Q2 2024 Earnings Summary
- PG&E is delivering strong financial performance, projecting 9.5% rate base growth through 2028 and at least 10% core earnings per share growth in 2024, followed by at least 9% growth from 2025 to 2028.
- PG&E has significantly reduced wildfire risk, with Moody's RMS wildfire model estimating a 93% reduction in potential economic loss due to their mitigation efforts.
- PG&E is making progress on its undergrounding initiatives, reaffirming its target of 250 miles for the year, with process improvements ensuring they are on track.
- Operational savings may be behind schedule: PG&E reported year-to-date O&M savings of $52 million versus the targeted $200 million, achieving only 25% of the target halfway through the year, raising concerns about meeting the full-year savings goal.
- Financing and debt reduction challenges: The company acknowledges flexibility in its plan to pay down $2 billion of parent debt by 2026, indicating potential delays or adjustments, which may impact credit improvement timelines and the ability to finance additional capital expenditures.
- Potential for higher customer bills due to regulatory concerns: Interveners like Cal Advocates are predicting double-digit percent increases in customer bills over the next several years, suggesting that PG&E's assumption of keeping rate increases below inflation might face challenges, potentially affecting customer satisfaction and regulatory relations.
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Financing for Incremental Capital
Q: Framework for financing additional capital?
A: Management emphasizes a balanced, flexible financing plan for new capital investment. They aim for affordability for customers, accretion to EPS, and strengthening the balance sheet without issuing equity, while meeting growth targets. Flexibility comes from dividend ramp-up and parent debt paydown of $2 billion by end of 2026. They will follow the authorized regulatory structure and consider market conditions. -
Undergrounding Plan and Wildfire Risk
Q: Status of undergrounding amid active fire season?
A: PG&E remains committed to undergrounding in high-risk areas as a critical safety measure. They have 1,230 miles approved in the GRC through 2026 and are on track to meet mileage requirements. No incremental mileage is expected outside of the next GRC or the 10-year plan. Despite high fuel levels due to earlier moisture, they have advanced safety measures including AI-enabled cameras and partnerships with CAL FIRE, contributing to a differentiated safety posture in California. -
Load Growth from Data Centers and EVs
Q: Update on data center and EV load growth?
A: PG&E sees significant potential in data center load growth, with only a few hundred megawatts currently in the capital plan and a cluster study underway revealing higher demand. Electric vehicle adoption is strong, with 610,000 EVs on the road in California, up from 580,000, and 25% of new vehicles sold being electric, contributing to beneficial load growth. -
O&M Savings Target Progress
Q: Progress on O&M savings target?
A: PG&E is on track to meet or exceed the 2% O&M reduction target this year, with initiatives from both smaller and larger projects. Savings materialize more significantly in the second half of the year. They emphasize waste elimination through their Lean playbook, engaging employees to identify efficiencies, aiming for a culture of performance. -
Bill Increases and Regulatory Outlook
Q: Outlook on bill increases amid regulatory concerns?
A: Management believes they can maintain rate increases below the rate of inflation through their simple, affordable model, which includes O&M savings and efficient financing. They acknowledge that some interveners may not yet understand this new approach but are confident in proving its effectiveness over time. -
SB 410 Capital Funding
Q: Plans for incremental requests under SB 410?
A: PG&E recognizes that demand is outstripping the $2.3 billion cap approved by the commission. They plan to make additional filings based on customer demand to secure funding for necessary infrastructure to support load growth, ensuring affordability and balance sheet health. -
Fire Protection Index and Outlook
Q: Fire risk outlook for remainder of year?
A: The Fire Threat Index shows more days with higher risk conditions due to low fuel moisture levels. PG&E is prepared with enhanced safety measures and forecasts continued vigilance until environmental conditions improve. -
Management Continuity
Q: CEO's thoughts on contract extension?
A: The CEO expresses commitment to building a lasting system through a performance playbook and strong team, aiming to ensure continued service standards beyond her tenure. She emphasizes that the company's success is not reliant on one individual.
Research analysts covering PG&E.