PG&E; Reports Profit for Quarter
PG&E; Corp. posted a first-quarter profit Wednesday, reversing a loss from a year earlier, when it took hefty charges for its utility unit, Pacific Gas & Electric Co., which had filed for bankruptcy protection.
The turnaround was driven by a sharp drop in the cost of the power that the utility, California’s largest, purchases to supply its customers in Northern and Central California.
The San Francisco-based company earned $631 million, or $1.71 a share, contrasted with a loss of $951 million, or $2.62, in the year-earlier period.
Revenue fell to $4.77 billion, down from $6.67 billion in the prior-year quarter.
PG&E; took charges of $1.2 billion, or $3.32 a share, in the year-earlier quarter related to sky-high power costs that the company was barred from passing on to customers under California’s deregulation laws.
The subsequent collapse in wholesale power prices linked to the economic downturn has allowed the utility to cover its costs and also recover some of the money spent the previous year, even though slower demand has hurt revenue for PG&E;’s power-plant operations outside California.
Earnings from operations fell to $220 million, or 60 cents a share, from $255 million, or 70 cents, a year earlier.
Earnings from operations exclude “headroom.” Headroom, used to recover previously written off costs, is the difference between retail rates and wholesale power costs for the utility.
Wall Street analysts, who excluded that cost cushion from their projections, had expected the company to earn 53 cents to 65 cents a share, with an average forecast of 59 cents, according to research firm Thomson Financial/First Call.
Analyst Mike Worms of Gerard Klauer Mattison said the company’s results were “more or less” in line with analysts’ forecasts.
“Clearly, the weak economy and problems in California have hurt the earnings capabilities of the utility,” Worms said, noting that economic weakness and mild weather also had an adverse effect on the company’s key unregulated unit, PG&E; National Energy Group.
PG&E; shares fell 1 cent to $23.49 on the New York Stock Exchange.
In another development, a PG&E; spokesman dismissed reports that a California lawmaker is seeking to arrange the purchase of its utility unit to make it a not-for-profit agency.
The San Jose Mercury News reported that Assembly Speaker Pro Tem Fred Keeley (D-Boulder Creek) is talking to would-be investors about a buyout.
“It is a silly idea,” said Ron Low, a spokesman for the utility. “With the state facing a budget deficit of up to $20 billion, we feel Mr. Keeley should be focused on more pressing issues.”
Keeley could not immediately be reached for comment.
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Reuters and Bloomberg News were used in compiling this report.
