                                                                         -----------      ----------------
</TABLE>

     The  cumulative  effect  on  earnings  comprised  one  significant  element
associated with a Power Purchase Agreement (PPA) that a Global affiliate entered
into and that provides for indexation of foreign  currencies to the $US over the
tariff  collection  period.  The indexation  provides for an increased amount of
foreign  currency  to be  provided  to the  affiliated  entity  in the  event of
currency devaluation.

     The indexation portion of the PPA is considered an embedded  derivative and
has been  recognized  and  valued  separately  as a  derivative  instrument.  As
currencies   devalue/revalue   in   relation   to  the   $US,   the   derivative
increases/decreases in value equal to the discounted present value of additional
units of  foreign  currency  (measured  in $US)  over the life of the PPA.  This
increased/decreased   value   is   reported   on  the   balance   sheet   as  an
asset/liability. To the extent that such indexation is provided to hedge foreign
currency debt exposure, the offsetting amount is recorded in Other Comprehensive
Income.  Amounts will be amortized from Other  Comprehensive  Income to Earnings
over the life of the debt upon commercial operation of the project,  expected to
occur in the fourth  quarter of 2001. To the extent such  indexation is provided
to hedge an equity return in $US, the offsetting amount is recorded in Earnings.
The total value of this embedded derivative was recorded on January 1, 2001 as a
transition  adjustment  to Earnings as required by SFAS 133. All changes in fair
value of this embedded  derivative recorded subsequent to January 1, 2001 impact
both Other Comprehensive Income and Earnings, as described above.

     The cumulative  effect on Other  Comprehensive  Income was  attributable to
marking to market  interest rate swaps used to hedge  variable-rate  borrowings.
Decreases in the fair values of these  instruments were attributable to declines
in  interest  rates since  inception  of the  hedging  arrangements  and will be
recognized  contemporaneously  in Earnings in future periods by offsetting lower
interest expense associated with the hedged items.

     A reconciliation of current period changes, net of applicable income taxes,
in the separate component of Other Comprehensive Income follows.


                                                         (Millions of Dollars)
Transition adjustment as of January 1, 2001.......            $(15.1)
Current period declines in fair value - net.......              (0.5)
Reclassification to earnings - net................               0.1
                                                          --------------

Balance at March 31, 2001.........................            $(15.5)
                                                          --------------

     As of March 31, 2001 the fair values of Energy Holdings'  derivative assets
and liabilities were $31 million and $46 million,  respectively. The fair values
of such  derivative  assets and  liabilities  were recorded on the  consolidated
balance sheet in Other Assets and Other Noncurrent Liabilities, respectively.

Additional  disclosures  required  by  SFAS  No.  133 are  provided  in the
following paragraphs.

     Hedges of Future Cash Flows

     The  ineffective  portion of changes in fair values of interest rate swaps,
reported in first  quarter  earnings,  amounted to $0.6  million,  net of income
taxes and minority interest. This amount was recorded in Other Income.

     Of the $(15.1) million recorded in equity at January 1, 2001, $0.1 million,
net of income taxes and minority  interest,  was reclassified to earnings during
the first  quarter of 2001. Of the $(15.5)  million  recorded in equity at March
31, 2001, $0.7 million,  net of income taxes and minority interest,  is expected
to be  reclassified  to earnings  over the twelve month period  ending March 31,
2002.  The actual  amounts that will be  reclassified  to earnings over the next
twelve  months  will  vary from this  amount  as a result of  changes  in market
conditions. No amounts were reclassified to earnings during the first quarter in
connection with forecasted  transactions that were no longer considered probable
of occurring.

     At March 31, 2001,  the maximum term of derivative  instruments  that hedge
forecasted transactions, except those related to payment of variable interest on
existing financial  instruments,  was 20 years subsequent to the commencement of
commercial  operation of the  electric  generation  facility in Rades,  Tunisia,
expected to occur in the fourth quarter of 2001.

     Hedges of Recognized  Assets,  Liabilities and Firm  Commitments - Embedded
Derivative

     The change in fair value of the indexation in the PPA, related to the hedge
of equity  return in $US  reported  in first  quarter  earnings,  amounted to $1
million, net of income taxes and minority interest.

     The FASB's Derivative  Implementation  Group has issued tentative  guidance
regarding  certain  derivative  contracts and eligibility of those contracts for
the normal  purchases  and sales  exceptions.  The ultimate  resolution of these
issues could result in a requirement to mark certain power and fuel  agreements,
entered  into by  subsidiaries  of Energy  Holdings,  to their fair  values each
reporting period.  Energy Holdings and its subsidiaries are currently evaluating
this tentative  guidance in light of its potential impacts on the implementation
of SFAS 133 and cannot  predict the impact on its financial  position or results
of operations, however, such impact could be material.

Note 6.  Comprehensive Income

<TABLE>
<CAPTION>

                                                                                             For the Quarters Ended
                                                                                                   March 31,
                                                                                           ---------------------------
                                                                                               2001            2000
                                                                                           ------------    -----------
                                                                                             (Millions of Dollars)
<S>                                                                                         <C>             <C>
Net income available to PSEG.........................................................       $  53.9         $  24.8
Currency translation adjustments (net of tax of $0.2 and
    $(3.1) for 2001 and 2000, respectively)..........................................          (2.1)           27.8
Cumulative effect of a change in accounting principle (net of tax of $14.4 and
    minority interest of $11.5)......................................................         (15.1)            -
Current period declines in fair value of derivative instruments - net................          (0.5)            -
Reclassifications to earnings - net..................................................           0.1             -
Unrealized losses on marketable securities...........................................           -              (0.1)
                                                                                           -----------     -----------
Comprehensive income.................................................................       $  36.3         $  52.5
                                                                                           ===========     ===========
</TABLE>

<PAGE>

================================================================================
                            PSEG ENERGY HOLDINGS INC.
================================================================================

                 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     Following  are the  significant  changes  in or  additions  to  information
reported in the Energy  Holdings'  2000 Annual Report on Form 10-K affecting the
consolidated  financial  condition  and the  results  of  operations  of  Energy
Holdings  and its  subsidiaries.  This  discussion  refers  to the  Consolidated
Financial  Statements  (Statements) and related Notes to Consolidated  Financial
Statements  (Notes) of Energy  Holdings and should be read in  conjunction  with
such Statements and Notes.

     The  Financial  Accounting  Standards  Board  (FASB)  issued  Statement  of
Financial  Accounting  Standards  (SFAS)  No.  133,  Accounting  for  Derivative
Instruments  and Hedging  Activities,  as amended,  which  became  effective  on
January 1, 2001.  SFAS 133  establishes  accounting and reporting  standards for
derivative  instruments,  including certain derivative  instruments  embedded in
other contracts,  and for hedging activities.  Under SFAS 133, certain contracts
that were not formerly  considered  derivatives may now meet the definition of a
derivative. Energy Holdings adopted SFAS 133 effective January 1, 2001. See Note
5 of Notes to the Consolidated Financial Statements.


Results of Operations

Energy Holdings -- Revenues

     Revenues  increased  $2 million to $220  million  from $218 million for the
quarter ended March 31, 2001 as compared to the same period in 2000. Revenues in
2001 were  favorably  impacted by Global's  withdrawal  from its interest in the
Eagle  Point  Cogeneration  Partnership  in  exchange  for a series of  payments
through 2005, expected to total up to $290 million.  Global realized an increase
in revenues of $46 million for the quarter  ended March 31, 2001, as compared to
the same period in 2000,  almost  entirely  related to the  withdrawal  from the
Eagle  Point  Cogeneration  Partnership.  In  addition,  revenues  were  further
enhanced by an increase of $9 million due to higher  leveraged lease income from
continued  investment  by  Resources  in  such  financing  transactions.   These
increases were partially  offset by lower Net Investments  Gains (Losses) of $46
million primarily due to a net decrease in the carrying value of publicly traded
equity securities in Resources' leveraged buyout funds.

Energy Holdings -- Operating Expenses

     Operating  expenses decreased $13 million to $126 million from $139 million
for the quarter ended March 31, 2001 as compared to the same period in 2000. The
decrease was primarily due to lower operating  expenses  experienced as a result
of restructuring  initiatives  undertaken at Energy  Technologies.  In the first
quarter of 2000, Energy Holdings recorded a restructuring charge of $6.6 million
associated with such restructuring initiatives.

Energy Holdings -- Net Interest Expense and Preferred Dividends

     Net Interest  Expense and Preferred  Dividends  decreased $2 million to $39
million from $41 million for the quarter ended March 31, 2001 as compared to the
same period in 2000.  The decrease was primarily  due to interest  income earned
from a note receivable recorded in connection with the withdrawal from the Eagle
Point  Cogeneration  Partnership  and from  interest  earned  on a loan to Texas
Independent Energy, L.P. (TIE), a 50/50 joint venture of Global and Panda Energy
International.

     At March 31, 2001 and  December 31,  2000,  Energy  Holdings had total debt
outstanding of $2.334 billion and $2.182  billion,  respectively,  of which $466
million and $354 million is non-recourse to Energy Holdings,  Global,  Resources
and  Energy  Technologies,   respectively.  The  increase  of  $152  million  in
outstanding  debt for the quarter ended March 31, 2001 was primarily  related to
the non-recourse  debt associated with  consolidation of the investment in Tanir
Bavi Power Company Private Ltd. and the continued  drawdown of the loan facility
and working capital facility agreement by Elektrocieplownia  Chorzow ELCHO sp. z
o.o. Both projects are currently  under  construction  (as discussed  below) and
accordingly interest related to such borrowings is capitalized.

Energy Holdings - Earnings Before Interest and Taxes (EBIT) Contribution

     The results of operations for each of Energy  Holdings'  business  segments
are explained  below with reference to the EBIT  contribution.  Energy  Holdings
borrows on the basis of a combined  credit  profile to finance the activities of
its  subsidiaries.  As such, the capital  structure of each of the businesses is
managed by Energy Holdings. Debt at each subsidiary is evidenced by demand notes
with Energy Holdings and PSEG Capital Corporation (PSEG Capital).
<PAGE>


                                                  For the Quarters Ended
                                                         March 31,
                                             --------------------------------
                                                 2001                 2000
                                             ------------    ----------------
                                                       (Millions of Dollars)
EBIT:
     Global.............................      $    73             $    26
     Resources..........................           29                  63
     Energy Technologies................           (5)                 (8)
     Other..............................           (2)                 (1)
                                             ------------     ---------------
Total EBIT..............................      $    95             $    80
                                             ============     ===============

         Global

     Until  the  fourth  quarter  of 2000,  Global's  investments  consisted  of
minority  ownership  positions in projects and joint  ventures.  Other than fees
collected for providing operations and maintenance  services,  Global's revenues
represented  its  pro-rata  ownership  share of net income  generated by project
affiliates  which is  accounted  for by the  equity  method of  accounting.  The
expenses in the table below are those  required to develop  projects and general
and  administrative  expenses  required  to  operate  the  business  as a whole.

     In the fourth quarter of 2000, Global increased its interest in an electric
generation  facility under construction in Tunisia from 35% to 60% and completed
project  financing for a 90% economic  interest in a power plant currently under
construction  in Poland.  In the first  quarter of 2001,  Global  increased  its
interest in an electric  generation  facility,  currently under  construction in
India from 49% to 74%. The accounts of Global  include the assets,  liabilities,
revenues and expenses of majority-owned subsidiaries over which Global exercises
control and for which control is other than temporary.

Summary Results - Global
                                               For the Quarters Ended
                                                      March 31,
                                               ------------------------
                                                 2001           2000
                                               ---------       --------
                                                (Millions of Dollars)
Revenues...............................         $  84           $  38
Expenses...............................            13              13
                                               ---------       --------
Operating Income.......................            71              25
Other Income...........................             2               1
                                               ---------       --------
EBIT...................................         $  73           $  26
                                               =========       ========

     Global's  EBIT  contribution  increased  $47 million for the quarter  ended
March 31, 2001 from the  comparable  period in 2000.  The increase was primarily
due to  increased  revenues  of $46  million,  of which $45  million  related to
Global's   withdrawal  from  its  interest  in  the  Eagle  Point   Cogeneration
Partnership.

         Resources

     Resources earns its leveraged lease revenues primarily from rental payments
and tax benefits  associated with such  transactions.  As a passive  investor in
limited partnership project financing transactions, Resources recognizes revenue
from its  pro-rata  share of the income  generated by these  investments.  As an
owner  of  beneficial  interests  in  two  leveraged  buyout  funds,   Resources
recognizes  revenue as the share  prices of public  companies  in the  leveraged
buyout funds fluctuate.  In addition,  revenue is recognized as companies in the
fund  distribute  dividend  income  through the fund to the investors and as the
fund liquidates its holdings.


<PAGE>



Summary Results - Resources
                                              For the Quarters Ended
                                                     March 31,
                                              ------------------------
                                                2001           2000
                                              ---------       --------
                                               (Millions of Dollars)
Revenues...............................        $  33           $  66
Expenses...............................            4               3
                                              ---------       --------
Operating Income and EBIT..............        $  29           $  63
                                              =========       ========

     Resources'  EBIT  contribution  decreased $34 million for the quarter ended
March 31, 2001 from the  comparable  period in 2000.  The decrease was primarily
due to lower Net Investment Gains (Losses) of $46 million,  of which $42 million
resulted  from a net decrease in the carrying  value of publicly  traded  equity
securities  within certain  leveraged buyout funds.  This decrease was partially
offset by an increase of $9 million due to higher  leveraged  lease  income from
continued investment by Resources in such financing transactions.

         Energy Technologies

     Energy  Technologies  earns  its  revenues  from  providing  energy-related
engineering, consulting and mechanical contracting services to and constructing,
operating and  maintaining  heating,  ventilating  and air  conditioning  (HVAC)
systems for industrial and commercial  customers in the  Northeastern and Middle
Atlantic United States.

Summary Results - Energy Technologies

                                                     For the Quarters Ended
                                                            March 31,
                                                     ------------------------
                                                        2001           2000
                                                     ---------       --------
                                                      (Millions of Dollars)
Revenues.....................................          $102            $113
Expenses.....................................           107             121
                                                     ---------       --------
Operating Income and EBIT....................         $  (5)          $  (8)
                                                     =========       ========

     Energy Technologies' EBIT contribution increased $3 million for the quarter
ended March 31, 2001 from the comparable period in 2000,  primarily due to lower
operating expenses. In the first quarter of 2000, Energy Technologies recorded a
restructuring  charge of $6.6  million.  In the first  quarter  of 2001,  Energy
Technologies  began to benefit from lower expenses  realized as a result of this
restructuring initiative.  Partially offsetting this improvement was a reduction
in revenues related to the exit from the electric and gas commodity business.

Liquidity and Capital Resources

     It is  intended  that  Global and  Resources  will  continue to provide the
earnings  and cash  flow  for  Energy  Holdings'  long-term  growth.  Resources'
investments are designed to produce immediate cash flow and earnings that enable
Global and Energy  Technologies to focus on longer investment  horizons.  During
the next five years,  Energy  Holdings will need material  amounts of capital to
fund its planned growth.  In addition to cash generated from operations,  Energy
Holdings' growth will be funded through external financings and equity infusions
from PSEG.

     Over the next  several  years,  Energy  Holdings,  certain  of its  project
affiliates and PSEG Capital will be required to refinance  maturing debt,  incur
additional debt and provide equity to fund investment activity. Any inability to
obtain required  additional  external  capital or to extend or replace  maturing
debt and/or existing  agreements at current levels and reasonable interest rates
may affect Energy Holdings' financial  condition,  results of operations and net
cash flows.

<PAGE>

     Regulatory Restrictions

     As a result  of a 1992 BPU  proceeding  concerning  the  impact  of  PSEG's
non-utility  investments  on Public  Service  Electric  And Gas Company  (PSE&G)
businesses  (Focused  Audit),  the New Jersey  Board of Public  Utilities  (BPU)
approved a plan which,  among other things,  provided  that:  (1) PSEG would not
permit PSEG's  non-utility  assets to exceed 20% of PSEG's  consolidated  assets
without  prior notice to the BPU (as of December 31, 2000,  these assets were in
excess of the 20% limit and such notice had been given);  (2) the PSE&G Board of
Directors would provide an annual  certification that the business and financing
plans of Energy  Holdings  will not adversely  affect PSE&G;  (3) PSEG would (a)
limit debt supported by the minimum net worth maintenance agreement between PSEG
and PSEG Capital to $650  million and (b) make a good-faith  effort to eliminate
such support by May 2003; and (4) Energy Holdings would pay PSE&G an affiliation
fee of up to $2 million a year to be applied by PSE&G to reduce utility rates.

     The  Final  Order   addressed  the  Focused   Audit,   noting  that  PSEG's
non-regulated  assets  would  likely  exceed  20% and that,  due to  significant
changes in the industry  and, in  particular,  PSEG's  corporate  structure as a
result of the Final  Order,  modifications  to or relief from the Focused  Audit
might be warranted. In March 2000, PSE&G submitted a letter to the BPU notifying
the BPU of its  intention  to make a filing to modify  the terms of the  Focused
Audit within 120 days after the Final Order  becomes  final and  non-appealable.
Energy Holdings  believes that, if still required,  it is capable of eliminating
PSEG  support  of PSEG  Capital  debt  within  the time  period set forth in the
Focused Audit.

     Regulatory  oversight by the BPU to ensure that there is no harm to utility
customers from PSEG's non-utility  investments is expected to continue. PSEG and
PSE&G  believe that these issues will be  satisfactorily  resolved,  although no
assurances  can be given.  In addition,  if PSEG were no longer exempt under the
Public Utility Holding Company Act, PSEG and its  subsidiaries  would be subject
to  additional  regulation  by the SEC with respect to financing  and  investing
activities,  including the amount and type of  non-utility  investments.  Energy
Holdings believes,  however,  that this would not have a material adverse impact
on its financing and investing activities.

Capital Requirements

     Energy  Holdings  plans to  continue  the growth of Global  and  Resources.
Energy Holdings will assess the growth  prospects and  opportunities  for Energy
Technologies'  business  before  committing  substantial  amounts of  additional
capital.  For the quarter ended March 31, 2001,  Energy  Holdings'  subsidiaries
made net investments  totaling  approximately  $124 million.  These  investments
included $59 million by Global,  primarily related to incremental investments in
certain  existing  generation  and  distribution  projects  including  those  in
operation  and  currently  under  construction.  In addition,  Global loaned $60
million to TIE. Factors  affecting actual  expenditures and investments  include
availability of capital and suitable investment opportunities, market volatility
and local economic trends.

     In March 2001,  Global reached  agreement to purchase a 94% equity stake in
Sociedad Austral de Electricidad  S.A. (SAESA) and all of its subsidiaries  from
Compania  de  Petroleos  de Chile S.A.  (COPEC).  Additionally,  Global  reached
agreement to purchase from COPEC  approximately  14% of Empresa  Electrica de la
Frontera  S.A.  (Frontel)  not owned by  SAESA.  The  SAESA  group of  companies
consists  of four  distribution  companies  and one  transmission  company  that
provide  service in the southern part of Chile.  Additionally,  SAESA owns a 50%
interest in the Argentine  distribution  company Empresa Electrica del Rio Negro
S.A. Collectively, the companies serve more than 615,000 customers. The purchase
price for Global will total approximately $460 million.

     In May 2001, Resources closed its investment of $140 million in a leveraged
lease financing of two electric power stations in the United States.


External Financings

     On March 31, 2001, Energy Holdings had two separate senior revolving credit
facilities with a syndicate of banks; a $495 million five-year  revolving credit
and  letter of credit  facility  and a $165  million  364-day  revolving  credit
facility.  The  interest  rate on these  facilities  is  based on LIBOR  and the
average  borrowing rate at Energy Holdings'  current rating level is 1.375% over
the one, three or six month LIBOR rate.  The revolving  credit  facilities  also
permit  shorter  term base rate  borrowings  at the prime  rate.  The  five-year
facility also permits up to $250 million of letters of credit to be issued.  The
five-year  facility  matures  on May 12,  2004 and the  364-day  facility  which
matured  on May 9,  2001,  was  extended  to May 8, 2002 and  increased  to $200
million.  At December 31,  2000,  Energy  Holdings had $329 million  outstanding
under the revolving credit facilities.

     In February 2001,  Energy  Holdings,  in a private  placement,  issued $400
million of 8.625%  Senior Notes due 2008.  The net  proceeds  from the sale were
used for repayment of the revolving credit facilities.  Energy Holdings plans to
file a registration statement with the SEC relating to an exchange offer for, or
the resale of,  these  Senior  Notes later in 2001.  On March 31,  2001,  Energy
Holdings  had no  outstanding  balances  under  its  existing  revolving  credit
facilities.

     In March 2001, $160 million of non-recourse  bank debt originally  incurred
to fund a portion of the  purchase  price of  Global's  interest  in  Chilquinta
Energia,  S.A. was  refinanced.  The private  placement  offering by  Chilquinta
Energia  Finance  Co.  LLC,  a Global  affiliate,  of senior  secured  notes was
structured  in two  tranches:  $60 million due 2008 at an interest rate of 6.47%
and $100 million due 2011 at an interest rate of 6.62%.

Foreign Operations

     As of March 31, 2001, Global and Resources had approximately $2.023 billion
and $1.210 billion, respectively, of international assets. As of March 31, 2001,
foreign assets represented 59% of Energy Holdings'  consolidated  assets and the
revenues  related  to  those  foreign  assets  contributed  23% to  consolidated
revenues  for the  quarter  ended March 31,  2001.  For  discussion  of Global's
foreign currency risk, see Note 5. Financial Instruments and Risk Management.

     In April 2001, Global announced that the PPN Generation  Station located in
India began commercial operations.  The 330 MW combined-cycle plant is currently
being run on naphtha  and will switch to a mixture of naphtha and natural gas as
offshore gas wells are completed. The Tamil Nadu Electricity Board will purchase
the entire output of the plant under a PPA.

Forward Looking Statements

     Except for the  historical  information  contained  herein,  certain of the
matters  discussed  in  this  offering  memorandum  constitute  "forward-looking
statements" within the meaning of the Private  Securities  Litigation Reform Act
of 1995. Such forward-looking  statements are subject to risks and uncertainties
which could cause actual results to differ  materially  from those  anticipated.
These  statements are based on management's  beliefs as well as assumptions made
by and information currently available to management. When used in this offering
memorandum, the words "will",  "anticipate",  "intend",  "estimate",  "believe",
"expect", "plan",  "hypothetical",  "potential" and variations of such words and
similar expressions are intended to identify forward-looking statements.  Energy
Holdings   undertakes   no   obligation   to  publicly   update  or  revise  any
forward-looking  statements,  whether  as a result  of new  information,  future
events or otherwise.

     In addition to any assumptions  and other factors  referred to specifically
in connection with forward-looking  statements,  factors that could cause actual
results to differ  materially  from those  contemplated  in any  forward-looking
statements include, among others, the following,  some of which relate to Energy
Holdings indirectly as a result of their potential impact upon PSEG or PSE&G:

<PAGE>
o    deregulation  and the  unbundling  of energy  supplies and services and the
     establishment  of  a  competitive   energy  marketplace  for  products  and
     services;

o    managing   rapidly  changing   wholesale   energy  trading   operations  in
     conjunction   with   electricity  and  gas  production,   transmission  and
     distribution systems;

o    managing  foreign  investments  and electric  generation  and  distribution
     operations  in  locations  outside  of  the  traditional   utility  service
     territory;

o    political and foreign currency risks;

o    sales retention and growth potential in a mature PSE&G service territory;

o    ability to  complete  development  or  acquisition  of  current  and future
     investments;

o    partner and counterparty risk;

o    exposure to market  price  fluctuations  and  volatility  of fuel and power
     supply, power output and marketable securities, among others;

o    ability to obtain adequate and timely rate relief, cost recovery, and other
     necessary regulatory approvals;

o    federal, state and foreign regulatory actions;

o    regulatory  oversight  with  respect to utility and  non-utility  affiliate
     relations and activities;

o    operating   restrictions,   increased   costs   and   construction   delays
     attributable to environmental regulations;

o    nuclear  decommissioning  and the  availability of reprocessing and storage
     facilities for spent nuclear fuel;

o    licensing  and  regulatory   approvals  necessary  for  nuclear  and  other
     operating stations;

o    the ability to economically and safely operate nuclear  facilities in which
     PSEG has an interest in accordance with regulatory requirements;

o    environmental concerns; and

o    market  risk and debt and  equity  market  concerns  associated  with these
     issues.

<PAGE>

================================================================================
                            PSEG ENERGY HOLDINGS INC.
================================================================================

                           PART II. OTHER INFORMATION

                            ITEM 1. LEGAL PROCEEDINGS

     There are no  updates  to  information  reported  under Item 3 of Part I of
Energy Holdings' 2000 Annual Report on Form 10-K.

                    ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(A)  A listing of exhibits being filed with this document is as follows:

Exhibit Number              Document
---------------             ----------------------------------------------------
12                          Computation of Ratios of Earnings to Fixed Charges


(B)  Reports on Form 8-K:

Date of Report              Item Reported
---------------             ----------------------------------------------------
March 14, 2001              Item 5


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                            PSEG ENERGY HOLDINGS INC.
================================================================================

                                    SIGNATURE

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                            PSEG ENERGY HOLDINGS INC.
                                  (Registrant)


                                By: Derek DiRisio
                        -------------------------------
                                  Derek DiRisio
                          Vice President and Controller
                         (Principal Accounting Officer)




Date: May 15, 2001