NGI The Weekly Gas Market Report
Thanks to a strong fourth quarter, San Francisco-based PG&ECorp. earnings increased slightly in 1998, mainly due toimprovements in its nonutility operations, particularly in theelectricity businesses. Merchant natural gas operations lost moneyoverall because of Texas operations that continued to operate inthe red.
Overall, PG&E earned $719 million on revenues of $19.9billion last year, compared to $716 million on revenues of $15.4billion in 1997. Fourth quarter figures for ’98 were $196 millionon revenues of $5.4 billion, compared to $94 million on revenues of$4.8 billion in ’97. This was the first full year in whichnonutility operating revenues exceeded revenues from thesubstantial utility operations of Pacific Gas and Electric Co. ($11billion versus $8.9 billion, respectively). Nonutility operationsstill lost money, however.
PG&E Corp. CEO Robert Glynn said financial performanceoverall in ’98 “grew significantly,” noting that he is particularlypleased the unregulated businesses overall “showed dramaticimprovement for the full year.” A PG&E Corp. spokespersonindicated that expectations for this year are that all but theTexas gas operations, which are hurt by the continuing depressedgas liquids market, will be operating profitably by the end of1999, including PG&E Energy Trading and PG&E Energy Services,both of which continued to lose money in 1998. Among the nonutilitybusinesses, however, trading pulled in the most operating revenueslast year, the spokesperson said.
The utility continued to provide more than 80% of the earnings,but PG&E’s merchant power plant developer/operator, U.S.Generating Co., showed a profit on an annual basis for the firsttime, contributing almost 15% to the holding company’searnings-per-share; the natural gas interstate pipeline activitiesin the Pacific Northwest similarly showed a profit.
Texas gas operations had the worst relative showing among theunregulated subsidiaries showing substantial losses, however, thePG&E Corp. spokesperson reiterated that there are no currentplans to sell any of the Texas assets. “It is simply a matter ofseeing what the market does and if the current weakness in themarket fundamentals begin to improve,” said Greg Pruett, PG&ECorp. vice president. “Currently with those [Texas] assets, weintend to do everything we can to maximize efficiencies.” Theleaders of the natural gas merchant operations “are not headlong inpursuit of selling assets unless they can see a compelling businessreason to do so,” Pruett added.
There is an ongoing effort to consolidate the Portland-based andHouston/San Antonio-based natural gas operations, eliminatingduplications that exist more than two years after the acquisitionsin Texas. “We recently announced that we are going to streamlinethe [nonutility] gas operations and bring them all under oneumbrella, and then look for more opportunities to createefficiencies and maximize the assets we already have,” Pruett said.
Richard Nemec, Los Angeles
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