Thursday, electricity utility firm PG & E Corp. (PCG) reported a higher profit for the third quarter on lower operating expenses, more than offsetting a fall in revenue, as a result of lower electric and natural gas revenues. On an adjusted basis, quarterly earnings from operations increased from last year, beating Wall Street estimates by a penny. Looking ahead, the company lowered its earnings outlook for fiscal 2009, while reaffirming its guidance for earnings from operations for the years 2009, 2010, and 2011.
The San Francisco, California-based company reported net income available for common shareholders for the third quarter of $318 million or $0.83 per share, compared to $304 million or $0.83 per share in the year-ago quarter.
Income from operation for the quarter increased to $374 million or $0.93 per share from $318 million or $0.83 per share in the previous year quarter.
The third quarter results included a net charge of $0.10 per share, reflecting costs for accelerated natural gas system survey and maintenance work and a workforce reduction.
Excluding items, third quarter non-GAAP income from operation increased to $358 million or $0.93 per share from $304 million or $0.83 per share in the same quarter last year.
The company noted that the higher year-over-year income from operations was primarily due to additional revenues generated by new capital investments in its infrastructure.
On average, eleven analysts polled by Thomson Reuters expected the company to earn $0.92 per share for the quarter. Analysts estimates typically exclude special items.
For the third quarter of 2009, the company recognized a $26 million interest and state tax benefit related to the tax refund, as a result of the approval by the Joint Committee of Taxation of deferred gain treatment for power plant sales in 1998 and 1999.
Further, the company incurred a $16 million after tax cost to perform accelerated system-wide natural gas integrity surveys and associated remedial work. In addition, the company accrued $34 million, after-tax, of severance costs related to the reduction of about 2% of the utility's workforce in the three months ended September 30.
Total operating revenues for the quarter decreased to $3.24 billion from $3.67 billion in the prior-year quarter. Six analysts had a revenue consensus of $3.48 billion for the third quarter.
Total operating expenses for the third quarter eased significantly to $2.63 billion from $3.04 billion in the third quarter of 2008.
Commenting on the results, PG&E's Chairman, CEO, and President, Peter Darbee said, "We continue to report solid earnings despite a challenging economic environment while moving ahead with the necessary investments to ensure safe and reliable service for our customers."
In its preceding first quarter, PG&E had reported an increased profit of $338 million or $1.02 per share on lower operating expenses, even as electric and natural gas operating revenues declined to $3.19 billion. On a adjusted basis, earnings from operations for the first quarter were $315 million or $0.83 per share.
Among PG&E's rivals, Columbus, Ohio-based American Electric Power Co., Inc. (AEP) reported a 18.4% rise in profit for the third quarter of $443 million or $0.93 per share, helped by improved rate structures and cost controls, despite a decline in quarterly revenues. Revenues for the quarter declined to $3.5 billion from $4.2 billion last year.
Another peer, Xcel Energy Inc. (XEL) reported a profit for the third-quarter that declined to $219.77 million or $0.48 per share from last year, reflecting unseasonably cool temperatures, higher operating and maintenance expense, and a rise in overall effective tax rate. On an ongoing basis, earnings declined marginally year-over-year and missed consensus by two cents. Total operating revenues dropped to $2.31 billion from prior-year quarter.
For the nine-month period, Pacific Gas and Electric's net income available to the common shareholders rose to $947 million or $2.49 per share from $821 million or $2.24 per share in the same period last year.
Total operating revenues for the period decreased to $9.86 billion from $10.99 billion a year ago period.
Pacific Gas and Electric's year-to-date capital expenditures totaled $3 billion, increasing the value of the asset base on which the company is allowed to earn its authorized return.
Looking ahead to fiscal 2009, the company now expects GAAP earnings to be in the range of $3.13 to $3.27 per share. Earlier, GAAP earnings were projected in the range of $3.21 - $3.33 per share for 2009.
Analysts currently expect the company to report earnings of $3.16 per share for fiscal 2009.
PG&E reaffirmed its previous guidance for earnings from operations in the range of $3.15 - $3.25 per share for 2009, $3.35 - $3.50 per share for 2010, and $3.65 - $3.85 per share for 2011.
PG&E said the forecast for 2009 earnings from operations excludes severance cost associated with the workforce reduction and three other items impacting comparability.
PCG is currently trading at $41.54, down $0.01 or 0.02%, on a volume of 672,636 shares on the NYSE.
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