PG&E Corp. delays release of earnings; stock market reacts

SAN FRANCISCO, Feb. 21, 2002 — PG&E Corp., parent company of Pacific Gas & Electric Co., announced that it will delay release of its 4th Quarter and annual earnings that were originally scheduled to be issued today.

After the announcement, shares of PG&E fell 47 cents, or 2.3 percent, to $20.12 on the New York Stock Exchange, Reuters News Service reported.

The corporation said that late yesterday, as it was preparing for the simultaneous release of its earnings and 10-K, it identified a technical issue related to four synthetic leases it has or had associated with its power plant projects including Lake Road and La Paloma. The company stated that it expects this finding will have no material impact on net income.

This type of lease, which has been fully disclosed in previous consolidated financial statements, requires that independent third party lessors hold a minimum of three percent ownership. The technical issue concerns the composition of separate trusts’ routine monthly dispersals.

These dispersals inadvertently included amounts to the independent third party lessors resulting in their “deemed” (for accounting purposes) equity ownership dropping below the required three percent minimum. Such a decrease in “deemed” equity ownership would require reclassification of these financings from off balance sheet to on balance sheet.

Due to this finding, the corporation said it would delay release of earnings and 10-K until its review is complete and subsequent determinations have been made.

On completion of its review, the company will take the necessary actions including amending its financial statements, potentially back to the inception of the earliest transaction in 1999.

Placing these leases on the company’s balance sheet would increase the total assets and liabilities by approximately $1 billion and have no material impact on the income statement.

PG&E Corporation confirmed that these leases were previously disclosed in its consolidated financial statements and have been fully discussed with rating agencies, lenders, and the financial community. The company stated that it expects this change will have no material impact on earnings, equity, or debt covenants.

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