PG&E Corp. to Issue Shares - Analyst Blog
March 15 2012 - 11:00AM
Zacks
PG&E Corporation (PCG) has recently
announced a secondary offering of 5,900,000 shares, valued at
approximately $250 million. The shares are expected to be issued on
March 20, 2012.
The offering would be utilized partly to meet a portion of the
company's estimated equity needs during 2012. The rest of the
proceeds would be utilized in its regulated utility subsidiary,
Pacific Gas and Electric Company, for general corporate
purposes.
PG&E ended fiscal 2011 with cash and cash equivalents of
approximately $513 million compared with $291 million at year-end
2010. Cash generated from operations in 2011 totaled $3.7 billion
versus cash from operations of $3.2 billion in the year-ago period.
Long-term debt however increased to $11.8 billion at fiscal 2011
end from roughly $10.9 billion at the end of fiscal 2010.
PG&E operates in the regulatory progressive state of
California. The California Public Utilities Commission (CPUC)
provides the company with ample regulatory support through
progressive mechanisms like decoupling. Decoupling insulates the
top line of the company from risks of lower customer usage,
vagaries of weather and volatility in prices. The revenue
decoupling mechanism is paired with an annual attrition mechanism
that adjusts annually for customer growth, inflation and
replacement of aging infrastructure facilities.
PG&E Corporation has a solid portfolio of regulated utility
assets that offer a stable earnings base and substantial long-term
growth potential. The company strives to optimize generation
margins by improving the cost structure, performance and
reliability of its nuclear as well as fossil units. Going forward,
PG&E’s earnings growth will be driven by favorable decisions
from CPUC and FERC, as well as long-term supply agreements,
diversification into alternative power sources and infrastructure
improvement programs (such as Cornerstone and Smart Meter).
These positives, however, will be partially offset by risks,
including the present unfavorable macro backdrop, headwinds in the
California economy, tepid demand for electricity, risk of penalties
related to the San Bruno pipeline explosion and power-price
volatility. The company presently retains a short-term Zacks #3
Rank (Hold) that corresponds with our long-term Neutral
recommendation on the stock.
San Francisco, California-based PG&E Corporation is the
parent holding company of California’s largest regulated electric
and gas utility, Pacific Gas and Electric Company (Pacific Gas).
The company mainly competes with Edison
International (EIX) and Sempra Energy
(SRE).
EDISON INTL (EIX): Free Stock Analysis Report
PG&E CORP (PCG): Free Stock Analysis Report
SEMPRA ENERGY (SRE): Free Stock Analysis Report
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