Q3 2024 Earnings Summary
- 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.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | Increased by $696 million (13%) | Higher authorized base revenues (about $650 million), interim rate relief in WMCE ($275 million) and WGSC ($130 million) proceedings, plus $90 million for recovering electricity procurement costs; partially offset by lower revenues in the RTBA and RUBA. These increased regulatory allowances reflect company-specific approvals and robust market demand. |
Electric Segment | Significant increase in Q2 2024 vs. Q2 2023 | Base revenues up by $650 million, plus $275 million and $130 million from interim rate relief in separate wildfire and gas safety proceedings, and $90 million in recoverable electricity procurement cost. Offsets include $180 million (RTBA), $80 million (RUBA), and $70 million (natural gas) decreases. This reflects regulatory steps to bolster electric infrastructure. |
Natural Gas Segment | Lower gas costs by $70 million (26%) | Falling natural gas prices drove lower procurement costs, while operating and maintenance expenses rose by $322 million (13%) due to deferred expenses recognized in various regulatory proceedings. Overall throughput remained flat year-over-year, indicating currently limited impact from electrification initiatives. |
Net Income | Increased by $85 million (from $480M to $565M) | Stronger operating revenues (up $696 million) and lower Wildfire Fund expenses offset higher interest costs and a larger tax provision. The combination of rate case approvals and controlled cost escalations contributed to improved profitability, though continued wildfire and safety investments may influence future earnings trends. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
EPS | FY 2024 | $1.33 – $1.37 | $1.34 – $1.37 | raised |
EPS | FY 2025 | no prior guidance | $1.47 – $1.51 | no prior guidance |
Long-Term EPS Growth | FY 2026 | at least 9% | at least 9% | no change |
Long-Term EPS Growth | FY 2027 | at least 9% | at least 9% | no change |
Long-Term EPS Growth | FY 2028 | at least 9% | at least 9% | no change |
Rate Base Growth | FY 2028 | 9.5% CAGR through 2028 | 10% CAGR through 2028 | raised |
Capital Expenditure | FY 2028 | $62B plan through 2028 | $63B plan through 2028 | raised |
Equity Issuance | FY 2024 | no prior guidance | No new equity issuance | no prior guidance |
Debt Reduction | FY 2026 | no prior guidance | $2B reduction by end of 2026 | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Investment-grade credit rating progress | Q2 2024: Also one notch below with positive outlook. Q1 2024: Same status, emphasizing financial and operational progress. Q4 2023: One notch away with a positive outlook from Moody’s and S&P. | Still one notch below investment grade at Moody’s and Fitch, with a positive outlook and expectation of near-term upgrades. | Recurring topic, consistently positive trend. |
Capital plan increased to $63 billion through 2028 with no new equity in 2024 and potential $3 billion equity from 2025–2028 | Q2 2024: No mention of $63B [No documents]. Q1 2024: Discussed a $62B plan but not $63B. Q4 2023: Did not specify $63B. | Announced $63B plan through 2028, sticking to no new equity in 2024, with $3B equity expected from 2025–2028. | New mention in Q3 2024, expanded from $62B. |
Efforts to reduce operating and maintenance expenses | Q2 2024: Reported $52M in O&M savings year-to-date, slightly behind mid-year target but confident in catching up. Q1 2024: Exceeded prior-year targets, no concerns. Q4 2023: 5.5% O&M savings, optimistic about more improvements. | Emphasized nonfuel O&M savings, multiple cost-reduction projects, and no concerns about falling behind targets. Reinvesting savings in risk mitigation. | Recurring, consistently positive progress. |
Load growth driven by electrification and EV adoption | Q2 2024: 610,000 EVs in service area; EV/data centers reduce bills for customers and spur new revenue. Q1 2024: Noted 1–3% near-term load growth and potential 70% growth by 2045. Q4 2023: Called out data centers and EVs as future load drivers. | EVs, data centers, and building electrification are accelerating load growth, benefiting revenues and supporting decarbonization goals. | Recurring, remains positively viewed. |
Extended EPS growth guidance (at least 9–10%) | Q2 2024: Reaffirmed 10% in 2024, 9% annually from 2025–2028. Q1 2024: Same 10% and 9% outlook. Q4 2023: At least 9% through 2028. | At least 10% EPS growth through 2025 and at least 9% from 2026–2028; raised after an extra $1B in capital. | Recurring, confidence remains high. |
Delays in undergrounding plans due to additional requirements from OEIS | Q2 2024: No mention. Q1 2024: No mention. Q4 2023: No mention. | Mentioned expanded OEIS requirements may delay filing until mid-2025; still see undergrounding as best long-term solution. | New in Q3 2024, potential schedule impact. |
Dividend growth ambitions aiming for a competitive payout ratio over the next five years | Q2 2024: No specific discussion [No direct info]. Q1 2024: Plans to grow dividend more slowly initially, targeting a competitive payout ratio. Q4 2023: Seeks significant catch-up in dividend growth, prioritizing balance sheet health in near term. | No mention in Q3 2024. | Not mentioned this period; previously discussed. |
Regulatory risks and dependency on CPUC approvals for capital investments and growth initiatives | Q2 2024: Positive GRC Phase II decision and ROE increase to 10.7%. Q1 2024: 93% of 2024 rate base authorized; AB 1054 aids wildfire risk. Q4 2023: Several regulatory catalysts, constructive environment but some intervenor challenges. | Emphasized CPUC approvals for $3.1B in supplemental funding requests by Q1 2025; remain cautious until approvals are finalized. | Recurring, remains constructive overall. |
Potential equity dilution through future ATM programs or issuances beyond 2024 | Q2 2024: Committed to no new equity in 2024; minimal detail on post-2024. Q1 2024: Plans for $3B equity starting 2025. Q4 2023: Possible ATM in 2025, timing uncertain. | Reaffirmed $3B equity from 2025–2028 via routine ATM; already factored into EPS guidance. | Recurring, plan is consistent. |
Continued wildfire liability exposure, including settlements for past fires like Dixie | Q2 2024: Surpassed $1B in Dixie Fire settlements, can now draw on Wildfire Fund. Q1 2024: Paid $870M in settlements; top-up to $1B triggers additional fund access. Q4 2023: No specific mention of Dixie settlements [No direct references]. | A second monthly $34M reimbursement from the Wildfire Fund was received in late October; monthly cadence expected. | Recurring, settlement process advancing. |
Flexibility in parent debt paydown timeline | Q2 2024: Still targeting $2B by 2026, with some timing flexibility. Q1 2024: Similar approach, acknowledging flexibility. Q4 2023: Committed to $2B paydown, focusing on credit metrics. | No mention in Q3 2024. | Not mentioned in Q3, previously recurring. |
Possible DOE loans or hybrid securities discussed as financing options not yet included in guidance | Q2 2024: No mention [No documents]. Q1 2024: No mention. Q4 2023: No mention. | Indicated DOE loan process is ongoing and could be upside; issued $1B in junior subordinated notes with 50% equity credit. | New in Q3 2024, potential financing avenue. |
Concerns about customer affordability and increased scrutiny from intervenors like Cal Advocates | Q2 2024: Cal Advocates forecasting larger bill increases; PG&E aiming to prove lower actual rates. Q1 2024: No mention. Q4 2023: No direct mention of Cal Advocates. | Addressed misinformation on undergrounding cost-effectiveness; stressed "simple, affordable model". | Recurring recently, key for future perception. |
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$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. -
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. -
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. -
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. -
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. -
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. -
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. -
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. -
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. -
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.
Research analysts covering PG&E.