Yahoo Finance PG&E Corp (PCG) Q1 2024 Earnings Call Transcript Highlights: Strategic Growth and Enhanced ...
Core Earnings Per Share (Q1 2024): $0.37
2024 EPS Guidance: $1.33 to $1.37, up at least 10% from 2023
Long-term EPS Growth: At least 9% annually from 2025 through 2028
Dividend Growth: Plan to grow dividend, reaching closer to regulated utility peers by 2028
Capital Investment Plan: $62 billion over 5 years
Operating Cash Flow: Grew from $5 billion in 2023 to $8 billion in 2024
Wildfire Risk Reduction: Reduced by 94%, with a 68% reduction in ignitions compared to 2017
Nonfuel O&M Savings: Reduced by 3% in 2022 and 5.5% in 2023
Load Growth: 1% to 3% per year in the near term, up to 70% over the next 20 years
Customer Bill Increase Control: Average annual bill increases maintained at 2% to 4%
Financing Plan: No new equity in 2024, up to $3 billion of equity starting in 2025 through a routine ATM program
Release Date: April 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Can you elaborate on the timing of equity needs and the levers to manage equity needs over time? The $2.5 billion dividend use of funds implies a big step up from current levels. Is the timing and amount of the dividend a lever to minimize dilutive equity? Do you have an assumption around reaching investment grade (IG) status at the parent as potential headroom for equity needs? A: Patricia Kessler Poppe, CEO & Director of PG&E Corporation, responded that the plan balances utility debt, parent company debt, dividend growth, and routine equity financing. The routine ATM program will be ratable over the plan period. The dividend will grow more slowly at the start of the 5-year plan and then ramp up. Progress towards IG status is assumed, continuing to improve credit metrics.
Q: Could you share your thoughts on the sector wildfire risk, particularly in light of recent comments by Warren Buffet which have impacted valuation levels for West Coast and Pacific Northwest names? A: Carolyn J. Burke, CFO & Executive VP, emphasized that California has effectively mitigated both physical and financial wildfire risks. She highlighted the state's progress in wildfire risk reduction and financial protections under AB 1054, which limits investor exposure and provides a substantial wildfire insurance fund.
Q: On the dividend strategy, could you clarify whether the slower initial growth and later ramp-up are based on a cents per share basis or a percent basis? A: Carolyn J. Burke explained that the intent is to achieve a competitive payout ratio over the long term, with slower growth in the initial half of the plan to prioritize customer capital investment, followed by quicker increases later.
Q: How does the financing plan account for the authorized capital structure at the operating company, especially considering the waiver through 2025? A: Patricia Kessler Poppe clarified that the plan addresses both the $62 billion customer capital and regulatory balance sheet targets, including achieving a 52% utility equity ratio by mid-2025 when the waiver expires.
Q: Regarding the potential sale of a minority interest in Pacific Generation (Pac Gen), what are the next steps and how might this impact the financing plan? A: Patricia Kessler Poppe noted that while they await a final decision, which may include a supplemental phase to provide more information, the financing plan does not currently include Pac Gen. However, its inclusion would strengthen the plan, enhancing balance sheet health and customer affordability.
Q: With the focus on reducing the operating company's debt and considering equity needs, how do you balance these against potential equity dilution or capital deployment pace? A: Patricia Kessler Poppe emphasized that the plan, excluding Pac Gen, includes paying down $2 billion of parent debt by end of 2026, maintaining a balance between capital investments, utility equity ratio targets, and efficient financing options.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
