Release and Selected Exhibits
Presentation and Complete Earnings Exhibits
SAN FRANCISCO, Calif. — PG&E Corporation's (NYSE: PCG) recorded third-quarter 2018 net income available to common shareholders was $564 million, or $1.09 per share, as reported in accordance with generally accepted accounting principles (GAAP). This compares with net income available to common shareholders of $550 million, or $1.07 per share, for the third quarter of 2017.
GAAP results include items that management does not consider part of normal, ongoing operations (items impacting comparability), which totaled $18 million after-tax, or $0.04 per share, for the quarter. This was primarily driven by legal and other costs, net of probable insurance recoveries, related to the Northern California wildfires. This was partially offset by a reduction in gas-related capital disallowance estimates. Items impacting comparability for the quarter also include legal costs related to the Butte fire and costs to clear pipeline rights-of-way.
"Driven by the growing threat posed by extreme weather, PG&E is making critical investments and further enhancing our operations so that our communities are safer and more resilient. We are committed to helping meet California's climate challenges while continuing to invest in a sustainable energy future for all of our customers," said PG&E Corporation CEO and President Geisha Williams.
In recent months, PG&E's work to further reduce the risk of wildfires and address public safety has included the following actions:
- Creating even greater safety clearances between trees and power lines in neighborhoods that face the most extreme wildfire threat to reduce the risk of vegetation coming into contact with lines;
- Continued installation of additional weather stations and early fire detection cameras to have better situational awareness of where extreme wildfire danger could occur; and
- Proactively turning off power for safety in certain communities in the North Bay and Sierra Foothills before forecasted extreme weather in October.
Among recent legislative and regulatory developments:
- California lawmakers passed important wildfire policy reforms as outlined in Senate Bill 901. A series of upcoming regulatory filings, including PG&E's 2020 General Rate Case, will lay out the company's wildfire risk management programs in detail.
- The California Public Utilities Commission (CPUC) approved a revised Power Charge Indifference Adjustment for customers who choose Community Choice Aggregation programs, reducing the cost-shift to remaining bundled utility customers.
Non-GAAP Earnings from Operations
PG&E Corporation's non-GAAP earnings from operations, which exclude items impacting comparability (IIC), were $601 million, or $1.16 per share, in the second quarter of 2018, compared with $440 million, or $0.86 per share, during the same period in 2017.
The increase in quarter-over-quarter non-GAAP earnings from operations was primarily driven by the timing and duration of nuclear refueling outages, the impact of miscellaneous regulatory decisions, probable cost recoveries of insurance premiums incurred in 2018 above amounts included in authorized revenue requirements, and the timing of taxes resulting from the percentage of quarterly earnings to annual earnings.
PG&E Corporation discloses historical financial results based on "non-GAAP earnings from operations," which is a non-GAAP financial measure, in order to provide a measure that allows investors to compare the underlying financial performance of the business from one period to another, exclusive of items impacting comparability. See the accompanying tables for a reconciliation of non-GAAP earnings from operations to consolidated income available for common shareholders.
PG&E Corporation is not providing at this time guidance for 2018 GAAP earnings and non-GAAP earnings from operations due to the uncertainty related to the Northern California wildfires. The company is providing 2018 IIC guidance of $1.65 billion to $1.82 billion after-tax for costs related to 14 of the Northern California wildfires, net of insurance, costs related to the Butte fire, net of contractor insurance, costs to clear pipeline rights-of-way, a reduction to gas-related capital disallowance estimates, and probable cost recoveries of insurance premiums incurred in 2017 above amounts included in authorized revenue requirements.
IIC guidance is based on various assumptions and forecasts related to future expenses and certain other factors.
Supplemental Financial Information
In addition to the financial information accompanying this release, presentation slides for today's conference call with the financial community have been furnished to the Securities and Exchange Commission (SEC) and are available on PG&E Corporation's website at: http://investor.pgecorp.com/financials/quarterly-earnings-reports/default.aspx.
Public Dissemination of Certain Information
PG&E Corporation and Pacific Gas and Electric Company (Utility) routinely provide links to the Utility's principal regulatory proceedings with the California Public Utilities Commission (CPUC) and the Federal Energy Regulatory Commission (FERC) at http://investor.pgecorp.com, under the "Regulatory Filings" tab, so that such filings are available to investors upon filing with the relevant agency. PG&E Corporation and the Utility also routinely post, or provide direct links to, presentations, documents, and other information that may be of interest to investors at http://investor.pgecorp.com, under the "Wildfire Updates" and "News & Events: Events & Presentations" tabs, respectively, in order to publicly disseminate such information. It is possible that any of these filings or information included therein could be deemed to be material information.
Conference Call with the Financial Community to Discuss Financial Results
Today's call at 12:00 a.m. Eastern Time, is open to the public on a listen-only basis via webcast. Please visit http://investor.pgecorp.com/news-events/events-and-presentations/default.aspx for more information and instructions for accessing the webcast. The webcast call and the related materials will be available for replay through the website for at least one year. Alternatively, a toll-free replay of the conference call may be accessed shortly after the live call through November 19, 2018, by dialing (800) 585-8367. International callers may dial (416) 621-4642. For both domestic and international callers, the confirmation code 7077354 will be required to access the replay.
About PG&E Corporation
PG&E Corporation (NYSE: PCG) is a Fortune 200 energy-based holding company, headquartered in San Francisco. It is the parent company of Pacific Gas and Electric Company, an energy company that serves 16 million Californians across a 70,000-square-mile service area in Northern and Central California. For more information, visit http://www.63nuoqian.com. In this press release, they are together referred to as "PG&E."
This press release contains statements regarding current expectations, objectives and assumptions for future periods, including PG&E Corporation's 2018 IIC guidance. These statements and other statements that are not purely historical constitute forward-looking statements that are necessarily subject to various risks and uncertainties. Actual results may differ materially from those described in forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to:
- the impact of the Northern California wildfires, including whether the Utility will be able to timely recover costs incurred in connection thereto in excess of the Utility's currently authorized revenue requirements; the timing and outcome of the remaining wildfire investigations and the extent to which the Utility will have liability associated with these fires; the timing and amount of insurance recoveries; and potential liabilities in connection with fines or penalties that could be imposed on the Utility if the CPUC or any other law enforcement agency were to bring an enforcement action and determined that the Utility failed to comply with applicable laws and regulations;
- the timing and outcome of the Butte fire litigation and of any proceeding to recover costs in excess of insurance through regulatory mechanisms and the timing of such recovery; and whether additional investigations and proceedings in connection with the Butte fire will be opened and any additional fines or penalties imposed on the Utility;
- whether PG&E Corporation and the Utility are able to successfully challenge the application of the doctrine of inverse condemnation to investor-owned utilities;
- whether the Utility will be able to obtain full recovery of its significantly increased insurance premiums, and the timing of any such recovery;
- whether the Utility can obtain wildfire insurance at a reasonable cost in the future, or at all, and whether insurance coverage is adequate for future losses or claims;
- the timing and outcome of any CPUC decision related to the Utility's March 30, 2018 submissions in connection with the impact of the Tax Cuts and Jobs Act of 2017 on the Utility's rate cases, and its implementation plan;
- the timing and outcomes of the 2019 GT&S rate case, 2020 GRC, FERC TO18, TO19, and TO20 rate cases, 2018 CEMA, WEMA, FHPMA, future cost of capital proceeding, and other ratemaking and regulatory proceedings;
- the timing and outcome of future regulatory and legislative developments in connection with SB 901, including the customer harm threshold in connection with the Northern California wildfires, and future wildfire reforms;
- the ability of PG&E Corporation and the Utility to access capital markets and other sources of financing in a timely manner on acceptable terms;
- further credit ratings downgrades that could, among other things, result in higher borrowing costs, fewer financing options, and additional collateral posting, especially if PG&E Corporation's or the Utility's credit ratings were to fall below investment grade;
- the cost of the Utility's community wildfire safety program, and the timing and outcome of any proceeding to recover such cost through rates;
- the timing and outcomes of phase two of the ex parte order instituting investigation (OII) and of the safety culture OII;
- the Utility's ability to efficiently manage capital expenditures and its operating and maintenance expenses within the authorized levels of spending and timely recover its costs through rates, and the extent to which the Utility incurs unrecoverable costs that are higher than the forecasts of such costs;
- the outcome of the probation and the monitorship, the timing and outcomes of the debarment proceeding, the Safety and Enforcement Division's (SED) unresolved enforcement matters relating to the Utility's compliance with natural gas-related laws and regulations, and other investigations that have been or may be commenced, and the ultimate amount of fines, penalties, and remedial and other costs that the Utility may incur as a result; and
- the other factors disclosed in PG&E Corporation and the Utility's joint annual report on Form 10-K for the year ended December 31, 2017, their joint quarterly reports on Form 10-Q for the quarters ended March 31, 2018, June 30, 2018 and September 30, 2018, respectively, and other reports filed with the SEC, which are available on PG&E Corporation's website a www.63nuoqian.com and on the SEC website at www.sec.gov.