Performance Across the Board
Builds on Momentum of First Quarter
-
PG&E Corporation reported
second quarter earnings from operations of $0.69 per share on
a diluted basis, or $253 million. Results increased 38 percent
over diluted earnings from operations in the same quarter last
year of $0.50 per share, or $182 million. Second quarter 1999
results did not include the revenue from Pacific Gas and Electric
Company's general rate case (GRC), which was resolved in February
2000 and was retroactive to January 1, 1999. Adjusted for the
GRC, second quarter 1999 diluted earnings would have been $0.61
per share, and second quarter 2000 results would represent a
12 percent increase.
-
Revenues for the period
were $5.6 billion, an increase of 19 percent over second quarter
1999 revenues of $4.7 billion.
-
National Energy Group
contributions continued to accelerate, with earnings from operations
in the second quarter of $0.10 per share on a diluted basis,
or $37 million. Results reflect a 233 percent increase over
diluted earnings of $0.03 per share, or $10 million, from the
same quarter last year. Revenues from the unit increased to
$3.3 billion, compared with $2.4 billion in the second quarter
of 1999.
-
Pacific Gas and Electric
Company posted second quarter earnings from operations of $0.59
per share on a diluted basis, or $216 million. Results reflect
an increase of 26 percent compared with second quarter 1999
diluted earnings from operations of $0.47 per share, or $172
million. Revenues for the period were $2.3 billion, compared
with revenues of $2.2 billion for the second quarter of 1999.
Second quarter 1999 results did not include the increase in
revenues associated with the final decision of the company's
1999 GRC, which was resolved in February 2000 and was retroactive
to January 1, 1999. Adjusted for the GRC, second quarter 1999
diluted earnings would have been $0.58.
-
Pacific Venture Capital,
LLC was launched to build and manage a portfolio of investments
in growing energy and telecommunications companies. The unit
plans to invest up to $100 million during its first year of
activity.
(San Francisco) -
PG&E Corporation (NYSE:PCG) today reported that it grew earnings
significantly for the second quarter, with both its PG&E National
Energy Group and its utility business continuing to perform in keeping
with the pace set in the first quarter. The Corporation's second
quarter earnings from operations rose to $0.69 per share on a diluted
basis, or $253 million, a 38 percent increase over second quarter
1999 earnings of $0.50 per share, or $182 million.
PG&E Corporation Chairman,
CEO, and President Robert D. Glynn, Jr. said, "Midway through 2000
the Corporation is achieving strong performance across the board.
All of our businesses are delivering sustainable contributions to
shareholder value. We are on track to exceed, for the third year
running, our target to increase earnings from operations by 8 to
10 percent annually."
PG&E National Energy Group
The Corporation's National
Energy Group (NEG) continued to grow significantly its contribution
to overall earnings. The NEG earned $0.10 per diluted share from
operations in the second quarter, a 233 percent increase over the
same quarter in 1999.
The unit's performance was
marked by a second consecutive profitable quarter in its electric
and natural gas trading operations. Income from the trading operations
in the first two quarters of 2000 is significantly outpacing performance
from the same period in 1999. The unit also turned in strong results
in the electric generation business, based on early summer demand
increases owing to hotter-than-usual weather in the Northeast.
"With its performance in
the first two quarters of 2000, our National Energy Group is on
track to meet its target of delivering 30 percent of the Corporation's
earnings by 2002," said Glynn. He added that in the second quarter
the NEG also continued to achieve important milestones in its strategy
to grow its business, both in the wholesale power generation and
natural gas transmission markets.
In its efforts to expand
its portfolio of controlled megawatts* (MW), the NEG moved forward
with key greenfield power plant development and construction projects,
and it continued to secure additional capacity through strategic
tolling agreements*, including one agreement for 530 MW in the second
quarter.
The NEG brought its 360-MW
Millennium Power facility in Massachusetts into the start-up phase
during the quarter. The project is on schedule to begin full commercial
operation in late 2000. On the development front the unit obtained
critical environmental permits for 1,080-MW Athens Generating project
in New York, which will incorporate dry cooling technology and will
use less than one percent of the water used by conventional plants.
Key environmental permits were also obtained for the Harquahala
Generating project in Arizona. Both plants remain on schedule for
operation in 2003. The NEG also announced it has begun development
of the 550-MW Umatilla project in Oregon, on a site adjacent to
the company's existing 474-MW Hermiston Generating Plant. The new
facility, planned for operation in late 2003, will further strengthen
the NEG's position in the growing Northwest marketplace.
The NEG also continued construction
on its 1,048-MW La Paloma Generating Plant in California and its
792-MW Lake Road Generating Plant in New England. The Lake Road
facility remains on schedule for operation in mid-2001, and the
La Paloma plant remains on schedule for operation in 2002.
The NEG also completed a
key tolling agreement during the quarter, raising to 1,800 megawatts
the total capacity it has secured under such contracts to date.
The 14 ½ year, 530-MW agreement with Liberty Electric Power, a subsidiary
of Columbia Electric Corporation, gives the NEG rights to the output
from the Liberty Power Project near Philadelphia, PA, scheduled
to go into operation in the spring of 2002.
Plans also progressed to
install mobile generation units at up to three sites in Ohio to
help the Midwest meet its peak electric demand needs. The first
units at two of the sites are expected to be on line this month.
The company plans to have the third site operational by this fall.
In total, the units at these sites are expected to represent up
to 135 MW of peaking capacity. These units allow the NEG the flexibility
to locate valuable power generation resources in regions where seasonal
increases in power demands are creating markets for peaking power.
In its natural gas operations,
the NEG launched an initiative with Sempra Energy International
and Próxima Gas to design, develop, construct and operate a 212-mile
pipeline to serve the rapidly growing demand for energy in Baja
California, Mexico. The NEG expects to begin transporting natural
gas on the pipeline in early 2003.
In April of this year, the
Corporation announced the sale of the energy commodities portfolio
of its energy services business, PG&E Energy Services, to Enron
Energy Services Operations, Inc. for $85 million. This sale was
concluded during the second quarter.
Pacific Gas and Electric
Company
Performance in the National
Energy Group was matched by a strong quarter from the Corporation's
utility unit, Pacific Gas and Electric Company, owing in part to
the final decision on the unit's 1999 General Rate Case and an increase
in its authorized return on equity from 10.6 percent to 11.22 percent,
retroactive to February 2000. Also contributing to the quarter's
results was the excellent operating performance of the Diablo Canyon
Power Plant, despite an unplanned outage of the plant's Unit 1 during
May.
Customer service ratings
for the utility also remained strong in the second quarter. More
than 90 percent of the respondents to customer satisfaction surveys
rated the company's overall quality of service as "good," "very
good" or "excellent."
PG&E Corporation noted that
Pacific Gas and Electric Company is making progress to divest its
hydroelectric generation assets in response to California's electric
industry restructuring law. As part of this process, the unit is
in discussions with several parties in an effort to reach agreement
on the valuation of the company's hydroelectric plants and a plan
for the ultimate transfer of the assets from Pacific Gas and Electric
Company to an affiliate.
New Business Initiatives
The second quarter also
saw the Corporation make important strategic investments in areas
that complement and leverage the Corporation's expertise and experience.
In June, the Corporation
created a new business unit, Pacific Venture Capital, LLC, to build
and manage a portfolio of investments in growing energy and telecommunications
companies. "The mission of this new unit," noted Glynn, "is to create
an additional opportunity for value generation for our shareholders.
As it invests in fast-growing, innovative energy and telecommunications
companies, it will also gain insight into new technologies and business
models that we can use to enhance the performance of our core businesses."
The Corporation also announced
its equity investment in True Quote®, an online wholesale energy
trading system. True Quote® is the first real-time, broker-assisted,
quote system for the natural gas and electricity wholesale marketplace.
True Quote® is positioned to become a leading online platform for
energy trading, a prospect further strengthened by True Quote's®
recent strategic partnerships involving APB Energy, one of the fastest
growing energy brokerage companies in the US, and Enron Online,
the largest online trading platform. The Corporation said that in
addition to being a high quality e-commerce investment, its equity
stake in True Quote® will provide valuable insight into state-of-the-art
Internet technology that can be used to build on the existing value
of its core businesses.
"Our second quarter performance
shows that the Corporation's businesses are executing our strategy
and delivering results," said Glynn. "Our challenge, not only during
the second half of 2000, but beyond, will be to build on the momentum
achieved during the first six months of this year. I'm confident
that our team is up to this challenge."
* Terms Used in This Release
Controlled Megawatts - Electric
generating capacity which PG&E Corporation has the rights to sell
in the wholesale marketplace, either through full or partial ownership
of generating assets, or through contractual agreements.
Tolling Agreements - Contracts
that provide PG&E Corporation with the rights to sell electricity
generated by facilities owned and operated by another party. Under
such arrangements, PG&E Corporation supplies the fuel to the power
plant, and then sells the plant's output in the competitive market.
PG&E
CORPORATION
CONDENSED STATEMENT OF CONSOLIDATED INCOME
(unaudited)
|
|
Three months ended June 30, |
Six months ended June 30, |
|
|
|
|
(in millions, except per share amounts) |
2000 |
|
1999 |
|
2000 |
|
1999 |
|
|
|
|
|
|
|
Operating Revenues |
Pacific Gas and Electric Company |
$ |
2,296 |
|
$ |
2,233 |
|
$ |
4,514 |
|
$ |
4,318 |
PG&E National Energy Group |
PG&E Generating |
281 |
254 |
592 |
543 |
PG&E Gas Transmission |
– Texas |
224 |
436 |
449 |
793 |
– Northwest |
56 |
52 |
113 |
110 |
PG&E Energy Trading |
3,159 |
2,024 |
5,716 |
4,655 |
Eliminations and Other |
(378) |
(317) |
(738) |
(611) |
|
|
|
|
|
Total operating revenues |
5,638 |
4,682 |
10,646 |
9,808 |
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
Cost of energy for Pacific Gas and |
1,157 |
664 |
1,953 |
1,319 |
Electric Company |
|
|
|
|
|
|
|
|
|
|
|
Cost of energy–PG&E National Energy |
3,047 |
2,224 |
5,519 |
5,021 |
Group |
|
|
|
|
|
|
|
|
|
|
|
Operating expenses, including |
812 |
1,314 |
1,876 |
2,527 |
depreciation |
|
|
|
|
Total operating expenses |
5,016 |
4,202 |
9,348 |
8,867 |
|
|
|
|
|
Operating Income |
622 |
480 |
1,298 |
941 |
|
Interest expense and other |
(170) |
(152) |
(338) |
(332) |
|
|
|
|
|
Income Before Income Taxes |
452 |
328 |
960 |
609 |
|
|
|
|
|
Income taxes |
204 |
132 |
432 |
246 |
|
|
|
|
|
Income before discontinued operations |
and cumulative effect of a change in accounting
principle |
248 |
196 |
528 |
363 |
|
|
|
|
|
Discontinued operations |
Loss from operations of PG&E |
Energy Services (net of applicable income
taxes of $10 million and |
$17 million, respectively) |
– |
(14) |
– |
(22) |
|
|
|
|
|
|
Net income before cumulative effect of |
a change in accounting principle |
248 |
182 |
528 |
341 |
|
|
|
|
|
Cumulative effect of a change in an |
accounting principle (net of appli- |
cable income taxes of $8 million) |
– |
– |
– |
12 |
|
|
|
|
|
Net Income |
$ |
248 |
$ |
182 |
$ |
528 |
$ |
353 |
|
|
|
|
|
|
|
|
|
Weighted Average Common Shares |
|
|
|
|
|
|
|
|
|
|
|
Outstanding |
361 |
367 |
361 |
370 |
|
Earnings Per Common Share, Basic |
Income from continuing operations |
$ |
0.69 |
$ |
0.53 |
$ |
1.46 |
$ |
0.98 |
Discontinued operations |
– |
(0.03) |
– |
(0.06) |
Cumulative effect of a change in an |
accounting principle |
– |
– |
– |
0.03 |
|
|
|
|
|
Net Income |
$ |
0.69 |
$ |
0.50 |
$ |
1.46 |
$ |
0.95 |
|
|
|
|
|
Earnings Per Common Share, Diluted |
Income from continuing operations |
$ |
0.68 |
$ |
0.50 |
$ |
1.45 |
$ |
0.90 |
Discontinued operations |
– |
(0.03) |
– |
(0.06) |
Cumulative effect of a change in an |
accounting principle |
– |
– |
– |
0.03 |
|
|
|
|
|
Net Income |
$ |
0.68 |
$ |
0.47 |
$ |
1.45 |
$ |
0.87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends Declared Per Common |
$ |
0.30 |
$ |
0.30 |
$ |
0.60 |
$ |
0.60 |
Share |
|
|
Earnings and earnings per share for PG&E Corporation's
lines of business are as follows: |
|
|
Earnings (millions) |
Earnings (millions) |
Three months ended June 30, |
Six months ended June 30, |
|
|
2000 |
|
1999 |
|
2000 |
|
1999 |
|
|
|
|
|
|
|
Utility |
Pacific Gas and Electric Company |
$ |
216 |
|
$ |
172 |
|
$ |
444 |
|
$ |
319 |
|
PG&E National Energy Group |
PG&E Generating |
20 |
21 |
54 |
56 |
PG&E Gas Transmission |
– Texas |
– |
(8) |
– |
(28) |
– Northwest |
13 |
13 |
27 |
28 |
PG&E Energy Trading |
7 |
1 |
22 |
(2) |
PG&E Energy Services |
|
– |
(14) |
– |
(22) |
Eliminations and Other |
(3) |
(3) |
(10) |
(6) |
|
|
|
|
Subtotal - PG&E National Energy |
|
|
|
|
|
|
|
|
|
|
|
Group |
37 |
10 |
93 |
26 |
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from Operations |
253 |
182 |
537 |
345 |
|
|
|
|
|
|
|
|
Items impacting comparability (a) |
(5) |
– |
(9) |
8 |
|
|
|
|
|
Reported Earnings |
$ |
248 |
$ |
182 |
$ |
528 |
$ |
353 |
|
|
|
|
|
|
Earnings per Share (Diluted) |
Earnings per Share (Diluted) |
Three months ended June 30, |
Six months ended June 30, |
|
|
2000 |
|
1999 |
|
2000 |
|
1999 |
|
|
|
|
|
|
|
Utility |
Pacific Gas and Electric Company |
$ |
0.59 |
|
$ |
0.47 |
|
$ |
1.22 |
|
$ |
0.86 |
|
PG&E National Energy Group |
PG&E Generating |
0.05 |
0.06 |
0.15 |
0.15 |
PG&E Gas Transmission |
– Texas |
– |
(0.02) |
– |
(0.08) |
– Northwest |
0.04 |
0.04 |
0.07 |
0.08 |
PG&E Energy Trading |
0.02 |
– |
0.06 |
(0.01) |
PG&E Energy Services |
|
– |
(0.04) |
– |
(0.06) |
Eliminations and Other |
(0.01) |
(0.01) |
(0.03) |
(0.01) |
|
|
|
|
Subtotal - PG&E National Energy |
|
|
|
|
|
|
|
|
|
|
|
Group |
0.10 |
0.03 |
0.25 |
0.07 |
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from Operations |
0.69 |
0.50 |
1.47 |
0.93 |
|
|
|
|
|
|
|
|
Items impacting comparability (a) |
(0.01) |
(0.03) |
(0.02) |
(0.06) |
|
|
|
|
|
Reported Earnings |
$ |
0.68 |
$ |
0.47 |
$ |
1.45 |
$ |
0.87 |
|
|
|
|
|
|
(a) Items impacting comparability
in 2000 include relocation and severance charges related to the
restructuring of the PG&E National Energy Group of $5 million ($0.01
per share) in the second quarter and $9 million ($0.02 per share)
in the six months ended June 30, 2000. Items impacting comparability
in the six-month period ending June 30, 1999 include a restructuring
charge of $4 million ($0.01 per share) incurred at PG&E Gas Transmission
and income from a change in accounting principle ($0.03 per share).
Also in 1999, the diluted earnings per share include dilution of
$0.03 and $0.08 per share for the three- and six-month periods,
respectively, reflecting accounting treatment for the Corporation's
1999 stock repurchase program which was still in progress.