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PCG » Topics » PG&E Corporation and the Utility intend to retain sufficient cash for operating needs and to manage debt levels to maintain access to credit. PG&E Corporation and the Utility target cash balances, which, together with credit facilities, accommodate normal

This excerpt taken from the PCG 8-K filed Oct 28, 2005.
PG&E Corporation and the Utility intend to retain sufficient cash for operating needs and to manage debt levels to maintain access to credit.  PG&E Corporation and the Utility target cash balances, which, together with credit facilities, accommodate normal and unforeseen demands on its liquidity.

 

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At March 31, 2005, PG&E Corporation and its subsidiaries had consolidated cash and cash equivalents of approximately $1.4 billion, and restricted cash of approximately $1.9 billion.  PG&E Corporation and the Utility maintain separate bank accounts.  At March 31, 2005, PG&E Corporation on a stand-alone basis had cash and cash equivalents of approximately $319 million.  At March 31, 2005, the Utility had cash and cash equivalents of approximately $1.1 billion, and restricted cash of approximately $1.9 billion.  The Utility’s restricted cash includes amounts deposited in escrow related to the remaining disputed Chapter 11 claims, collateral required by the ISO and deposits under certain third party agreements.  PG&E Corporation and the Utility primarily invest their cash in money market funds and in short-term obligations of the U.S. Government and its agencies.

 

The Utility seeks to maintain or strengthen its credit ratings to provide efficient access to financial and trade credit and to ensure adequate liquidity.  On February 16, 2005, S&P, upgraded its corporate credit rating on the Utility to BBB from BBB- and affirmed its BBB senior secured rating on the Utility’s First Mortgage Bonds.   S&P has not assigned a rating to PG&E Corporation.

 

On March 3, 2005, Moody’s announced that it had upgraded its corporate credit rating on the Utility to Baa1 from Baa3 and upgraded the Utility’s other debt ratings as follows:

 

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First Mortgage Bonds, secured pollution control bonds, and secured bank loan agreement to Baa1 from Baa2;

 

 

 

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Preferred stock to Baa3 from Ba2;

 

 

 

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Shelf registration for the issuance of First Mortgage Bonds to (P)Baa1 from (P)Baa2; and

 

 

 

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The issuance of senior unsecured debt to (P)Baa1 from (P)Baa3.

 

Moody’s also assigned a rating of Baa3 to PG&E Corporation’s $200 million unsecured bank revolving credit facility. Moody’s stated that its rating outlook is stable for the Utility and PG&E Corporation.

 

As discussed in Note 3 in the Notes to the Condensed Consolidated Financial Statements, on April 22, 2005, the lien of the indenture securing the First Mortgage Bonds was released following confirmation by Moody’s and S&P that the Utility’s unsecured debt would be rated BBB by S&P and Baa1 by Moody’s after the release of the lien.

 

PG&E Corporation and the Utility have taken advantage of recent favorable market conditions by completing the following post-March 31 transactions:

 

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On April 8, 2005, the Utility refinanced its existing $850 million working capital facility with a $1 billion working capital facility that has a term of 5 years, reduced fees and applicable margins, and less restrictive covenants;

 

 

 

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On April 22, 2005, the Utility entered into an amendment to four reimbursement agreements totaling $620 million related to letters of credit aggregating $614 million that had been issued to support certain pollution control bonds issued on behalf of the Utility. In addition to containing more favorable provisions, the term of the amended agreements has been extended from three years to five years until April 22, 2010; and

 

 

 

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On April 8, 2005, PG&E Corporation’s unsecured $200 million credit facility was amended to include an extended 5-year term and to conform the provisions regarding covenants, representations and events of default to those contained in the Utility’s $1 billion working capital facility.

 

Currently, PG&E Corporation and the Utility have available credit facilities totaling $200 million and $1.65 billion, respectively.

 

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