PRESS RELEASES 2012
FOR IMMEDIATE RELEASE
 
February 16, 2012
ISSUED BY:   PG&E Corporation, 1-800-743-6397

PG&E CORPORATION REPORTS YEAR-END AND FOURTH QUARTER FINANCIAL RESULTS FOR 2011; UPDATES 2012 GAS MATTERS

Related Documents
Press Release and Selected Tables
Presentation Slides
Complete Earnings Tables

(San Francisco) — PG&E Corporation's (NYSE: PCG) full-year 2011 net income after dividends on preferred stock (also called "income available for common shareholders") was $844 million, or $2.10 per share, as reported in accordance with generally accepted accounting principles (GAAP). This compares with $1.1 billion, or $2.82 per share, for the full year 2010. For the fourth quarter of 2011, GAAP results were $0.20 per share, compared with $0.63 per share for the same quarter in 2010.

GAAP results include items that management does not consider part of normal, ongoing operations (items impacting comparability), which totaled $861 million pre-tax, or $1.48 per share, for the full year and $339 million pre-tax, or $0.69 per share, for the fourth quarter. The items impacting comparability relate to natural gas matters (natural gas pipeline-related costs, penalties, third-party liability claims, and insurance recoveries) and environmental costs.

"Enhancing the safety and performance of our operations continues to be our top priority," said Tony Earley, Chairman, CEO and President of PG&E Corporation. "In keeping with that focus, our new gas operations organization made significant strides in 2011 completing extensive pipeline testing and other safety-related work, much of which was unprecedented in its scope and rigor. While much of our work in 2011 addressed past operating and records issues, our gas pipeline initiatives in 2012 are aimed primarily at meeting the substantial new safety requirements that California has adopted for the future. We expect that PG&E will be among the first utilities in the country to meet the new standards in the years ahead."

Costs for natural gas pipeline-related actions in 2011 were absorbed by shareholders and were the largest item impacting comparability reflected in 2011 GAAP results. This consisted of extensive work to validate safe pipeline operating pressures and conduct strength testing, as well as legal and other expenses related to the San Bruno pipeline accident. Costs totaled $483 million on a pre-tax basis, or $0.72 per share, for the full year and $180 million on a pre-tax basis, or $0.26 per share, for the fourth quarter. Since the September 2010 accident, the utility has incurred, at shareholders' expense, a total of $546 million pre-tax for natural gas pipeline-related actions.

GAAP results for 2011 also reflect a fourth-quarter accrual of $200 million ($0.50 per share for the year and $0.49 per share for the quarter) for potential penalties regulators are expected to levy in connection with gas matters. The accrual takes into account a number of recent regulatory developments.

Annual GAAP results also reflect an accrual of $155 million pre-tax, or $0.23 per share, for third-party liability associated with the San Bruno accident. No additional accruals for third-party liability were taken in the fourth quarter. For 2010 and 2011 combined, the total provision for third-party liability is $375 million. PG&E continues to expect that a significant portion of its third-party liability will ultimately be recovered through insurance. Insurance recoveries related to third-party liability totaled $99 million pre-tax, or $0.15 per share, for the year and $39 million pre-tax, or $0.06 per share, for the fourth quarter.

Finally, GAAP results also reflect a $125 million pre-tax provision, or $0.18 per share, booked in the third quarter for estimated environmental-related costs associated with historic natural gas compressor station operations in Hinkley, California.

Full-Year and Fourth Quarter Earnings from Operations

On a non-GAAP basis, excluding items impacting comparability, PG&E Corporation's earnings from operations in 2011 were $1.44 billion, or $3.58 per share, compared with $1.33 billion, or $3.42 per share, in 2010.

For the fourth quarter, earnings from operations were $366 million, or $0.89 per share. During the same period in 2010, earnings from operations were $277 million, or $0.70 per share. The quarter-over-quarter increase in earnings per share from operations primarily reflects higher revenues stemming from increased capital investments in PG&E's system, as authorized by the California Public Utilities Commission. In addition, absent from fourth quarter results in 2011 were several items that negatively affected results for the same period in 2010, including a refueling at Diablo Canyon Power Plant. These positive factors were partially offset by an increase in the number of common shares outstanding and other items.

2012 Earnings Guidance

PG&E Corporation is maintaining previously issued guidance for 2012 earnings from operations in the range of $3.10 to $3.30 per share.

On a GAAP basis, 2012 guidance is being updated to include the costs of the utility's proposed Pipeline Safety Enhancement Plan (PSEP), given uncertainty regarding the timing and outcome of regulatory approval. All costs in the PSEP for which PG&E is seeking recovery are for work necessary to meet newly adopted pipeline safety requirements going forward. PG&E is not seeking recovery of costs to address past operational and records-related issues and other work outside the scope of the PSEP.

Previous GAAP guidance for 2012 assumed recovery of all PSEP costs (originally estimated at $230 million pre-tax) as filed and, therefore, included only pipeline-related work outside the scope of the PSEP. The previous range for these non-PSEP costs was $100 million to $200 million pre-tax. The updated range includes both PSEP and non-PSEP costs and reflects an aggregate increase in expected costs of $120 million pre-tax based on the company's experience with pipeline-related work during 2011. The updated range for all pipeline-related work is $450 million to $550 million pre-tax.

GAAP guidance is unchanged for third-party liability claims associated with the San Bruno accident. The estimate for third-party liability remains $0 to $225 million pre-tax for the year, representing the difference between the upper end of the company's estimated range for third-party liability of $600 million and the $375 million already accrued to date. GAAP guidance is also unchanged for potential additional environmental-related costs. The estimate for environmental-related costs remains $0 to $100 million pre-tax for the year.

The resulting range for 2012 GAAP guidance is now $1.88 to $2.67 per share, compared with the previous range of $2.36 to $3.16 per share.

As in 2011, guidance does not include any potential future insurance recoveries or penalties (other than those already accrued) or any potential punitive damages. In addition, it assumes PG&E Corporation will issue approximately $600 million of common stock in 2012. Guidance is based on various assumptions, including those described above. Other assumptions include future operating expenses, capital expenditures, authorized rate base and allowed return.

PG&E Corporation discloses historical financial results and provides guidance based on "earnings from operations" in order to provide a measure that allows investors to compare the underlying financial performance of the business from one period to another, exclusive of items that management believes do not reflect the normal course of operations. Earnings from operations are not a substitute or alternative for consolidated net income presented in accordance with GAAP (see the accompanying tables for a reconciliation of results and guidance based on earnings from operations to results and guidance based on consolidated net income in accordance with GAAP).

Supplemental Financial Information

In addition to the financial information accompanying this release, an expanded package of supplemental financial and operational information along with slides for today's conference call with the financial community has been furnished to the Securities and Exchange Commission and is available on PG&E Corporation's website at: http://www.pgecorp.com/news/press_releases/Release_Archive2012/120216press_release.shtml.

Conference Call with the Financial Community to Discuss Financial Results

Today's call at 11:30 a.m., Eastern Time, is open to the public on a listen-only basis via webcast. Please visit http://www.pgecorp.com/investors/investor_info/conference/ for more information and instructions for accessing the webcast. The call will be archived on the website. Alternatively, a toll-free replay of the conference call may be accessed shortly after the live call through 8:00 p.m., Eastern Time, March 1, 2012, by dialing 866-415-9493. International callers may dial 585-419-6446. For both domestic and international callers, the confirmation code 23820 will be required to access the replay.

This press release and tables contain forward-looking statements that relate to management's guidance for PG&E Corporation's 2012 financial results and the various assumptions and estimates discussed above, including forecasts of costs related to planned gas and electric operations improvements, gas pipeline matters, third-party liabilities associated with the San Bruno accident, environmental matters, and future dividends and equity issuances, as well as earnings. These statements, assumptions, and estimates reflect management's judgment and opinions and are necessarily subject to various risks and uncertainties, the realization or resolution of which may be outside of management's control. Actual results may differ materially. Factors that could cause actual results to differ materially include:

  • the outcomes of pending and future investigations and regulatory proceedings related to the San Bruno accident, and the safety of the Utility's natural gas pipelines in its service territory; the ultimate amount of costs the Utility incurs for natural gas matters that are not recovered through rates; the ultimate amount of third-party claims associated with the San Bruno accident that are not recovered through insurance; and the amount of any civil or criminal penalties, or punitive damages the Utility may incur related to these matters, including the amount of penalties that the CPSD may impose on the Utility for violations of natural gas safety regulations;
  • the outcome of future investigations or proceedings that may be commenced by the CPUC or other regulatory authorities relating to the Utility's compliance with law, rules, regulations, or orders applicable to the operation, inspection, and maintenance of its electric and gas facilities (in addition to investigations or proceedings related to the San Bruno accident and natural gas matters);
  • whether PG&E Corporation and the Utility are able to repair the reputational harm that they have suffered which, in part, will depend on their ability to adequately and timely respond to the findings and recommendations made by the NTSB and CPUC's independent review panel and cure the deficiencies that have been identified in the Utility's operating practices and procedures and corporate culture; developments that may occur in the various investigations of the San Bruno accident and natural gas matters; the decisions, findings, or orders issued in connection with these investigations, including the amount of civil or criminal penalties that may be imposed on the Utility; developments that may occur in the civil litigation related to the San Bruno accident; and the extent of service disruptions that may occur due to changes in pipeline pressure as the Utility continues to inspect and test pipelines;
  • the adequacy and price of electricity and natural gas supplies, the extent to which the Utility can manage and respond to the volatility of electricity and natural gas prices, the ability of the Utility and its counterparties to post or return collateral in connection with price risk management activities; and the availability and price of nuclear fuel used in the two nuclear generation units at Diablo Canyon;
  • explosions, fires, accidents, mechanical breakdowns, equipment failures, human errors, labor disruptions, and similar events, as well as acts of terrorism, war, or vandalism, including cyber-attacks, that can cause unplanned outages, reduce generating output, disrupt the Utility's service to customers, or damage or disrupt the facilities, operations, or information technology and systems owned by the Utility, its customers, or third parties on which the Utility relies; and subject the Utility to third-party liability for property damage or personal injury, or result in the imposition of civil, criminal, or regulatory penalties on the Utility;
  • the impact of storms, tornadoes, floods, drought, earthquakes, tsunamis, wildland and other fires, pandemics, solar events, electromagnetic events, and other natural disasters, or that affect customer demand or that damage or disrupt the facilities, operations, or information technology and systems owned by the Utility, its customers, or third parties on which the Utility relies;
  • the potential impacts of climate change on the Utility's electricity and natural gas businesses, the impact of environmental laws and regulations aimed at the reduction of carbon dioxide and other greenhouse gases ("GHG") on the Utility's electricity and natural gas businesses, and whether the Utility is able to recover associated compliance costs, including the cost of emission allowances and offsets, that the Utility may incur under cap and trade regulations;
  • changes in customer demand for electricity ("load") and natural gas resulting from unanticipated population growth or decline in the Utility's service area, general and regional economic and financial market conditions, the development of alternative energy technologies including self-generation and distributed generation technologies, or other reasons;
  • the occurrence of unplanned outages at the Utility's large hydroelectric or nuclear generation facilities and the ability of the Utility to procure replacement electricity if hydroelectric or nuclear generation operations were unavailable;
  • the results of seismic studies the Utility is conducting that could affect the Utility's ability to continue operating Diablo Canyon or renew the operating licenses for Diablo Canyon; the impact of new NRC orders or regulations to implement various recommendations made by the NRC's task force following the March 2011 earthquake and tsunami in Japan that caused significant damage to nuclear facilities in Japan; and the impact of new legislation, regulations, or policies that may be adopted in the future to address the operations, security, safety, or decommissioning of nuclear facilities, the storage of spent nuclear fuel, seismic design, cooling water intake, or other issues;
  • the impact of federal or state laws or regulations, or their interpretation, on energy policy and the regulation of utilities and their holding companies, including how the CPUC interprets and enforces the financial and other conditions imposed on PG&E Corporation when it became the Utility's holding company, and whether the outcome of proceedings and investigations relating to the Utility's natural gas operations affects the Utility's ability to make distributions to PG&E Corporation in the form of dividends or share repurchases;
  • whether the Utility's newly installed electric and gas SmartMeter™ devices and related software systems and wireless communications equipment continue to accurately and timely measure customer energy usage and generate billing information, whether the Utility recovers costs associated with analog meters that customers choose instead of digital meters, whether the Utility can successfully implement "dynamic pricing" retail electric rates that are more closely aligned with wholesale electricity market prices, and whether the Utility can continue to rely on third-party vendors and contractors to support the advanced metering system;
  • whether the Utility is able to protect its information technology, operating systems and networks, including the advanced metering system infrastructure, from damage, disruption, or failure caused by cyber-attacks, computer viruses, and other hazards; and whether the Utility's security measures are sufficient to protect the confidential customer, vendor and financial data contained in such systems and networks from unauthorized access and disclosure;
  • the extent to which PG&E Corporation or the Utility incurs costs in connection with third-party claims or litigation, that are not recoverable through insurance, rates, or from other third parties;
  • the ability of PG&E Corporation, the Utility, and counterparties to access capital markets and other sources of credit in a timely manner on acceptable terms;
  • the impact of environmental remediation laws, regulations, and orders; the extent to which the Utility is able to recover compliance and remediation costs from third parties or through rates or insurance; and the ultimate amount of costs the Utility incurs in connection with its natural gas compressor station located near Hinkley, California which are not recoverable through rates or insurance;
  • the loss of customers due to various forms of bypass and competition, including municipalization of the Utility's electric distribution facilities, increasing levels of "direct access" by which consumers procure electricity from alternative energy providers, and implementation of "communitychoice aggregation," which permits certain types of governmental bodies to purchase and sell electricity for their local residents and businesses;
  • the outcome of federal or state tax audits and the impact of changes in federal or state tax laws, policies, or regulations, such as The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the "Tax Relief Act"); and
  • other factors and risks discussed in PG&E Corporation and the Utility's 2011 Annual Report on Form 10-K and other reports filed with the Securities and Exchange Commission.
 

 

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