PG&E Reports Drop in Third Quarter
Nov. 14, 2002
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SAN FRANCISCO (AP) _ PG&E Corp. has reported a 40 percent drop in its third-quarter profit, dragged down by the bankruptcy costs of its utility and deepening troubles at the company's unregulated energy trading division.
The San Francisco-based company earned $466 million, or $1.19 per share, for the three months ended Sept. 30, down from $771 million, or $2.12 per share, from the same time last year. Revenue totaled $4 billion, an 8 percent increase from last year.
Despite the plunge in its reported net income, PG&E said Wednesday its operating profit rose slightly from a year ago.
After stripping out accounting charges and the extra revenue that PG&E's utility is allowed to collect to cover its past costs, the company said it made $274 million in this year's quarter compared with $256 million last year.
The third-quarter operating profit translated into 69 cents per share, topping the consensus estimate of 60 cents per share among analysts polled by Thomson First Call.
PG&E's shares gained 23 cents to close at $11.60 Wednesday on the New York Stock Exchange.
The third-quarter results included $107 million in charges tied to California's past energy woes and the 19-month-old bankruptcy of the company's biggest business, utility Pacific Gas and Electric. PG&E hopes to extract the utility from bankruptcy proceedings by May 30 next year.
PG&E will lose $20 million per quarter if the utility remains stuck in bankruptcy beyond May 30, company executives told investors.
The deteriorating finances of PG&E's National Energy Group, a formerly thriving power wholesaler, is emerging as a bigger problem.
The parent company warned National Energy will begin defaulting on its outstanding debt Thursday when the division will miss a deadline on a scheduled $431 million payment. All told, National Energy could default on nearly $1.5 billion in obligations during the next six months, PG&E executives said Wednesday.
Seeking to avoid bankruptcy, National Energy is trying to negotiate new deals with its lenders and bondholders. The alternatives could require National Energy to relinquish power plants.
``This is a complex and challenging undertaking,'' Peter Darbee, PG&E's chief financial officer, said during Wednesday's conference call.
The solutions will probably force PG&E to absorb substantial charges either in this year's final quarter or next year, executives said. Writing off all of National Energy's assets would result in a $1 billion loss, PG&E management said.
The parent company absorbed $97 million in third-quarter charges to account for cutbacks and other financial adjustments that the company has made to cushion the blow from National Energy's downfall.
National Energy's president and CEO, Tom Boren, decided to retire amid the turmoil. Boren, 53, will be replaced Friday by Thomas B. King, who has been overseeing National Energy's Western operations.
While National Energy is struggling, bankrupt Pacific Gas and Electric continued to prosper during the third quarter.
With California regulators allowing the utility charge its customers considerably more than the wholesale price of energy, Pacific Gas and Electric's third-quarter operating profit totaled $232 million, a 21 percent increase from last year.
Through the first nine months of this year, PG&E earned $1.3 billion, or $3.49 per share, on revenue of $10.5 billion. At the same juncture last year, the company had earned $570 million, or $1.57 per share, on revenue of $9.9 billion.
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