PG&E Shows '99 Loss, Will Sell Services Unit
PG&E Corp. released negative financial results for 1999
caused by its ill-fated experience with Texas natural gas
properties and signaled further retrenchment with the confirmation
it is pursuing a buyer for its energy services operations, which
showed growing losses last year.
While PG&E posted record total operating revenues of $20.8 billion, operating
income was down 58% to $878 million in 1999 compared to $2.098 billion in
1998. The write-down on the sale of the Texas gas pipeline and liquids assets
(See NGI, Feb. 7), and the prospective sale
of the retail energy service operations collectively put the results into
the minus column with a net loss of $73 million or $0.20/share.
In a Securities Exchange Commission (8-K) filing Feb. 23,
PG&E made public the fact that it is putting the energy
services business on the market, with a goal of closing a sale by
the end of the second quarter, according to Greg Pruett, a PG&E
vice president and corporate spokesperson. Pruett said the company
leaders made the decision to sell that business at the end of last
"We are not trying to hide anything or low-key it; it is just an
SEC filing," Pruett said. "We should have something to report in
the near future because our expectation is that we will close by
the end of the second quarter."
Although he cannot say how many prospective buyers there are,
Pruett said the company "is very pleased with the level of
interest." Speculation among energy observers in California is that
Duke, Enron, AES/NewEnergy and Sempra Energy are among those
showing interest. Pruett emphasized that the sale does not involve
PG&E's trading operations, which have a natural gas component
in Houston and power unit in Bethesda, MD, home of its power plant
developer/operator, PG&E Generating (formerly US Generating).
The generating and Pacific Northwest-based interstate gas
pipeline businesses continued to operate in the black last year,
contributing a total of 44 cents/share profit; trading losses
increased from a negative 2 cents/share to a negative 9
cents/share. Pruett said the trading operation is considered a key
to PG&E's strategic goal of maximizing its results from the
business of developing and operating merchant power plants
"Our focus is on reviewing the bids for the energy services
unit, determining if any of them are attractive enough for us to
divest that unit and then moving forward from there," Pruett said.
"Our focus is on building our competitive generation unit from its
current levels of 10,000 MW operating or under development to the
17,000 MW level by 2002.
"We're going to maximize the benefits we get out of generation
assets through the trading operation. We see a very strong presence
for trading in the future, as well as our Pacific Northwest gas
PG&E no longer sees the same potential in the energy
services business, according to Pruett, because of "the kinds of
financial and human resource support needed to get a business off
the ground." He noted that PG&E had made these commitments over
the past three years with PG&E Energy Services with a "fair
amount of success," and the company still feels the business "will
go into the black" by the end of the year.
On average, PG&E Energy Services was beginning to require
more than $100 million annually to operate, sources at the utility
holding company indicated.
"We think energy services for the long term is a good business,
but for the shorter and mid-term, we are going to concentrate on
the generation business," Pruett said.
PG&E's fourth quarter results showed a loss of $1.49 per
share, compared to $0.54 earnings per share in 4Q 1998. This was
based on a decrease in operating revenues to $4.795 billion in 4Q
1999 from $5.364 billion in the same period in 1998 and increased
expenses, resulting in an operating income loss of $579 million for