01—Abstract
Summary
Summary of the 10-K filed February 18, 2016. Cited figures are marked; the original filing is the authoritative source.
PG&E Corporation and Pacific Gas and Electric Company filed a combined Form 10-K for fiscal 2015.
PG&E Corporation reported 2015 operating revenues of $16.83 billiona, operating income of $1.51 billion, and net income of $888 million, with income available for common shareholders of $874 million, or $1.79 per diluted share, down from $3.06 in 2014. The decline reflects the $1.6 billion CPUC Penalty Decision for the San Bruno accident, of which $907 million was charged to 2015 operating and maintenance expense. Excluding items impacting comparability, the filing reports earnings from operations of $1.519 billion, or $3.12 per diluted share, compared with $3.50 in 2014.
The filing highlights significant ongoing risks. The Utility faces a federal criminal trial on 13 counts of pipeline safety and obstruction charges, scheduled to begin March 22, 2016, with potential fines of $6.5 millionb plus a possible alternative fine of approximately $562 million. Other pending matters include CPUC investigations into natural gas record-keeping and ex parte communications, a CPUC inquiry into safety culture, and Butte fire liabilities estimated at $350 million to $450 million.
The company states it will need to issue material equity in 2016 and future years, with a forecast of $600 million to $800 millionc of common stock issuance in 2016, which would be materially dilutive to EPS. On the operating side, the Utility estimates 2016 capital expenditures of $5.4 billion to $5.6 billion.
Pending rate matters include the 2017 General Rate Case requesting a $457 milliond revenue requirement increase and the 2015 Gas Transmission and Storage rate case requesting a 2015 revenue requirement of $1.263 billion. The Utility's authorized ROE is 10.40% with a 52% equity capital structure through 2017.
02—Key points
Key Highlights
- PG&E Corporation 2015 net income was $888 million; income available for common shareholders was $874 million, or $1.79 per diluted share, versus $1,436 million, or $3.06, in 2014.
- The $1.6 billion Penalty Decision drove $907 million of 2015 operating and maintenance charges, including a $400 million customer bill credit, a $100 million additional state fine charge, and $407 million of disallowed capital.
- Earnings from operations, a non-GAAP measure, were $1,519 million, or $3.12 per diluted share, versus $1,648 million, or $3.50, in 2014.
- The federal criminal trial on 13 remaining counts is scheduled to begin March 22, 2016; the filing states no criminal fines have been accrued.
- PG&E forecasts issuing $600 million to $800 million of common stock in 2016, which would have a material dilutive impact on EPS.
- The Utility estimates 2016 capital expenditures of $5.4 billion to $5.6 billion, and the 2017 GRC requests a $457 million revenue requirement increase over 2016 authorized amounts.
- Total consolidated debt to total capitalization was 51% at PG&E Corporation and 50% at the Utility at year-end 2015, against a 65% covenant limit.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2015filed February 18, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $16.83B$17.09B | −1.5% |
| Operating Income | $1.51B$2.45B | −38.4% |
| Interest Expense | $773.00M$734.00M | +5.3% |
| Net Income | $888.00M$1.44B | −38.2% |
| EPS (Basic) | $1.81$3.07 | −41.0% |
| EPS (Diluted) | $1.79$3.06 | −41.5% |
| Shares Outstanding (Basic) | 484.00M468.00M | +3.4% |
| Shares Outstanding (Diluted) | 487.00M470.00M | +3.6% |
05—Questions
Frequently Asked Questions
How much did the Penalty Decision cost PG&E in 2015?
The Utility recorded $907 million of charges in 2015 operating and maintenance expense for the Penalty Decision, consisting of a $400 million customer bill credit, a $100 million additional charge for the $300 million state fine, and $407 million of disallowed capital. The total Penalty Decision penalties and remedies are $1.6 billion, with $473 million of future charges still expected.
What is the status of the federal criminal case against the Utility?
A federal grand jury returned a superseding indictment in July 2014. On December 23, 2015, the court dismissed 15 of the Pipeline Safety Act counts, leaving 13 counts. The maximum statutory fine is $500,000 per felony count, or $6.5 million in total. The trial is scheduled to begin March 22, 2016, and the Utility has pleaded not guilty.
Will PG&E need to raise additional equity?
Yes. PG&E Corporation issued $801 million of common stock in 2015 and forecasts issuing between $600 million and $800 million in 2016 to fund equity contributions to the Utility. The filing states that additional issuances tied to Penalty Decision charges, unrecoverable pipeline expenses, and any fines would have a material dilutive impact on EPS.
What are the key pending regulatory decisions?
The 2015 Gas Transmission and Storage rate case requests a 2015 revenue requirement of $1.263 billion, an increase of $532 million, with a final decision expected in 2016. The 2017 General Rate Case requests a $457 million increase over currently authorized 2016 revenues, with a proposed decision expected in November 2016. The Utility's authorized ROE remains 10.40%.
What is the Butte fire exposure?
The Utility may incur liability related to the September 2015 Butte fire, which Cal Fire is investigating for a possible tree contact with a Utility power line. The filing estimates losses for structures, contents, other personal property, and fire suppression costs at $350 million to $450 million, and states the Utility has insurance coverage that may be insufficient.
06—Continue