PG&E Corporation (PCG) 2024 Q2 Earnings Call Summary

Optimistic Highlights

• Solid Progress and Guidance Reaffirmation

  PG&E reported solid progress with core earnings per share at $0.31 for Q2, totaling $0.69 for the first half of 2024. They reaffirmed their 2024 guidance range of $1.33 to $1.37 and a long-term earnings growth of at least 9% annually from 2025 through 2028.

• Commitment to No New Equity in 2024

  The company remains committed to not issuing new equity in 2024 and has made no changes to its five-year financing plan.

• Regulatory Support and Capital Investment Authorization

  The CPUC authorized an incremental $2.3 billion of capital investment for energization, with the opportunity for more if needed, and approved an increase in return on equity to 10.7%.

• Wildfire Risk Mitigation Success

  PG&E's wildfire risk mitigation strategies have significantly reduced wildfire risks across its service area, with no fires of consequence linked to PG&E so far this season despite a more active wildfire season.

• Financial Risk Mitigations

  Through Assembly Bill 1054, PG&E has established financial risk mitigations including access to liquidity, an improved prudence standard, and a cap on shareholder exposure.

Pessimistic Highlights

• Increased Wildfire Activity

  The start of this year's wildfire season has been more active, with circuit mile days under high-risk conditions up 48% year-to-date.

Company Outlook

• Continued Growth and Investment

  PG&E is focused on executing against its simple affordable model to make necessary safety, reliability, and resiliency investments while keeping bills at or below inflation for customers. They see potential for at least another $5 billion of incremental T&D investment.

Q & A Highlights

• Q: Can you discuss the plan for undergrounding and its evolution over the past few quarters? (Shar Pourreza, Guggenheim Partners)

  A: Undergrounding remains a critical element of our wildfire risk mitigation strategy. We have 1,230 miles approved in the GRC through 2026 and are on track to meet this year's mileage requirements. We do not anticipate filing for incremental mileage outside of our next GRC or the undergrounding 10-year plan. (Patricia Poppe)

• Q: Any comments on the Park Fire in Butte County and PSPS preparedness? (Shar Pourreza, Guggenheim Partners)

  A: No indications of our equipment being involved in the Park Fire. We have a differentiated safety posture and are prepared for PSPS events, having executed two small ones this year. (Patricia Poppe)

• Q: Could you provide more details on the financing aspect of potential incremental capital beyond the plan? (Steve Fleishman, Wolf Research)

  A: New capital must be affordable for customers, accretive to EPS, and helpful to our balance sheet. Our current financing plan is balanced and provides flexibility, including the ramp-up of the dividend and parent debt pay-down. (Carolyn Burke)

• Q: How are data center growth and electric vehicle adoption tracking this year? (Steve Fleishman, Wolf Research)

  A: Data center load growth is being studied, with only a couple hundred megawatts currently in our plan. EVs continue to sell well, with 610,000 EVs on the road in our service area, up from 580,000 reported earlier. (Patricia Poppe)

• Q: Can you walk through the energization order process going forward? (Jeremy Tonet, JPMorgan Securities)

  A: The CPUC's order authorizes incremental spend of up to $2.3 billion for new energization projects through 2026. We will make filings based on actual completion and demand, potentially requesting additional increases. (Patricia Poppe)

• Q: How are ground conditions affecting the ignition rate, and what factors contribute to the uptick? (Jeremy Tonet, JPMorgan Securities)

  A: Increased fuel levels and low fuel moisture levels due to early moisture and subsequent hot conditions have contributed to a more active wildfire season. However, our layers of protection strategy, including AI-enabled cameras and partnerships with CAL FIRE, have significantly improved our readiness and response. (Patricia Poppe)

• Q: Any updates on national policy regarding wildfires? (Jeremy Tonet, JPMorgan Securities)

  A: We are actively involved in discussions, providing insight and experience. There's interest from western states in a national solution, but it's a long process, especially for states not as affected by wildfires. (Patricia Poppe)

• Q: How do you think about committing to another contract extension? (Julian Dumoulin Smith, Jefferies)

  A: My focus is on building a system and culture of performance at PG&E that lasts and stands the test of time, beyond any individual's tenure. (Patricia Poppe)

• Q: Can you comment on the path of bill increases and the disconnect with interveners' projections? (Gregg Orrill, UBS)

  A: Cal Advocates may not yet understand our simple affordable model, which is new for California and PG&E. We aim to prove that we can maintain rate increases below the rate of inflation. (Patricia Poppe)

• Q: How is the gas system throughput year over year, and is electrification impacting it? (Anthony Crowdell, Mizuho)

  A: Throughput has been pretty flat, with no notable decrease due to electrification, though we are seeing targeted electrification in specific cases. (Patricia Poppe)

• Q: What's the outlook for the remaining portion of this year compared to prior years on the PG&E Fire Protection Index? (Ryan Levine, Citi)

  A: We're seeing more days in higher risk conditions, with forecasts indicating continued high risk until more moisture is present. However, our readiness and response capabilities are significantly improved. (Patricia Poppe)

• Q: Are savings from O&M reductions currently behind due to summer conditions, or was there a planned acceleration for the second half? (Michael Lonegan, Evercore ISI)

  A: Savings typically materialize in the second half of the year, following the planning and initiation of ideas earlier in the year. We are on track to meet or exceed our 2% O&M reduction target. (Patricia Poppe)