PG&E (PCG) - 2024 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The core earnings per share for the first quarter came in at $0.37, an increase of$ 0.08 year-over-year, primarily driven by increased customer capital investment [41][54] - The CPUC rate base now provides an equity return of 10.7% as approved through the adjusted cost of capital mechanism [36] - Operating cash flow is forecasted to rise from $5 billion in 2023 to$ 8 billion in 2024, with a total of $50 billion in operating cash flow expected from 2024 through 2028 [57][81] Business Line Data and Key Metrics Changes - The company has exceeded its annual nonfuel O&M reduction target every year, achieving a reduction of 3% in 2022 and 5.5% in 2023 [27] - The plan includes$ 62 billion of customer capital investment over the next five years, with an additional $5 billion expected to be incorporated once it becomes affordable [75][79] Market Data and Key Metrics Changes - California is projected to experience 1% to 3% load growth per year in the near term, with upwards of 70% load growth over the next 20 years as the state moves towards carbon neutrality by 2045 [28] - The company has reduced its wildfire risk by 94% and has achieved a 68% reduction in ignitions compared to 2017 [45][46] Company Strategy and Development Direction - The company is committed to a five-year financing plan that does not include the proposed sale of a minority interest in Pacific Generation, reaffirming its earnings guidance and capital plan [23][25] - The strategy focuses on maintaining a conservative approach to financing while prioritizing customer capital investments and achieving a competitive dividend payout ratio [58][79] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to manage physical and financial risks associated with wildfires, highlighting the effectiveness of AB 1054 and the self-insurance model [44][100] - The company anticipates significant opportunities in the clean energy transition, with plans to support California's ambitious decarbonization goals [131][200] Other Important Information - The company plans to grow its dividend payout to a level closer to its regulated utility peers, with$ 2.5 billion included in the plan through 2028 [26] - The recent improvements in credit ratings are attributed to demonstrated financial and operational progress since 2020, particularly in wildfire risk mitigation [61][80] Q&A Session Summary Question: Can you elaborate on the timing of equity needs and the levers to manage equity needs over time? - The plan assumes a reasonable balance of utility debt, parent company debt, dividend growth, and routine equity financing [88] Question: What are your thoughts on the recent letter regarding sector wildfire risk? - The company believes California has made significant progress in mitigating both physical and financial risks, making it an investable region [91][114] Question: Can you clarify the dividend comment regarding slower growth initially and ramping up later? - The intent is to grow the dividend more slowly in the early years of the five-year plan, with a quicker ramp-up in the later years [97][119] Question: How do you view the potential for national policy regarding wildfire risk? - There is a possibility for a national safety regulator for wildfire, similar to FEMSA for gas pipelines, to establish safety standards [172] Question: What is the status of the Pac Gen transaction? - The company continues to advocate for the Pac Gen sale, believing it will bring affordability to bills and help accelerate the return to investment grade [149][150]