The parent of bankruptcy-saddled Pacific Gas and Electric Co. utility, PG&E Corp., San Francisco, Tuesday reported a 19% increase in earnings from operations last year, compared to 2000, including a 19% increase for the utility over 2000 results ($2.51/share, or $914 million). PG&E’s National Energy Group (NEG), its nonutility operations, increased its contribution to earnings from operations by 27% (57 cents/share, or $209 million), compared to the previous year, but that is not expected to continue this year due to currently depressed energy prices..

Company officials on a conference call indicated that fourth quarter results provide a harbinger for this year’s earnings, with the utility providing a bigger share and the nonutility NEG providing a smaller contribution to profits due to depressed energy prices and corresponding deferral of some of its proposed new power plant projects. In the fourth quarter, utility earnings were 94 cents/share, compared to 31 cents/share in 2000. NEG results were 2 cents/share for the fourth quarter, compared to 8 cents/share in 2000. Overall, the company is forecasting earning in the same $3/share range for this year as was realized in 2001.

Total net income reported for 2001 was $1.1 billion, or $3.02/share, according to Robert Glynn, PG&E Corp.’s CEO. That compared to a reported total net loss of $3.36 billion, or a negative ($9.29)/share, in 2000. (The negative 2000 results were the result of accounting rules that required PG&E “to record a more than $4.1 billion charge for wholesale power costs and transition costs that it could no longer consider ‘probable’ of recovery in light of multiple adverse regulatory decisions by the California Public Utilities Commission.”)

The utility Chapter 11 bankruptcy did not adversely affect earnings, and, in fact, “financial results for the full year 2002 show that the company’s fundamental operations performed solidly last year,” said Glynn, adding that the results would be “solid in any year, but 2001 wasn’t just ‘any year,’ given the volatility of the markets, the utility bankruptcy filing and the Enron demise at year-end.”

In giving an update on the PG&E utility’s bankruptcy proceedings, Glynn reiterated that the utility will push forward with its reorganization plan, for which a revised version will be filed with the federal bankruptcy court in San Francisco on Thursday. In response to an analyst’s question about a possible settlement with the CPUC, Glynn noted that he did not expect that to develop, given the $4.5 billion gap in the state’s alternative utility reorganization plan and the fact that it does not bring the utility back to an investment-grade credit rating as the PG&E plan purports to do.

While noting that capital expenditures will likely decrease by $1 billion annually this year and next and earnings are expected to remain down for the year, Tom Boren, the head of PG&E’s nonutility NEG businesses, said the company is assuming spark spreads will widen as the year progresses and energy prices move upward in reaction to what he calls the 60,000 to 100,000 MW of new generation capacity that was cancelled over the past six to eight months.

Among the NEG results, the natural gas operations provided 21 cents/share of the year-long 57 cents/share contribution, Boren indicated. He noted that about $200 million of the $1.5 billion planned for capital budgets in 2002 will be spent on the Pacific Northwest interstate natural gas pipeline expansions and the currently under-construction U.S. portion of the North Baja Pipeline being built on a joint venture basis with affiliates of San Diego-based Sempra Energy ($160 million will pay for the North Baja and Pacific Northwest pipeline work; $40 million for maintenance).

NEG has 7,099 MW of generating capacity it owns or controls nationally, with a large contingent in northeastern part of the country; it has 7,743 MW under construction, said Boren, noting that 2,640 MW are expected to begin operations this year, and by year-end PG&E will have about 9,800 MW it either operates or controls.

In the energy trading area, PG&E saw its gross margin for the year drop to $176 million from $205 million in 2000, with an overall mark-to-market loss of ($120 million).

©Copyright 2002 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.