PG&E Corporation Reports First-Quarter Results; On Track to Deliver Solid 2023

(Unaudited)

Three Months Ended March 31,

2023

2022

Operating Revenues

Electric

$ 4,119

$ 4,158

Natural gas

2,090

1,640

Total operating revenues

6,209

5,798

Operating Expenses

Cost of electricity

522

502

Cost of natural gas

916

561

Operating and maintenance

2,677

3,110

SB 901 securitization charges, net

273

—

Wildfire-related claims, net of recoveries

(2)

(1)

Wildfire Fund expense

117

118

Depreciation, amortization, and decommissioning

1,077

972

Total operating expenses

5,580

5,262

Operating Income

629

536

Interest income

112

8

Interest expense

(602)

(419)

Other income, net

85

149

Income Before Income Taxes

224

274

Income tax benefit

(348)

(204)

Net Income

572

478

Preferred stock dividend requirement of subsidiary

3

3

Income Available for Common Shareholders

$ 569

$ 475

Weighted Average Common Shares Outstanding, Basic

1,991

1,986

Weighted Average Common Shares Outstanding, Diluted

2,132

2,134

Net Income Per Common Share, Basic

$ 0.29

$ 0.24

Net Income Per Common Share, Diluted

$ 0.27

$ 0.22

Reconciliation of PG&E Corporation's Consolidated Earnings Available for Common Shareholders in Accordance with Generally Accepted Accounting Principles ("GAAP") to Non-GAAP Core Earnings

First Quarter, 2023 vs. 2022

(in millions, except per share amounts)

Three Months Ended

March 31,

Earnings

Earnings per
Common
Share

(in millions, except per share amounts)

2023

2022

2023

2022

PG&E Corporation's Earnings/EPS on a GAAP basis

$ 569

$ 475

$ 0.27

$ 0.22

Non-core items: (1)

Amortization of Wildfire Fund contribution (2)

84

85

0.04

0.04

Bankruptcy and legal costs (3)

17

34

0.01

0.02

Fire Victim Trust tax benefit net of securitization (4)

(74)

(135)

(0.03)

(0.06)

Investigation remedies (5)

15

70

0.01

0.03

Prior period net regulatory impact (6)

(6)

45

—

0.02

Strategic repositioning costs (7)

1

—

—

—

Wildfire-related costs, net of insurance (8)

9

66

—

0.03

PG&E Corporation's Non-GAAP Core Earnings/EPS (9)

$ 615

$ 639

$ 0.29

$ 0.30

All amounts presented in the table above and footnotes below are tax adjusted at PG&E Corporation's statutory tax rate of 27.98% for 2023 and 2022, except for certain costs that are not tax deductible. Earnings per Common Share is calculated based on diluted shares, except as noted. Amounts may not sum due to rounding.

(1)

"Non-core items" include items that management does not consider representative of ongoing earnings and affect comparability of financial results between periods, consisting of the items listed in the table above. See Non-GAAP Financial Measures below.

(2)

The Utility recorded costs of $117 million (before the tax impact of $33 million) during the three months ended March 31, 2023, associated with the amortization of the Wildfire Fund asset and accretion of the related Wildfire Fund liability.

(3)

Includes bankruptcy and legal costs associated with PG&E Corporation's and the Utility's Chapter 11 filing, including legal and other costs and exit financing costs, as shown below.

(in millions)

Three Months Ended
March 31, 2023

Legal and other costs

$ 15

Exit financing

9

Bankruptcy and legal costs (pre-tax)

$ 23

Tax impacts

(6)

Bankruptcy and legal costs (post-tax)

$ 17

Includes any earnings-impacting investment losses, net of gains, associated with investments related to the upfront contributions to the Customer Credit Trust, the charge related to the establishment of the SB 901 securitization regulatory asset and the SB 901 securitization regulatory liability associated with revenue credits funded by Net Operating Loss monetization, and tax benefits related to the Fire Victim Trust's sale of PG&E Corporation common stock.

(in millions)

Three Months
Ended March 31, 2023

Rate neutral securitization charge

$ 273

Losses, net of gains related to Customer Credit Trust

(20)

Fire Victim Trust tax benefit net of securitization (pre-tax)

$ 253

Tax impacts

(71)

Tax benefits from Fire Victim Trust share sales

(256)

Fire Victim Trust tax benefit net of securitization (post-tax)

$ (74)

(5)

Includes costs associated with restoration and rebuild costs for the town of Paradise, the system enhancements related to the locate and mark OII, and the CPUC's OII into the 2017 Northern California Wildfires and 2018 Camp Fire, as shown below.

(in millions)

Three Months Ended
March 31, 2023

Paradise restoration and rebuild

$ 21

Locate and mark OII system enhancements

1

Wildfire OII disallowance and system enhancements

(1)

Investigation remedies (pre-tax)

$ 21

Tax impacts

(6)

Investigation remedies (post-tax)

$ 15

(6)

Includes adjustments associated with the recovery of capital expenditures from 2011 through 2014 above amounts adopted in the 2011 GT&S rate case per the CPUC decision dated July 14, 2022.

(in millions)

Three Months Ended
March 31, 2023

2011-2014 GT&S capital audit

$ (8)

Prior period net regulatory impact (pre-tax)

Tax impacts

2

Prior period net regulatory impact (post-tax)

$ (6)

(7)

The Utility recorded one-time costs related to repositioning PG&E Corporation's and the Utility's operating model, including their workforce.

(in millions)

Three Months Ended
March 31, 2023

Operating model

$ 2

Strategic repositioning costs (pre-tax)

$ 2

Tax impacts

(1)

Strategic repositioning costs (post-tax)

$ 1

(8)

Includes costs associated with the 2019 Kincade fire, 2020 Zogg fire, and 2021 Dixie fire, net of insurance, as shown below.

(in millions)

Three Months Ended
March 31, 2023

2019 Kincade fire-related costs

$ 2

2020 Zogg fire-related costs

7

2020 Zogg fire-related insurance recoveries

(1)

2021 Dixie fire-related legal settlements

6

Wildfire-related costs, net of insurance (pre-tax)

$ 13

Tax impacts

(4)

Wildfire-related costs, net of insurance (post-tax)

$ 9

(9)

"Non-GAAP core earnings" is a non-GAAP financial measure. See Non-GAAP Financial Measures below.

Undefined, capitalized terms have the meanings set forth in the PG&E Corporation and the Utility's joint quarterly report on Form 10-Q for the quarter ended March 31, 2023.

PG&E Corporation's 2023 Earnings Guidance

2023

EPS Guidance

Low

High

Estimated EPS on a GAAP basis

~

$ 1.00

~

$ 1.13

Estimated Non-Core Items: (1)

Amortization of Wildfire Fund contribution (2)

~

0.16

~

0.16

Bankruptcy and legal costs (3)

~

0.03

~

0.02

Fire Victim Trust tax benefit net of securitization (4)

~

(0.05)

~

(0.11)

Investigation remedies (5)

~

0.04

~

0.03

Prior period net regulatory impact (6)

~

(0.01)

~

(0.01)

Strategic repositioning costs (7)

~

—

~

—

Wildfire-related costs, net of insurance (8)

~

0.02

~

0.01

Estimated EPS on a non-GAAP Core Earnings basis

~

$ 1.19

~

$ 1.23

All amounts presented in the table above and footnotes below are tax adjusted at PG&E Corporation's statutory tax rate of 27.98% for 2023, except for certain costs that are not tax deductible. Amounts may not sum due to rounding.

(1)

"Non-core items" include items that management does not consider representative of ongoing earnings and affect comparability of financial results between periods. See Non-GAAP Financial Measures below.

(2)

"Amortization of Wildfire Fund contribution" represents the amortization of the Wildfire Fund asset and accretion of the related Wildfire Fund liability.

2023

(in millions, pre-tax)

Low
guidance
range

High
guidance
range

Amortization of Wildfire Fund contribution

~

$ 470

~

$ 470

Amortization of Wildfire Fund contribution (pre-tax)

~

$ 470

~

$ 470

Tax impacts

~

(132)

~

(132)

Amortization of Wildfire Fund contribution (post-tax)

~

$ 338

~

$ 338

(3)

"Bankruptcy and legal costs" consists of legal and other costs associated with PG&E Corporation's and the Utility's Chapter 11 filing, and exit financing costs.

2023

(in millions, pre-tax)

Low
guidance
range

High
guidance
range

Legal and other costs

~

$ 65

~

$ 40

Exit financing

~

35

~

25

Bankruptcy and legal costs (pre-tax)

~

$ 100

~

$ 65

Tax impacts

~

(28)

~

(18)

Bankruptcy and legal costs (post-tax)

~

$ 72

~

$ 47

(4)

"Fire Victim Trust tax benefit net of securitization" includes the impact of rate neutral (SB 901) securitization and tax benefits related to the Fire Victim Trust. Impacts of the SB 901 securitization include the establishment of the SB 901 securitization regulatory asset and the SB 901 regulatory liability associated with revenue credits funded by Net Operating Loss monetization. Fire Victim Trust tax benefits include tax benefits recognized upon the sale of shares of PG&E Corporation common stock by the Fire Victim Trust, which PG&E Corporation and the Utility have elected to treat as a grantor trust. Also included are the earnings-impacting investment losses, net of gains, associated with investments related to the upfront contributions to the Customer Credit Trust. The low case includes tax benefits for the 120,000,000 shares of PG&E Corporation common stock sold in the aggregate by the Fire Victim Trust as of April 26, 2023, whereas the high case reflects an assumption that the Fire Victim Trust sells the remaining 127,743,590 shares during 2023.

2023

(in millions, pre-tax)

Low
guidance
range

High
guidance
range

Rate neutral securitization charge

~

$ 595

~

$ 1,145

Losses, net of gains related to Customer Credit Trust

~

(20)

~

(20)

Fire Victim Trust tax benefit net of securitization (pre-tax)

~

$ 575

~

$ 1,125

Tax impacts

~

(161)

~

(315)

Tax benefits from Fire Victim Trust share sales

~

(525)

~

(1,045)

Fire Victim Trust tax benefit net of securitization (post-tax)

~

$ (111)

~

$ (235)

(5)

"Investigation remedies" includes costs related to the settlement agreement with the Safety and Enforcement Division's investigation into the 2020 Zogg fire, Paradise restoration and rebuild, the Wildfires OII decision different, and the locate and mark OII system enhancements.

2023

(in millions, pre-tax)

Low
guidance
range

High
guidance
range

2020 Zogg fire settlement

~

$ 50

~

$ 15

Paradise restoration and rebuild

~

30

~

30

Wildfire OII disallowance and system enhancements

~

20

~

20

Locate and mark OII system enhancements

~

5

~

5

Investigation remedies (pre-tax)

~

$ 105

~

$ 70

Tax impacts

~

(22)

~

(13)

Investigation remedies (post-tax)

~

$ 83

~

$ 57

(6)

"Prior period net regulatory impact" represents the recovery of capital expenditures from 2011 through 2014 above amounts adopted in the 2011 GT&S rate case.

2023

(in millions, pre-tax)

Low
guidance
range

High
guidance
range

2011-2014 GT&S capital audit

~

$ (35)

~

$ (35)

Prior period net regulatory impact (pre-tax)

~

$ (35)

~

$ (35)

Tax impacts

~

10

~

10

Prior period net regulatory impact (post-tax)

~

$ (25)

~

$ (25)

(7)

"Strategic repositioning costs" includes one-time costs related to repositioning PG&E Corporation's and the Utility's operating model, including their workforce, and costs associated with the potential sale of a minority interest in Pacific Generation LLC.

2023

(in millions, pre-tax)

Low
guidance
range

High
guidance
range

Operating model

~

$ 5

~

$ 5

Pacific Generation LLC minority interest sale

~

—

~

—

Strategic repositioning costs (pre-tax)

~

$ 5

~

$ 5

Tax impacts

~

(1)

~

(1)

Strategic repositioning costs (post-tax)

~

$ 4

~

$ 4

(8)

"Wildfire-related costs, net of insurance" includes legal and other costs associated with the 2019 Kincade fire, 2020 Zogg fire, and 2021 Dixie fire, net of insurance.

2023

(in millions, pre-tax)

Low guidance
range

High guidance
range

2019 Kincade fire-related costs

~

$ 25

~

$ 10

2020 Zogg fire-related costs

~

25

~

15

2020 Zogg fire-related insurance recoveries

~

(10)

~

(10)

2021 Dixie fire-related legal settlements

~

15

~

15

Wildfire-related costs, net of insurance (pre-tax)

~

$ 55

~

$ 30

Tax impacts

~

(15)

~

(8)

Wildfire-related costs, net of insurance (post-tax)

~

$ 40

~

$ 22

Undefined, capitalized terms have the meanings set forth in the PG&E Corporation and the Utility's joint quarterly report on Form 10-Q for the quarter ended March 31, 2023.

Non-GAAP Financial Measures

PG&E Corporation and Pacific Gas and Electric Company

Non-GAAP Core Earnings and Non-GAAP Core EPS

"Non-GAAP core earnings" and "Non-GAAP core EPS," also referred to as "non-GAAP core earnings per share," are non-GAAP financial measures. Non-GAAP core earnings is calculated as income available for common shareholders less non-core items. "Non-core items" include items that management does not consider representative of ongoing earnings and affect comparability of financial results between periods, consisting of the items listed in Exhibit A. Non-GAAP core EPS is calculated as non-GAAP core earnings divided by common shares outstanding (taken on a basic basis in the event of a GAAP loss and a diluted basis in the event of a GAAP gain).

PG&E Corporation discloses historical financial results and provides guidance based on "non-GAAP core earnings" and "non-GAAP core EPS" 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. PG&E Corporation and the Utility use non-GAAP core earnings and non-GAAP core EPS 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 and the Utility believe that non-GAAP core earnings and non-GAAP core EPS provide additional insight into the underlying trends of the business, allowing for a better comparison against historical results and expectations for future performance. With respect to our projection of non-GAAP core EPS for the years 2024-2026, PG&E Corporation is unable to predict with reasonable certainty the reconciling items that may affect GAAP net income without unreasonable effort. The reconciling items are primarily due to the future impact of wildfire-related costs, timing of regulatory recoveries, special tax items, and investigation remedies. These reconciling items are uncertain, depend on various factors and could significantly impact, either individually or in the aggregate, the GAAP measures.

Non-GAAP core earnings and non-GAAP core EPS 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.