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    PG&E Corp (PCG)

    Q4 2023 Earnings Summary

    Reported on Jan 10, 2025 (Before Market Open)
    Pre-Earnings Price$16.78Last close (Feb 21, 2024)
    Post-Earnings Price$16.58Open (Feb 22, 2024)
    Price Change
    $-0.20(-1.19%)

    What went well

    • PG&E extended its core EPS growth guidance of at least 9% through 2028, demonstrating strong confidence in its long-term growth prospects.
    • The company commits to no new equity issuance in 2024 and has multiple efficient financing options beyond 2024, including retained earnings and utility debt, which are accretive to earnings.
    • Constructive regulatory relationships, evidenced by positive discussions with regulators regarding the Pac Gen transaction, position PG&E to capitalize on clean energy opportunities and support future growth.

    What went wrong

    • PG&E may need to reintroduce an at-the-market (ATM) equity program in 2025 to finance an additional $5 billion in incremental capital expenditures, potentially leading to dilution for shareholders.
    • Uncertainty surrounding the approval of the Pacific Generation (Pac Gen) transaction could impact PG&E's financing plans, as delays may require the company to seek alternative funding options that might be less favorable.
    • PG&E has not yet achieved investment-grade credit ratings, and while progress has been made, reaching this milestone depends on improving credit metrics and mitigating wildfire risks, posing challenges to financial stability.

    Q&A Summary

    1. Earnings Growth Guidance
      Q: What are your updated EPS growth projections?
      A: PG&E raised and extended its core EPS guidance, expecting 12% growth in 2023, at least 10% in 2024, and at least 9% annually through 2028.

    2. Equity Financing Plans
      Q: Will you need to issue new equity soon?
      A: The guidance includes no new equity in 2024, with or without the Pac Gen transaction. We have several financing options, including retained earnings and utility debt. It's too soon to size a potential ATM equity program in 2025, and we'll only consider it if accretive to our guidance.

    3. Dividend Growth Outlook
      Q: How are you approaching dividend growth?
      A: Our intent is to achieve a competitive payout ratio and show meaningful progress over the next five years. Given our low starting point, the dividend growth rate will be dramatically different from peers during this period.

    4. Pac Gen Transaction Status
      Q: What's the status of the Pac Gen sale approval?
      A: Communications with the commission have been constructive. The extended time allows us to better align on the benefits, including customer affordability and advancing California's clean energy goals. We remain confident in the transaction.

    5. Credit Rating and Investment Grade Path
      Q: What are the milestones to achieve investment-grade credit rating?
      A: We're focused on improving credit metrics, targeting mid-teens FFO to debt in 2024. Rating agencies are looking at wildfire risk mitigation and governance improvements. We expect sustained high cash flows and positive outlooks from both Moody's and S&P.

    6. Capital Expenditure Plans
      Q: How will you finance your incremental CapEx?
      A: We have an additional $5 billion in new CapEx. We'll ensure it's financed affordably, considering options like utility debt and potential asset sales. Our financing choices will be accretive to earnings.

    7. Load Growth and Data Center Demand
      Q: Is data center demand affecting your load growth projections?
      A: Yes, we experienced a 3x increase in data center applications in 2023 compared to the prior four years. This contributes to higher load growth forecasts, especially in the latter part of our five-year plan.

    8. Undergrounding Initiatives
      Q: Can you update us on your undergrounding plans?
      A: Last year proved we can underground lines at scale and affordably. Due to the rate case, we'll underground about 250 miles this year. We'll file our ten-year undergrounding plan as required, aiming to enhance climate-resilient infrastructure.

    9. Cost of Capital Proceeding
      Q: What's the impact if the cost of capital trigger doesn't hold?
      A: The impact on monthly bills is very minor, just a couple of dollars. We've planned conservatively for either outcome, and it doesn't affect our 2024 earnings guidance.

    10. Lean Enterprise Maturity
      Q: What does your 44% enterprise lean maturity score indicate?
      A: It reflects our assessment of leaders' adoption of lean practices. The 44% score shows significant room for improvement, which can lead to further O&M savings and process efficiencies as we mature.

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