PG&E Corporation Reports Third-Quarter 2019 Financial Results

PG&E Corporation (NYSE: PCG) recorded third-quarter 2019 net losses attributable to common shareholders of $1.6 billion, or $3.06 per share, as reported in accordance with generally accepted accounting principles (GAAP). This compares with net income available for common shareholders of $564 million, or $1.09 per share, for the third quarter of 2018.

GAAP results include items that management does not consider part of normal, ongoing operations (items impacting comparability, or "IIC"), which totaled $2.2 billion after-tax, or $4.17 per share, for the quarter. This was primarily driven by an additional $2.5 billion pre-tax charge for estimated third-party claims related to the 2017 Northern California wildfires and the 2018 Camp fire. This additional charge reflects the previously announced agreement with insurance subrogation claimants.

IIC for the quarter also include a charge for capital disallowances in the 2019 Gas Transmission and Storage (GT&S) rate case; enhanced and accelerated electric asset inspection costs; clean-up and repair costs related to the 2018 Camp fire; legal and other costs related to the 2017 Northern California wildfires and the 2018 Camp fire; and legal and other costs, partially offset by interest income, 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).

“We continue to make progress in our efforts to move expeditiously through the Chapter 11 process, and remain focused on a fair and prompt resolution of wildfire victims’ claims, while continuing to support California’s clean energy future. We also remain dedicated to the safe operation of our gas and electric systems, and in particular, to reducing the risk of wildfire in our communities. This work has involved in recent weeks shutting off power for safety in anticipation of dangerous weather conditions—a decision that we know causes hardship but is done solely in the interest of public safety,” said PG&E Corporation Chief Executive Officer and President Bill Johnson.

Progress Report

PG&E welcomes the engagement of the Governor’s Office through discussions that began this week toward resolving the Chapter 11 process and defining the future structure of the company.

Over the past several months, the company has made significant headway on operational improvements, wildfire victim compensation, and the Chapter 11 process:

• The Utility Board of Directors named Andrew M. Vesey as Chief Executive Officer and President of Pacific Gas and Electric Company, with responsibility for all aspects of Utility operations.
• The Utility received its safety certificate from the California Public Utilities Commission (CPUC), and the Bankruptcy Court approved PG&E’s participation in the statewide wildfire fund established by California Assembly Bill (AB) 1054. The Utility expects that its initial contribution to the wildfire fund would be approximately $4.8 billion, and that its annual contributions thereafter would be approximately $193 million. The initial contribution would be payable upon the company’s emergence from Chapter 11 reorganization.
• PG&E announced an $11 billion settlement to resolve all insurance subrogation claims arising from the 2017 Northern California wildfires and 2018 Camp fire.
• PG&E filed a Plan of Reorganization that will meet the requirements of AB 1054 by satisfying wildfire claims, in full, in the amount reached through settlement or as estimated by the court—consistent with the terms of AB 1054 that it be neutral, on average, for the Utility’s customers—along with the assumption of all power-purchase agreements and community-choice aggregation servicing agreements; the assumption of all collective bargaining agreements; and certain other terms. PG&E remains committed to working with the individual wildfire claimants to fairly and reasonably resolve their claims and will continue to work to do so.

Non-GAAP Earnings from Operations

PG&E Corporation’s non-GAAP earnings from operations, which exclude IIC, were $590 million, or $1.11 per share, in the third quarter of 2019, compared with $582 million, or $1.13 per share, during the same period in 2018.

The decrease in quarter-over-quarter non-GAAP earnings from operations per share was primarily driven by 2019 vegetation management costs, the resolution of 2018 regulatory items, and the increase in shares outstanding, partially offset by growth in rate base earnings.

PG&E Corporation discloses “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 loss attributable to common shareholders.

IIC Guidance

At this time, PG&E Corporation is not providing guidance for 2019 GAAP earnings and non-GAAP earnings from operations due to the continuing uncertainty related to the 2017 Northern California wildfires, the 2018 Camp fire, the 2019 Kincade fire, the Chapter 11 proceedings, and legislative and regulatory reforms. PG&E Corporation is providing 2019 IIC guidance of $6.2 billion to $6.3 billion after-tax for costs related to the 2017 Northern California wildfires, the 2018 Camp fire, enhanced and accelerated electric asset inspections, Chapter 11-related matters, 2019 GT&S capital disallowance, and the Public Safety Power Shutoff customer bill credit. See the accompanying tables for additional information.

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 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.pgecorp.com. In this press release, they are together referred to as “PG&E.”

Forward-Looking Statements

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 potential liability in connection with the 2018 Camp fire and 2017 Northern California wildfires, the Utility’s wildfire mitigation initiatives, 2019 Wildfire Mitigation Plan, the Utility’s participation in the statewide wildfire fund created by AB 1054, and PG&E Corporation’s 2019 IIC 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, their joint quarterly reports on Form 10-Q for the quarters ended March 31, 2019, June 30, 2019 and September 30, 2019, and other reports filed with the SEC, which are available on PG&E Corporation’s website at www.pgecorp.com 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.

Actual financial results for 2019 may differ materially from the guidance provided. For a discussion of the factors that may affect future results, see the Forward-Looking Statements.

PG&E Corporation discloses historical financial results and provides guidance based on “non-GAAP earnings from operations” and “non-GAAP EPS from operations” 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.

“Non-GAAP earnings from operations” is a non-GAAP financial measure and is calculated as income available for common shareholders less items impacting comparability. “Items impacting comparability” represent items that management does not consider part of the normal course of operations and affect comparability of financial results between periods, consisting of the items listed in "Reconciliation of PG&E Corporation’s Consolidated Earnings (Loss) Attributable to Common Shareholders in Accordance with Generally Accepted Accounting Principles (“GAAP”) to Non-GAAP Earnings from Operations." “Non-GAAP EPS from operations” also referred to as “non-GAAP earnings per share from operations” is a non-GAAP financial measure and is calculated as non-GAAP earnings from operations divided by common shares outstanding (diluted). PG&E Corporation uses non-GAAP earnings from operations and non-GAAP EPS from operations to understand and compare operating results across reporting periods for various purposes including internal budgeting and forecasting, short- and long-term operating planning, and employee incentive compensation. PG&E Corporation believes that non-GAAP earnings from operations and non-GAAP EPS from operations provide additional insight into the underlying trends of the business, allowing for a better comparison against historical results and expectations for future performance.

Non-GAAP earnings from operations and non-GAAP EPS from operations are not substitutes or alternatives for GAAP measures such as consolidated income available for common shareholders and may not be comparable to similarly titled measures used by other companies.

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