PG&E 2011 Annual Report Download - page 23

S&P’s downgrade reflects its view that PG&E Corporation and the Utility are beginning a multiyear rebuilding
of the Utility’s gas operations, customer reputation, and regulatory relationships following the San Bruno accident.
S&P affirmed a stable outlook for PG&E Corporation and the Utility as of December 2011.
On September 30, 2011, Moody’s Investors Service affirmed the ratings of and stable outlook for PG&E
Corporation and the Utility.
The credit ratings downgrade had no impact on the principal balance, principal payments, interest rates, or fees
related to PG&E Corporation’s and the Utility’s long-term debt outstanding at the time of the downgrade.
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 from operations. Earnings from operations are calculated on an adjusted basis to
exclude the impact of items that management believes do not reflect the normal course of operations. Earnings from
operations are not a substitute or alternative for consolidated net income presented in accordance with GAAP.
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 the Utility’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:
2011 2010 2009
(in millions)
PG&E Corporation:
Common stock dividends paid ................................. $704 $662 $590
Common stock dividends reinvested in Dividend Reinvestment and Stock
Purchase Plan ........................................... 24 18 17
Utility:
Common stock dividends paid ................................. $716 $716 $624
Preferred stock dividends paid ................................. 14 14 14
On December 21, 2011, the Board of Directors of PG&E Corporation (‘‘Board’’) declared dividends of $0.455
per share, totaling $188 million, of which $182 million was paid on January 15, 2012 to shareholders of record on
December 30, 2011. The remaining $6 million was reinvested under the Dividend Reinvestment and Stock Purchase
Plan.
On December 21, 2011, the Board of Directors of the Utility declared dividends on its outstanding series of
preferred stock, payable on February 15, 2012, to shareholders of record on January 31, 2012.
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