PG&E 2009 Annual Report Download - page 26

will also depend on the timing of the resolution of the
Chapter 11 disputed claims and the amount of interest on
these claims that the Utility will be required to pay. (See
Note 14 of the Notes to the Consolidated Financial
Statements.)
PG&E Corporation may issue debt or equity in the
future to fund the Utility’s operating expenses and capital
expenditures to the extent that internally generated funds
are not available. Assuming that PG&E Corporation and
the Utility can access the capital markets on reasonable
terms, PG&E Corporation and the Utility believe that the
Utility’s cash flow from operations, existing sources of
liquidity, and future financings will provide adequate
resources to fund operating activities, meet anticipated
obligations, and finance future capital expenditures.
Credit Ratings
As of January 31, 2010, PG&E Corporation’s and the
Utility’s credit ratings from Moody’s and Standard &
Poor’s (“S&P”) ratings service were as follows:
Moody’s S&P
Utility
Corporate credit rating A3 BBB+
Senior unsecured debt A3 BBB+ to A-2
Credit facility A3 BBB+
Pollution control bonds
backed by letters of credit
Not rated to
Aaa/VMIG1
AA-/A-1+ to
AAA/A-1+
Pollution control bonds
backed by bond insurance A3 BBB+ to A
Pollution control bonds —
nonbacked A3 BBB+
Preferred stock Baa2 BBB-
Commercial paper program P-2 A-2
PG&E Energy Recovery
Funding LLC
Energy recovery bonds Aaa AAA
PG&E Corporation
Corporate credit rating Baa1 BBB+
Convertible subordinated
notes Baa1 BBB+
Senior unsecured debt Baa1 BBB
Credit facility Baa1 Not rated
Moody’s and S&P are nationally recognized credit-rating
organizations. These ratings may be subject to revision or
withdrawal at any time by the assigning rating organization,
and each rating should be evaluated independently of any
other rating. A credit rating is not a recommendation to
buy, sell, or hold securities.
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 sufficient 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 fluctuations in financial 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 so that more
internal funds are 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 its 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 efficient
manner, be given first priority.
During 2009, the Utility paid common stock dividends
totaling $624 million to PG&E Corporation. During 2009,
PG&E Corporation paid common stock dividends of $1.65
per share, totaling $590 million, net of $17 million that
was reinvested in additional shares of common stock by
participants in the Dividend Reinvestment and Stock
Purchase Plan. On December 16, 2009, the Board of
Directors of PG&E Corporation declared a dividend of
$0.42 per share, totaling $157 million, which was paid on
January 15, 2010 to shareholders of record on
December 31, 2009. On February 17, 2010, the Board of
Directors of PG&E Corporation declared a dividend of
$0.455 per share, payable on April 15, 2010, to
shareholders of record on March 31, 2010.
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