PG&E Corp (PCG)

• Strong Financial Performance and EPS Growth: PG&E reported core earnings of $1.06 per share for the first nine months of 2024, up $0.30 over the same period last year, driven by higher customer capital investment and O&M savings. The company extended its guidance of at least 10% core EPS growth through 2025. -
• Increased Capital Plan and Rate Base Growth: PG&E increased its five-year capital plan by $1 billion, resulting in a compound annual growth rate in rate base of 10%. This incremental capital is expected to be accretive to earnings per share and supports further customer growth. - -
• Operational Improvements and Load Growth Opportunities: The company is achieving O&M cost savings through nearly 200 initiatives, reducing expenses by 5.5% in 2023 and targeting further reductions. Additionally, PG&E anticipates load growth from electric vehicles, data centers, and building electrification, contributing positively to future earnings. - -

• Regulatory approval uncertainty for future capital expenditures: PG&E's earnings growth is heavily reliant on significant capital expenditure plans, such as the additional funding requested in the supplemental SB 410 filing. The company acknowledges that they won't include this in their plan until they meet their criteria, indicating uncertainty in securing regulatory approval. -
• Potential regulatory pushback on undergrounding costs: There is concern about the cost-effectiveness of undergrounding as a wildfire mitigation strategy. The CEO mentions that some policy decision-makers and interveners do not understand the actual math, which could lead to challenges in obtaining approval for these investments. -
• Credit rating below investment grade: PG&E remains one notch below investment grade at Moody's and Fitch, affecting their financing costs and potentially hindering their ability to fund future investments efficiently. -

1. $1 Billion CapEx and EPS Growth
   Q: Was the $1B CapEx increase the driver of 10% EPS growth?
   A: Yes, the additional $1 billion in CapEx was the key driver for increasing EPS growth to 10%. - This disciplined approach ensures approved CapEx that's affordable, accretive to EPS, and efficiently financed. -

2. Funding Without New Equity
   Q: How do you fund the $1B CapEx with no new equity?
   A: The $1 billion CapEx was funded by issuing junior subordinated notes with 50% equity content. - This efficient financing means no changes to our equity plan; we're issuing a routine $3 billion ATM program over five years, with no new equity in 2024. -

3. Data Center Load Growth
   Q: What's the status of the 3.5 GW data center pipeline?
   A: We're completing our first cluster study with 3.5 GW of requests from multiple customers. - Demand is strong, confirming significant capacity available. - Last year, we added 9.5 GW of new supply and 10 GW of battery storage in California. -

4. Additional $5B CapEx Potential
   Q: How do you view the $5B in incremental investments?
   A: We have a robust pipeline and could add an additional $5 billion of CapEx as it meets our criteria. - This includes transmission, data centers, IT improvements, generation, hydros, and EV-related capital. - Despite adding $1B this quarter, the $5B potential remains unchanged. -

5. Undergrounding Strategy
   Q: What's the update on undergrounding guidelines and plans?
   A: We're working with OEIS to establish filing requirements, aiming to file by mid-2025. - Undergrounding is the right solution for our highest risk areas, offering long-term cost benefits and safety without compromising reliability. -

6. Wildfire Mitigation and Agency Relations
   Q: Any updates on wildfire risk discussions with agencies?
   A: The focus is on making the system safer faster, with current mitigations working effectively. - We discuss acceptable outage levels given risks, advocating undergrounding as it eliminates both PSPS and wildfire risks. - Our progress includes no major fires and limited structural damage over multiple years. -

7. Affordability Initiatives
   Q: Thoughts on Governor's executive order on affordability?
   A: We share the goal of affordable energy and are implementing our simple affordable model. - Our upcoming 2027 rate case filing will demonstrate cost reductions and load growth benefits, aiding customer affordability as we invest in infrastructure. -

8. DOE Loans and Election Impact
   Q: How might the election affect potential DOE loans?
   A: The DOE loan process is confidential, but resolution is possible before year-end. - We like the DOE loan for net savings to customers but haven't included it in our financial plan; it would be upside and accretive. -

9. Credit Rating Improvements
   Q: Where do you stand on FFO to debt and ratings?
   A: We're on track to reach mid-teens FFO to debt by year-end, showing significant improvement. - We're one notch below investment grade at Moody's, meeting financial metrics, and optimistic about our discussions. -

10. Asset Sales Not Planned
    Q: Are asset sales part of efficient financing plans?
    A: Asset sales are not on our list; we don't see them as a primary source of efficient financing. - We're not moving forward with Pac Gen and have no plans for monetizing assets. -

Annual guidance for FY 2024:

• Core Earnings Per Share (EPS): $1.34–$1.37 - (raised from $1.33–$1.37 - )
• Capital Expenditure (CapEx): $63 billion - (raised from $62 billion - )
• Operating Cash Flow: Over $3 billion - (no prior guidance)

Annual guidance for FY 2025:

• Core Earnings Per Share (EPS): $1.47–$1.51 - (no prior guidance)

Additional multi-year guidance:

• Long-term EPS Growth (2026–2028): At least 9% each year - (no prior guidance)
• Equity Guidance (2025–2028): $3 billion - (no prior guidance)
• Credit Rating: On path to achieving investment-grade credit - (no prior guidance)