Cheaper fuel, weather help triple PG&E's profit

Parent of bankrupt Calif. utility earns $2.12 a share, from 62 cents

November 06, 2001|By BLOOMBERG NEWS

SAN FRANCISCO - PG&E Corp., whose California utility filed for bankruptcy protection seven months ago, said yesterday that its third-quarter profit more than tripled as the state's average electricity price fell 74 percent.

Net income rose to $771 million, or $2.12 a share, from $225 million, or 62 cents, in the third quarter a year ago. Revenue fell 16 percent to $6.3 billion, the company said in a statement. The cost of buying electricity for the Pacific Gas & Electric unit, California's biggest utility, dropped to $697 million from $2.23 billion.

California power prices tumbled last quarter as new power plants opened, and cooler-than-expected weather and conservation trimmed demand. Pacific Gas & Electric had filed for bankruptcy in April after the company couldn't agree with state lawmakers on a plan to help repay $9 billion in debt from buying power at soaring prices.

"I think bankruptcy has been useful. It bought them some time," said David Burks, a utility analyst at Hilliard Lyons who rates PG&E stock a "hold" and doesn't own the company's shares.

Shares of San Francisco-based PG&E rose 42 cents to close at $18.35. The stock has more than doubled since its subsidiary filed for bankruptcy protection April 6, although it fell 32 percent in the past year.

Pacific Gas & Electric is scheduled to try to persuade a U.S. Bankruptcy judge in mid-December to approve details of the plan it intends to use to emerge from Chapter 11 next year.

California's 1996 electricity deregulation law capped the rates utilities could charge consumers, even as wholesale power prices increased as much as 100-fold on some days.

The average price of electricity in California from January to June almost quadrupled when compared with the average price in the first six months of last year. A shortage of power plants and a drought that cut production from hydroelectric dams in the West had left generators unable to meet higher demand.

PG&E said it still expects to make $2.70 to $2.75 a share this year, and earnings are forecast to rise 8 percent to 10 percent in 2002. First Call predicts PG&E will earn $2.62 this year and $2.64 in 2002.

The company collected $687 million it previously wrote off for buying power and gained $8 million in tax benefits. PG&E also had natural-gas hedging costs of $66 million, interest costs of $62 million and $25 million in bankruptcy costs. It lost $27 million because of lower rates.

Including those items, the company had a profit of $256 million, or 70 cents a share.

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