Utility Operating Statistics
- Fourth quarter 2004 consolidated net income
reported under GAAP was $2.04 per share. (All “per
share” amounts are presented on a diluted
basis.)
- Earnings from operations were $0.44 per share
for the quarter.
- Full-year GAAP results were $10.57 per share,
due largely to one-time, non-cash items.
- Full-year earnings from operations were $2.12
per share.
- Guidance for 2005 earnings from operations is
reaffirmed at $2.15 to $2.25 per share.
(San Francisco) -- PG&E Corporation’s
(NYSE: PCG) consolidated net income as reported in
accordance with generally accepted accounting principles
(GAAP) was $871 million, or $2.04 per share for the
fourth quarter of 2004. As previously reported, a
one-time, non-cash item related to the elimination
of the Corporation’s equity interest in its
former national energy unit increased GAAP results
by $684 million, or $1.60 per share. Consolidated
net income in the fourth quarter of 2003 was $37
million, or $0.09 per share.
On a non-GAAP earnings-from-operations basis, earnings
for the fourth quarter were $186 million, or $0.44
per share, compared with $139 million, or $0.33 per
share, in 2003. Earnings from operations excludes
certain non-operating income and expenses. These
items are shown as “Items Impacting Comparability” on
the attached financial tables, which reconcile earnings
from operations with consolidated net income as reported
in accordance with GAAP.
For Pacific Gas and Electric Company alone, fourth
quarter earnings from operations were $191 million,
or $0.45 per share, compared with $141 million, or
$0.34 per share, in 2003.
The quarter-over-quarter difference in earnings
from operations primarily reflects the effects of
the delayed 2003 General Rate Case (GRC) decision.
The net effect was approximately $0.11 per share
that otherwise would have been reflected in fourth
quarter of 2003 earnings from operations.
Other factors impacting the quarter-over-quarter
difference include about $0.06 per share of earnings
on the Chapter 11 settlement regulatory asset in
the fourth quarter of 2004, as well as $0.06 per
share from higher electric and gas transmission revenues.
Higher electric transmission revenues were driven
by electric transmission rate decisions, and higher
gas transmission revenues reflected the effects of
colder-than-normal weather. These positive items
were offset by $0.07 per share of additional costs
from a second scheduled refueling outage at the Diablo
Canyon power plant, with the remaining $0.05 per
share due to a higher number of shares outstanding
and other items.
FULL-YEAR 2004 RESULTS
For the full year 2004, PG&E Corporation’s
reported GAAP results were $4.5 billion, or $10.57
per share, of which $8.52 per share reflected two
one-time, non-cash items relating to Pacific Gas
and Electric Company’s Chapter 11 exit and
the elimination of the Corporation’s equity
interest in its former national energy unit. Total
consolidated net income in 2003 was $420 million,
or $1.02 per share.
On a non-GAAP earnings-from-operations basis, PG&E
Corporation earned $901 million, or $2.12 per share
in 2004, compared with $611 million, or $1.48 per
share in 2003. Earnings from operations exceeded
the $2.10 per share upper end of the Corporation’s
guidance range due to higher gas transmission revenues,
which occurred primarily due to the effects of colder-than-normal
weather in the fourth quarter. Pacific Gas and Electric
Company contributed $931 million, or $2.19 per share,
to earnings from operations in 2004, compared with
$616 million, or $1.49 per share, in 2003.
“Last year’s financial, regulatory and
operational accomplishments drove solid earnings
performance. They also establish a platform for focusing
on our performance for customers and returning value
to shareholders,” said Peter A. Darbee, President
and Chief Executive Officer of PG&E Corporation. “Pacific
Gas and Electric Company has a strong balance sheet,
healthy cash flows and investment grade credit ratings.
We’ve re-established a common stock dividend.
We are executing substantial share repurchases. And
we’re continuing to make new investments in
the core utility business in order to deliver better,
faster and more cost-effective service to customers.”
The difference in earnings from operations from
2003 to 2004 is magnified by the effects of the delayed
2003 GRC decision, which was not resolved until May
2004. Revenues authorized in the GRC were retroactive
to January 1, 2003, but the decision was not final
in time to be reflected in 2003 earnings from operations.
If not for the delayed GRC decision, 2003 earnings
from operations would have been higher by approximately
$0.45 per share.
Another principal driver for the increase in earnings
from operations in 2004 versus 2003 was earnings
on the equity portion of the Chapter 11 settlement
agreement regulatory asset, which accounted for an
additional $0.27 per share. (As previously reported,
the Chapter 11 settlement agreement regulatory asset
is being refinanced through the issuance of Energy
Recovery Bonds, and therefore earnings on the regulatory
asset will not recur.)
For the full year 2004, two large one-time, non-cash
items impacting comparability accounted for a substantial
amount of the difference between earnings from operations
and reported consolidated net income.
Specifically, as previously reported for the first
quarter of 2004, accounting for the regulatory assets
established as part of Pacific Gas and Electric Company’s
Chapter 11 settlement agreement was reflected as
a non-cash gain of approximately $6.92 per share.
In the fourth quarter, the Corporation recorded a
positive $1.60 per share non-cash entry necessary
to reflect the resolution of the Chapter 11 filing
by National Energy & Gas Transmission, Inc. (NEGT),
which eliminated the Corporation’s equity interest
in NEGT. The $1.60 per share item reverses the Corporation’s
net negative investment in NEGT.
2005 EARNINGS GUIDANCE
Reaffirming its previously issued earnings guidance,
the Corporation expects 2005 earnings from operations
to be in the range of $2.15-$2.25 per share. The
assumptions underlying the 2005 estimates include
the achievement of the utility’s authorized
return on equity of 11.22 percent, the refinancing
of the settlement agreement regulatory asset and
the implementation of accelerated share repurchase
programs.
The first series of Energy Recovery Bonds refinancing
the regulatory asset has been issued, and the second
series is now expected to be issued in late 2005,
earlier than previously anticipated. Stock repurchases
of $1.05 billion are now planned for March 2005,
which is higher than the $975 million originally
planned as a result of a slightly stronger cash and
capital structure position.
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 GAAP.
The attachment to this news release reconciles 2005
estimated earnings per share from operations with
estimated consolidated net income per share in accordance
with GAAP.
PG&E Corporation will host an investor conference
for members of the financial community at 8:00 a.m.
Eastern time on February 25, 2005 in New York City.
The meeting will be available to the public on a
listen-only basis via webcast and will include an
overview of the business and strategic focus, capital
spending needs, and multi-year financial outlook.
Because the meeting so closely follows today’s
earnings announcement, PG&E Corporation will
not hold its regular quarterly conference call for
analysts today. Please visit our website www.pgecorp.com for more information and instructions for accessing
next week’s investor conference webcast.
This press release and the attachment
contain forward-looking statements regarding estimated
earnings for 2005, and the targeted level of stock
repurchases and dividends in 2005 based on anticipated
cash flows. 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 described above prove to be
inaccurate (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), 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 dividend 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.