PG&E 2012 Annual Report Download - page 23

PG&E Corporation contributes equity to the Utility as needed to maintain the Utility’s CPUC-authorized capital
structure. In December 2012, the CPUC issued a final decision authorizing the Utility to maintain a capital structure
consisting of 52% equity, 47% long-term debt and 1% preferred stock, beginning on January 1, 2013. The decision
also reduced the authorized ROE from 11.35% to 10.40%. (See the ‘‘2013 Cost of Capital Proceeding’’ discussion in
‘‘Regulatory Matters’’ below.) The Utility’s future equity needs will continue to be affected by costs that are not
recoverable through rates, including costs related to natural gas matters. Further, given the Utility’s significant
ongoing capital expenditures, it will continue to need equity contributions from PG&E Corporation to maintain its
authorized capital structure.
PG&E Corporation’s equity contributions to the Utility are funded primarily through common stock issuances.
PG&E Corporation also may use draws under its revolving credit facility to occasionally fund equity contributions on
an interim basis. Additional common stock issued by PG&E Corporation in the future to fund further equity
contributions to the Utility could have a material dilutive effect on PG&E Corporation’s earnings per common share.
Dividends
The Board of Directors of PG&E Corporation and the Utility have each adopted a common stock dividend
policy that is 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.
Each Board of Directors retains authority to change the common stock dividend rate 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, before declaring a dividend, 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. 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 Board of Directors of PG&E Corporation declared dividends of $0.455 per share for each of the quarters
of 2012, for an annual dividend of $1.82 per share.
The following table summarizes PG&E Corporation’s and the Utility’s dividends paid:
2012 2011 2010
(in millions)
PG&E Corporation:
Common stock dividends paid ............... $ 746 $ 704 $ 662
Common stock dividends reinvested in Dividend
Reinvestment and Stock Purchase Plan ....... 22 24 18
Utility:
Common stock dividends paid ............... $ 716 $ 716 $ 716
Preferred stock dividends paid ............... 14 14 14
In December 2012, the Board of Directors of PG&E Corporation declared quarterly dividends of $0.455 per
share, totaling $196 million, of which $191 million was paid on January 15, 2013 to shareholders of record on
December 31, 2012. The remaining $5 million was reinvested under the Dividend Reinvestment and Stock Purchase
Plan.
In December 2012, the Board of Directors of the Utility declared dividends on its outstanding series of
preferred stock, payable on February 15, 2013, to shareholders of record on January 31, 2013.
19