PG&E Weighs Stock Repurchase against New Generation

If Pacific Gas & Electric can ensure it gets an ?appropriate? return on investment, management will weigh investments in new power generation plants against share repurchases?after it pays some dividends?according to PG&E Corp. chief executive officer and chair Bob Glynn. In addition, the utility subsidiary is expected to emerge from bankruptcy in April, company executives said February 19. PG&E officials dismissed pending attempts by two California Public Utilities Commission members and the city of Palo Alto to force its bankruptcy settlement into appeals court. PG&E attorney Chris Warner added that a bill to allow for refinancing $2.2 billion in debt through ratepayer-funded bonds should be passed by the legislature this spring. Officials did not explain what, if any, new generation there may be, during the teleconference with financial analysts. At the same time, the company reported that PG&E Corp. earned $420 million for the year 2003, compared with a net loss of $874 million the previous year. For the fourth quarter only, consolidated net income was $37 million, or $0.09 per share, compared with a net loss of $2.19 billion, or $5.41 per share, in the fourth quarter of 2002. PG&E Corp.?s subsidiary PG&E, the utility, earned $611 million in 2003, compared with $851 million in 2002. Earnings from operations for the fourth quarter were $139 million in 2003, compared with $220 million the same quarter a year earlier. The parent company?s earnings from operations do not include results from its bankrupt National Energy & Gas Transmission. Income from ?headroom? (the difference between PG&E?s generation-related costs and generation- related revenues) was $43 million in the latest fourth quarter. Total headroom in 2003 was $677 million. Earnings statements did not include headroom. Bankruptcy and energy crisis costs were pegged at $123 million for 2003 for the parent company. Unsettled in the utility?s earnings statement is the still-pending resolution of its general rate case at the CPUC. ?While the delay of the final general rate case decision affects earnings from operations, it did not significantly affect the utility?s or the Corporation?s consolidated net income, because the majority of any revenues authorized for 2003 are recognized in existing headroom,? noted PG&E. However, if the utility is successful in returning to cost-of-service regulation, the whole idea of headroom will disappear. If PG&E can float $8 billion in financing by April, it could emerge from bankruptcy. Credit-rating agencies would deem the utility ?creditworthy? but ?at the low end,? according to the utility?s chief operating officer, Kent Harvey. The risks noted in achieving its goals include takeover of customers by irrigation districts, operation of Diablo Canyon, and competition from community-choice aggregators. PG&E officials added that if all goes well for the company, it will take a more active role in communities in its territory.

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PG&E Weighs Stock Repurchase against New Generation

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