01—Abstract
Summary
Summary of the 10-K filed February 24, 2009. Cited figures are marked; the original filing is the authoritative source.
PG&E Corporation (filed as PG&E Corporation) is a holding company whose primary purpose is to hold interests in energy-based businesses.
It conducts its business principally through Pacific Gas and Electric Company (the Utility), a public utility operating in northern and central California. At December 31, 2008, the Utility served approximately 5.1 million electricity distribution customers and 4.3 million natural gas distribution customers, had approximately $40.5 billiona of assets, and generated revenues of approximately $14.6 billion in 2008. The Utility is regulated primarily by the California Public Utilities Commission and the Federal Energy Regulatory Commission.
PG&E Corporation reported 2008 net income of $1,338 millionb, or $3.63 diluted earnings per share, compared with $1,006 million, or $2.78 per share, in 2007. The filing attributes the increase primarily to a settlement of federal tax audits for 2001 through 2004 that increased net income by $257 million, of which about $154 million was reported as discontinued operations related to former subsidiary NEGT. Income from continuing operations was $1,184 million.
Operating expenses rose, and the filing cites higher costs for storm-related outages, natural gas system maintenance, and the extended Diablo Canyon steam generator outage. Looking ahead, the filing identifies significant capital needs: the Utility expects capital expenditures of about $3.6 billionc in 2009 and an average of $3.5 to $4.0 billion per year over the next three years, and plans to issue $3.5 billion to $4.5 billion of long-term debt through 2011 while PG&E Corporation plans equity contributions of $1.2 billion to $1.8 billion to the Utility through 2011. Key risks cited include pending litigation by the California Attorney General and City and County of San Francisco seeking restitution of alleged improper transfers, the NRC and court proceedings over Diablo Canyon spent fuel storage, and uncertainty around CAISO market redesign (MRTU) and cost recovery.
02—Key points
Key Highlights
- 2008 diluted EPS of $3.63 versus $2.78 in 2007; net income of $1,338 million versus $1,006 million, aided by a $257 million after-tax federal tax audit settlement.
- Operating revenues of $14,628 million in 2008; Utility electric operating revenues of $10,738 million and natural gas operating revenues of $3,890 million.
- Utility capital expenditures were $3.7 billion in 2008 and are expected to total about $3.6 billion in 2009, with an average of $3.5 to $4.0 billion per year over the next three years.
- Utility plans $3.5 billion to $4.5 billion of long-term debt issuance through 2011; PG&E Corporation plans $1.2 billion to $1.8 billion of equity contributions to the Utility through 2011.
- Quarterly dividend increased to $0.39 per share in 2008; the Board declared $0.42 per share on February 18, 2009, payable April 15, 2009.
- Litigation by the California Attorney General and City and County of San Francisco seeks restitution and penalties, with a total penalty of not less than $500 million sought; the company believes the claims have no merit.
- Diablo Canyon spent fuel storage: the Utility expects to begin loading spent fuel into dry cask storage in June 2009; without additional storage, Unit 1 may need to be curtailed as early as October 2010 and Unit 2 as early as May 2011.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2008filed February 24, 2009Financial Statements
FY2008 against FY2007
| Line item | FY2008FY2007 | Change |
|---|---|---|
| Revenue | $14.63B$13.24B | +10.5% |
| Operating Income | $2.26B$2.11B | +7.0% |
| Interest Expense | $728.00M$762.00M | −4.5% |
| Net Income | $1.34B$1.01B | +33.0% |
| EPS (Basic) | $3.64$2.79 | +30.5% |
| EPS (Diluted) | $3.63$2.78 | +30.6% |
| Shares Outstanding (Basic) | 357.00M351.00M | +1.7% |
| Shares Outstanding (Diluted) | 358.00M353.00M | +1.4% |
05—Questions
Frequently Asked Questions
What drove the increase in 2008 earnings?
Diluted EPS rose to $3.63 from $2.78, mainly due to a settlement of federal tax audits for 2001 through 2004 that increased net income by $257 million. The Utility's return on equity on higher authorized capital investments added about $98 million, and about $25 million in CPUC energy efficiency incentive earnings was also recognized, partly offset by about $50 million of higher operating and maintenance expenses.
How large are the company's planned capital investments and financing needs?
The Utility expects capital expenditures of about $3.6 billion in 2009 and an average of $3.5 to $4.0 billion per year over the next three years. It plans to issue $3.5 billion to $4.5 billion of long-term debt through 2011, and PG&E Corporation plans to contribute $1.2 billion to $1.8 billion of equity to the Utility through 2011.
What are the main legal and regulatory risks?
The California Attorney General and City and County of San Francisco sued over alleged transfers of funds from the Utility to PG&E Corporation during 1997 through 2000 and alleged failure to support the Utility during the energy crisis, seeking restitution of about $5 billion as estimated by plaintiffs and a penalty of not less than $500 million. The company believes these claims have no merit. Other risks include NRC and Ninth Circuit proceedings on Diablo Canyon spent fuel storage, CAISO's MRTU market redesign scheduled to start April 1, 2009, and the CPUC's ability to allow full cost recovery.
What dividends has PG&E Corporation declared?
PG&E Corporation paid common stock dividends of $1.53 per share in 2008, totaling $573 million including amounts paid to a subsidiary. The Board declared $0.39 per share in December 2008, paid January 15, 2009, and declared $0.42 per share on February 18, 2009, payable April 15, 2009. Dividends declared per share were $1.56 in 2008 versus $1.44 in 2007.
06—Continue