PG&E 2010 Annual Report Download - page 82

The Utility treats the amount of its outstanding
commercial paper as a reduction to the amount available
under its revolving credit facilities so that liquidity from
the revolving credit facility is available to repay outstanding
commercial paper.
The revolving credit facilities include usual and
customary covenants for credit facilities of this type,
including covenants limiting liens to those permitted under
the senior note indenture, mergers, sales of all or
substantially all of the Utility’s assets, and other
fundamental changes. Both the $750 million and $1.9
billion revolving credit facilities require that the Utility
maintain a ratio of total consolidated debt to total
consolidated capitalization of, at most, 65% as of the end
of each fiscal quarter. At December 31, 2010, the Utility
met this ratio test.
Commercial PaperProgram
The Utility has a $1.75 billion commercial paper program,
the borrowings from which are used primarily to cover
fluctuations in cash flow requirements. Liquidity support
for these borrowings is provided by available capacity
under the Utility’s revolving credit facilities, as described
above. The commercial paper may have maturities up to
365 days and ranks equally with the Utility’s other
unsubordinated and unsecured indebtedness. Commercial
paper notes are sold at an interest rate dictated by the
market at the time of issuance. At December 31, 2010, the
average yield was 0.51%.
OtherShort-termBorrowings
On October 12, 2010, the Utility issued $250 million
principal amount of Floating Rate Senior Notes due
October 11, 2011. The interest rate for the Floating Rate
Senior Notes is equal to the three-month LIBOR plus
0.58% and will reset quarterly beginning on January 11,
2011. At December 31, 2010, the interest rate on the
Floating Rate Senior Notes was 0.87%. On January 11,
2011, the interest rate was reset to 0.88%.
NOTE 5: ENERGY RECOVERY
BONDS
In 2005, PERF issued two separate series of ERBs in the
aggregate amount of $2.7 billion to refinance a regulatory
asset that the Utility recorded in connection with the
Chapter 11 Settlement Agreement. The proceeds of the
ERBs were used by PERF to purchase from the Utility the
right, known as “recovery property,” to be paid a specified
amount from a dedicated rate component (“DRC”) to be
collected from the Utility’s electricity customers. DRC
charges are authorized by the CPUC under state legislation
and will be paid by the Utility’s electricity customers until
the ERBs are fully retired. Under the terms of a recovery
property servicing agreement, DRC charges are collected
by the Utility and remitted to PERF for payment of
principal, interest, and miscellaneous expenses associated
with the bonds.
The first series of ERBs issued on February 10, 2005
included five classes aggregating to a $1.9 billion principal
amount, with scheduled maturities ranging from
September 25, 2006 to December 25, 2012. Interest rates
on the remaining two outstanding classes are 4.37% for the
earlier maturing class and 4.47% for the later maturing
class. The proceeds of the first series of ERBs were paid by
PERF to the Utility and were used by the Utility to
refinance the remaining unamortized after-tax balance of
the settlement regulatory asset. The second series of ERBs,
issued on November 9, 2005, included three classes
aggregating to an $844 million principal amount, with
scheduled maturities ranging from June 25, 2009 to
December 25, 2012. Interest rates on the remaining two
classes are 5.03% for the earlier maturing class and 5.12%
for the later maturing class. The proceeds of the second
series of ERBs were paid by PERF to the Utility to pre-fund
the Utility’s tax liability that will be due as the Utility
collects the DRC charges from customers.
The total amount of ERB principal outstanding was
$827 million at December 31, 2010 and $1.2 billion at
December 31, 2009. The scheduled principal repayments
for ERBs are reflected in the table below:
(in millions) 2011 2012 Total
Utility
Average fixed interest rate 4.59% 4.66% 4.63%
Energy recovery bonds $ 404 $ 423 $ 827
While PERF is a wholly owned consolidated subsidiary
of the Utility, it is legally separate from the Utility. The
assets (including the recovery property) of PERF are not
available to creditors of the Utility or PG&E Corporation,
and the recovery property is not legally an asset of the
Utility or PG&E Corporation.
NOTE 6: COMMON STOCK AND
SHARE-BASED COMPENSATION
PG&E CORPORATION
Of the 395,227,205 shares of PG&E Corporation common
stock outstanding at December 31, 2010, 475,880 shares
were granted as restricted stock under the PG&E
Corporation Long-Term Incentive Program and the 2006
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