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PG&E Corporation Exhibit99.2
Pacific Gas and Electric Company
Fixed-Income Presentation
Christopher P. Johns, CFO, PG&E Corporation
September 7, 2007
New York, NY
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Cautionary Statement Regarding Forward-Looking
Information
This presentation contains forward-looking statements regarding management’s guidance for PG&E Corporation’s 2007 and 2008 earnings per share from operations, targeted average annual
growth rate for earnings per share from operations, as well as management’s projections regarding Pacific Gas and Electric Company’s (Utility) capital expenditures, rate base and rate base
growth, future electricity resources, renewable energy resources, and financing activity. These statements are based on current expectations and various assumptions which management
believes are reasonable, including that substantial capital investments are made in Utility business over the 2007-2011 period, Utility rate base averages $17 billion in 2007 and $18.7 billion in
2008, that the Utility earns at least its authorized rate of return on equity, and that the Utility’s ratemaking capital structure is maintained at 52 percent equity. These statements and
assumptions are necessarily subject to various risks and uncertainties, the realization or resolution of which are outside of management's control. Actual results may differ materially. Factors
that could cause actual results to differ materially include:
•the Utility’s ability to timely recover costs through rates;
•the outcome of regulatory proceedings, including ratemaking proceedings pending at the California Public Utilities Commission (CPUC) and the Federal Energy Regulatory
Commission;
•the adequacy and price of electricity and natural gas supplies, and the ability of the Utility to manage and respond to the volatility of the electricity and natural gas markets;
•the effect of weather, storms, earthquakes, fires, floods, disease, other natural disasters, explosions, accidents, mechanical breakdowns, acts of terrorism, and other events or hazards
that could affect the Utility’s facilities and operations, its customers, and third parties on which the Utility relies;
•the potential impacts of climate change on the Utility’s electricity and natural gas business;
•changes in customer demand for electricity and natural gas resulting from unanticipated population growth or decline, general economic and financial market conditions, changes in
technology including the development of alternative energy sources, or other reasons;
•operating performance of the Utility’s Diablo Canyon nuclear generating facilities (Diablo Canyon), the occurrence of unplanned outages at Diablo Canyon, or the temporary or
permanent cessation of operations at Diablo Canyon;
•the ability of the Utility to recognize benefits from its initiatives to improve its business processes and customer service;
•the ability of the Utility to timely complete its planned capital investment projects;
•the impact of changes in federal or state laws, or their interpretation, on energy policy and the regulation of utilities and their holding companies;
•the impact of changing wholesale electric or gas market rules, including the California Independent System Operator’s new rules to restructure the California wholesale electricity
market;
•how the CPUC administers the conditions imposed on PG&E Corporation when it became the Utility’s holding company;
•the extent to which PG&E Corporation or the Utility incur costs and liabilities in connection with pending litigation that are not recoverable through rates, from third parties, or through
insurance recoveries;
•the ability of PG&E Corporation and/or the Utility to access capital markets and other sources of credit;
•the impact of environmental laws and regulations and the costs of compliance and remediation;
•the effect of municipalization, direct access, community choice aggregation, or other forms of bypass, and
•other risks and factors disclosed in PG&E Corporation’s and the Utility’s SEC reports.
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Business Unit | 2006 Rate Base ($B) | Regulation |
Electric and gas distribution | $10.3 | CPUC |
Electric generation | $1.8 | CPUC |
Gas transmission | $1.5 | CPUC |
Electric transmission | $2.3 | FERC |
PCG Total Business | $15.9 | 85% CPUC/15% FERC |
Pacific Gas and Electric Company (PG&E)
•$12.5 B in Revenues
•$34.8 B in Assets
•5.1 MM Electric/4.2 MM Gas Customers
•$16 B Market Capitalization
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We act with integrity and communicate honestly and openly.
We are passionate about meeting our customers’ needs
and delivering for our shareholders.
We are accountable for all of our own actions: these include
safety, protecting the environment, and supporting our communities.
We work together as a team and are committed to excellence and innovation.
We respect each other and celebrate our diversity.
The
leading
utility in the
United States
Delighted Energized Rewarded
customers employees shareholders
Our values
Operational excellence
Transformation
Our strategies
Our goals
Our vision
PG&E Vision
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Our Business Strategy
•Competitive customer focus
•Operational excellence
•Regulatory alignment
•Environmental leadership
•Community involvement
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Regulated Business Drivers
•Statewide Energy Strategy
California Energy Action Plan
Renewable Portfolio Standard
AB32 Greenhouse Gas Legislation
•Constructive Regulatory Environment
Decoupling/Balancing Account Treatment
Purchased Power and Fuel Costs Pass-Through
Pre-Approved CapEx
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Investment Driver | Cap Ex | Example Projects |
Electric Generation Resources | ~$1.3 Billion | •Gateway Generation Station •Humboldt •Colusa |
Electric and Gas Delivery System | ~$7 Billion | •Distribution Maintenance and Upgrades •McDonald Island Gas Storage Pipeline •New Customer Connections •AMI |
Electric Transmission | > $3 Billion | •Central California Clean Energy Transmission (Midway - Gregg) •System Automation •Line Upgrades for Renewables |
2007-2011 CapEx totals more than $14 B ($2.8 B/yr.)
Capital Expenditures Drive Core Growth
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Capital Expenditures ($MM)
Common Plant
Gas Trans.
Electric Trans.
Generation
Distribution
Chart Key
0
$1,000
$2,000
$3,000
2007
2008
2009
2010
2011
$3,200
$3,200
$2,500
$3,100
$2,200
Capital Expenditure Outlook
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* Projected 2007-2011 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. Earnings will be reduced by an amount equal to the deferred tax
balance associated with the Energy Recovery Bonds regulatory asset, multiplied by the utility's equity ratio and by its
equity return. The carrying cost credit declines to zero when the taxes are fully paid in 2012.
Rate Base Growth
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*Reg G reconciliation to GAAP for 2006 EPS from Operations and 2007 and 2008
EPS Guidance available in Appendix and at www.pge-corp.com
EPS from Operations*
EPS Guidance
EPS from Operations*: 2007 guidance of $2.70-$2.80 per share
2008 guidance of $2.90-$3.00 per share
8%
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California Energy Policy
PG&E’s resource investment strategy is aligned with
California’s Energy Action Plan “preferred loading order”:
1.Energy Efficiency
2.Demand Response
3.Renewable Resources
4.Distributed Generation
5.Conventional Resources
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Over the past 30 years, California per capita energy use has remained relatively
flat compared to the 50% increase in U.S. per capita energy use.
Source: California Energy Commission
California’s Success With Energy Efficiency
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
1960
1965
1970
1975
1980
1985
1990
1995
2000
US
CA
Western Europe
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Changing Legislative Environment for GHG
Recent greenhouse gas legislation:
•California global warming legislation enacted in 2006
•Federal legislation expected in 2 to 4 years
PG&E supports:
•Mandatory market-based approach
•Encouraging early action toward goals before full regulatory
implementation
•Recognition of prior actions
•Pursuit of all cost-effective reductions in greenhouse gases
•International cooperation
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* Comparison companies selected by Innovest. Data include emissions of regulated and unregulated plants.
2004 is the most recent data available.
2004 CO2 Emissions and Emission Rates*
Source: Innovest
Relative CO2 Emissions Rates - Generation
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Industry Leadership and Emerging Growth
PG&E is looking ahead to the future of utility services
•Clean/renewable fuel technologies
•Smart Energy Web
•Plug-in anywhere technologies
•Sustainable Energy Communities
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Rating Agency Outlook
•Current Ratings
Utility issuer rating: BBB+(1) / Baa1(2)
Utility unsecured debt: BBB+(1) / Baa1(2)
Utility short-term rating: A2 / P2
•Average Utility Metrics (2007-2011)(3)
S&P Business Profile Rating: 5
Total Debt to Capitalization (EOY): 53.6%
Funds from Operations Cash Interest Coverage: 5.1x
Funds from Operations to Average Total Debt: 22%
(1)S&P upgraded the Utility to BBB+ from BBB on May 31, 2007
(2)Moody’s placed the Utility’s rating under review for possible upgrade on April 9, 2007
(3)Metrics include debt equivalents for long-term power purchase contracts
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Recent and Projected Financing Activity
2007:
•Utility issued $700 million senior unsecured bonds due 2037 in March
•Utility bank revolver extended to 2012 and upsized by $650 million to $2
billion (replaced asset-backed CP program)
•Extended $200 million Holding Company bank revolver to 2012
Projected:
•Utility plans to issue approximately $250-350 million of senior unsecured
debt in the fourth quarter of 2007
•Additional long-term debt necessary to fund CapEx plans
§Annual issuance of approximately $1 billion in 2008-2011
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(1)The amounts shown for borrowings outstanding, commercial paper outstanding, and cash have fluctuated since June 30, 2007 in light of recent
changes in the credit and commercial paper markets, although the current overall liquidity remains consistent with the June 30, 2007 level.
(2)Borrowing capacity under the commercial paper program is $1.75 billion.
Liquidity Profile
As of June 30, 2007
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Appendix
September 7, 2007
New York, NY
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Issue | Size (MM) | Coupon | Issue Date | Maturity Date | Tax Status |
Senior Note | $600 | 3.60% | 3/23/2004 | 3/01/2009 | Taxable |
Senior Note | $500 | 4.20% | 3/23/2004 | 3/01/2011 | Taxable |
Senior Note | $1,000 | 4.80% | 3/23/2004 | 3/01/2014 | Taxable |
Senior Note | $3,000 | 6.05% | 3/23/2004 | 3/01/2034 | Taxable |
Senior Note | $700 | 5.80% | 3/13/2007 | 3/01/2037 | Taxable |
PC1996 A | $200 | 5.35% | 5/23/1996 | 12/01/2016 | Tax-exempt (AMT) |
PC1996 C | $200 | Variable rate | 5/23/1996 | 11/01/2026 | Tax-exempt |
PC1996 E | $165 | Variable rate | 5/23/1996 | 11/01/2026 | Tax-exempt |
PC1996 F | $100 | Variable rate | 5/23/1996 | 11/01/2026 | Tax-exempt |
PC1997 B | $149 | Variable rate | 9/16/1997 | 11/01/2026 | Tax-exempt (AMT) |
PC2004 A-D | $345 | 4.75% | 6/29/2004 | 12/01/2023 | Tax-exempt (AMT) |
PC2005 A-B | $149 | Auction-rate | 5/24/2005 | 11/01/2026 | Tax-exempt (AMT) |
PC2005 C-D | $160 | Auction-rate | 5/24/2005 | 12/01/2016 | Tax-exempt (AMT) |
PC2005 E-F | $100 | Auction-rate | 5/24/2005 | 11/01/2026 | Tax-exempt |
PC2005 G | $45 | Auction-rate | 5/24/2005 | 12/01/2018 | Tax-exempt |
AMT: Subject to alternative minimum tax
Pacific Gas and Electric Company
Long-Term Debt Portfolio ($7.4 Bn)
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Issue | Size (MM) | Coupon | Issue Date | Maturity Date | Conversion Price | Shares |
Convertible Subordinated Note | $280 | 9.50% | 06/25/2002 | 06/30/2010 | $15.0873 | 18,558,059 |
•The convertible notes can be converted into PG&E Corporation common shares at the
conversion price of $15.0873 per share at any time prior to the close of business on
June 29, 2010
•Based upon the current stock price, PG&E expects full conversion of the notes to
common shares prior to the maturity date
PG&E Corporation
Long-Term Debt Portfolio
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Long-Term Debt Maturity Schedule
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(1)PG&E Corporation and Pacific Gas and Electric Company
(2)Fixed-floating mix is 80.1% / 19.9% if $577 million of commercial paper outstanding on June 30, 2007 is included.
Debt Profile(1)
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Ratemaking =Projected Test Year
w/ Attrition adjustments
Rate Base = | Net Plant (in service) -deferred taxes from accelerated depreciation +/- net working capital (may exclude many balance sheet assets or liabilities) |
Balancing Accounts = | •Cost of procuring energy •Sales volume •Selected other elements of operating costs such as energy conservation programs |
Ratemaking Summary
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* 2008 to 2011 estimates are based on forecasted construction schedules and
additional contracted resources
Projected Deliveries Plus Contracts*
2006 deliveries comprised of:
Renewable Portfolio Standard target is 20% by 2010
Renewable Resource Procurement
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Facility | Size (MW) | Status | Target Operational Date |
Gateway | 530 | broken ground | 2009 |
Humboldt Bay | 163 | permitting | 2009 |
Colusa | 657 | permitting | 2010 |
Total | 1,350 |
PPAs Counterparty/Facility | Size (MW) | Target Operational Date | Contract Term (years) |
Calpine Hayward | 601 | 2010 | 10 |
EIF Firebaugh | 399 | 2009 | 20 |
Starwood Firebaugh | 118 | 2009 | 15 |
EIF Fresno | 196 | 2009 | 20 |
Tierra Energy Hayward | 116 | 2009 | 20 |
Total | 1,430 |
New Generation Resources: Utility-Owned &
Conventional Power Purchase Agreements
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*Over 20% of total retail sales expected to be eligible renewable resources coming from
utility-owned, QFs, Irrigation Districts, and other sources.
**May include utility-owned resources.
* Approximately 13% of total retail sales expected to be eligible renewable resources
coming from utility-owned, QFs, Irrigation Districts and other sources.
2007 Projected Sources of Energy
85,500 GWh
2012 Projected Sources of Energy
89,900 GWh
•Energy efficiency expected to meet half of future load growth
•Growth in renewable resources and resources with operating flexibility
•Growth in utility ownership
Long-Term Electric Resources
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2006
* 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 financial performance from one period to
another, exclusive of items that do not reflect the normal course of operations.
2006 EPS - Reg G Reconciliation
EPS on an Earnings from Operations Basis* $2.57
Items Impacting Comparability:
Scheduling Coordinator Cost Recovery 0.21
Environmental Remediation Liability (0.05)
Recovery of Interest on PX Liability 0.08
Severance Costs (0.05)
EPS on a GAAP Basis $2.76
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EPS Guidance - Reg G Reconciliation
2007Low High
EPS Guidance on an Earnings from Operations Basis* $2.70 $2.80
Estimated Items Impacting Comparability 0.00 0.00
EPS Guidance on a GAAP Basis $2.70 $2.80
2008
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
* 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 financial performance from one period to another, exclusive of items that do not reflect the
normal course of operations.