SDG&E; Decides to Delay Holding Company Plans

Although San Diego Gas & Electric has decided not to form a diversified holding company, Chairman and Chief Executive Thomas Page on Thursday pledged that the utility would nonetheless “move smartly ahead” with diversification, expanding an existing subsidiary that has amassed up to $70 million in equity capital.

During a Thursday news conference, however, Page predicted that SDG&E; would later resubmit its holding company proposal to the state Public Utilities Commission if such a move is then economically attractive.

If that resubmission occurs after Jan. 1, 1987, it will be heard by a five-member commission controlled by appointees of Gov. George Deukmejian, who will name three new members to the five-person commission over the next few months.

Although the PUC unanimously approved SDG&E;’s holding company plan on March 28, a PUC spokeswoman said that California law would not prohibit SDG&E; from submitting another proposal to commissioners.

“We obviously need three (PUC) votes to create a holding company that’s not saddled down . . . with 30 pounds of excess baggage,” said Page, who described the holding company format as “the most appropriate organizational structure for diversified activities.”

The utility abandoned its proposed holding company because of PUC-mandated restrictions that Page blasted as infringing upon “private property and shareholder rights.”

SDG&E;’s board of directors rejected “a number of those restrictions out of hand” during a special board meeting earlier this month, Page said.

Several of those restrictions would have burdened SDG&E;’s “diversified businesses and (made) them so unpredictable as to be unmanageable,” Page complained.

Although SDG&E; spent $2 million on the aborted holding company plan, Page said that most of those expenses--paid for by shareholders rather than utility customers--covered planning activities that likely could be used to benefit Pacific Diversified Capital Co. The subsidiary was created to house SDG&E;’s real estate, computer and energy-technology businesses.

Although Pacific Diversified already has stockpiled nearly $70 million in equity capital and has the ability to borrow money, Page acknowledged that diversification has been slowed by the decision not to form a holding company.

Although the holding company format would have freed SDG&E;’s diversified operations to seek equity capital, Pacific Diversified’s future growth now will be funded by shareholder equity “that’s deemed to be surplus,” Page said. “The greatest limitation is on our ability to issue equity capital” to fund growth in those diversified companies.

Pacific Diversified, which built its available equity through surplus shareholder equity, bolstered its cash reserves through the recent $24.6-million sale of a 20% interest in Energy Factors.

Before the decision not to create a holding company, Pacific Diversified Capital President Richard Korpan had stated that the company “planned to acquire at least one medium-size company a year as a new subsidiary.”

On Thursday, Page said that acquisition pace would be slowed.