PG&E 2010 Annual Report Download - page 28

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 CPUC requires that the PG&E
Corporation Board of Directors give first priority to 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, in setting the amount of dividends.
The Boards of Directors must also consider the CPUC
requirement that the Utility maintain, on average, its
CPUC-authorized capital structure, including a 52% equity
component.
The following table summarizes PG&E Corporation’s
and the Utility’s dividends paid:
(in millions) 2010 2009 2008
PG&E Corporation:
Common stock dividends paid $ 662 $ 590 $ 546
Common stock dividends reinvested
in Dividend Reinvestment and
Stock Purchase Plan 18 17 20
Utility:
Common stock dividends paid $ 716 $ 624 $ 568
Preferred stock dividends paid 14 14 14
On December 15, 2010, the Board of Directors of
PG&E Corporation declared a quarterly dividend of $0.455
per share, totaling $183 million, which was paid on
January 15, 2011 to shareholders of record on
December 31, 2010. On February 16, 2011, the Board of
Directors of PG&E Corporation declared a dividend of
$0.455 per share, payable on April 15, 2011 to shareholders
of record on March 31, 2011.
On December 15, 2010, the Board of Directors of the
Utility declared a cash dividend on its outstanding series of
preferred stock totaling $4 million that was paid on
February 15, 2011 to preferred shareholders of record on
January 31, 2011. On February 16, 2011, the Board of
Directors of the Utility declared a cash dividend on its
outstanding series of preferred stock, payable on May 15,
2011 to shareholders of record on April 29, 2011.
PG&E Corporation and the Utility each have revolving
credit facilities that require the company to maintain a
ratio of consolidated total debt to consolidated
capitalization of at most 65%. This covenant, along with
the CPUC’s requirement for the Utility to maintain the
52% equity component of its capital structure, are
considered to be restrictions on the payment of dividends.
Based on the calculation of these ratios for each company,
no amount of PG&E Corporation’s retained earnings and
$5.3 billion of the Utility’s retained earnings were restricted
at December 31, 2010.
In addition, the Utility was required to maintain at least
$9.7 billion of its net assets as equity in order to maintain
the capital structure of at least 52% equity at December 31,
2010. As a result, $9.7 billion of the Utility’s net assets are
restricted and may not be transferred to PG&E Corporation
in the form of cash dividends.
UTILITY
Operating Activities
The Utility’s cash flows 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.
The Utility’s cash flows from operating activities for
2010, 2009, and 2008 were as follows:
(in millions) 2010 2009 2008
Net income $ 1,121 $ 1,250 $ 1,199
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation, amortization, and
decommissioning 2,116 1,927 1,838
Allowance for equity funds used
during construction (110) (94) (70)
Deferred income taxes and tax
credits, net 762 787 593
Other 46 (27) (6)
Effect of changes in operating assets
and liabilities:
Accounts receivable (105) 157 (83)
Inventories (43) 109 (59)
Accounts payable 109 (33) (137)
Disputed claims and customer
refunds –(700) –
Income taxes receivable/payable (58) 21 43
Other current assets (7) 122 (187)
Other current liabilities 130 183 60
Regulatory assets, liabilities, and
balancing accounts, net (394) (516) (374)
Other changes in noncurrent
assets and liabilities (331) (282) (51)
Net cash provided by operating
activities $ 3,236 $ 2,904 $ 2,766
During 2010, net cash provided by operating activities
increased $332 million compared to 2009. This increase
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