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PG&E Retrenchment Nets Solid 1Q

PG&E Retrenchment Nets Solid 1Q

Having sold unprofitable Texas natural gas businesses and begun to dispose of its unprofitable energy services business, PG&E Corp. reported an 80% increase in first quarter results, compared to the year-earlier period, earning $284 million, or 79 cents-per-share. Its slimmed-down national energy group now focused on merchant power generation and trading contributed 16 cents-per-share to those results, said CEO Robert Glynn, Jr.

Glynn characterized the results as "particularly strong," following within weeks and months of the sale of money-losing nonutility energy businesses, and noting that the overall corporate effort is now in a "good position" to achieve its goal of earnings growth in the range of 8-10% this year. "The results are very positive and give us more confidence for the rest of the year," said Glynn.

The California-based company went to Boston for its annual shareholders meeting to emphasize its multi-billion-dollar investment in merchant generating plants in New England where power prices are up for the portfolio of plants it purchased several years ago from New England Electric System.

The bulk of the earnings continue to come from the regulated utility, which had net earnings of $228 million, or 63 cents-per-share. Resolution of a long-standing general rate case by California regulators and uninterrupted operations at PG&E's major nuclear plant at Diablo Canyon combined to account for 21 cents-per-share of the earnings.

PG&E's trading "across the board" for gas and electricity was in the black for the first time in the first quarter, and its Pacific Northwest gas transmission business is "consistently meeting expectations," said Glynn. He cited the generating unit's niche business of providing up to 200 MW of mobile generation capacity that can be moved to follow power demand in coordination with its trading operations as a potential growth opportunity.

Thomas Boren, head of the nonutility national energy group, said the sales of its Texas gas assets and the energy services business should be completed by mid-year. He said PG&E intends to continually tinker with its portfolio mix in the nonutility area, particularly in the merchant power plant business.

Richard Nemec, Los Angeles

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