01—Abstract
Summary
Summary of the 10-K filed April 17, 2001. Cited figures are marked; the original filing is the authoritative source.
PG&E Corporation's 10-K for fiscal 2000 reports that its utility subsidiary, Pacific Gas and Electric Company, filed a voluntary Chapter 11 bankruptcy petition on April 6, 2001, and that the California energy crisis drove a severe deterioration in liquidity.
Wholesale power costs rose sharply beginning in June 2000, averaging 18.16 cents per kWh for June through December 2000 versus 4.23 cents in the same period of 1999, while the utility's frozen rates recovered only about 5.4 cents per kWh. The undercollected power purchase balance reached $6.6 billiona at December 31, 2000, and the company took a fourth-quarter 2000 charge of $6.9 billion ($4.1 billion after tax) to write off generation-related regulatory assets and undercollected purchased power costs. The consolidated net loss was $3,364 million for 2000, compared with a net loss of $73 million in 1999, and the utility's accumulated deficit reached $2.0 billion.
The filing states that the utility is in default or has not paid amounts due under bank agreements, commercial paper, and payments to the California Power Exchange, the ISO, qualifying facilities, and energy service providers totaling over $4 billionb as of March 29, 2001, against cash on hand of $2.6 billion. The utility's credit ratings were cut to below investment grade in January 2001, and dividends on common and preferred stock were suspended.
PG&E Corporation itself refinanced its defaulted obligations on March 2, 2001 with $1 billionc in term loans secured by a pledge of its National Energy Group subsidiary, and it states that it believes its holding company and non-CPUC regulated subsidiaries are protected from the utility's bankruptcy. Investors face significant uncertainty about any reorganization plan and about future recovery of the utility's costs.
02—Key points
Key Highlights
- Pacific Gas and Electric Company filed a voluntary Chapter 11 petition on April 6, 2001, and continues to operate as debtor in possession.
- Consolidated net loss was $3,364 million in 2000, versus a net loss of $73 million in 1999, driven primarily by the $6.9 billion pre-tax provision for loss on generation-related regulatory assets and undercollected purchased power costs.
- The utility's undercollected power purchase costs were $6.6 billion at December 31, 2000, and rose to approximately $8.9 billion by February 28, 2001 per the MD&A.
- As of March 29, 2001, the utility was in default or had not paid more than $4 billion in obligations, against $2.6 billion of cash on hand.
- The utility's credit ratings were downgraded to below investment grade in January 2001, and common and preferred dividends were suspended.
- PG&E Corporation refinanced its defaulted debt on March 2, 2001 with $1 billion of term loans, secured by a security interest in the National Energy Group, and dividends are prohibited until the loans are repaid.
- Total assets were $35.3 billion for PG&E Corporation at December 31, 2000, with operating revenues of $26.2 billion; the utility had $22.0 billion in assets and $9.6 billion in operating revenues.
03—Questions
Frequently Asked Questions
Why did PG&E file for bankruptcy?
The filing attributes the Chapter 11 petition to four factors: the failure of the state to assume the full procurement responsibility for the utility's net open position under AB 1X, the negative impact of recent CPUC actions that created new payment obligations, a lack of progress in negotiations with the state on a solution to the energy crisis, and a CPUC accounting change that the utility believes would eliminate its true undercollected purchased power costs. The utility also cites its inability to obtain funding after its credit downgrades.
How much did the company lose in 2000 and what caused it?
PG&E Corporation reported a net loss of $3,364 million for 2000, or $9.29 per share, compared with a net loss of $73 million in 1999. The main driver was the fourth-quarter $6.9 billion pre-tax ($4.1 billion after tax) write-off of generation-related regulatory assets and undercollected purchased power costs, together with a provision of $83 million after tax for potential litigation losses.
Are PG&E Corporation's non-utility businesses affected by the utility's bankruptcy?
The filing states that PG&E Corporation believes its holding company and its non-CPUC regulated subsidiaries are protected from the utility's bankruptcy. It describes a ringfencing restructuring of the National Energy Group, PG&E GTN, and PG&E Energy Trading into special purpose entities intended to reduce the risk of substantive consolidation. The company also notes that it had $297 million of cash at March 29, 2001, and believes that amount will be adequate to maintain its continuing operations through 2001.
Will shareholders receive dividends?
No dividends are expected in the near term. PG&E Corporation suspended its fourth-quarter 2000 common stock dividend of $0.30 per share, which was later paid on March 2, 2001 in satisfaction of the defaulted dividend. The March 2001 loan agreements prohibit further dividends until the loans are repaid. The utility also suspended its common and preferred dividends, and it may not pay common dividends until cumulative preferred dividends are paid.
What are the main uncertainties ahead for investors?
Key uncertainties include the terms of any reorganization plan the bankruptcy court adopts, whether the utility can recover its undercollected power purchase costs, the CPUC's rate decisions including the 3-cent-per-kWh surcharge and its treatment of transition costs, the value of the utility's hydroelectric assets, the resolution of FERC refund proceedings, and the outcome of pending litigation including the chromium compressor station cases and the Wilson shareholder complaints. The filing states that neither the company nor the utility can predict the outcome of these matters.
04—Continue