Tuesday, February 24, 2009

PG&E Are Risks Explaned.

PG&E (PCG) announced much improved results when comparing 2008 over 2007. They of course are a rather large utility and subject to much regulation. Essentially everyone who ever turns on a light bulb is a paying customer. Considering that point they still have operating challenges in managing huge infrastructure, capital expenditures, cost of capital and volatile raw fuel pricing.

But look at the bottom of their press release. No fewer than 19 separate and distinct items are identified in their risks including the ability of trading parties to return collateral under various hedge agreements. The last cautionary item is a gem.

“other factors and risks discussed in PG&E Corporation and Pacific Gas and Electric Company's 2008 Annual Report on Form 10-K and other reports filed with the Securities and Exchange Commission.”

You know the lawyers had the last word but you have to worry about the fine print. When you read through the other points they essentially are cautioning you on every major factor in their business.

But when you listen to management comments or read disclosure documents they do not correlate and align to the stated risks. The devil is in the details as they say.

Open comment to the SEC. When a company gives you a list of risks that may influence operations why are they not obligated to report on those risks and let investors large and small know where things stand. It is one thing to manage risk. It is quite another to blindfold investors and say just trust us, no one has this trust level any more.