Pacific Gas & Electric Corporation (PCG) announced an offering of $250 million of senior notes due March 2037, with a coupon rate of 5.8%. Pacific Gas will use the proceeds to refinance a portion of its outstanding commercial paper. The transaction is scheduled to close on Apr 1, 2010. The bonds are rated “A3” by Moody’s Corporation (MCO) and “BBB+” by Standard & Poor’s, a division of McGraw-Hill Companies Inc. (MHP).
Pacific Gas’ strong balance sheet and cash flows provide substantial financial flexibility and cushion in the present challenging business environment. The company mainly relies on short-term debt, including commercial paper, to fund its short-term financing needs.
Pacific Gas ended fiscal 2009 with a total liquidity of more than $2 billion, comprising $527 million of cash and $1.5 billion of unutilized credit facility, and debt-to capitalization ratio of 50.8% (Zacks Industry Average 95.1%).
San Francisco, California-based Pacific Gas & Electric Corporation is the parent holding company of California’s largest regulated electric and gas utility, Pacific Gas and Electric Company (Pacific Gas).
Pacific Gas serves approximately 5.1 million electricity and 4.3 million natural gas customers in northern and central California. The Utility is engaged in the business of electricity and natural gas distribution; electricity generation, procurement, and transmission; and natural gas procurement, transportation, and storage.
The utility also operates hydro-electric, nuclear and fossil-fueled power plants. Pacific Gas as of fiscal-end 2009 owned a total generating capacity of 6,801MW. The Utility is regulated primarily by the California Public Utilities Commission (CPUC) and the Federal Energy Regulatory Commission (FERC).
Pacific Gas Corporation has a solid portfolio of regulated utility assets that offer a stable earnings base and substantial long-term growth potential. The company strives to optimize generation margins by improving cost-structure, performance and reliability of its nuclear as well as fossil units.
Going forward, favorable decisions from the CPUC and FERC (including a CPUC authorized 11.35% ROE until 2013), long-term supply agreements, diversification into alternative power sources and infrastructure improvement programs (such as Cornerstone, and Smart Meter) will drive Pacific Gas’ earnings growth. Thus we maintain our Neutral recommendation on the Zacks #3 (‘Hold’) stock.
Read the full analyst report on “PCG”
Read the full analyst report on “MCO”
Read the full analyst report on “MHP”
Zacks Investment Research
