(New York, NY) – In remarks to investors and
analysts today, PG&E Corporation (NYSE: PCG)
President and CEO Peter A. Darbee and other members
of the company’s senior management detailed
the company’s outlook for 2005 and beyond,
including expectations for continued solid financial
performance, new investment in its core utility business
to better serve customers, and delivering value for
customers and shareholders.
“PG&E Corporation’s financial strength
and regulatory stability create an excellent platform
for delivering value to customers and shareholders,” said
Darbee. “The solid earnings growth and cash
flows from our core business are enabling us to pay
a regular common stock pidend, buy back substantial
amounts of PG&E Corporation stock, and invest
in new infrastructure that will drive better, faster
and more cost-effective customer service.”
The company recently reaffirmed its 2005 guidance
for earnings from operations in the range of $2.15
to $2.25 per share. Today, 2006 guidance for earnings
from operations was issued at a range of $2.30 to
$2.40 per share. Using the mid-point of its 2005
guidance range as a baseline, management also expects
earnings per share from operations to grow on average
between 4 percent and 6 percent annually through
2009. Projections are based on the expectation that
the company will earn its authorized return on equity
of 11.22 percent, among other assumptions.
PG&E Corporation bases guidance on “earnings
from operations” in order to provide a measure
that allows investors to compare the underlying financial
performance of the business from one period to another,
exclusive of items that management believes do not
reflect the normal course of operations. Earnings
from operations are not a substitute or alternative
for consolidated net income presented in accordance
with generally accepted accounting
principles (GAAP).
Following this news release is information that
reconciles estimated earnings per share from operations
with estimated consolidated net income per share
in accordance with GAAP.
Stock repurchases in 2005 are projected to be approximately
$1.6 billion, depending on the amount of the issuance
of the second series of energy recovery bonds expected
to be completed in late 2005. More than $1 billion
of the total repurchases for 2005 are expected to
be initiated by early March through an accelerated
share repurchase program.
The company also recently declared a quarterly
common stock pidend of $0.30 per share, payable
in April of this year. In total for 2005, the
company expects to pay approximately $350 million
to shareholders through pidends.
The company’s strong cash flows are also providing
significant capital for investments in replacing
and upgrading infrastructure in order to better serve
customers. Base case projections for capital expenditures
in electric transmission and distribution, gas transmission,
and electric generation facilities are on average
approximately $2.0 billion per year for 2005 through
2009. Potential incremental investments could be
up to $2.0 billion over the 2005 through 2009 timeframe,
depending on utility needs.
Operational changes aimed at better, faster and
more cost-effective customer service are a major
focus of the company. The company has launched an
intensive, multi-year program to achieve these goals
by ensuring it is utilizing industry-leading business
processes and tools for its people to succeed.
“We are committed to simplifying PG&E’s
work processes, investing in new technologies that
allow for faster and more efficient service, and
strengthening our focus on the customer,” said
Darbee. “We intend to satisfy our customers
with excellent service, which in turn further enhances
our relations with regulators and our opportunities
to earn a fair return for shareholders.” The
company’s program to achieve these results
will be a three- to five-year process, he said.
“Investors today have a clear line of sight
into our financial outlook and strong regulatory
environment,” said Darbee. “We believe
PG&E Corporation represents a value opportunity,
with solid growth potential against a backdrop of
regulatory stability and controllable risk. We look
forward to delivering value to shareholders and customers
in 2005 and beyond.”
A webcast replay of the company’s investor
conference and a copy of the presentation slides
are available on the PG&E Corporation web site,
www.pgecorp.com.
This press release and the attachment contain forward-looking
statements regarding estimated earnings for 2005
and 2006 and a projected growth rate for earnings
per share from operations through 2009, the targeted
level of stock repurchases and pidends in 2005
based on anticipated cash flows, and future capital
expenditures. These statements are based on current
expectations and assumptions which management believes
are reasonable and on information currently available
to management, but are necessarily subject to various
risks and uncertainties. In addition to the risk
that the assumptions on which the statements are
based (including that the Utility earns an authorized
return on equity of 11.22 percent, the timely implementation
of an $1.05 billion accelerated share repurchase
program, and the issuance of the second series of
energy recovery bonds in late 2005) prove to be inaccurate,
factors that could cause actual results to differ
materially from those contemplated by the forward-looking
statements include:
- The timing and resolution
of the pending appeals of the CPUC’s approval of the settlement
agreement and the bankruptcy court confirmation of
the Utility’s plan of reorganization;
- Unanticipated changes
in operating expenses or capital expenditures,
which may affect the Utility’s
ability to earn its authorized rate of return;
- The level and volatility
of wholesale electricity and natural gas prices
and supplies, the Utility’s
ability to manage and respond to the levels and volatility
successfully, and the extent to which the Utility
is able to timely recover increased costs related
to such volatility;
- The operation of the
Utility’s
Diablo Canyon nuclear power plant, which exposes
the Utility to potentially significant environmental
costs and capital expenditure outlays;
- The impact of current
and future ratemaking actions of the CPUC, including
the risk of material differences between forecasted
costs used to determine rates and actual costs
incurred;
- Whether the assumptions
and forecasts underlying the Utility’s CPUC-approved long-term electricity
procurement plan prove to be accurate, the terms
and conditions of the generation or procurement commitments
the Utility enters into in connection with its plan,
the extent to which the Utility is able to recover
the costs it incurs in connection with these commitments,
and the extent to which a failure to perform by any
of the counterparties to the Utility’s electricity
purchase contracts or the Department of Water Resources’ contracts
allocated to the Utility’s customers affects
the Utility’s ability to meet its obligations
or to recover its costs;
- The extent to which
the CPUC or the FERC delays or denies recovery
of the Utility’s
costs, including electricity purchase costs, from
customers due to a regulatory determination that
such costs were not reasonable or prudent or for
other reasons resulting in write-offs of regulatory
balancing accounts;
- How the CPUC administers
the capital structure, stand-alone pidend and
first priority conditions of the CPUC’s
decisions permitting the establishment of holding
companies for the California investor-owned electric
utilities;
- The impact of future
legislative or regulatory actions or policies;
- Increased competition;
- The outcome of pending litigation; and
- Other factors discussed
in PG&E
Corporation's SEC reports.
|
Year Ended
December 31, 2005
|
EPS Guidance on an Earnings from Operations
Basis |
$ |
2.15
|
|
$ |
2.25
|
Estimated Items Impacting Comparability (1) |
|
|
|
|
|
Incremental interest expense (2) |
|
(0.08)
|
|
|
(0.05)
|
EPS Guidance on a GAAP Basis |
$ |
2.07
|
|
$ |
2.20
|
|
(1) The range of potential outcomes
is developed using a range of dollar estimates
and a range of estimated shares outstanding for
the items presented. |
|
(2) The net interest expense,
after-tax, related to remaining generator disputed
claims in the Utility’s Chapter 11 proceeding,
which are subject to resolution by bankruptcy
court.
|
|
Year Ended
December 31, 2006
|
EPS Guidance on an Earnings from Operations Basis |
$ |
2.30
|
|
$ |
2.40
|
Estimated Items Impacting Comparability |
|
(0.00)
|
|
|
(0.00)
|
EPS Guidance on a GAAP Basis |
$ |
2.30
|
|
$ |
2.40
|