PRESS RELEASES 2001 RELEASE
FOR IMMEDIATE RELEASE
May 02, 2001
Listen to the conference call to the Financial Community
Contact: Greg S. Pruett
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.

PG&E 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 this standard.

"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 Company

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 as possible.

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.

Conclusion

"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.

 

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