PG&E; Sells Bonds Backed by Usage
PG&E; Corp., the parent of the Pacific Gas & Electric utility, sold $1.9 billion of bonds Thursday in the final stage of its recovery from California’s 2000-01 energy crisis.
San Francisco-based PG&E; sold five classes of securities maturing in one year to about 7.7 years. They pay annual interest of 3.3% to about 4.5%.
The “energy-recovery” bonds will be repaid via surcharges on customers’ electricity bills. That backing gives the bonds top credit ratings. Because they will be funded from consumer electricity use instead of by the company, the bonds are considered asset-backed securities.
Some of the money will be used to strengthen the finances of the utility unit and enable PG&E; to pay the first cash dividend on its common stock since January 2001.
PG&E;’s utility unit emerged from bankruptcy in April, four years after incurring about $9 billion in debt by buying power for more than it could charge customers under the state’s electricity deregulation program. The unit filed for Chapter 11 bankruptcy protection in the spring of 2001. PG&E; suspended dividend payments at that time.
Thursday’s debt sale follows a $6.7-billion borrowing in March of last year, the proceeds of which were used to repay creditor claims in the bankruptcy.
With PG&E;’s latest borrowing, “I don’t think there’s anything else that needs to be done,” said Philip Smyth, an analyst who covers the utility at Fitch Ratings in New York.
The bond sale will boost the equity on Pacific Gas’ balance sheet, satisfying one of state regulators’ requirements before PG&E; could resume dividend payments to shareholders.
The company has said it expects to begin paying a quarterly dividend of 30 cents a share once regulators give approval.
PG&E;’s shares edged down 19 cents to $35.05 on the New York Stock Exchange on Thursday, but the stock is up 5.3% this year after rising 20% last year. The price has surged from a low of $6.90 in April 2001.
A dividend of $1.20 a year would mean a yield of 3.4% at the stock’s Thursday closing price.
By contrast, the dividend yield on shares of Edison International, parent of Southern California Edison, is 3.1%. The average dividend yield of 33 stocks in a Standard & Poor’s index of utility companies is 3.3%.
