Release and Selected Exhibits
Presentation and Complete Earnings Exhibits
SAN FRANCISCO — PG&E Corporation (NYSE: PCG) full-year 2019 net loss attributable to common shareholders was $7.7 billion, or $14.50 per share, as reported in accordance with generally accepted accounting principles ("GAAP"). This compares with net loss attributable to common shareholders of $6.9 billion, or $13.25 per share, for the full-year 2018. For the fourth quarter of 2019 net loss attributable to common shareholders was $3.6 billion, or $6.84 per share, compared with net loss attributable to common shareholders of $6.9 billion, or $13.24 per share, for the fourth quarter of 2018.
GAAP results include non-core items that management does not consider representative of ongoing earnings, which totaled $4.0 billion after-tax, or $7.52 per share, for the quarter. This was primarily driven by an additional $5.0 billion pre-tax charge for estimated third-party claims related to the 2018 Camp fire, the 2017 Northern California wildfires and the 2015 Butte fire. This additional charge reflects the previously announced agreements with individual wildfire victims.
Other wildfire-related non-core items for the fourth quarter of 2019 include an additional charge for the Wildfire Order Instituting Investigation ("Wildfire OII") settlement and the bill credit compensating customers for the October 9, 2019 Public Safety Power Shutoff ("PSPS"), partially offset by the probable recoveries of insurance premiums incurred in 2018 above amounts included in authorized revenue requirements. Non-core items related to PG&E Corporation's and Pacific Gas and Electric Company's ("Utility") reorganization cases under Chapter 11 of the U.S. Bankruptcy Code ("Chapter 11") include a reduction of interest expense on pre-petition debt, partially offset by legal and other costs. Other non-core items include enhanced and accelerated electric asset inspection costs and the Locate and Mark OII penalty.
Five-year Financial Forecast
As a milestone in the process of emerging from Chapter 11 reorganization, PG&E is also releasing a five-year financial forecast highlighting capital and rate base growth along with other material drivers of the business, as well as filing three-statement financials with the Bankruptcy Court. This financial forecast was developed for purposes of the formulation and negotiation of the Plan of Reorganization and to enable the stakeholders entitled to vote under the Plan to make an informed judgment about the Plan and should not be used or relied upon for any other purpose.
Chapter 11 Proceeding and Timeline
On January 31, 2020, PG&E submitted regulatory and court filings outlining the key elements of the company's updated Chapter 11 Plan of Reorganization. Key elements include: refreshing the Boards of Directors of PG&E Corporation and the Utility; regionalizing the company's operations and its infrastructure to enhance the company's focus on local communities and customers; paying value in excess of $25 billion to wildfire victims through the settlements reached with individual victims, subrogation claimants, and public entities; and emerging with a financing structure that protects customer rates and positions the company for long-term success.
PG&E believes it remains on track to have its Chapter 11 Plan confirmed by June 30, 2020, the deadline for participating in the state's new wildfire fund under the terms of Assembly Bill ("AB") 1054.
"PG&E has made significant progress in our Chapter 11 cases over the past year. We have resolved essentially every consequential issue within the Bankruptcy Court's jurisdiction, most notably reaching a settlement with wildfire victims. Our focus now is on working with all key stakeholders, including elected officials and state regulators, to position PG&E for emergence as a financially stable company with a renewed and rigorous focus on safe operations and customer service, while meeting California's energy needs and goals in a changed climate," said PG&E Corporation Chief Executive Officer and President Bill Johnson.
Over the past several months, the company has made significant headway on operational improvements, wildfire victim compensation, ratemaking, and the Chapter 11 process. As examples, PG&E:
- Met or exceeded core objectives of its 2019 Wildfire Mitigation Plan;
- Announced a $13.5 billion settlement with the Tort Claimants Committee and Representatives of Individual Fire Victims Claimants to resolve claims arising from the 2018 Camp fire, the 2017 Northern California wildfires and the 2015 Butte fire;
- Announced a settlement with Consenting Noteholders to refinance senior notes and bank debt;
- Announced a settlement in its 2020 General Rate Case that includes cost-recovery mechanisms for wildfire safety spend and insurance costs and will provide clarity into rates over a three year horizon, once approved by the California Public Utilities Commission ("CPUC");
- Received a Final Decision in its 2020-2022 Cost of Capital Case;
- Announced a settlement with the CPUC in the Wildfire OII, agreeing not to seek recovery for $1.7 billion of wildfire-related expenses; and
- Filed an updated Plan of Reorganization that meets the requirements of AB 1054 by, among other things, satisfying wildfire claims through settlements consistent with the terms of AB 1054, by keeping rates neutral, on average, for the Utility's customers, and by providing for the assumption of all power-purchase agreements, community-choice aggregation servicing agreements, and collective bargaining agreements.
Non-GAAP Core Earnings
PG&E Corporation's non-GAAP core earnings, which exclude non-core items, in 2019 were $2.1 billion, or $3.93 per share, compared with $2.1 billion, or $4.00 per share, in 2018. For the fourth quarter of 2019, non-GAAP core earnings were $360 million, or $0.68 per share, compared with $417 million, or $0.80 per share, during the same period in 2018.
The decrease in quarter-over-quarter non-GAAP core earnings per share was primarily driven by the absence of 2018 short-term incentive compensation, 2019 interest on pre-petition payables and short-term debt, and 2019 vegetation management costs. The decrease was partially offset by the probable recovery of 2019 insurance premiums above amounts included in authorized revenue requirements and by the growth in rate base earnings.
Beginning with the quarter and full year periods ended December 31, 2019, PG&E Corporation and the Utility changed the name of their principal non-GAAP earnings metric from "non-GAAP earnings from operations" to "non-GAAP core earnings" in order to align more closely with the terminology used by their industry peers. Likewise, PG&E Corporation and the Utility will now refer to adjustments as "non-core items" rather than "items impacting comparability." PG&E Corporation uses "non-GAAP core earnings," 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 non-core items. See the accompanying tables for a reconciliation of non-GAAP core earnings to consolidated loss attributable to common shareholders.
PG&E Corporation is not providing guidance for 2020 GAAP earnings and non-GAAP core earnings. However, the company is providing factors affecting 2020 non-GAAP core earnings and guidance for non-core earnings items.
These include a range of drivers causing a variance in earnings below authorized, including net below the line and spend above authorized of $150 million to $200 million after tax and unrecovered interest expense of $150 million to $250 million after tax. PG&E Corporation is providing 2020 non-core items guidance of approximately $1.4 billion after-tax for Chapter 11-related costs, wildfire fund-related costs, investigation remedies and delayed cost recoveries, and GT&S capital audit.
Both the drivers and non-core items guidance are 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 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 the Utility routinely provide links to the Utility's principal regulatory proceedings with the 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 "Chapter 11," "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.
About PG&E Corporation
PG&E Corporation (NYSE: PCG) is a 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. Each of PG&E Corporation and the Utility is a separate entity, with distinct creditors and claimants, and is subject to separate laws, rules and regulations. For more information, visit http://www.1linli.icu. In this press release, they are together referred to as "PG&E."
This press release contains forward-looking statements that are not historical facts, including statements about the beliefs, expectations, estimates, future plans and strategies of PG&E Corporation and the Utility, as well as forecasts and estimates regarding timing of PG&E Corporation's and the Utility's emergence from Chapter 11, the Utility's participation in the statewide wildfire fund created by AB 1054, and PG&E Corporation's 2020 non-core items guidance. These statements are based on current expectations and assumptions, which management believes are reasonable, and on information currently available to management, but are necessarily subject to various risks and uncertainties. In addition to the risk that these assumptions prove to be inaccurate, factors that could cause actual results to differ materially from those contemplated by the forward-looking statements include factors disclosed in PG&E Corporation's and the Utility's annual report on Form 10-K for the year ended December 31, 2018, as updated in their subsequent joint quarterly reports on Form 10-Q and their joint annual report on Form 10-K for the year ended December 31, 2019, and other reports filed with the SEC, which are available on PG&E Corporation's website at www.1linli.icu and on the SEC website at www.sec.gov. Additional factors include, but are not limited to, those associated with the Chapter 11 cases of PG&E Corporation and the Utility that commenced on January 29, 2019. PG&E Corporation and the Utility undertake no obligation to publicly update or revise any forward-looking statements, whether due to new information, future events or otherwise, except to the extent required by law.