Utilities Back in the Black in Quarterly Earnings

With its first earnings report since emerging from bankruptcy, Pacific Gas & Electric appeared to the investment community to be a Teflon corporation. It posted big gains and predicted dividends while evading concerns about continued multimillion-dollar executive bonuses and lingering hurdles for refinancing up to $3 billion in regulatory assets. Other utilities also appear well out of the ratings agencies? creditworthiness dungeon they have been in for the last three years. PG&E Corp. recorded a leap in net income?$372 million this quarter, compared to $227 million during the same time last year. Of that, utility PG&E posted a $307 million profit this quarter compared with $130 million last year. The utility has $553 million in unrestricted cash, with total cash of $2.7 billion. According to company officials, $1.2 billion can be paid to the parent corporation for dividends and share repurchases. PG&E plans to invest $600 million to $700 million in the next few years to own half of any new power plants supplying its territory. The utility expects that to be about 2,200 MW of capacity, according to Kent Harvey, chief financial officer. With other subsidiaries pulling it down, Edison International, Southern California Edison?s parent company, posted a $17 million loss this quarter, compared to a loss of $22 million in the second quarter of 2003. However, the regulated utility posted a $242 million profit in the second quarter, compared to $223 million this time last year. The utility posted gains despite the expiration of subsidies for the San Onofre Nuclear Generating Station that resulted in a $47 million earnings decrease. That was offset by $55 million in regulatory adjustments and ?improved operating results.? The utility reported operating revenue for the quarter of $2.17 billion, compared to $2.38 billion this time last year. The night before the earnings announcement, Edison finalized a deal to sell off almost all of ailing Edison Mission Energy?s international assets?about 6,500 MW. John Bryson, Edison International chair, president, and chief executive officer, said the net proceeds should be about $2.8 billion when complete. Even though the regulated utility is providing a hefty share to the corporation?s bottom line, Edison officials appeared strangely remote from committing to the utility?s future in the state. ?We want to help California, that?s important to our business, but only under circumstances in which it?s good business for us,? Bryson said. Equally puzzling was Bryson?s enthusiasm over the California Public Utilities Commission?s recent general rate case decision. Edison officials had vigorously fought the decision because it allowed for less than half of what the utility was willing to accept in increased rates. Bryson, however, extolled another part of the commission?s decision. The decision is ?vitally important to our future. It?s the first general rate case in which the commission not only adopted rates but accepted fully our proposal that our utility system needs a stepped-up investment? in infrastructure, he said. The general rate case decision approved an additional $300 million of investments in 2004-05, according to Edison. Sempra, the parent company of San Diego Gas & Electric and SoCal Gas, reported quarterly earnings of $121 million, compared with $116 million this time last year. Of that, SoCal Gas accounted for $50 million, up from $37 million last year. SDG&E reported $30 million, down from $41 million last year. Sempra?s unregulated power plant developer, Sempra Energy Resources, was way up?$22 million this quarter, from $5 million this time last year. Sempra LNG, along with Sempra International, posted $15 million this quarter in profits, compared with $18 million this time in 2003. Sempra remains committed to developing liquefied natural gas facilities, officials said, despite reports that its Costa Azul plant in Baja California, Mexico, is in trouble. Recent elections defeated the plant?s opponents, and construction is supposed to start this year.

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Utilities Back in the Black in Quarterly Earnings

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