PRESS RELEASES 2000 RELEASE
                FOR IMMEDIATE RELEASE
                July 20, 2000
                Listen to the archived conference call to the Financial Community
                Contact: PG&E News Department (415) 973-5930
                EDITORS: Please do not use "Pacific Gas and Electric" or "PG&E" when referring to PG&E Corporation or its National Energy Group. The PG&E National Energy Group is not the same company as Pacific Gas and Electric Company, the utility, and is not regulated by the California Public Utilities Commission. Customers of Pacific Gas and Electric Company do not have to buy products or services from the National Energy Group in order to continue to receive quality regulated services from Pacific Gas and Electric Company.

                EARNINGS FROM PG&E CORPORATION NATIONAL ENERGY GROUP LEAD STRONG SECOND QUARTER

                Performance Across the Board Builds on Momentum of First Quarter
                • PG&E Corporation reported second quarter earnings from operations of $0.69 per share on a diluted basis, or $253 million. Results increased 38 percent over diluted earnings from operations in the same quarter last year of $0.50 per share, or $182 million. Second quarter 1999 results did not include the revenue from Pacific Gas and Electric Company's general rate case (GRC), which was resolved in February 2000 and was retroactive to January 1, 1999. Adjusted for the GRC, second quarter 1999 diluted earnings would have been $0.61 per share, and second quarter 2000 results would represent a 12 percent increase.

                • Revenues for the period were $5.6 billion, an increase of 19 percent over second quarter 1999 revenues of $4.7 billion.

                • National Energy Group contributions continued to accelerate, with earnings from operations in the second quarter of $0.10 per share on a diluted basis, or $37 million. Results reflect a 233 percent increase over diluted earnings of $0.03 per share, or $10 million, from the same quarter last year. Revenues from the unit increased to $3.3 billion, compared with $2.4 billion in the second quarter of 1999.

                • Pacific Gas and Electric Company posted second quarter earnings from operations of $0.59 per share on a diluted basis, or $216 million. Results reflect an increase of 26 percent compared with second quarter 1999 diluted earnings from operations of $0.47 per share, or $172 million. Revenues for the period were $2.3 billion, compared with revenues of $2.2 billion for the second quarter of 1999. Second quarter 1999 results did not include the increase in revenues associated with the final decision of the company's 1999 GRC, which was resolved in February 2000 and was retroactive to January 1, 1999. Adjusted for the GRC, second quarter 1999 diluted earnings would have been $0.58.

                • Pacific Venture Capital, LLC was launched to build and manage a portfolio of investments in growing energy and telecommunications companies. The unit plans to invest up to $100 million during its first year of activity.

                (San Francisco) - PG&E Corporation (NYSE:PCG) today reported that it grew earnings significantly for the second quarter, with both its PG&E National Energy Group and its utility business continuing to perform in keeping with the pace set in the first quarter. The Corporation's second quarter earnings from operations rose to $0.69 per share on a diluted basis, or $253 million, a 38 percent increase over second quarter 1999 earnings of $0.50 per share, or $182 million.

                PG&E Corporation Chairman, CEO, and President Robert D. Glynn, Jr. said, "Midway through 2000 the Corporation is achieving strong performance across the board. All of our businesses are delivering sustainable contributions to shareholder value. We are on track to exceed, for the third year running, our target to increase earnings from operations by 8 to 10 percent annually."

                PG&E National Energy Group

                The Corporation's National Energy Group (NEG) continued to grow significantly its contribution to overall earnings. The NEG earned $0.10 per diluted share from operations in the second quarter, a 233 percent increase over the same quarter in 1999.

                The unit's performance was marked by a second consecutive profitable quarter in its electric and natural gas trading operations. Income from the trading operations in the first two quarters of 2000 is significantly outpacing performance from the same period in 1999. The unit also turned in strong results in the electric generation business, based on early summer demand increases owing to hotter-than-usual weather in the Northeast.

                "With its performance in the first two quarters of 2000, our National Energy Group is on track to meet its target of delivering 30 percent of the Corporation's earnings by 2002," said Glynn. He added that in the second quarter the NEG also continued to achieve important milestones in its strategy to grow its business, both in the wholesale power generation and natural gas transmission markets.

                In its efforts to expand its portfolio of controlled megawatts* (MW), the NEG moved forward with key greenfield power plant development and construction projects, and it continued to secure additional capacity through strategic tolling agreements*, including one agreement for 530 MW in the second quarter.

                The NEG brought its 360-MW Millennium Power facility in Massachusetts into the start-up phase during the quarter. The project is on schedule to begin full commercial operation in late 2000. On the development front the unit obtained critical environmental permits for 1,080-MW Athens Generating project in New York, which will incorporate dry cooling technology and will use less than one percent of the water used by conventional plants. Key environmental permits were also obtained for the Harquahala Generating project in Arizona. Both plants remain on schedule for operation in 2003. The NEG also announced it has begun development of the 550-MW Umatilla project in Oregon, on a site adjacent to the company's existing 474-MW Hermiston Generating Plant. The new facility, planned for operation in late 2003, will further strengthen the NEG's position in the growing Northwest marketplace.

                The NEG also continued construction on its 1,048-MW La Paloma Generating Plant in California and its 792-MW Lake Road Generating Plant in New England. The Lake Road facility remains on schedule for operation in mid-2001, and the La Paloma plant remains on schedule for operation in 2002.

                The NEG also completed a key tolling agreement during the quarter, raising to 1,800 megawatts the total capacity it has secured under such contracts to date. The 14 ?year, 530-MW agreement with Liberty Electric Power, a subsidiary of Columbia Electric Corporation, gives the NEG rights to the output from the Liberty Power Project near Philadelphia, PA, scheduled to go into operation in the spring of 2002.

                Plans also progressed to install mobile generation units at up to three sites in Ohio to help the Midwest meet its peak electric demand needs. The first units at two of the sites are expected to be on line this month. The company plans to have the third site operational by this fall. In total, the units at these sites are expected to represent up to 135 MW of peaking capacity. These units allow the NEG the flexibility to locate valuable power generation resources in regions where seasonal increases in power demands are creating markets for peaking power.

                In its natural gas operations, the NEG launched an initiative with Sempra Energy International and Pr髕ima Gas to design, develop, construct and operate a 212-mile pipeline to serve the rapidly growing demand for energy in Baja California, Mexico. The NEG expects to begin transporting natural gas on the pipeline in early 2003.

                In April of this year, the Corporation announced the sale of the energy commodities portfolio of its energy services business, PG&E Energy Services, to Enron Energy Services Operations, Inc. for $85 million. This sale was concluded during the second quarter.

                Pacific Gas and Electric Company

                Performance in the National Energy Group was matched by a strong quarter from the Corporation's utility unit, Pacific Gas and Electric Company, owing in part to the final decision on the unit's 1999 General Rate Case and an increase in its authorized return on equity from 10.6 percent to 11.22 percent, retroactive to February 2000. Also contributing to the quarter's results was the excellent operating performance of the Diablo Canyon Power Plant, despite an unplanned outage of the plant's Unit 1 during May.

                Customer service ratings for the utility also remained strong in the second quarter. More than 90 percent of the respondents to customer satisfaction surveys rated the company's overall quality of service as "good," "very good" or "excellent."

                PG&E Corporation noted that Pacific Gas and Electric Company is making progress to divest its hydroelectric generation assets in response to California's electric industry restructuring law. As part of this process, the unit is in discussions with several parties in an effort to reach agreement on the valuation of the company's hydroelectric plants and a plan for the ultimate transfer of the assets from Pacific Gas and Electric Company to an affiliate.

                New Business Initiatives

                The second quarter also saw the Corporation make important strategic investments in areas that complement and leverage the Corporation's expertise and experience.

                In June, the Corporation created a new business unit, Pacific Venture Capital, LLC, to build and manage a portfolio of investments in growing energy and telecommunications companies. "The mission of this new unit," noted Glynn, "is to create an additional opportunity for value generation for our shareholders. As it invests in fast-growing, innovative energy and telecommunications companies, it will also gain insight into new technologies and business models that we can use to enhance the performance of our core businesses."

                The Corporation also announced its equity investment in True Quote? an online wholesale energy trading system. True Quote?is the first real-time, broker-assisted, quote system for the natural gas and electricity wholesale marketplace. True Quote?is positioned to become a leading online platform for energy trading, a prospect further strengthened by True Quote's? recent strategic partnerships involving APB Energy, one of the fastest growing energy brokerage companies in the US, and Enron Online, the largest online trading platform. The Corporation said that in addition to being a high quality e-commerce investment, its equity stake in True Quote?will provide valuable insight into state-of-the-art Internet technology that can be used to build on the existing value of its core businesses.

                "Our second quarter performance shows that the Corporation's businesses are executing our strategy and delivering results," said Glynn. "Our challenge, not only during the second half of 2000, but beyond, will be to build on the momentum achieved during the first six months of this year. I'm confident that our team is up to this challenge."

                * Terms Used in This Release

                Controlled Megawatts - Electric generating capacity which PG&E Corporation has the rights to sell in the wholesale marketplace, either through full or partial ownership of generating assets, or through contractual agreements.

                Tolling Agreements - Contracts that provide PG&E Corporation with the rights to sell electricity generated by facilities owned and operated by another party. Under such arrangements, PG&E Corporation supplies the fuel to the power plant, and then sells the plant's output in the competitive market.

                This press release contains forward-looking statements regarding the future performance of the PG&E National Energy Group and the Corporation. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially. Some of the factors that could cause actual results to differ materially include: the pace and extent of the ongoing restructuring of the electric and natural gas industries across the United States; future conditions in the energy markets; the extent to which current or planned generation development projects are completed and the pace and cost of such completion; generating capacity expansion and retirements by others; the Corporation's ability to successfully manage fluctuations in commodity gas and electricity prices; the method and timing of disposition and valuation of the Utility's hydroelectric generation assets; the timing of the completion of the Utility's transition cost recovery and the consequent end of the current electric rate freeze in California; the pace and extent of competition in the California generation market and its impact on the Utility's costs and resulting collection of transition costs; future operating performance of the Diablo Canyon Nuclear Power Plant; and other factors discussed in reports filed with the Securities and Exchange Commission by the Corporation and Pacific Gas and Electric Company.

                PG&E CORPORATION
                CONDENSED STATEMENT OF CONSOLIDATED INCOME
                (unaudited)

                 

                Three months ended June 30,
                Six months ended June 30,
                 
                (in millions, except per share amounts)
                2000
                1999
                2000
                1999
                 
                Operating Revenues
                Pacific Gas and Electric Company
                $
                2,296
                $
                2,233
                $
                4,514
                $
                4,318
                PG&E National Energy Group
                PG&E Generating
                281
                254
                592
                543
                PG&E Gas Transmission
                ?Texas
                224
                436
                449
                793
                ?Northwest
                56
                52
                113
                110
                PG&E Energy Trading
                3,159
                2,024
                5,716
                4,655
                Eliminations and Other
                (378)
                (317)
                (738)
                (611)
                Total operating revenues
                5,638
                4,682
                10,646
                9,808
                Operating Expenses
                                     
                Cost of energy for Pacific Gas and
                1,157
                664
                1,953
                1,319
                Electric Company
                                     
                Cost of energy–PG&E National Energy
                3,047
                2,224
                5,519
                5,021
                Group
                                     
                Operating expenses, including
                812
                1,314
                1,876
                2,527
                depreciation
                Total operating expenses
                5,016
                4,202
                9,348
                8,867
                Operating Income
                622
                480
                1,298
                941
                Interest expense and other
                (170)
                (152)
                (338)
                (332)
                Income Before Income Taxes
                452
                328
                960
                609
                Income taxes
                204
                132
                432
                246
                Income before discontinued operations
                and cumulative effect of a change in accounting principle
                248
                196
                528
                363
                Discontinued operations
                Loss from operations of PG&E
                Energy Services (net of applicable income taxes of $10 million and
                $17 million, respectively)
                (14)
                (22)
                 
                Net income before cumulative effect of
                a change in accounting principle
                248
                182
                528
                341
                Cumulative effect of a change in an
                accounting principle (net of appli-
                cable income taxes of $8 million)
                12
                Net Income
                $
                248
                $
                182
                $
                528
                $
                353
                Weighted Average Common Shares                      
                Outstanding
                361
                367
                361
                370
                Earnings Per Common Share, Basic
                Income from continuing operations
                $
                0.69
                $
                0.53
                $
                1.46
                $
                0.98
                Discontinued operations
                (0.03)
                (0.06)
                Cumulative effect of a change in an
                accounting principle
                0.03
                 
                Net Income
                $
                0.69
                $
                0.50
                $
                1.46
                $
                0.95
                Earnings Per Common Share, Diluted
                Income from continuing operations
                $
                0.68
                $
                0.50
                $
                1.45
                $
                0.90
                Discontinued operations
                (0.03)
                (0.06)
                Cumulative effect of a change in an
                accounting principle
                0.03
                 
                Net Income
                $
                0.68
                $
                0.47
                $
                1.45
                $
                0.87
                                     
                Dividends Declared Per Common
                $
                0.30
                $
                0.30
                $
                0.60
                $
                0.60
                Share
                Earnings and earnings per share for PG&E Corporation's lines of business are as follows:
                Earnings (millions)
                Earnings (millions)
                Three months ended June 30,
                Six months ended June 30,
                2000
                1999
                2000
                1999
                Utility
                Pacific Gas and Electric Company
                $
                216
                $
                172
                $
                444
                $
                319
                PG&E National Energy Group
                PG&E Generating
                20
                21
                54
                56
                PG&E Gas Transmission
                ?Texas
                (8)
                (28)
                ?Northwest
                13
                13
                27
                28
                PG&E Energy Trading
                7
                1
                22
                (2)
                PG&E Energy Services
                 
                (14)
                (22)
                Eliminations and Other
                (3)
                (3)
                (10)
                (6)
                Subtotal - PG&E National Energy
                                     
                Group
                37
                10
                93
                26
                             
                Earnings from Operations
                253
                182
                537
                345
                             
                Items impacting comparability (a)
                (5)
                (9)
                8
                Reported Earnings
                $
                248
                $
                182
                $
                528
                $
                353
                Earnings per Share (Diluted)
                Earnings per Share (Diluted)
                Three months ended June 30,
                Six months ended June 30,
                2000
                1999
                2000
                1999
                Utility
                Pacific Gas and Electric Company
                $
                0.59
                $
                0.47
                $
                1.22
                $
                0.86
                PG&E National Energy Group
                PG&E Generating
                0.05
                0.06
                0.15
                0.15
                PG&E Gas Transmission
                ?Texas
                (0.02)
                (0.08)
                ?Northwest
                0.04
                0.04
                0.07
                0.08
                PG&E Energy Trading
                0.02
                0.06
                (0.01)
                PG&E Energy Services
                 
                (0.04)
                (0.06)
                Eliminations and Other
                (0.01)
                (0.01)
                (0.03)
                (0.01)
                Subtotal - PG&E National Energy
                                     
                Group
                0.10
                0.03
                0.25
                0.07
                             
                Earnings from Operations
                0.69
                0.50
                1.47
                0.93
                             
                Items impacting comparability (a)
                (0.01)
                (0.03)
                (0.02)
                (0.06)
                Reported Earnings
                $
                0.68
                $
                0.47
                $
                1.45
                $
                0.87

                (a) Items impacting comparability in 2000 include relocation and severance charges related to the restructuring of the PG&E National Energy Group of $5 million ($0.01 per share) in the second quarter and $9 million ($0.02 per share) in the six months ended June 30, 2000. Items impacting comparability in the six-month period ending June 30, 1999 include a restructuring charge of $4 million ($0.01 per share) incurred at PG&E Gas Transmission and income from a change in accounting principle ($0.03 per share). Also in 1999, the diluted earnings per share include dilution of $0.03 and $0.08 per share for the three- and six-month periods, respectively, reflecting accounting treatment for the Corporation's 1999 stock repurchase program which was still in progress.


                 

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