EDITORS: Please do not use "Pacific Gas
and Electric" or "PG&E" when referring to PG&E
Corporation or its National Energy Group. The PG&E National
Energy Group is not the same company as Pacific Gas and Electric
Company, the utility, and is not regulated by the California Public
Utilities Commission. Customers of Pacific Gas and Electric Company
do not have to buy products or services from the National Energy
Group in order to continue to receive quality regulated services
from Pacific Gas and Electric Company.
CORPORATION REPORTS FIRST QUARTER FINANCIAL RESULTS
PG&E Corporation reported
a net loss of $951 million, or $2.62 per share, for the first
quarter of 2001. The results include $1.1 billion (after tax)
at Pacific Gas and Electric Company for unreimbursed wholesale
power costs and ISO power purchases.
Before the charge and
other non-recurring items, net income from operations in the
first quarter was $243 million, or $0.67 per diluted share.
Net income from operations for the same quarter in 2000 was
$0.78 per diluted share, or $284 million.
Pacific Gas and Electric
Company posted net income from operations of $0.53 per diluted
share, or $192 million, for the quarter. For the same quarter
in 2000, the utility reported net income from operations of
$0.63 per share, or $228 million.
PG&E National Energy
Group net income from operations was $0.15 per diluted share,
or $54 million, for the first quarter of 2001, compared with
$0.15 per share, or $56 million, for the same quarter in 2000.
First Quarter Consolidated
Income Statement (PDF, 8KB)
(San Francisco, CA)
- PG&E Corporation today reported a net loss of $951 million, or
$2.62 per share, for the first quarter of 2001, compared with net
income of $280 million, or $0.77 per diluted share, in the same
quarter last year. The loss resulted from $1.1 billion (after tax)
for unreimbursed wholesale power costs at the utility as well as
billed and estimated amounts for real-time power purchases and other
costs incurred by the California Independent System Operator (ISO)
during the first quarter. While the Company is both disputing its
liability for the ISO's purchases and asserting its legal rights
to recover wholesale power costs through retail rates, financial
reporting standards require that the amounts be accounted for as
expenses unless they can be deemed probable of recovery. As in the
fourth quarter of 2000, uncertainties surrounding the resolution
of the California energy crisis prevented the company from meeting
"While standard accounting
rules required the utility to record a charge against earnings for
unreimbursed wholesale and transition costs, taking this charge
does not diminish our conviction that the utility is entitled under
law to recover these costs, nor does it diminish our ongoing lawsuit
in Federal District Court," said PG&E Corporation Chairman, CEO
and President, Robert D. Glynn, Jr. "Further, a significant portion
of the charges in the first quarter reflect both billed amounts
and estimated power purchases by the ISO. We believe the utility
is not responsible for these charges, and we are encouraged that
the federal government has said the ISO may not make these purchases
while relying on a non-creditworthy entity, such as Pacific Gas
and Electric Company."
Glynn said that, pending
the outcome of the Company's challenges to these matters, the Company
may later reverse the charges it is now required to record. "Should
it be confirmed that these costs are indeed recoverable, and/or
that the ISO charges are illegitimate, as we believe they are, we
will reinstate these amounts and report the corresponding increase
in earnings," Glynn said.
On an operating basis, PG&E
Corporation reported earnings from operations of $243 million, or
$0.67 per share, for the quarter, compared with $284 million or
$0.78 per share, for the same quarter in 2000.
"We are disappointed that
the California energy situation continues to have such a negative
impact on our reported financial results," said Glynn. "Under Chapter
11, we are preparing our plan of reorganization so that we can obtain
its approval, implement the plan, exit Chapter 11, and restore the
shareholder value associated with our strong operating results."
Pacific Gas And Electric
On an operating basis, Pacific
Gas and Electric Company contributed $192 million, or $0.53 per
share, to the overall results at the Corporation for the quarter,
compared with operating results of $228 million, or $0.63 per diluted
share, in the same quarter in 2000.
The utility's reported results
for the first quarter include January and February bills and an
estimate for March totaling $1.1 billion (after tax) for power purchased
by the ISO. The costs reflect the ISO's total purchases for the
period, including real-time power purchases for the California Department
of Water Resources (DWR). Because the ISO cannot currently separate
DWR purchases from purchases it makes to cover the net open position,
the ISO has invoiced the utilities for its costs. While it disputes
these bills, in light of accounting rules, the utility must recognize
them as charges in the first quarter. Additional charges include
the interest expense associated with financing all past unreimbursed
power costs and the portion of the tax loss that the utility is
unable to carry forward.
Throughout the quarter,
the utility continued to deliver electricity and natural gas to
its 13 million customers, while working in several arenas to bring
about a fair and equitable solution to the California energy crisis.
The utility also continued efforts to ramp up customer energy efficiency
programs in preparation for anticipated power shortages this summer.
Those efforts are ongoing.
On April 6, 2001, the utility
filed for reorganization under Chapter 11 of the U.S. Bankruptcy
Code, believing that the federal bankruptcy court will ultimately
provide the best forum for reaching such a solution. The utility
is currently preparing its plan of reorganization. The utility intends
to move through and emerge from the Chapter 11 process as expeditiously
PG&E National Energy Group
On an operating basis, the
PG&E National Energy Group (NEG) contributed $54 million, or $0.15
per diluted share, to the Corporation's overall results, compared
with operating results of $56 million, or $0.15 per diluted share,
in the same quarter last year.
The NEG continued to execute
its growth strategy in the first quarter, building on a very strong
performance for the year 2000. During the first quarter, the NEG
obtained independent investment-grade credit ratings for itself
and its energy trading business, affirming the creditworthiness
of both entities. Those ratings were reaffirmed following the Chapter
11 filing by the Corporation's utility unit. The NEG's solid credit
rating is enabling this unit to move forward with a number of projects
aimed at expanding its power and natural gas asset base.
"In the NEG, our strategy
and our ability to execute it remain solid, as demonstrated by a
number of accomplishments in the first quarter," said Glynn. "We
fully expect to continue that unit's outstanding track record of
building value for shareholders."
On the new plant construction
front, last quarter the NEG successfully renegotiated capital agreements
for three of its projects, replacing $729 million in PG&E Corporation
credit guarantees with guarantees at the NEG level. During the quarter,
the NEG also awarded natural gas pipeline capacity as a result of
bidding for new space on the unit's Northwest pipeline. The NEG
is moving forward with plans to expand the capacity of the pipeline
by an additional 200 million cubic-feet per day, bringing total
capacity to 2.9 billion cubic-feet per day. The NEG has requested
expedited federal approval of the project in order to supply California
with much needed natural gas as early as the winter of 2001.
"We are focused on resolving
the challenges associated with the California energy crisis fairly
and equitably for all parties, including creditors, shareholders
and customers," said Glynn. "The federal court is the best venue
for us in which to pursue this objective. Like all the parties involved,
we look forward to completing this process as quickly as possible.
In the interim, our people remain dedicated to providing our customers
with reliable and safe electric and natural gas service."
This press release contains
forward-looking statements regarding the future performance of PG&E
Corporation and its businesses. These statements are subject to
certain risks and uncertainties that could cause actual results
to differ materially. Some of the factors that could cause actual
results to differ materially include: whether and to what extent
the Utility is determined to be responsible for the ISO's charges
billed to the Utility; the terms and conditions of the Utility's
reorganization plan that is ultimately adopted by the bankruptcy
court, the pace and extent of the ongoing restructuring of the electric
and natural gas industries across the United States; future conditions
in the energy markets; the extent to which current or planned generation
development, pipeline and storage capacity projects are completed
and the pace and cost of such completion; the extent and timing
of generating, pipeline and storage capacity expansion and retirements
by others; the Corporation's ability to successfully manage fluctuations
in commodity gas and electricity prices; liquidity in the commodity
energy market and NEG's ability to provide the credit enhancements
necessary to support its trading activities; NEG's ability to obtain
financing for its planned development and to refinance NEG's and
its subsidiaries' existing indebtedness on reasonable terms; the
method and timing of valuation of the Utility's hydroelectric generation
assets; the timing of the completion of the Utility's transition
cost recovery and the consequent end of the current electric rate
freeze in California; the pace and extent of competition in the
California generation market and its impact on the Utility's costs
and resulting collection of transition costs; future operating performance
of the Diablo Canyon Nuclear Power Plant; and other factors discussed
in reports filed with the Securities and Exchange Commission by
the Corporation and Pacific Gas and Electric Company.