01—Abstract
Summary
Summary of the 10-K filed February 11, 2014. Cited figures are marked; the original filing is the authoritative source.
PG&E Corporation and Pacific Gas and Electric Company filed a combined annual report on Form 10-K for the year ended December 31, 2013.
PG&E Corporation reported 2013 income available for common shareholders of $814 milliona, or $1.83 per diluted share, compared with $816 million, or $1.92 per share, in 2012. The filing states that operating results continue to be materially affected by costs the Utility incurs to improve natural gas safety and reliability that are not recoverable through rates, and that these unrecovered costs have increased equity needs funded through share issuances that have materially diluted EPS. Cumulative charges related to natural gas matters since the San Bruno accident total approximately $2.5 billion.
The most significant open risk is three pending CPUC investigations tied to the San Bruno accident. The Safety and Enforcement Division has recommended a $2.25 billionb penalty, consisting of a $300 million fine and $1.95 billion of non-recoverable costs. The Utility estimates total unrecovered costs and fines would be about $4.5 billion if that recommendation is adopted, and has accrued $200 million as the minimum probable fine.
A federal criminal investigation is also ongoing, with the Utility identified as a target. Outcomes could materially affect financial condition, cash flows and future equity issuance. The Utility's 2014 General Rate Case requests a 2014 revenue requirement of $7.8 billionc, an increase of about $1.16 billion over 2013 authorized revenues.
The Utility forecasts capital expenditures of $5 billion to $6 billiond in 2014, and PG&E Corporation expects to issue a material amount of equity in 2014. The CPUC authorized a 10.40% ROE effective January 1, 2013, down from 11.35%, and a capital structure of 52% common equity.
02—Key points
Key Highlights
- 2013 diluted EPS of $1.83, down from $1.92 in 2012; income available for common shareholders was $814 million versus $816 million.
- Cumulative charges related to natural gas matters since the San Bruno accident total approximately $2.5 billion, with $645 million recorded in 2013 that is not recoverable through rates.
- SED has recommended a $2.25 billion penalty ($300 million fine plus $1.95 billion of non-recoverable costs); the Utility estimates total unrecovered costs and fines would be about $4.5 billion if adopted, versus a $200 million accrual.
- Federal criminal investigation of the San Bruno accident is ongoing; the Utility is identified as a target and the filing states penalties could materially affect financial condition.
- The 2014 GRC requests a $7.8 billion 2014 revenue requirement, an increase of about $1.16 billion over 2013 authorized revenues; the CPUC's ORA recommended a $125 million reduction from 2013 levels.
- PG&E Corporation issued 26 million shares in 2013 for net proceeds of $1,045 million to fund Utility equity needs; it forecasts a material equity issuance in 2014.
- CPUC authorized ROE of 10.40% effective January 1, 2013 (down from 11.35%) and a 52% common equity capital structure; the Utility will file its next cost of capital application in April 2015.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2013filed February 11, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $15.60B$15.04B | +3.7% |
| Operating Income | $1.76B$1.69B | +4.1% |
| Interest Expense | $715.00M$703.00M | +1.7% |
| Net Income | $828.00M$830.00M | −0.2% |
| EPS (Basic) | $1.83$1.92 | −4.7% |
| EPS (Diluted) | $1.83$1.92 | −4.7% |
| Shares Outstanding (Basic) | 444.00M424.00M | +4.7% |
| Shares Outstanding (Diluted) | 445.00M425.00M | +4.7% |
05—Questions
Frequently Asked Questions
How did PG&E's earnings change in 2013?
Income available for common shareholders was $814 million, or $1.83 per diluted share, in 2013, compared with $816 million, or $1.92 per share, in 2012. The filing attributes the EPS decline largely to the reduction in authorized cost of capital ($166 million after-tax, or $0.37 per share) and to the dilution from additional shares issued to fund Utility equity needs.
What is the largest financial risk disclosed in the filing?
The three pending CPUC investigations related to natural gas operations and the San Bruno accident. The SED recommended a $2.25 billion penalty, and the Utility estimates total unrecovered costs and fines would be about $4.5 billion if adopted. The Utility has accrued $200 million as the minimum probable fine, and the CPUC may impose fines materially higher than that amount.
Will PG&E need to issue more equity?
Yes, according to the filing. PG&E Corporation issues common stock to fund equity contributions that maintain the Utility's 52% CPUC-authorized equity component, and it forecasts that it will issue a material amount of equity in 2014, primarily to support 2014 capital expenditures of $5 billion to $6 billion and to fund unrecovered costs. Further issuances could have a material dilutive effect on EPS.
What are the expected dividends?
PG&E Corporation declared quarterly dividends of $0.455 per share in each quarter of 2013, totaling $1.82 per share annually. The filing states that PG&E Corporation expects its Board to continue the current quarterly dividend, subject to the outcome of natural gas matters. The CPUC requires the Board to give first priority to the Utility's capital requirements before declaring dividends.
What regulatory decisions are expected in 2014?
The CPUC proposed decision in the 2014 General Rate Case is anticipated in the first quarter of 2014, with the Utility requesting a $7.8 billion 2014 revenue requirement. The 2015 GT&S rate case requests a $1.29 billion revenue requirement for 2015, with a final decision requested by year-end 2014. The Utility also expects a decision on PSEP updates by August 2014 and an update to Diablo Canyon decommissioning cost estimates.
06—Continue