reached a settlement with its bankrupt energy transmission unit over the big utility's tax treatment of the subsidiary's income.
San Francisco-based PG&E said the settlement, with its National Energy & Gas Transmission subsidiary, resolves claims that the company is obliged to compensate the unit for tax savings resulting from the incorporation of losses and deductions related to National Energy in PG&E's consolidated federal income tax return. PG&E will pay NEGT $30 million.
PG&E said the settlement will allow it to make $350 million of additional cash available for stock repurchases. The $350 million, which had been restricted pending a resolution of the dispute, adds to the $1.2 billion the company has previously estimated will be available for dividends and stock repurchases in 2005, assuming the refinancing of Pacific Gas & Electric's $2.21 billion regulatory asset occurs as planned in January 2005.
PG&E said it boosted its guidance for 2005 earnings from operations to a range of $2.15 to $2.25 per share, reflecting the impact of the expected additional share repurchases. Analysts surveyed by Thomson First Call expect the company to make $2.21 a share next year."The settlement agreement provides for timely closure of outstanding issues between PG&E Corporation and NEGT," said CEO Robert D. Glynn Jr. "This resolution lifts the restriction on corporate cash and reduces uncertainty as we focus on shareholder value from the improved financial performance of our core utility business."
The settlement agreement requires the approval of the U.S. District Court for the District of Maryland, where NEGT's complaint has been transferred, and the Bankruptcy Court overseeing Chapter 11 proceedings for NEGT and certain of its subsidiaries. A joint hearing before both courts has been set for Sept. 22.
NEGT filed for Chapter 11 bankruptcy protection in July 2003.
PG&E rose 45 cents Tuesday to $29.06.