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    PCG
    Earnings call· Mar 2025(Q1 FY25)

    PG&E Corp PCG

    Apr 24, 2025 Source

    Executive summary

    PG&E Q1 FY25 — Strong Progress on Affordability and Data Center Growth

    PG&E reported a solid Q1 FY25, reaffirming its full-year EPS guidance and demonstrating significant progress on safety and O&M efficiency. The company is actively addressing customer affordability, with bills decreasing in 2025 and projected to decline further in 2026, driven by beneficial load growth from data centers and efficient capital deployment. Management expressed confidence in a constructive legislative outcome for AB 1054 this year, which is crucial for attracting low-cost capital and achieving investment-grade ratings at the holding company.

    Highlights

    5

    • Reaffirmed 2025 full-year EPS guidance of $1.48 to $1.52, with a midpoint up 10% from 2024.

    • Data center project pipeline grew from 5.5 GW to 8.7 GW, with 1.4 GW in final engineering.

    • Achieved 814 days without a fatality, the longest run in over 25 years, demonstrating significant safety culture improvement.

    • O&M savings exceeded annual 2% target, with over $500 million saved in 2023 and nearly $350 million in 2024.

    • Customer bills are down in 2025 compared to 2024 and forecast to decrease again in 2026.

    Concerns

    3

    • Q1 core EPS of $0.33 was down $0.04 year-over-year due to timing, lower ROE, and equity dilution.

    • Uncertainty around AB 1054 legislative solution continues to impact investor confidence and credit ratings at the holding company level.

    • The company's capital to expense ratio of $0.90 of capital for every $1 of expense is significantly below the best-in-class of $2.40, indicating room for further efficiency but also a current headwind.

    Guidance & targets

    6
    CategoryTargetConfidence
    Full-year Core EPS
    $1.48 to $1.52
    high materiality
    High
    Core EPS Growth Rate
    at least 9%
    high materiality
    High
    Customer Bill Increases
    at or below inflation or 2% to 4%
    high materiality
    Medium
    Long-term Debt Issuance
    reduced by $0.5 billion
    medium materiality
    High
    Dividend Payout Ratio
    20%
    medium materiality
    High
    Authorized ROE
    11.3%
    high materiality
    High

    Operational metrics

    18
    Core EPS
    $0.33down $0.04
    Q1 FY25

    Down $0.04 over 2024 due to timing, lower ROE, and equity dilution.

    Customer capital investment contribution to EPS
    $0.02
    Q1 FY25

    Net of reduction in authorized ROE.

    Non-fuel O&M savings contribution to EPS
    $0.01
    Q1 FY25

    Expected to grow throughout the year.

    ROE reduction impact on EPS
    -$0.02
    Q1 FY25

    Related to Phase 2 cost of capital decision.

    Equity dilution impact on EPS
    -$0.02
    Q1 FY25

    From well-timed December equity issuance.

    Redeployment to risk mitigation impact on EPS
    -$0.02
    Q1 FY25

    For various programs including those supporting risk mitigation.

    O&M savings
    $500M
    FY23

    Exceeded annual 2% target.

    O&M savings
    $350M
    FY24

    Nearly $350 million saved.

    Capital to expense ratio
    $0.90
    Current

    Spending $0.90 of capital for every $1 of expense, compared to best-in-class $2.40.

    Non-wildfire self-insurance program savings potential
    $600M
    through 2030

    Potential savings assuming no claims, approved by CPUC.

    Undergrounding O&M savings
    $465M
    over life

    Expected from first 1,230 miles being undergrounded during the GRC cycle.

    Undergrounding vegetation savings
    $280M
    over life

    Expected from first 1,230 miles being undergrounded during the GRC cycle.

    Undergrounding cost to customer bill
    $1
    Current

    Only $1 a month of customer's bill is undergrounding today.

    Vegetation management cost to customer bill
    $20
    Current

    $20 a month is vegetation management.

    DOE loan guarantee facility savings potential
    $1BNPV
    over life

    Potential interest cost savings from drawdowns on $15 billion facility.

    Days without fatality
    814longest run in over 25 years
    Current

    Reflects significant improvement in safety culture.

    Sourcing domestic materials and supply spend
    90%
    Current

    Over 90% of total materials and supply spend is domestic, limiting tariff exposure.

    International transformer sourcing
    1/3
    Current

    1/3 of transformers sourced internationally from South Korea at 12% tariff, representing $100 million of total spend.

    Industry KPIs

    4
    MetricValueDetails
    Ffo to debtmid-teens%
    Retail sales growth1% to 2%%
    Regulatory rate base growth10%%
    Contracted large load capacity esas loas1.4GW

    Orderbook & backlog

    2
    Data center project pipeline8.7 GWQ1 FY25

    up from 5.5 GW

    Includes projects in various stages, from early interest to final engineering. A second cluster study is underway, not yet reflected in this figure.

    Data center projects in final engineering1.4 GWQ1 FY25

    Comprised of 18 projects. 90% of this capacity is expected to be online by 2030. These are primarily inference model size data centers (around 100 MW each).

    Capital programs

    2
    Capital Investment Planunderway$63B
    Funding: equity fully priced

    The equity to fund this plan through 2028 is fully priced and behind us. There is an incremental $5 billion of investment needs beyond this plan.

    DOE Loan Guarantee Facilityavailable$15B

    Benefit: potential to save customers up to $1 billion net present value over its life

    Drawdowns on this facility are not assumed in the current financial plan but represent future affordability benefits for customers.

    Risks & headwinds

    5
    AB 1054 UncertaintyOngoing, expected resolution in 2025

    Impacts investor confidence and credit ratings at the holding company level.

    Mitigation: Active conversations in Sacramento; management expects a constructive legislative outcome this year to address capital provider and rating agency concerns.

    Lower Authorized ROEFY25

    -$0.02 EPS impact in Q1 FY25 (from 10.7% in 2024 to 10.28% in 2025)

    Mitigation: Line of sight on savings over the balance of the year; company expects to deliver 2025 plan despite this headwind.

    Equity DilutionQ1 FY25

    -$0.02 EPS impact in Q1 FY25

    Mitigation: Result of well-timed December equity issuance which put the company back in compliance with authorized regulatory capital structure ahead of schedule.

    Tariff-related cost pressures and inflationOngoing

    Discussed, not quantified as a specific impact.

    Mitigation: Deploying performance playbook to offset pressures; lean operating system; over 90% of materials and supply spend is domestic, limiting exposure.

    Recession RiskOngoing

    Discussed, not quantified as a specific impact.

    Mitigation: Decoupled revenue model offers significant protection; investment plans not built around any particular large project; California's regulatory construct and lean operating system act as a buffer.

    What to watch in Q2 FY25

    5

    AB 1054 Legislative Outcome

    this year
    CurrentActive conversations in Sacramento, expectation of constructive outcome this year.
    TargetConstructive legislative outcome.

    Why it matters

    Critical for attracting low-cost capital and achieving investment-grade ratings, impacting long-term affordability.

    Based on active conversations in Sacramento, we expect constructive legislative outcome yet this year.

    Q&A highlights

    5

    Why is management confident in a 2025 legislative solution for AB 1054, given the legislature's busy agenda? What specific changes are being pursued (e.g., extension, fund size, liability cap)?

    Patti Poppe expressed confidence due to the critical importance of AB 1054 for rate smoothing, wildfire victim recovery, and attracting low-cost capital. She declined to provide specifics on the proposed changes, stating it's a "live ball" and they don't want to get ahead of legislators, but expects a constructive outcome this year.

    “It's too important not to do. And we're confident that we can continue to help advocate for the right kind of surgical changes to the strong existing construct.”

    asked by Nicholas Campanella · answered by Patricia Poppe

    2 min read6 chapters

    Detailed Narrative

    01

    AB 1054 Legislative Outlook

    Management expressed confidence in a constructive legislative outcome for AB 1054 in 2025, emphasizing its importance for rate smoothing, wildfire victim recovery, and attracting high-quality, low-cost capital. The company is advocating for surgical changes to the existing framework to address investor and rating agency concerns, which are critical for long-term affordability. While specifics on proposed changes were not disclosed, the company believes the issue is too important not to be resolved this year.

    02

    General Rate Case (GRC) Filing

    PG&E will file its General Rate Case (GRC) on May 15, covering the 2027-2030 period. The proposal will reflect efficiency gains and O&M savings achieved over the past three years, aiming to stabilize customer bills with increases at or below inflation (2-4%). Management expects this to be the lowest GRC ask in a decade, with additional customer savings anticipated from the DOE loan, investment-grade ratings, and beneficial load growth, which are not yet included in the base plan.

    03

    Data Center Load Growth Opportunity

    The data center project pipeline has expanded significantly from 5.5 GW to 8.7 GW, with 1.4 GW (comprising 18 projects) currently in final engineering. Approximately 90% of these 1.4 GW projects are expected to be online by 2030. This growth is primarily driven by demand for inference models in the Bay Area. Management estimates that each gigawatt of new data center demand can save existing customers 1-2% on their electricity bills, making it a significant driver for affordability and capital investment.

    04

    Capital Investment Plan and Financing

    The $63 billion capital plan through 2028 remains unchanged, with an incremental $5 billion of investment needs identified. The equity funding for this plan is fully secured. The company is focused on achieving investment-grade ratings for the parent company, following Moody's upgrade of the utility. The 5-year financing plan prioritizes customer capital investment and targets a 20% dividend payout ratio by 2028, while modestly reducing 2025 long-term debt guidance by $0.5 billion.

    05

    Operational Efficiency and Safety Culture

    PG&E continues to drive O&M savings, exceeding its 2% annual target with over $500 million saved in 2023 and nearly $350 million in 2024. These savings will be incorporated into the upcoming GRC filing. The company also highlighted a significant improvement in safety, achieving 814 days without a fatality, the longest run in over 25 years, attributing it to a strong safety culture and lean operating system. This safety performance is seen as a critical leading indicator for consistent financial performance.

    06

    Undergrounding and Wildfire Mitigation

    The company filed its 2026-2028 Wildfire Mitigation Plan and plans to file its 10-year undergrounding proposal later this year. Undergrounding is presented as a permanent solution in high-risk areas, reducing 98% of wildfire risk where deployed. It is expected to generate $465 million in O&M savings and $280 million in vegetation savings over the life of the first 1,230 miles undergrounded. Currently, only $1 per month of a customer's bill is attributed to undergrounding, compared to $20 for vegetation management.

    AI-generated summary of the company’s earnings call. Not investment advice.