2007 Earnings Guidance and Capital Investment Plan Presented
(New York, NY) – At a conference today with
investors and analysts, PG&E Corporation’s
(NYSE: PCG) senior leadership team presented an in-depth
review of the company’s strategy and outlook
for 2006 and beyond. The team emphasized that it is
focused on strengthening utility customer service,
investing substantially in the utility’s infrastructure,
and securing the energy supplies necessary for a stable
and clean energy future in California.
“Delivering the strongest long-term returns
for shareholders starts with redesigning our operations
and culture around providing excellent customer service,” said
Chairman, CEO and President Peter A. Darbee. “We
refer to this plan and everything it entails as ‘Transformation,’ and
it is the core of our strategy today.”
Darbee said that, through the Transformation effort,
Pacific Gas and Electric Company is working to become
more efficient and more responsive to customers through
restructuring and streamlining utility operations and
using new technology. The company shared with analysts
the concrete operational performance measures, along
with the specific 2006 performance targets for each
measure, that it will use to track the utility’s
progress, and noted that the performance targets will
increase in future years. The performance measures
include boosting the utility’s J.D. Power customer
satisfaction score, answering customer service calls
more quickly, and reducing the frequency and duration
of service interruptions.
In addition to better service, the company expects
that Transformation will produce significant cost benefits.
Chief Financial Officer Chris Johns outlined a proposal
to provide customers the benefit of current savings
estimates in the next rate case, and to share any savings
in excess of these levels between customers and shareholders.
The proposal is now before the California Public Utilities
Commission (CPUC) as part of the case to set the utility’s
base rates for 2007 through 2009.
The rate case also reflects the utility’s plans
for substantial investment in its infrastructure to
increase reliability and improve customer service.
Pacific Gas and Electric Company President and CEO
Tom King reiterated prior estimates that base-level
capital investments in the 2006 through 2010 period
will average $2.5 billion annually. Investments would
span all parts of the business, from gas and electric
distribution to transmission and generation. Current
annual capital investment plans peak in 2007 at approximately
$2.85 billion.
King also highlighted the utility’s investments
in energy efficiency and renewable power, as a critical
part of its planning for California’s energy
future. In 2006, the utility plans to invest over $250
million in energy efficiency programs and to increase
by 2 percent the portion of its supply that comes from
renewable energy sources.
After taking into account increases in renewable supplies
and demand reduction through energy efficiency, the
utility estimates that growing power demand in its
service area will necessitate development of up to
2,200 megawatts of new generation between 2008 and
2010. King reported that, as a result of the utility’s
request for offers for new generation resources to
meet the need for new power, the utility may make additional
investments in new utility-owned generation.
King said that the utility is negotiating agreements
that could result in utility-owned facilities capable
of providing 800 megawatts. The utility is also negotiating
agreements that could secure an additional 1,300 megawatts
to be provided under long-term contracts with third-party
generators. By the end of March, King said, the utility
expects to execute these agreements and file for CPUC
approval. If approved, the investments in new generation
would be in addition to the proposed capital investments
outlined in today’s investor conference.
“Investments in Pacific Gas and Electric Company’s
system are essential to strengthening our service,
and they provide investors with a solid opportunity
to earn returns on a growing rate base,” said
King.
Johns reaffirmed the growth forecast for PG&E
Corporation’s earnings per share from operations
issued earlier this year. As previously announced,
the company anticipates earnings per share from operations
will grow an average of 7.5 percent annually for 2006
through 2010. Johns also reaffirmed earnings per share
from operations guidance for 2006 in the range of $2.40-$2.50
per share. He presented 2007 guidance for the first
time in the range of $2.65-$2.75 per share.
The above-target growth from 2006 to 2007 reflects
the high levels of anticipated utility capital investment
in 2007, combined with plans to reduce the company’s
liquidity targets in 2006 and, thereby, make between
$100 million and $200 million available for capital
investments by the end of this year.
“PG&E Corporation’s current financial
health, combined with our strategy to create value
by focusing on the customer, represent an excellent
opportunity for investors today,” said Darbee. “We
look forward to delivering.”
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).
Click here (10
Kb) for
information that reconciles estimated earnings per
share from operations with estimated consolidated net
income per share in accordance with GAAP.
A webcast 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 contains
forward-looking statements regarding management’s guidance for PG&E
Corporation’s 2006 and 2007 earnings per share
from operations and targeted average annual growth
rate for earnings per share from operations over the
2006-2010 period. These statements are based on current
expectations and various assumptions which management
believes are reasonable, including that Pacific Gas
and Electric Company (Utility) earns its authorized
rate of return, substantial capital investments are
made in the Utility’s business as forecasted
over the 2006-2010 period, and that share repurchases
are made. These statements and assumptions are necessarily
subject to various risks and uncertainties the realization
or resolution of which are outside of management's
control. Actual results may differ materially. Factors
that could cause actual results to differ materially
include:
- Unanticipated changes in operating expenses or
capital expenditures, which may affect the Utility’s
ability to earn its authorized rate of return;
- How the Utility manages its responsibility to
procure electric capacity and energy for its customers;
- The adequacy and price of natural gas supplies,
the ability of the Utility to manage and respond
to the volatility of the natural gas market for its customers;
- The operation of the Utility’s Diablo Canyon
nuclear power plant, which could cause the Utility
to incur potentially significant environmental costs and
capital expenditures, and the extent to which the
Utility is able to timely increase its spent nuclear fuel storage
capacity at Diablo Canyon;
- Whether the Utility is able to recognize the anticipated
cost benefits and savings to result from its efforts
to improve customer service through implementation
of specific initiatives to streamline business processes
and deploy new technology;
- The outcome of proceedings pending at the Federal
Energy Regulatory Commission (FERC) and the California
Public Utilities Commission (CPUC), including the Utility’s
general rate case and the CPUC’s pending investigation
into the Utility’s billing and collection practices;
- 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, and the outcome of the CPUC's
new rulemaking proceeding concerning the relationship
between the California investor-owned energy utilities
and their holding companies and non-regulated affiliates;
- The impact of the recently adopted Energy Policy
Act of 2005 and future legislative or regulatory
actions or policies affecting the energy industry;
- The outcome of the litigation pending against
the Utility in California state court involving allegations
of injury allegedly caused by exposure to chromium
at certain of the Utility's gas compressor stations and
other pending litigation;
- Increased municipalization and other forms of
bypass in the Utility’s service territory;
and
- Other factors discussed in PG&E Corporation's
SEC reports.