PG&E;’s Net Income Soars in 4th Quarter
PG&E; Corp., owner of California’s largest private utility, said Friday that fourth-quarter profit surged as the company had a gain from wiping out its equity interest in a former wholesale power unit.
Net income jumped to $871 million, or $2.04 a share, from $37 million, or 9 cents, a year earlier, the San Francisco-based company said. Sales climbed 20% to $2.98 billion.
PG&E; will pay dividends this year for the first time since 2001, when its utility was forced to seek Bankruptcy Court protection because of soaring power costs during the California energy crisis.
The company also said it planned to buy back $1.05 billion in stock in March, exceeding an earlier target of $975 million.
“They’ve got a very strong cash position, and the use of cash is going to be huge,” said Jeffrey Scissons, a fund manager at Northern Asset Management in Duluth, Minn. “They have plenty of opportunities,” Scissons said.
Excluding a noncash gain of $684 million from eliminating PG&E;’s negative equity in National Energy & Gas Transmission Inc., a failed subsidiary that is now controlled by creditors, fourth-quarter profit was 44 cents a share. That was 2 cents higher than the average estimate from analysts surveyed by Thomson First Call.
Profit at PG&E;’s Pacific Gas & Electric utility, which emerged from Chapter 11 last year, rose 35% from a year earlier to $191 million. The utility benefited from a rate adjustment and a gain in natural-gas demand spurred by colder-than-normal weather, PG&E; said.
The utility supplies gas and electricity to about 14 million customers over 70,000 square miles.
Shares of PG&E; fell 5 cents to $35.95 on the New York Stock Exchange. The stock, which has climbed 8% this year, has seven “buy” ratings and two “hold” recommendations from analysts.
PG&E; plans to pay a quarterly dividend of 30 cents a share in April. The company this month sold $1.9 billion in bonds, partly to meet a financial requirement that allowed for the dividend.
Demand for power in the state rose to a record in September.
The California Energy Commission has predicted that rotating outages may occur in PG&E;’s service territory by 2008 during peak demand periods because some aging power plants may be retired.
“Everybody has been very excited about their business prospects in terms of the needs of the state of California,” Edward Paik, who holds PG&E; shares in his $400-million Columbia Utilities Fund, said before the earnings statement was released. “The infrastructure build in California has been light, and they need to build more.”
