- PG&E Corporation reported a total net loss of $2.36 per share for 2002, compared with total net income of $3.02 per share for 2001. (All "per share" amounts in this release are presented on a diluted basis.)
- The Corporation's earnings from operations without "headroom" for 2002 were $2.33 per share, compared with $3.02 per share for 2001. Including headroom, the Corporation's earnings from operations were $5.16 per share for the year.
- Pacific Gas and Electric Company's earnings from operations, without headroom, were $2.15 per share, compared with $2.51 per share for 2001.
- PG&E National Energy Group (PG&E NEG) reported earnings from operations of $0.03 per share, compared with $0.57 per share for 2001.
|Fourth Quarter Consolidated Income Statement
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(San Francisco) -- PG&E Corporation (NYSE: PCG) reported a total net loss of $874 million, or $2.36 per share, for 2002, compared with total net income of $1,099 million, or $3.02 per share, for 2001. The 2002 results primarily reflect substantial fourth-quarter impairment charges in connection with the planned sale, transfer or abandonment of various assets in the merchant power generation segment of its PG&E National Energy Group (PG&E NEG) business unit.
In addition to actual reported earnings, which are presented in accordance with generally accepted accounting principles (GAAP), the Corporation also presents results on an operations basis, excluding certain gains and losses. Earnings from operations without headroom were $864 million, or $2.33 per share, for 2002 compared with $1,099 million, or $3.02 per share for 2001. With headroom, earnings from operations were $1.9 billion, or $5.16 per share for 2002. Earnings from operations primarily reflected the contribution of $797 million, or $2.15 per share, from Pacific Gas and Electric Company. PG&E NEG contributed $13 million, or $0.03 per share, and PG&E Corporation contributed $54 million, or $0.15 per share, reflecting consolidated tax benefits.
The Corporation's annual report on Form 10-K, to be filed today, also discloses the earnings impact of accounting for stock options if the company were to record them as an expense. For 2002, accounting for stock options as an expense would have reduced earnings by approximately $0.05 per share.
PACIFIC GAS AND ELECTRIC COMPANY
Not including headroom, the Corporation's California utility business, Pacific Gas and Electric Company, contributed $797 million, or $2.15 per share, to earnings from operations for 2002, compared with $914 million, or $2.51 per share, for in 2001. Earnings from operations including headroom were $1,848 million, or $4.98 per share, for 2002.
Operational performance at the utility remained strong in 2002, as the utility continued to deliver safe, reliable electric and gas service. The utility received high marks from customers responding to its customer service survey, with more than 90 percent rating their service as good, very good or excellent. Additional accomplishments for the year included strong safety performance, with total lost-time incidents that were down 21 percent from 2001 and fewer than any in the last 10 years; a sustained five-year trend of solid reliability, with outages down by 20 percent in frequency and duration over that period; the launch of a new IT system for customer accounts; and continued excellence in energy efficiency programs, with one-third of residential customers qualifying for the 20 percent rebate program, and receipt of the American Council for an Energy-Efficient Economy's Champion of Energy Efficiency Award.
Moreover, in 2002, the utility operated with the lowest system-wide average electric rates among the state's three largest investor-owned utilities.
"Pacific Gas and Electric Company's financial performance and operational accomplishments in 2002 demonstrate that this business remains strong and that our team continues to provide a solid foundation for us to move forward with the utility's proposed plan of reorganization," said Robert D. Glynn, Jr., Chairman, CEO and President of PG&E Corporation.
PG&E NATIONAL ENERGY GROUP
The Corporation's national wholesale energy business, PG&E National Energy Group, reported earnings from operations of $13 million, or $0.03 per share, for 2002, compared with earnings from operations of $209 million, or $0.57 per share, for 2001.
Performance on the PG&E NEG's Northwest natural gas pipeline remained solid for 2002, with approximately 93 percent of its available capacity committed under long-term contract at the end of the year. PG&E NEG also began operations on the North Baja pipeline in 2002. The Interstate Pipeline Operations segment of the PG&E NEG contributed $0.21 per share for 2002, compared with $0.21 per share in 2001. PG&E NEG's earnings from operations included a loss of $0.10 per share from the unit's Integrated Energy and Marketing and discontinued operations segments, compared with income of $0.37 per share for 2001.
Although the PG&E NEG's operating performance was solid during 2002, its financial performance was additionally impacted by the downturn in the wholesale electric power markets resulting in a loss of $3.4 billion for the year. These losses included the impairment charges related to the planned sale, transfer, or abandonment of investments associated with the merchant power generation operation - steps we took affirmatively to restructure that business.
PG&E NEG is continuing efforts to reach agreement with lenders and debt holders on a global restructuring plan to address financial obligations the company cannot meet, including amounts due under credit facilities and equity commitments for various power plant construction projects.
"Our emphasis remains on reaching a consensual restructuring agreement with the PG&E NEG's creditors," said Glynn. "We are fully engaged in that effort, and we continue to believe this is an achievable, though challenging, goal."
"PG&E marked its 150th year in 2002," said Glynn. "During this time, some things have changed; some have changed a great deal; and some haven't changed at all. Changed are the number of customers we serve and the size and scale of our operations. Changed a great deal is the structure of our industry and its marketplaces. And not changed at all are the dedication and commitment of the men and women of PG&E to provide safe, reliable and responsive delivery of energy and customer service."
"As we look ahead, each of our businesses is on clear, independent course of action with the objectives of resolving uncertainty and laying the foundation for our operations to deliver the financial performance and value shareholders expect," said Glynn.
EARNINGS FROM OPERATIONS AND ITEMS IMPACTING COMPARABILITY
Earnings from operations exclude certain income and expenses that impact comparability between years and are reflected on the Corporation's income statement as required by GAAP. Most significant were the charges incurred by PG&E NEG associated with its restructuring activities. During the year, PG&E Corporation recognized a combined after-tax charge of $1.6 billion, or $4.21 per share, to reflect impairment charges at the PG&E NEG related to power plant projects that are anticipated to be transferred to the project lenders, as well as impairment charges for generating turbines, dispersed generation equipment and related capitalized power plant development costs. PG&E Corporation incurred an additional charge of $767 million, or $2.07 per share, to reflect the loss on the anticipated disposal of PG&E NEG's USGen New England generating business and Energy Trading Canada entity, both of which are expected to be sold in 2003. Additional charges at PG&E NEG totaled $304 million, or $0.81 per share and are detailed in the Corporation's 10-K.
Items impacting comparability at the Corporation and Pacific Gas and Electric Company included incremental interest costs of $419 million, or $1.13 per share which include the write-off of previously deferred financing costs associated with the Corporation's third quarter refinancing; Chapter 11 costs of $132 million, or $0.36 per share, generally consisting of external legal and financial advisory fees; a gain of $352 million, or $0.95 per share, resulting from the reversal of charges previously incurred for ISO power purchases; and income of $42 million, or $0.11 per share, associated with the third quarter change in the valuation of PG&E NEG warrants issued in conjunction with PG&E Corporation's term loan agreement.
A conference call with the financial community will be held today at 8:30 a.m. PST/ 11:30 a.m. EST to discuss PG&E Corporation's results for the quarter. The call will be open to the public on a listen-only basis via webcast. Please visit our website www.pgecorp.com for more information and instructions for accessing the webcast. A replay of the conference call will be available toll-free by calling (877) 690-2090, and also will be available on our website. International callers will be able to access the replay by dialing (402) 220-0651.
Terms Used in This Release
Headroom - Headroom is generation-related revenues in excess of power costs at Pacific Gas and Electric Company.
GAAP - Generally Accepted Accounting Principles are the basic doctrine set forth by the Accounting Principles Board of the American Institute of Certified Public Accounts. These principles define accepted accounting practice, including broad guidelines as well as detailed procedures. *
* Barron's Dictionary of Finance and Investment Terms