PG&E 2008 Annual Report Download - page 52

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During 2008, the Utility paid common stock dividends
totaling $589 million, including $568 million of common
stock dividends paid to PG&E Corporation and $21 million
of common stock dividends paid to PG&E Holdings, LLC.
At December 31, 2007, PG&E Holdings, LLC, a wholly
owned subsidiary of the Utility, held 19,481,213 shares
of the Utility common stock. Effective August 29, 2008,
PG&E Holdings, LLC, was dissolved, and the shares
subsequently cancelled.
During 2008, PG&E Corporation paid common stock
dividends of $1.53 per share totaling $573 million, includ-
ing $28 million that was paid to Elm Power Corporation.
(At December 31, 2007, Elm Power Corporation, a wholly
owned subsidiary of PG&E Corporation, held 24,665,500
shares of PG&E Corporation common stock. Effective
August 29, 2008, Elm Power Corporation was dissolved, and
the shares subsequently cancelled.) On December 17, 2008,
the Board of Directors of PG&E Corporation declared
a dividend of $0.39 per share, totaling $141 million, which
was paid on January 15, 2009 to shareholders of record
on December 31, 2008. On February 18, 2009, the Board
of Directors of PG&E Corporation declared a dividend of
$0.42 per share, payable on April 15, 2009, to shareholders
of record on March 31, 2009.
During 2008, the Utility paid cash dividends to holders
of its outstanding series of preferred stock totaling $14 mil-
lion. On December 17, 2008, the Board of Directors of the
Utility declared a cash dividend on its outstanding series
of preferred stock totaling approximately $3 million that
was paid on February 15, 2009, to preferred shareholders of
record on January 30, 2009. On February 18, 2009, the Board
of Directors of the Utility declared a cash dividend on its
outstanding series of preferred stock, payable on May 15,
2009, to shareholders of record on April 30, 2009.
UTILITY
Operating Activities
The Utility’s cash fl ows from operating activities primarily
consist of receipts from customers less payments of operating
expenses, other than expenses such as depreciation that do
not require the use of cash.
DIVIDENDS
The dividend policies of PG&E Corporation and the Utility
are designed to meet the following three objectives:
• Comparability: Pay a dividend competitive with the
securities of comparable companies based on payout ratio
(the proportion of earnings paid out as dividends) and,
with respect to PG&E Corporation, yield (i.e., dividend
divided by share price);
• Flexibility: Allow suffi cient cash to pay a dividend and
to fund investments while avoiding having to issue new
equity unless PG&E Corporation’s or the Utility’s capital
expenditure requirements are growing rapidly and PG&E
Corporation or the Utility can issue equity at reasonable
cost and terms; and
• Sustainability: Avoid reduction or suspension of the
dividend despite fl uctuations in fi nancial performance
except in extreme and unforeseen circumstances.
The Boards of Directors of PG&E Corporation and the
Utility have each adopted a target dividend payout ratio
range of 50% to 70% of earnings. Dividends paid by PG&E
Corporation and the Utility are expected to remain in the
lower end of the target payout ratio range to ensure that
equity funding is readily available to support each company’s
capital investment needs. Each Board of Directors retains
authority to change the respective common stock dividend
policy and dividend payout ratio at any time, especially if
unexpected events occur that would change their view as
to the prudent level of cash conservation. No dividend is
payable unless and until declared by the applicable Board
of Directors.
In addition, the declaration of the Utility’s dividends is
subject to the CPUC-imposed conditions that the Utility
maintain on average its CPUC-authorized capital structure
and that the Utility’s capital requirements, as determined to
be necessary and prudent to meet the Utility’s obligation
to serve or to operate the Utility in a prudent and effi cient
manner, be given fi rst priority.