PG&E 2008 Annual Report Download - page 38

36
than a year. This is expected to result in additional costs.
(See “Results of Operations” below.) The Utility continually
seeks to achieve operational effi ciencies and improve reli-
ability while creating future sustainable cost savings to off-
set these higher anticipated expenses. The Utility also seeks
to make the amount and timing of its capital expenditures
consistent with budgeted amounts and timing.
• The Availability and Terms of Debt and Equity Financing —
The amount and timing of the Utility’s future fi nancing
needs will depend on various factors, some of which
include the conditions in the capital markets, the amount
and timing of scheduled principal and interest payments on
long-term debt, the amount and timing of planned capital
expenditures, and the amount and timing of interest pay-
ments related to the remaining disputed claims that were
made by electricity suppliers in the Utility’s proceeding
under Chapter 11 of the U.S. Bankruptcy Code (“Chap-
ter 11”). (See Note 15 of the Notes to the Consolidated
Financial Statements.) The amount of the Utility’s short-
term fi nancing will vary depending on the level of operat-
ing cash fl ows, seasonal demand for electricity and natural
gas, volatility in electricity and natural gas prices, and
collateral requirements related to price risk management
activity, among other factors. The Utility has continued to
have access to the capital markets despite the recent fi nan-
cial turmoil and economic downturn, although interest
rates on the Utility’s short-term and long-term debt have
increased. For example, the Utility’s $600 million principal
amount of 10-year senior notes, issued on October 21, 2008,
bears interest at 8.25% compared to the Utility’s $700 mil-
lion principal amount of 10-year senior notes, issued in
December 2007 and March 3, 2008 that bear interest at
5.625%. In addition, the Utility’s commercial paper issu-
ance rate reached a high of 7.3% on September 30, 2008
and a low of 1.2% as of December 26, 2008. In order to
maintain the Utility’s CPUC-authorized capital structure,
PG&E Corporation will be required to contribute equity
to the Utility. The timing and amount of these future
equity contributions will affect the timing and amount of
any future equity or debt issuances by PG&E Corporation.
(See “Liquidity and Financial Resources” below.)
In addition to the key factors discussed above, PG&E
Corporation’s and the Utility’s future results of operations
and fi nancial condition are subject to the risk factors.
(See “Risk Factors” below.)
FORWARD-LOOKING STATEMENTS
This combined annual report and the letter to shareholders
that accompanies it contain forward-looking statements
that are necessarily subject to various risks and uncertainties.
These statements are based on current estimates, expectations,
and projections about future events and assumptions regard-
ing these events and management’s knowledge of facts as
of the date of this report. These forward-looking statements
relate to, among other matters, estimated capital expen-
ditures, estimated environmental remediation liabilities,
estimated tax liabilities, the anticipated outcome of various
regulatory and legal proceedings, estimated future cash fl ows,
and the level of future equity or debt issuances, and are
also identifi ed by words such as “assume,” “expect,” “intend,”
“plan,” “project,” “believe,” “estimate,” “target,” “predict,”
“anticipate,” “aim,” “may,” “might,” “should,” “would,”
“could,” “goal,” “potential,” and similar expressions. PG&E
Corporation and the Utility are not able to predict all of the
factors that may affect future results. Some of the factors
that could cause future results to differ materially from
those expressed or implied by the forward-looking statements,
or from historical results, include, but are not limited to:
• the Utility’s ability to manage capital expenditures
and its operating and maintenance expenses within
authorized levels;
• the outcome of pending and future regulatory proceedings
and whether the Utility is able to timely recover its costs
through rates;