Slide 1: PG&E Corporation Investor Meetings
PG&E Corporation Investor Meetings July 30 - 31, 2008
Slide 2: Cautionary Language Regarding Forward-Looking Statements
Cautionary Language Regarding Forward-Looking Statements This presentation contains forward-looking statements regarding management’s guidance for PG&E Corporation’s 2008 and 2009 earnings per share from operations, targeted compound average growth rate for earnings per share from operations over th
Slide 3: Discussion Outline
Discussion Outline Overview Financial Update Operational Update 3
Slide 4: PCG: Investment Case
PCG: Investment Case PCG offers competitive growth in a constructive regulatory environment with an attractive valuation: $13 billion planned CapEx 2008-2011 85% of CapEx approved 11.45% weighted ROE on 52% equity High-performing, low-carbon generation Decoupled revenues Sustainable dividend, growin
Slide 5: Pacific Gas and Electric (PG&E)
Pacific Gas and Electric (PG&E) Provides energy to nearly 1 in 20 people in the U.S. 70,000 square-mile service territory Four main operational units: Electric and gas distribution Electric transmission Gas transmission Electric generation Forward test-year general rate case with inflation increases
Slide 6: Effect of Decoupling on Revenues
Effect of Decoupling on Revenues 6% Base Revenue not protected from sales fluctuations 35% Base 54% Electric and gas supply 5% Public Purpose 2007 total revenue protected from sales fluctuations = 94% 6
Slide 7: Electric And Gas Distribution
Electric And Gas Distribution Business Scope Retail electricity and natural gas distribution service (construction, operations and maintenance) Customer services (call centers, meter reading, billing) 5.1 million electric and 4.3 million gas customer accounts Primary Assets $11.0 billion of rate bas
Slide 8: Electric Transmission
Electric Transmission Business Scope Wholesale electric transmission services (construction, maintenance) Operation by CA Independent System Operator Primary Assets $2.6 billion of rate base (2007 wtd. avg.) Regulation Federal Regulation (FERC) Malin Round Mt Cost of Service Ratemaking Revenues vary
Slide 9: Natural Gas Transmission
Natural Gas Transmission Business Scope Natural gas transportation, storage, parking and lending services Customers: PG&E natural gas distribution and electric generation businesses, industrial customers, California electric generators Primary Assets $1.5 billion of rate base (2007 wtd. avg.) Regula
Slide 10: Electric Procurement & Owned Generation
Electric Procurement & Owned Generation Business Scope Electricity and ancillary services from owned and controlled resources Energy procurement program Primary Assets $1.7 billion of rate base (2007 wtd. avg.) Diablo Canyon nuclear power plant (2,240 MW) Largest privately owned hydro system (3,896
Slide 11: PG&E Vision
Tiley py ‘a-4 PG&E Vision Our Vision and Values OUR VISION utility in the United States OUR GOALS Delighted Customers Energized Employees Rewarded Shareholders OUR STRATEGIES Operational Excellence Transformation OUR VALUES We act with integrity and communicate honestly and openly We are passionate
Slide 12: 2008 Business Priorities
2008 Business Priorities Deliver on Financial Objectives Focus on Customer Service and Satisfaction Identify and Capture Operating Efficiencies Ensure Workforce Readiness and Alignment Improve System Reliability 12
Slide 13: Delivering on Financial Objectives
Delivering on Financial Objectives Invest in needed infrastructure Ensure adequate liquidity Meet EPS targets Generate strong cash flow 13
Slide 14: Confirming EPS Guidance
Confirming EPS Guidance EPS from Operations Guidance: 2008 guidance of $2.90-$3.00 per share 2009 guidance of $3.15-$3.25 per share 8% targeted CAGR 2007-2011 EPS from Operations* $3.60 $3.20 $2.80 $2.40 $2.00 2007 2008 Estimated 2009 Estimated Guidance Range * Reg G reconciliation to GAAP for 2007
Slide 15: Achieving 8% Growth Target
Achieving 8% Growth Target Components of Compound Average Growth Rate 2007-2011 % CAGR 2007-2011 Other Drivers (0% to +1%) New Shares (-3% to- 5%) Add’l CapEx Efficiency Savings 10% (+1 to 3%) CEE Incentives Holding Company Leverage 8% 8% CAGR Base 2007- 2011 6% 2007 Forecast Guidance { Rate Base Ra
Slide 16: Capital Expenditure Outlook
Capital Expenditure Outlook $ MM $4,000 $3.7 B $3,500 $3.3 B $3.0 B $3.0 B $3,000 $2,500 $2,000 $1,500 $1,000 $500 2008 2009 2010 2011 Common Plant $260 $230 $200 $250 SmartMeter Program $260 $330 $260 $220 Gas Transmission $230 $200 $175 $200 Electric Transmission $550 $580 $660 $750 Generation $1,
Slide 17: Rate Base Growth
Rate Base Growth Weighted Average Annual Rate Base* $B 30.0 $23.9 25.0 $22.1 $20.4 20.0 $18.3 15.0 10.0 5.0 0.0 2008 2009 2010 2011 * Projected 2008-2011 rate base is not adjusted for the impact of the carrying cost credit that primarily results from the second series of the Energy Recovery Bonds. E
Slide 18: Additional CapEx
Additional CapEx Proposed Projects Above 2008-2011 Base CapEx Forecast SmartMeterTM Program Upgrade $460 MM capital total/ $300 MM capital 2008-2011 Approval expected by year-end 2008 Cornerstone Improvement Program (Enhanced Reliability Investment) $800 MM capital 2008-2011 $1.5 B capital investmen
Slide 19: SmartMeter Program Progress
SmartMeterTM Program Progress 740,000 meters installed 400,000 meters being read electronically CPUC decision on SmartMeterTM Upgrade expected by 12/08 Year-end 2008 target: 1.3 million meters installed Live AMI billing 12/07 Demand Response Billing IT infrastructure Interval Billing Live 05/08 live
Slide 20: Cornerstone Improvement Program
Cornerstone Improvement Program Proposed $2.3 B/ 6-yr. System Upgrade Key to electric distribution system reliability improvements Supporting distribution automation Preparing for the grid of the future 20
Slide 21: Improved Operational Planning
Improved Operational Planning Current-state Performance Value Multi-year operating plan Rigorous comprehensive process Both tactical and strategic view Business Reviews Real-time decisions Sr. management dialogue and engagement Project governance Holistic approach Multi-functional business case revi
Slide 22: Identifying Operational Efficiencies
Identifying Operational Efficiencies Strategic Sourcing IT, Telecom, and consulting ($1.4 B in annual spend) Contract extensions ($1.2 B in annual spend) Labor Productivity Timekeeping and reporting process Asset Management Fleet Management ($200 M in annual spend) Real Estate Optimization ($100 M i
Slide 23: Energy Efficiency Incentives
Energy Efficiency Incentives Guidance assumes: $90 - $130 MM in Energy Efficiency Incentives 2008-2011 2 years in 2008, 1 year in 2009, hold-back in 2010, 2 years in 2011 2006-2008 Program effectiveness phase (“net-to-gross issues”) to be finalized by CPUC summer 2008 Program goals for 2009-2011 to
Slide 24: Cash Flow and Equity Needs
Cash Flow and Equity Needs Financing Needs 2008-2011 (in $MM) 2007 2008 2009 2010 2011 Actual Low High Low High Low High Low High Cash from operations* 1,953 3,225 to 3,125 2,275 to 2,175 2,400 to 2,250 2,825 to 2,675 Capital Expenditures (2,768) (3,650) to (3,750) (3,275) to (3,375) (2,975) to (3,1
Slide 25: Dividend Policy
Dividend Policy Dividend Policy Objectives: Dividends per Common Share Flexibility $ per Share EPS from Operations* Sustainability $3.00 $2.78 Comparability $2.57 $2.34 $2.50 $2.00 Target payout ratio range of $1.32 $1.44 50% - 70% $1.50 $1.23 $1.00 Growth balanced with funding $0.50 for additional
Slide 26: Financial Assumptions 2008-2011
Financial Assumptions 2008-2011 Capital expenditure base forecast reflects projects that are highly likely or already approved CPUC authorized ROE is 11.35% and Utility earns at least 12% at FERC on projected rate base Ratemaking capital structure maintained at 52% equity Additional capital expendit
Slide 27: Key Financial Takeaways
Key Financial Takeaways Delivering on Near-term EPS Guidance and 8% CAGR Investing in Attractive Rate Base Opportunities Utilizing Operating Efficiencies, Incentive Earnings and Leverage Effectively Delivering Strong Cash Flow and Liquidity Sustaining a Comparable Dividend 27
Slide 28: Notes
pak Notes
Slide 29: 2007 Customer Profiles
2007 Customer Profiles - % by Sales Electric Customers Gas Customers (86,179 GWh delivered) (869 Bcf delivered) Agricultural Industrial & Other 5% Commercial 18% 8% Commercial Industrial 40% 18% Agricultural Residential & Other Industrial Commercial 6% 69% 23% 40% Residential 36% 29
Slide 30: Customer Satisfaction Performance
Customer Satisfaction Performance Electric Customers Gas Customers J.D. Power Rank: Rank: Rank: Rank: 2/55 11/56 4/38 2/40 Top Business Quartile Rank: Overall Customer 11/37 Satisfaction Index 2nd Quartile 3rd Quartile Rank: 46/51 Bottom Quartile 2006 2007 2008 2006 2007 2008 Rank: 5/56 Top Resident
Slide 31: Preferred Loading Order
Preferred Loading Order PG&E’s resource investment strategy is aligned with California’s Energy Action Plans: Energy Efficiency Demand Response Renewable Resources Distributed Generation Conventional Resources 31
Slide 32: Innovative EE and DR programs
Innovative EE and DR programs 32
Slide 33: 2007 Energy Efficiency Successes
2007 Energy Efficiency Successes The Best Year Ever in Energy Efficiency Innovation PG&E set a personal best in terms of the highest gross savings we’ve ever achieved Prevented more than 1 million tons of CO2 emissions Equivalent to taking 150,000 cars off the road for one year Saved enough energy t
Slide 34: Innovating for the Future: Smart Energy Web
Innovating for the Future: Smart Energy Web Future Near-Term • Vehicle to Grid Today • Home Area • Distributed storage Network Energy and generation Management • SmartMeters™ • PHEV • Electric Field Vehicles SmartCharge™ 34
Slide 35: Renewable Contracts Signed
Renewable Contracts Signed Over 21% of Projected 2010 Load Currently Signed Year Max Year Max Project Technology Project Technology Signed GWh/yr Signed GWh/yr 2006 Military Pass Rd. 840 Geothermal 2007 Solel 1388 Solar Thermal 2006 HFI Silvan 142 Biomass 2007 PPM-Klondike 265 Wind 2006 Liberty Biof
Slide 36: Diablo Steam Generator Replacement
Diablo Steam Generator Replacement Steam Generator Replacement $700 MM approved capital investment Unit 2 replacement completed in 69 days Unit 1 replacement scheduled for early 2009 36
Slide 37: Gateway Generating Station
Gateway Generating Station More than 50% complete On budget, on time >1,000,000 hours with no injury Begins operations 1Q 2009 37
Slide 38: New Generation: Colusa & Humboldt
New Generation: Colusa & Humboldt Project Status: Humboldt Colusa: CEC permits received; 163 MW/ $240 MM construction imminent Humboldt: Slight delays in Colusa permitting, construction 657 MW/$670 MM expected to begin by end of year Gateway 530 MW/ $370 MM Strategy for execution mirrors successes a
Slide 39: 2008 Request for Offer Process
2008 Request for Offer Process Renewable RFO PG&E issued its annual Renewable RFO in March 2008 Objective to sign an additional 1-2% Offers received by June, followed by CPUC review Long-Term Plan 2006 Cycle PG&E issued its RFO in April, 2008 PG&E was authorized to procure 800-1200 MW of operational
Slide 40: Comparative Energy Procurement Costs
Comparative Energy Procurement Costs New Build Energy Procurement Cost ($/MWh) Solar & Emerging Biomass Geothermal Wind Energy Efficiency Combined Cycle 0 20 40 60 80 100 120 140 160 40
Slide 41: Measuring Our Performance
Measuring Our Performance Compensation Aligned with Business Focus Percentage 2008 Compensation metrics weight Delivering on EPS Goals 40% (Measurement of earnings from ongoing core operations) Brand Health Index 20% (Composite of customer surveys and marketing research) Reliable Energy Delivery 20%
Slide 42: Notes
pak Notes
Slide 43: Appendix
Appendix Investor Meetings July 30 - 31, 2008
Slide 44: Earnings Drivers Reconciliation
Earnings Drivers Reconciliation Cumulative four-year totals (pre-tax earnings in $MM) Need identified in December 2007 (2008-2011) $335- $575 Potential sources identified in December 2007 to fill need: Additional Rate Base Investment $125- $175 CEE Program Incentives $100- $200 Operational Efficienc
Slide 45: Operational Changes and Efficiencies in Current Operating Plan
Operational Changes and Efficiencies in Current Operating Plan + Economic Stimulus Act of 2008 + Resolution of outstanding tax audits + Settlement of outstanding generator claims − Delay in electric transmission project (C3ET) + Workforce reductions + Strategic sourcing + Cash cycle management + Inv
Slide 46: Carrying Cost Credit Impacts
Carrying Cost Credit Impacts Estimated Average Deferred Tax Balances and Carrying Cost Credit Impacts ($MM) ($MM) 2008 2009 2010 2011 2012 Energy Recovery Bond Average Deferred Tax $683 $542 $396 $243 $82 Balance Estimated After-tax $(40) $(32) $(23) $(14) $(5) Carrying Cost Credit* * Estimated carr
Slide 47: ERB Amortization Schedule
ERB Amortization Schedule ($MM) 2008 2009 2010 2011 2012 Annual ERB $354 $369 $386 $404 $423 Amortization End-of-year $1,582 $1,213 $827 $423 $- ERB balance 47
Slide 48: Credit Profile
Credit Profile Current Ratings Utility Corporate Credit/Issuer: BBB+ (S&P) and A3 (Moody’s) Utility Senior unsecured debt: BBB+ (S&P) and A3 (Moody’s) Average Utility Metrics (2008-2011)* S&P Business Profile Rating: 5 Total Debt to capitalization (EOY): 55% Funds from Operations Cash Interest Cover
Slide 49: 2007 EPS - Reg G Reconciliation
2007 EPS - Reg G Reconciliation 2007 EPS on an Earnings from Operations Basis $2.78 Items Impacting Comparability 0.00 EPS on a GAAP Basis $2.78 * Earnings per share from operations is a non-GAAP measure. This non-GAAP measure is used because it allows investors to compare the core underlying financ
Slide 50: EPS Guidance - Reg G Reconciliation
EPS Guidance -Reg G Reconciliation 2008 Guidance Range Low High EPS Guidance on an Earnings from Operations Basis* $2.90 $3.00 Estimated Items Impacting Comparability 0.00 0.00 EPS Guidance on a GAAP Basis $2.90 $3.00 2009 Guidance Range Low High EPS Guidance on an Earnings from Operations Basis* $3