PG&E; Reports 4th-Quarter Profit on Drop in Prices

PG&E; Corp., parent of bankrupt utility Pacific Gas & Electric Co., on Tuesday reported a fourth-quarter profit compared with a massive year-ago loss in a turnaround driven by a sharp drop in power prices.

The company reported fourth-quarter net income of $529 million, or $1.45 a share, reversing a net loss of $4.12 billion, or $11.34 a share, in the year-ago quarter.

Wholesale electricity prices skyrocketed in 2000, forcing the San Francisco-based company to take a charge of $4.11 billion, or $11.32 a share, in the fourth quarter of 2000 for money spent on buying power at higher prices. California’s deregulation laws had prevented the company from passing the higher prices on to retail customers.

A year later, the drop in wholesale prices linked partly to an economic recession meant the company’s utility unit not only managed to cover its costs but also recovered some of the money spent the previous year.

The company’s fourth-quarter earnings of $1.45 a share included 92 cents related to the collection of previously written-off costs as well as several other one-time items including a 10-cent loss for the termination of certain contracts with bankrupt industry giant Enron Corp.

Excluding one-time items the company reported a fourth-quarter profit of 95 cents a share versus earnings of 38 cents in the year-ago quarter.

The company, which last month delayed its fourth-quarter earnings report after discovering accounting problems related to the treatment of leases, posted operating revenue of $4.98 billion, down 38% from $8.08 billion in last year’s fourth quarter.

PG&E; shares gained 43 cents to close at $22.97 on Tuesday on the New York Stock Exchange.

The stock rose 26.6% during the fourth quarter as lower wholesale power prices sharply reduced the utility’s costs.

Looking ahead, PG&E; forecast 2002 earnings from operations in the range of $3.00 a share, little changed from $3.02 a share for 2001.

The 2002 projection included an expectation for lower earnings from PG&E; National Energy Group, the unit’s chief executive, Tom Boren, told an analysts conference call.

The unit builds and operates power plants and natural gas pipelines as well as trading in energy.

Boren said PG&E;’s financial problems, which included a bankruptcy filing by the utility unit in April 2001, prevented PG&E; NEG from signing as many forward power deals as it would have liked when prices were high early last year.