UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
September 30, 2001
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period _______________ to ________________
COMMISSION FILE NO. 0-25842
PG&E Gas Transmission, Northwest Corporation
(Exact name of registrant as specified in its charter)
California 94-1512922
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1400 SW Fifth Avenue, Suite 900, 97201
Portland, OR (Zip code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (503) 833-4000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ____
---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of November 7, 2001.
1,000 shares of common stock no par value. (All shares are owned by GTN
Holdings LLC.)
Registrant meets the conditions set forth in General Instruction (H) (1) (a) and
(b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced
disclosure format.
TABLE OF CONTENTS
-----------------
PART I. Financial Information Page
------------------------------
Item 1. Consolidated Financial Statements
Statements of Consolidated Income 1
Consolidated Balance Sheets 2
Statements of Consolidated Common Stock Equity 4
Statements of Consolidated Cash Flows 5
Notes to Consolidated Financial Statements
Note 1. Organization and Basis of Presentation 6
Note 2. Relationship with PG&E Corporation 6
Note 3. New Accounting Standards 7
Note 4. Accounting for Price Risk Management Activities 8
Note 5. Short-Term Debt 10
Note 6. Long-Term Debt 10
Note 7. Income Taxes 10
Note 8. Commitments and Contingencies 10
Item 2. Management's Discussion and Analysis of Financial Condition 12
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk 19
PART II. Other Information
--------------------------
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
Signatures 21
Part I: Financial Information
------------------------------
Item 1. Consolidated Financial Statements
---------------------------------
----------------------------------------------------------------------------------------------------------------------
Statements of Consolidated Income
(Unaudited)
----------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------------------------------------------------------------------------------------------------
(In Thousands) 2001 2000 2001 2000
----------------------------------------------------------------------------------------------------------------------
OPERATING REVENUES:
Gas transportation $ 46,056 $ 48,756 $ 155,521 $ 136,026
Gas transportation for affiliates 11,203 13,049 30,241 38,056
Other 47 341 144 1,089
----------------------------------------------------------------------------------------------------------------------
Total operating revenues 57,306 62,146 185,906 175,171
----------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
Administrative and general 9,133 7,174 25,302 21,943
Operations and maintenance 5,167 5,582 14,253 12,776
Depreciation and amortization 10,506 10,373 31,265 31,095
Property and other taxes 2,664 2,838 8,793 8,619
----------------------------------------------------------------------------------------------------------------------
Total operating expenses 27,470 25,967 79,613 74,433
----------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 29,836 36,179 106,293 100,738
----------------------------------------------------------------------------------------------------------------------
OTHER INCOME AND (INCOME DEDUCTIONS):
Allowance for equity funds used during construction 262 104 350 377
Interest income 1,626 32 5,156 107
Other - net 441 (201) 1,979 (352)
----------------------------------------------------------------------------------------------------------------------
Total other income and (income deductions) 2,329 (65) 7,485 132
----------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on long-term debt 8,858 9,470 27,395 29,489
Allowance for borrowed funds used during construction (255) (90) (319) (367)
Other interest charges 482 399 1,528 1,037
----------------------------------------------------------------------------------------------------------------------
Net interest expense 9,085 9,779 28,604 30,159
----------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 23,080 26,335 85,174 70,711
INCOME TAX EXPENSE 4,669 10,198 28,785 27,403
----------------------------------------------------------------------------------------------------------------------
NET INCOME $ 18,411 $ 16,137 $ 56,389 $ 43,308
----------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
1
------------------------------------------------------------------------------------------------
Consolidated Balance Sheets
(Unaudited)
------------------------------------------------------------------------------------------------
ASSETS
------------------------------------------------------------------------------------------------
September 30, December 31,
(In Thousands) 2001 2000
------------------------------------------------------------------------------------------------
PROPERTY, PLANT, and EQUIPMENT:
Property, plant, and equipment in service $ 1,561,695 $ 1,554,088
Accumulated depreciation and amortization (575,324) (544,225)
------------------------------------------------------------------------------------------------
Net plant in service 986,371 1,009,863
Construction work in progress 42,339 5,613
------------------------------------------------------------------------------------------------
Total property, plant and equipment - net 1,028,710 1,015,476
------------------------------------------------------------------------------------------------
CURRENT ASSETS:
Cash and cash equivalents 1,410 2,528
Accounts receivable - gas transportation 14,944 16,780
Accounts receivable - transportation imbalances and fuel 2,763 3,210
Accounts receivable - affiliated companies 10,370 8,907
Inventories (at average cost) 7,284 10,446
Notes receivable - parent - 75,000
Prepayments and other current assets 1,428 4,424
------------------------------------------------------------------------------------------------
Total current assets 38,199 121,295
------------------------------------------------------------------------------------------------
OTHER NON-CURRENT ASSETS:
Notes receivable - parent 75,000 -
Income tax related regulatory assets 24,701 25,033
Deferred charge on reacquired debt 9,136 10,040
Unamortized debt expense 2,558 2,848
Other regulatory assets 2,443 3,174
Other 5,463 2,775
------------------------------------------------------------------------------------------------
Total other non-current assets 119,301 43,870
------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 1,186,210 $ 1,180,641
------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
2
--------------------------------------------------------------------------------
Consolidated Balance Sheets
(Unaudited)
------------------------------------------------------------------------------------------------
CAPITALIZATION AND LIABILITIES
------------------------------------------------------------------------------------------------
September 30, December 31,
(In Thousands) 2001 2000
------------------------------------------------------------------------------------------------
CAPITALIZATION:
Common stock - no par value, 1,000 shares authorized,
issued and outstanding $ 85,474 $ 85,474
Additional paid-in capital 192,717 192,717
Reinvested earnings 112,459 108,570
------------------------------------------------------------------------------------------------
Total common stock equity 390,650 386,761
Long-term debt 442,280 538,041
------------------------------------------------------------------------------------------------
Total capitalization 832,930 924,802
------------------------------------------------------------------------------------------------
CURRENT LIABILITIES:
Long-term debt - current portion 33,580 543
Accounts payable 26,987 17,440
Accounts payable - affiliated companies 69,153 33,454
Accrued interest 10,169 3,416
Accrued liabilities 1,363 1,989
Accrued taxes 3,315 1,218
------------------------------------------------------------------------------------------------
Total current liabilities 144,567 58,060
------------------------------------------------------------------------------------------------
NON-CURRENT LIABILITIES:
Deferred income taxes 197,007 189,104
Other 11,706 8,675
------------------------------------------------------------------------------------------------
Total non-current liabilities 208,713 197,779
------------------------------------------------------------------------------------------------
COMMITMENTS and CONTINGENCIES (Note 8) - -
------------------------------------------------------------------------------------------------
TOTAL CAPITALIZATION AND LIABILITIES $ 1,186,210 $ 1,180,641
------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
3
--------------------------------------------------------------------------------
Statements of Consolidated Common Stock Equity
(Unaudited)
--------------------------------------------------------------------------------
Nine Months Ended
September 30,
--------------------------------------------------------------------------------
(In Thousands) 2001 2000
--------------------------------------------------------------------------------
BALANCE AT BEGINNING OF PERIOD $ 386,761 $ 328,472
Net income 56,389 43,308
Dividends paid to parent company (52,500) -
--------------------------------------------------------------------------------
BALANCE AT END OF PERIOD $ 390,650 $ 371,780
--------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
4
--------------------------------------------------------------------------------
Statements of Consolidated Cash Flows
(Unaudited)
---------------------------------------------------------------------------------------------
Nine Months Ended
September 30,
---------------------------------------------------------------------------------------------
(In Thousands) 2001 2000
---------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 56,389 $ 43,308
Adjustments to reconcile net income to net cash provided by
Operations:
Depreciation and amortization 33,490 32,959
Deferred income taxes 7,903 10,328
Allowance for equity funds used during construction (350) (377)
Changes in operating assets and liabilities:
Accounts receivable - gas transportation and other 2,283 4,958
Accounts payable and accrued liabilities 15,671 (1,125)
Net receivable/payable - affiliates 34,236 16,486
Accrued taxes 2,098 2,469
Inventory 3,163 410
Other working capital 2,996 2,874
Regulatory accruals 1,184 (2,448)
Other - net 341 333
---------------------------------------------------------------------------------------------
Net cash provided by operating activities 159,404 110,175
---------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction expenditures (44,298) (9,244)
Allowance for borrowed funds used during construction (319) (367)
---------------------------------------------------------------------------------------------
Net cash used in investing activities (44,617) (9,611)
---------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (107,402) (158,335)
Long-term debt issued, net of issuance costs 43,997 56,631
Cash dividends paid to parent (52,500) -
---------------------------------------------------------------------------------------------
Net cash used in financing activities (115,905) (101,704)
---------------------------------------------------------------------------------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (1,118) (1,140)
CASH AND CASH EQUIVALENTS AT JANUARY 1 2,528 2,039
---------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT SEPTEMBER 30 $ 1,410 $ 899
---------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for:
Interest $ 20,458 $ 22,743
Income taxes $ 85 $ -
---------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
5
Notes to Consolidated Financial Statements (Unaudited)
------------------------------------------------------
Note 1: Organization and Basis of Presentation
-----------------------------------------------
PG&E Gas Transmission, Northwest Corporation (GTN) was incorporated in
California in 1957 under its former name, Pacific Gas Transmission Company. GTN
is an indirect wholly owned subsidiary of PG&E National Energy Group, Inc. (PG&E
NEG) and is affiliated with, but is not the same company as, Pacific Gas and
Electric Company (the Utility), the gas and electric company serving Northern
and Central California. PG&E Corporation is the ultimate corporate parent for
both PG&E NEG and the Utility.
The accompanying unaudited consolidated financial statements, which have
been prepared in accordance with interim period reporting requirements, reflect
the results for GTN and its wholly owned subsidiaries which include Pacific Gas
Transmission Company and Pacific Gas Transmission International, Inc., and a
fifty percent interest in a joint venture known as Stanfield Hub Services, LLC.
GTN and its subsidiaries are collectively referred to herein as the
"Company". This information should be read in conjunction with the Consolidated
Financial Statements and Notes to Consolidated Financial Statements included in
Item 8, Financial Statements and Supplementary Data, in the Company's Form 10-K
for the fiscal year ended December 31, 2000.
In the opinion of management, the accompanying Consolidated Financial
Statements reflect all adjustments that are necessary to present a fair
statement of the financial position and results of operations for the interim
periods. All material adjustments are of a normal recurring nature unless
otherwise disclosed in this Form 10-Q. All significant intercompany accounts and
transactions have been eliminated in consolidation. Prior year amounts in the
consolidated financial statements have been reclassified where necessary to
conform to the 2001 presentation. Results of operations for interim periods are
not necessarily indicative of results to be expected for a full year.
Note 2: Relationship with PG&E Corporation
-------------------------------------------
The Utility, a regulated utility in California and a subsidiary of PG&E
Corporation, is experiencing liquidity and credit problems. Under the
deregulated wholesale power purchase market scheme in existence at the time in
California, the Utility spent approximately $6.6 billion through December 31,
2000 for purchased power above the amounts provided for under frozen rates.
Because of this situation, PG&E Corporation's credit rating was downgraded to
below investment grade in January 2001, which caused PG&E Corporation to default
on outstanding commercial paper and bank borrowings.
In March 2001, PG&E Corporation refinanced all of its outstanding
commercial paper and bank borrowings, and Standard & Poor's subsequently removed
its below investment grade credit rating since PG&E Corporation no longer had
rated securities outstanding.
PG&E Corporation and PG&E NEG have completed a corporate restructuring of
GTN, known as a "ringfencing" transaction. The ringfencing complied with credit
rating agency criteria designed to further separate a subsidiary from its parent
and affiliates, which enabled GTN to retain its own credit rating based on its
own creditworthiness.
The ringfencing involved creating a new special purpose entity (SPE),
between PG&E Corporation and GTN, called GTN Holdings LLC, which directly owns
100 percent of the stock
6
of GTN. As part of the ringfencing, GTN Holdings LLC's charter requires
unanimous approval of its Board of Control, including at least one independent
director, before it can: (a) consolidate or merge with any entity; (b) transfer
substantially all of its assets to any entity; or (c) institute or consent to
bankruptcy, insolvency or similar proceedings or actions. The SPE may not
declare or pay dividends unless such dividends are unanimously approved by the
Board of Control (including the independent director) and GTN Holdings LLC, on a
consolidated basis with GTN, maintains a debt coverage ratio of not less than
2.25:1 and a leverage ratio of not greater than 0.70:1, or an investment grade
credit rating.
The Company has terminated its intercompany borrowing and cash management
programs with PG&E Corporation. GTN has also settled all of its outstanding
balances to or from PG&E Corporation related to those programs. On October 26,
2000, the Company loaned $75 million to PG&E Corporation pursuant to a
promissory note bearing a floating interest rate tied to PG&E Corporation's
external borrowing rate. This note receivable is payable upon demand but has
been recorded as a non-current asset in the accompanying consolidated balance
sheet at September 30, 2001, reflecting Company expectations about the timing of
repayment.
On April 6, 2001, the Utility filed a voluntary petition for relief under
the provisions of Chapter 11 of the U.S. Bankruptcy Code. Pursuant to Chapter 11
of the U.S. Bankruptcy Code, the Utility retains control of its assets and is
authorized to operate its business as a debtor-in-possession while being subject
to the jurisdiction of the Bankruptcy Court. On September 20, 2001, the Utility
and PG&E Corporation jointly filed a proposed plan of reorganization that
entails separating the Utility into four distinct businesses. The proposed plan
of reorganization does not directly affect the Company or any of its
subsidiaries. The proposed plan is subject to confirmation by the Bankruptcy
Court. In addition, before the plan can become effective, various regulatory
approvals must be obtained and certain other conditions must be satisfied.
Management believes that the Company and its subsidiaries, as described
above, would not be substantively consolidated with any insolvency or bankruptcy
proceeding involving PG&E NEG, the Utility or PG&E Corporation.
The Utility has been GTN's largest customer, accounting for over 15 percent
of its revenues. In accordance with GTN's Federal Energy Regulatory Commission
(FERC) tariff provision, the Utility has provided assurances either in the form
of cash, an investment grade guarantee, letter of credit, or surety bond to
support its position as a shipper on the GTN pipeline. As a result of the April
6, 2001 filing with the Bankruptcy Court, all amounts owed to GTN on that date,
by the Utility, for transportation services were suspended pending the decision
of the Bankruptcy Court. As of April 6, 2001, the Utility owed GTN $2.9 million
for transportation services. The Utility is current on all subsequent
obligations incurred for the transportation services provided by GTN and has
indicated its intention to remain current. The proposed plan of reorganization
filed by PG&E Corporation and the Utility contemplates that the Utility will pay
all its legitimate debts with interest.
Note 3: New Accounting Standards
--------------------------------
In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141, "Business
Combinations". This Standard, which applies to all business combinations
completed after June 30, 2001, prohibits the use of pooling-of-interests method
of accounting for business combinations and provides a new definition of
intangible assets. The Company does not expect that implementation of this
Standard will have a significant impact on its financial statements.
Also in June 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets". This Standard eliminates the amortization of goodwill, and
requires that goodwill be reviewed annually for impairment. This Standard also
requires that the useful lives of previously
7
recognized intangible assets be reassessed and the remaining amortization
periods to be adjusted accordingly. This Standard is effective for fiscal years
beginning after December 15, 2001, and affects all goodwill and other intangible
assets recognized on a Company's balance sheet at that date, regardless of when
the assets were initially recognized. The Company does not expect that
implementation of this Standard will have a significant impact on its financial
statements.
In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". This Standard is effective for fiscal years beginning
after June 15, 2002, and provides accounting requirements for asset retirement
obligations associated with tangible long-lived assets. The Company has not yet
determined the effects of this Standard on its financial statements.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS No. 144 supercedes SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of", but retains its fundamental provisions for
recognizing and measuring impairment of long-lived assets to be held and used.
This Standard also requires that all long-lived assets to be disposed of by sale
are carried at the lower of carrying amount or fair value less cost to sell, and
that depreciation should cease to be recorded on such assets. SFAS No. 144
standardizes the accounting and presentation requirements for all long-lived
assets to be disposed of by sale, superceding previous guidance for discontinued
operations of business segments. This Standard is effective for fiscal years
beginning after December 15, 2001. The Company has not yet determined the
effects of this Standard on its financial statements.
Note 4: Accounting for Price Risk Management Activities
--------------------------------------------------------
The Company adopted SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities," as amended by SFAS Nos. 137 and 138 (collectively, the
"Statement"), on January 1, 2001. The Statement requires the Company to
recognize all derivatives, as defined in the Statement, on the balance sheet at
fair value. Effective January 1, 2001, derivatives are classified as price risk
management assets and liabilities. Derivatives, or any portion thereof, that are
not effective hedges must be adjusted to fair value through income. If
derivatives are effective hedges, depending on the nature of the hedges, changes
in the fair value of derivatives either will offset the change in fair value of
the hedged assets, liabilities, or firm commitments through earnings, or will be
recognized in other comprehensive income until the hedged items are recognized
in earnings.
GTN's contracts for the transportation of natural gas are considered
derivative contracts as defined in SFAS No. 133. These transportation service
contracts are transacted in the normal course of business and are subject to the
terms, conditions and rate schedules of the Company's tariff as approved by the
FERC. The contracts include long- and short-term firm, and interruptible
transportation service contracts. At this time, these derivative contracts are
exempt from the requirements of SFAS No. 133, as amended, under the normal
purchases and sales exception, and thus are not recorded on the balance sheet at
fair value.
GTN uses other derivative contracts (i.e., other than the transportation
service contracts), in limited instances and solely for hedging purposes, to
offset price risk associated with certain negotiated rate transportation
contracts. Commodity price risk is the risk that changes in market prices will
adversely affect earnings and cash flows. GTN has exposure to commodity price
risk associated with negotiated rate index price contracts to provide
transportation service. The goal of the hedging program is to effectively
convert a portion of GTN's variable-rate future revenues into fixed-rate
revenues by locking in forward prices on certain volumes through the basis swap
arrangements with its affiliate, PG&E Energy Trading. These hedge contracts were
effective from
8
April through October of 2001. In late June, GTN entered into new contracts
exactly offsetting the initial basis swap arrangements for July through October.
The initial and offsetting swap contracts were designated as cash flow hedges
and recorded on the balance sheet at fair value, with the offset in the other
comprehensive income section of equity.
The earnings impact of adopting SFAS No. 133, as amended, on January 1,
2001 was immaterial. The effect on other comprehensive income was a decrease of
$5.0 million. Through September 30, 2001, GTN recorded $3.4 million of pre-tax
($2.1 million after tax) swap losses reported as an offset against gas
transportation revenues. As of September 30, 2001, due to the execution of the
new swap contracts, GTN has reflected no remaining Accumulated other
comprehensive income (loss). As of September 30, 2001, there is no balance sheet
impact of cash flow hedges recorded in relation to SFAS No. 133.
For the three- and nine-month periods ended September 30, 2001, no
ineffectiveness was recognized in earnings related to the cash flow hedges.
The schedule below summarizes the activities affecting Accumulated other
comprehensive income (loss) from derivative instruments, net of related income
tax (in thousands, unaudited).
Three Months Ended Nine Months Ended
September 30, 2001 September 30, 2001
Beginning Accumulated other comprehensive income (loss) $ - $ (5,029)
Net gain from current period hedging transactions - 2,920
Net reclassification to earnings - 2,109
------------------ ------------------
Ending Accumulated other comprehensive income (loss) $ - $ -
================== ==================
9
Note 5: Short-Term Debt
------------------------
In May 1999, GTN entered into a three year $100 million revolving credit
facility which supports its commercial paper and LIBOR-based programs. GTN had
recorded all instruments supported by the facility as long-term due to the life
of the underlying credit facility. As of June 30, 2001, GTN had classified all
borrowings backed by this facility, $40 million at that time, as short-term to
reflect the facility's current maturity date.
GTN intends to refinance the debt supported by the revolving credit
agreement on a long-term basis. To establish a vehicle for this long-term
refinancing, GTN entered into a $100 million promissory agreement and note with
PG&E NEG on August 1, 2001. This note is due on demand, but in no event earlier
than January 2, 2003. As of September 30, 2001, GTN has classified its
borrowings under the revolving credit agreement as long-term debt.
Note 6: Long-Term Debt
------------------------
In May 1999, GTN entered into a $50 million revolving 364-Day credit
agreement which could be extended for successive 364-Day periods. This agreement
was extended for one 364-Day period in 2000, but was subsequently allowed to
expire.
As of September 30, 2001, $24 million of LIBOR-based borrowings were
outstanding and classified as long-term under the $100 million revolving credit
agreement as supported by the PG&E NEG promissory note described in Note 5
above. There were no outstanding borrowings on the promissory agreement and
note.
Note 7: Income Taxes
---------------------
The differences between reported income taxes and tax amounts determined by
applying the federal statutory rate of 35 percent to income before income tax
expense were (in thousands, unaudited):
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
-------- -------- -------- --------
Income Tax Expense
Expected federal income tax expense $ 8,079 $ 9,217 $ 29,814 $ 24,749
Increase (decrease) in income tax expense
resulting from:
State income taxes, net of federal benefit 799 912 2,949 2,448
Prior year tax contingencies resolved in the
3rd quarter of 2001 (4,300) - (4,300) -
Other 91 69 322 206
-------- -------- -------- --------
Total income tax expense $ 4,669 $ 10,198 $ 28,785 $ 27,403
======== ======== ======== ========
Note 8: Commitments and Contingencies
--------------------------------------
Legal Matters - In the normal course of business, the Company is named as a
party in a number of claims and lawsuits. Any pending legal proceedings to which
GTN is a party or to which any of its property is subject are not expected to
have a material adverse affect on GTN's financial position, results of
operations, or cash flows.
Credit Support - GTN entered into a credit support agreement, effective
December 22, 2000, with PG&E Energy Trading-Power Holdings Corporation (PG&E
ETH), another wholly owned
10
subsidiary of PG&E NEG, to provide guarantees and other credit support in favor
of PG&E ETH's operating subsidiaries. GTN has agreed to provide such credit
support in an aggregate amount up to $2.0 billion. At September 30, 2001, $968
million of guarantees were outstanding, with a net exposure of $78 million on
the transactions supported by the guarantees. PG&E ETH has advised that GTN's
exposure to PG&E ETH is more than offset by the underlying fair market value of
PG&E ETH's forward book.
GTN has been authorized by its Board of Directors to execute and deliver
guarantees to support the obligations of North Baja Pipeline, LLC, another
wholly owned subsidiary of PG&E NEG, in an amount not to exceed $146 million. At
September 30, 2001, a total of $47 million of guarantees were outstanding in
favor of two entities.
11
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
GENERAL
-------
PG&E Gas Transmission, Northwest Corporation (GTN) is an indirect wholly
owned subsidiary of PG&E National Energy Group, Inc. (PG&E NEG) and is
affiliated with, but is not the same company as, Pacific Gas and Electric
Company (the Utility), the gas and electric company serving Northern and Central
California. PG&E Corporation is the ultimate corporate parent for both PG&E NEG
and the Utility.
The consolidated financial statements include GTN and its wholly owned
subsidiaries, Pacific Gas Transmission International, Inc., Pacific Gas
Transmission Company and its fifty percent ownership interest in a joint venture
known as Stanfield Hub Services, LLC.
GTN and its subsidiaries are collectively referred to herein as the
"Company". This information should be read in conjunction with the Consolidated
Financial Statements and Notes to Consolidated Financial Statements included in
Item 8, Financial Statements and Supplementary Data, in the Company's Form 10-K
for the fiscal year ended December 31, 2000.
GTN operates an open-access transportation system that transports primarily
Western Canadian gas from the British Columbia-Idaho border to the
Oregon-California border for third-party shippers on a nondiscriminatory basis.
GTN's transportation system also provides service to various delivery points in
Idaho, Washington, and Oregon. GTN's natural gas transportation services are
regulated by the Federal Energy Regulatory Commission (FERC), and various safety
issues are subject to the jurisdiction of the U.S. Department of Transportation.
The following information includes forward-looking statements that involve
a number of risks, uncertainties, and assumptions and include statements
regarding the intent, belief or current expectations of GTN and its management.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, events, levels of
activity, performance or achievements. When used in Management's Discussion and
Analysis of Financial Condition and Results of Operations, words such as
"estimates," "expects," "intends," "anticipates," "plans," "projects,"
"believes," "could" and similar expressions identify those statements which are
forward-looking. Actual results may differ materially from those expressed in
the forward-looking statements. Some of the factors that could materially affect
actual results include, but are not limited to:
. the direct and indirect effects of the current California energy crisis,
including the measures adopted and being contemplated by federal and state
authorities to address the crisis;
. the effect of the Utility's bankruptcy proceedings upon PG&E NEG and upon
GTN;
. legislative and regulatory initiatives regarding deregulation and
restructuring of the electric and natural gas industries in the United
States;
. the pace and extent of the restructuring of the electric and natural gas
industries in the United States;
. the extent and timing of the entry of additional competition into the
natural gas transmission market;
. the pursuit of potential business strategies, including acquisitions or
dispositions of assets or internal restructuring;
. the ability to expand its core pipeline business as affected by: (a)
completion of pipeline projects that may be delayed or prevented by
permitting delays or restrictions, shortages of equipment or labor, work
stoppages, adverse weather conditions, unforeseen engineering
12
problems, adverse environmental conditions or unanticipated cost increases;
(b) refusal or reluctance of connecting pipelines to expand their pipeline
capacity; (c) the ability of new pipeline customers to construct and
operate electric generating facilities; or (d) financing proposed projects
on terms acceptable to the Company;
. restrictions imposed upon PG&E NEG under certain term loans of PG&E
Corporation;
. the extent and timing of pipeline and storage capacity expansion and
retirements by others;
. changes in or application of federal, state and other regulations affecting
the Company;
. changes in or application of environmental and other laws and regulations
affecting the Company;
. political, legal and economic conditions and developments in California and
the Pacific Northwest;
. financial market conditions and changes in interest rates;
. weather and other natural phenomena; and
. the performance of projects undertaken and the success of the Company's
efforts to invest in and develop new opportunities.
RELATIONSHIP WITH PG&E CORPORATION
----------------------------------
The Utility, a regulated utility in California and wholly owned subsidiary
of PG&E Corporation, is experiencing liquidity and credit problems. Under the
deregulated wholesale power purchase market scheme in existence at the time in
California, the Utility spent approximately $6.6 billion through December 31,
2000, for purchased power above the amounts provided for under frozen rates.
Because of this situation, PG&E Corporation's credit rating was downgraded to
below investment grade in January 2001, which caused PG&E Corporation to default
on outstanding commercial paper and bank borrowings.
In March 2001, PG&E Corporation refinanced all of its outstanding
commercial paper and bank borrowings, and Standard & Poor's subsequently removed
its below investment grade credit rating since PG&E Corporation no longer had
rated securities outstanding.
PG&E Corporation and PG&E NEG have completed a corporate restructuring of
GTN, known as a "ringfencing" transaction. The ringfencing complied with credit
rating agency criteria designed to further separate a subsidiary from its parent
and affiliates, which enabled GTN to retain its own credit rating based on its
own creditworthiness.
The ringfencing involved creating a new special purpose entity (SPE),
between PG&E Corporation and GTN, called GTN Holdings LLC, which directly owns
100 percent of the stock of GTN. As part of the ringfencing, GTN Holdings LLC's
charter requires unanimous approval of its Board of Control, including at least
one independent director, before it can: (a) consolidate or merge with any
entity; (b) transfer substantially all of its assets to any entity; or (c)
institute or consent to bankruptcy, insolvency or similar proceedings or
actions. The SPE may not declare or pay dividends unless such dividends are
unanimously approved by the Board of Control (including the independent
director) and GTN Holdings LLC, on a consolidated basis with GTN, maintains a
debt coverage ratio of not less than 2.25:1 and a leverage ratio of not greater
than 0.70:1, or an investment grade credit rating.
The Company has terminated its intercompany borrowing and cash management
programs with PG&E Corporation. GTN has also settled all of its outstanding
balances to or from PG&E Corporation related to those programs. On October 26,
2000, the Company loaned $75 million to PG&E Corporation pursuant to a
promissory note bearing a floating interest rate tied to PG&E Corporation's
external borrowing rate. This note receivable is payable upon demand but has
been recorded as a non-current asset in the accompanying consolidated balance
sheet at September 30, 2001, reflecting Company expectations about the timing of
repayment.
13
On April 6, 2001, the Utility filed a voluntary petition for relief under
the provisions of Chapter 11 of the U.S. Bankruptcy Code. Pursuant to Chapter 11
of the U.S. Bankruptcy code, the Utility retains control of its assets and is
authorized to operate its business as a debtor-in-possession while being subject
to the jurisdiction of the Bankruptcy Court. On September 20, 2001, the Utility
and PG&E Corporation jointly filed a proposed plan of reorganization that
entails separating the Utility into four distinct businesses. The proposed plan
of reorganization does not directly affect the Company or any of its
subsidiaries. The proposed plan is subject to confirmation by the Bankruptcy
Court. In addition, before the plan can become effective, various regulatory
approvals must be obtained and certain other conditions must be satisfied.
Management believes that the Company and its subsidiaries, as described
above, would not be substantively consolidated with any insolvency or bankruptcy
proceeding involving PG&E NEG, the Utility or PG&E Corporation.
The Utility has been GTN's largest customer, accounting for over 15 percent
of its revenues. In accordance with GTN's FERC tariff provision, the Utility has
provided assurances either in the form of cash, an investment grade guarantee,
letter of credit, or surety bond to support its position as a shipper on the GTN
pipeline. As a result of the April 6, 2001 filing with the Bankruptcy Court, all
amounts owed to GTN by the Utility for transportation services on that date were
suspended pending the decision of the Bankruptcy Court. As of April 6, 2001, the
Utility owed GTN $2.9 million for transportation services. The Utility is
current on all subsequent obligations incurred for the transportation services
provided by GTN and has indicated its intention to remain current. The proposed
plan of reorganization filed by PG&E Corporation and the Utility contemplates
that the Utility will pay all its legitimate debts with interest.
PRICE RISK MANAGEMENT ACTIVITIES
--------------------------------
PG&E Corporation and PG&E NEG have established officer-level risk
policy/risk management committees, the risk management policies of which are
also applicable to GTN. GTN may only engage in the use of derivatives in
accordance with policies established by the Risk Management Committees of PG&E
Corporation and PG&E NEG. PG&E NEG measures its commodity price risk exposure
using value-at-risk and other methodologies that simulate future price movement
in the energy markets to estimate the size and probability of future potential
losses. Market risk is quantified using the variance/co-variance value-at-risk
model that provides a consistent measure of risk across diverse energy markets
and products. The use of this methodology requires a number of important
assumptions, including the selections of confidence level for losses, volatility
of prices, market liquidity, and holding period.
GTN's contracts for the transportation of natural gas are considered
derivative contracts as defined in SFAS No. 133. These transportation service
contracts are transacted in the normal course of business and are subject to the
terms, conditions and rate schedules of the Company's tariff as approved by the
FERC. The contracts include long- and short-term firm, and interruptible
transportation service contracts. At this time, these derivative contracts are
exempt from the requirements of SFAS No. 133, as amended, under the normal
purchases and sales exception, and thus are not recorded on the balance sheet at
fair value.
GTN uses other derivative contracts (i.e., other than the transportation
service contracts), in limited instances and solely for hedging purposes, to
offset price risk associated with certain negotiated rate transportation
contracts. Commodity price risk is the risk that changes in market prices will
adversely affect earnings and cash flows. GTN has exposure to commodity price
risk associated with negotiated rate index price contracts to provide
transportation service. The goal of the hedging program is to effectively
convert a portion of GTN's variable-rate future revenues into fixed-rate
revenues by locking in forward prices on certain volumes through the basis swap
14
arrangements with its affiliate, PG&E Energy Trading. These hedge contracts were
effective from April through October of 2001. In late June, GTN entered into new
contracts exactly offsetting the initial basis swap arrangements for July
through October. The initial and offsetting swap contracts were designated as
cash flow hedges and recorded on the balance sheet at fair value, with the
offset in the other comprehensive income section of equity.
The earnings impact of adopting SFAS No. 133, as amended on January 1,
2001, was immaterial. The effect on other comprehensive income was a decrease of
$5.0 million. Through September 30, 2001, GTN recorded $3.4 million of pre-tax
($2.1 million after tax) swap losses reported as an offset against gas
transportation revenues. As of September 30, 2001, due to the execution of the
new swap contracts, GTN has reflected no remaining Accumulated other
comprehensive income (loss). As of September 30, 2001, there is no balance sheet
impact of cash flow hedges recorded in relation to SFAS No. 133.
CHANGING REGULATORY ENVIRONMENT
-------------------------------
In November 2000, the FERC issued Order 587-M, which required pipeline
companies to migrate from version 1.3 to version 1.4 of the Gas Industry
Standards Board's (GISB) standards applicable to gas pipeline companies by no
later than May 1, 2001. GTN requested and received an extension of this
requirement until August 1, 2001. On August 1, 2001, as supplemented on
September 7, 2001, GTN filed tariff sheets reflecting implementation of GISB
version 1.4. The FERC has accepted GTN's filings and GTN is now fully compliant
with FERC Order No. 587-M.
In February 2000, FERC issued Order 637 to promote competition in the
short-term transportation market. The order lifted the rate cap for short-term
capacity release transactions for a period of two years and established new
reporting requirements that would increase price transparency for short-term
capacity. The removal of the price cap only applies to capacity release
transactions and does not provide any material short-term benefits to GTN. The
Order also modified regulations related to certain pipeline system operations,
such as scheduling procedures, capacity segmentation and penalties.
In September 2001, FERC issued a notice of proposed rulemaking addressing,
among other things, the interactions between interstate pipelines (such as GTN)
and other energy affiliates. In the event FERC issues a final rule based on this
proposal, GTN may need to establish additional procedures relating to
communication among GTN and other affiliated entities.
These regulatory initiatives are not expected to have a material impact on
GTN's financial position, cash flows or results of operations in the foreseeable
future.
FUTURE EXPANSION AND BUSINESS DEVELOPMENT
-----------------------------------------
GTN plans to expand its pipeline capacity by approximately 370 million
decatherms per day by the end of 2003. The first phase of this expansion,
approximately 220 million decatherms per day, is to be completed by the end of
2002 and to cost approximately $122 million. As a result of contracts recently
finalized, GTN intends to complete a second phase of this expansion of
approximately 150 million decatherms per day of additional capacity, at a cost
of approximately $111 million, to be completed by the end of 2003. GTN expects
to fund these expansions from cash provided by operations and, to the extent
necessary, external financing and capital contributions from PG&E NEG. In
addition, customers have expressed interest in further mainline services
commencing in 2004. GTN has also initiated a preliminary assessment of a
Washington lateral pipeline that would originate at the GTN mainline system near
Spokane, Washington and extend west approximately 260 miles into the
Seattle/Tacoma metropolitan area.
15
ACCOUNTING FOR THE EFFECTS OF REGULATION
----------------------------------------
GTN currently accounts for the financial effects of regulation in
accordance with the provisions of Statement of Financial Accounting Standards
(SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation". As a
result of applying the provisions of SFAS No. 71, GTN has accumulated
approximately $37.8 million of regulatory assets and $12.0 million of regulatory
liabilities as of September 30, 2001.
RESULTS OF OPERATIONS
---------------------
Selected operating results and other data are as follows (in millions,
unaudited):
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
--------- --------- --------- ----------
Operating revenues $ 57.3 $ 62.2 $ 185.9 $ 175.1
Operating expenses 27.5 26.0 79.6 74.4
--------- --------- --------- ----------
Operating income 29.8 36.2 106.3 100.7
Other income and (income deductions), net 2.3 (0.1) 7.5 0.1
Net interest expense 9.0 9.8 28.6 30.1
--------- --------- --------- ----------
Income before taxes 23.1 26.3 85.2 70.7
Income tax expense 4.7 10.2 28.8 27.4
--------- --------- --------- ----------
Net Income $ 18.4 $ 16.1 $ 56.4 $ 43.3
========= ========= ========= ==========
Net Income - Net income for the three- and nine-month periods ended
September 30, 2001 increased $2.3 million and $13.1 million, respectively,
compared to the same periods in 2000. The increases in net income for the
quarter and year-to-date from the same periods in 2000 reflect higher interest
income and a favorable resolution of prior year tax contingencies. In addition,
year-to-date operating revenues reflect a higher demand for transportation
services which began in mid-2000 and extended into the first two quarters of
2001. During the third quarter 2001, operating revenues decreased from the same
period in 2000 as a result of weakening pricing fundamentals.
Operating Revenues - Operating revenues for the three- and nine-month
periods ended September 30, 2001 decreased $4.9 million and increased $10.8
million, respectively, compared to the same periods in 2000. Demand for
available space on GTN's system increased sharply during the third quarter of
2000 and continued through the second quarter of 2001 due to favorable market
conditions. During the three-month period ended September 30, 2001, operating
revenues have declined from the levels experienced in the same period of 2000 as
pricing fundamentals have weakened during this period.
16
Operating Expenses - The components of total operating expenses are as
follows (in millions, unaudited):
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
-------- -------- -------- --------
Administrative and general $ 9.1 $ 7.2 $ 25.3 $ 21.9
Operations and maintenance 5.2 5.6 14.2 12.8
Depreciation and amortization 10.5 10.4 31.3 31.1
Property and other taxes 2.7 2.8 8.8 8.6
-------- -------- -------- --------
Total operating expenses $ 27.5 $ 26.0 $ 79.6 $ 74.4
======== ======== ======== ========
For the three- and nine-month periods ended September 30, 2001, compared
with the same periods in 2000, operating expenses increased $1.5 million and
$5.2 million, respectively. The increases reflect increased administrative and
general expense allocations, additional compressor overhaul activity and higher
compressor fuel use tax as a result of higher natural gas prices, partially
offset by a decrease in the Gas Research Institute fees and lower labor costs.
Other income and (income deductions), net - Other income, net of $2.3
million and $7.5 million for the three- and nine-month periods ended September
30, 2001 increased over the same periods in 2000 by $2.4 and $7.4 million,
respectively. These increases are due primarily to interest income in the amount
of $1.4 million and $4.4 million for the three- and nine-month periods ended
September 30, 2001, respectively, earned on the $75 million borrowed by PG&E
Corporation from GTN in October, 2000. Additional other income for the three-
and nine-month periods ended September 30, 2001 has come from the credit support
provided to another wholly owned subsidiary of PG&E NEG of $0.2 million and $0.7
million, respectively, and greater interest income on overnight deposits of cash
on hand of $0.2 million and $0.6 million, respectively.
Interest Expense - Interest expense for the three- and nine-month periods
ended September 30, 2001 decreased $0.8 million and $1.5 million respectively,
compared to the same period in 2000 due primarily to lower average debt
balances. For the three months ended September 30, 2001 and 2000, the average
interest rate was approximately 7.5 percent and 7.6 percent, respectively, while
the average balance of long- and short-term debt outstanding (excluding capital
lease obligations) was $469 million and $491 million, respectively. For the nine
months ended September 30, 2001 and 2000, the average interest rate was
approximately 7.5 percent, while the average balance of long- and short-term
debt (excluding capital lease obligations) outstanding was $486 million and $522
million, respectively.
Income Tax Expense - The three- and nine-month periods ended September 30,
2001 reflect an adjustment prorated to the nine-month period ended September 30,
2001 ($4.3 million), related to the completion of prior year tax audits.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Sources of Capital - The Company's capital requirements are funded from
cash provided by operations and, to the extent necessary, external financing and
capital contributions from its parent company. GTN has paid dividends as part of
a balanced approach to managing its capital structure, funding its operations
and capital expenditures, and maintaining appropriate cash balances. PG&E
Corporation and PG&E NEG completed a corporate restructuring of GTN, known as a
ringfencing transaction. The ringfencing complied with credit rating agency
criteria designed to further separate a subsidiary from its parent and
affiliates, which enabled GTN to retain its own credit rating based on its own
creditworthiness. GTN Holdings LLC, GTN's
17
immediate parent, may not declare or pay dividends unless its Board of Control
(including at least one independent director) has unanimously approved such
dividends, and GTN Holdings LLC, on a consolidated basis with GTN, meets
specified financial requirements (i.e., it maintains a debt coverage ratio of
not less than 2.25:1 and a leverage ratio of not greater than 0.70:1, or an
investment grade credit rating).
Net Cash Provided by Operating Activities - For the nine-month period ended
September 30, 2001, net cash provided by operating activities was $159.4
million, compared with $110.2 million for the same period in 2000. The $49.2
million increase was primarily due to changes in accounts payable and accrued
liabilities, net receivable/payable-affiliates and greater net income.
Net Cash Used in Investing Activities - For the nine-month period ended
September 30, 2001 compared to the same period in 2000, net cash used in
investing activities increased by $35.0 million. The increase primarily reflects
higher construction expenditures in 2001.
Net Cash Used in Financing Activities - For the nine-month period ended
September 30, 2001, net cash used in financing activities was $115.9 million
reflecting the net reduction in long-term debt and the payment of $52.5
million dividends to the parent. For the nine-month period ended September 30,
2000 net cash used in financing activities was $101.7 million, also reflecting a
net reduction in long-term debt. No dividends were paid during the nine months
ended September 30, 2000.
GTN believes that its ability to finance or to fully comply with all of the
terms of its existing debt covenants is unaffected by the financial situation of
any of its affiliates. GTN has retained its stand-alone investment grade rating.
NEW ACCOUNTING STANDARDS
------------------------
The Company adopted SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities", as amended by SFAS Nos. 137 and 138 (collectively, the
"Statement"), on January 1, 2001. The Statement requires the Company to
recognize all derivatives, as defined in the Statement, on the balance sheet at
fair value. Effective January 1, 2001, derivatives are classified as price risk
management assets and liabilities. Derivatives, or any portion thereof, that are
not effective hedges must be adjusted to fair value through income. If
derivatives are effective hedges, depending on the nature of the hedges, changes
in the fair value of derivatives either will offset the change in fair value of
the hedged assets, liabilities, or firm commitments through earnings, or will be
recognized in other comprehensive income until the hedged items are recognized
in earnings.
The earnings impact of adopting SFAS No. 133, as amended, on January 1,
2001 was immaterial. The effect on other comprehensive income was a decrease of
$5.0 million. Through September 30, 2001, GTN recorded $3.4 million of pre-tax
($2.1 million after tax) swap losses reported as an offset against gas
transportation revenues. As of September 30, 2001, due to the execution of new
swap contracts, GTN has reflected no remaining Accumulated other comprehensive
income (loss). As of September 30, 2001, there is no balance sheet impact of
cash flow hedges recorded in relation to SFAS No. 133.
In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS
No. 141, "Business Combinations". This Standard, which applies to all business
combinations completed after June 30, 2001, prohibits the use of
pooling-of-interests method of accounting for business combinations and provides
a new definition of intangible assets. The Company does not expect that
implementation of this Standard will have a significant impact on its financial
statements.
18
Also in June 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets". This Standard eliminates the amortization of goodwill, and
requires that goodwill be reviewed annually for impairment. This Standard also
requires that the useful lives of previously recognized intangible assets be
reassessed and the remaining amortization periods to be adjusted accordingly.
This Standard is effective for fiscal years beginning after December 15, 2001,
and affects all goodwill and other intangible assets recognized on a Company's
balance sheet at that date, regardless of when the assets were initially
recognized. The Company does not expect that implementation of this Standard
will have a significant impact on its financial statements.
In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". This Standard is effective for fiscal years beginning
after June 15, 2002, and provides accounting requirements for asset retirement
obligations associated with tangible long-lived assets. The Company has not yet
determined the effects of this Standard on its financial statements.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS No. 144 supercedes SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of", but retains its fundamental provisions for
recognizing and measuring impairment of long-lived assets to be held and used.
This Standard also requires that all long-lived assets to be disposed of by sale
are carried at the lower of carrying amount or fair value less cost to sell, and
that depreciation should cease to be recorded on such assets. SFAS No. 144
standardizes the accounting and presentation requirements for all long-lived
assets to be disposed of by sale, superceding previous guidance for discontinued
operations of business segments. This Standard is effective for fiscal years
beginning after December 15, 2001. The Company has not yet determined the
effects of this Standard on its financial statements.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
See Price Risk Management Activities included in Management's Discussion
and Analysis above.
19
PART II: OTHER INFORMATION
---------------------------
Item 5. OTHER INFORMATION
-----------------
GTN's earnings to fixed charges ratio for the nine months ended September 30,
2001 was 3.9. The statement of the foregoing ratio, together with the statement
of the computation of the foregoing ratio filed as Exhibit 12 hereto, are
included herein for the purpose of incorporating such information and exhibit
into Registration Statement No. 33-91048 relating to GTN's debt outstanding.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits:
Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges.
(b) No reports on Form 8-K were issued during the quarter ended September 30,
2001 and through the date hereof.
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PG&E GAS TRANSMISSION, NORTHWEST CORPORATION
--------------------------------------------
(Registrant)
November 7, 2001 By: /s/ John R. Cooper
------------------
Name: John R. Cooper
Title: Chief Financial Officer & Treasurer
21
EXHIBIT INDEX
Exhibit No.: Description of Exhibit
12 Computation of Ratio of Earnings to Fixed Charges