PG&E 2008 Annual Report Download - page 4

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“PG&E’s strategy is
simple: continue to
learn better than ever
what customers need
and value, and run
our operations to
consistently deliver it.”
energy solutions — and then run our operations to consistently
deliver it with impeccable discipline, e ciency, and precision.
 is letter covers 2008  nancial results, examples of ways
we are putting our strategy into action, and insights into our
plans for the current year and beyond.
Delivering for Investors
Returns on new capital investments in PG&E’s asset base were
the predominant force behind last year’s core earnings growth.
Additional contributions came from incentives we earned by
helping customers achieve energy e ciency savings, as well as
from internal cost savings and operational e ciencies.
In total, we grew net income by 33 percent compared
with 2007, to $1.34 billion or $3.63 per share, as reported
under generally accepted accounting principles (GAAP).  is
increase included the substantial one-time bene ts of a
multiyear tax settlement.
Earnings per share from operations, a non-GAAP measure
adjusted to exclude the $257 million from the tax settlement
and re ect normal operations, were $2.95 per share, up
6 percent over 2007 levels. ( e “Financial Highlights” table on
page 31 reconciles GAAP total net income with non-GAAP
earnings from operations.)
 ese results met our targets for the year and exceeded the
 nancial community’s consensus forecast.
Also important, in 2008 we raised PG&E Corporation’s
common stock dividend by 8 percent, following through
on a commitment to shadow earnings growth over time with
higher dividends.
Despite solid earnings and dividend growth, however,
total shareholder return — stock price appreciation plus
dividends — declined with the falling share price, as it did for
virtually every large company. Although it may be cold
comfort, we take some con dence from the fact that PG&E
Corporation’s shares held their value better than most others
in the sector or the S&P 500.
Looking ahead, we continue to see attractive opportunities
to grow earnings.  e earnings trajectory we recently
shared with Wall Street analysts for the next three years projects
growth rates that put us in the top 25 percent among
comparable utilities. We also recently increased our common
stock dividend by almost another 8 percent, an expression of
con dence in the health and stability of the business.
Ultimately, we believe PG&E’s outlook represents exactly
the kind of potential for solid returns that will be rewarded
and once again re ected in the value of our stock as markets
eventually recover.
Investing in Our System
Our most basic, yet most demanding, everyday responsibility
will always be providing dependable service. Nothing is more
crucial to meeting this challenge than continuously making
smart, timely investments in the utility’s basic infrastructure.
PG&E’s total capital spending last year was $3.7 billion,
consistent with our plans to invest an average of $3.5 to
$4 billion per year over the 2008 through 2011 timeframe.
 e majority of these investments continue to go toward
our electric and natural gas distribution networks. For example,
last year we installed more than 5,000 pieces of new protective
equipment and control devices to strengthen our system and
enhance power restoration capabilities.
Another major accomplishment was ramping up our
SmartMeterTM initiative. We put in 1.4 million high-tech gas
and electric meters in 2008, 1.3 million of which were being
remotely read and billed by year’s end.
We also presented regulators with designs for a large
set of strategic, integrated investments in new equipment and
technology to strengthen reliability over the next six years.