- Recorded GAAP losses were $14.50 per share for the year and
$6.84 per share for the fourth quarter of 2019, compared to losses
of $13.25 and $13.24 per share for the same periods respectively in
2018.
- In anticipation of its emergence from Chapter 11
reorganization, the company is filing a five-year financial
forecast that includes capital and rate base growth
projections.
- PG&E remains on track to have its Chapter 11 Plan confirmed
by June 30, 2020.
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.
Progress Report
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.
2020 Guidance
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.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 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.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.
PG&E CORPORATION
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF
INCOME
(in millions, except per share
amounts)
Year ended December
31,
2019
2018
2017
Operating Revenues
Electric
$
12,740
$
12,713
$
13,124
Natural gas
4,389
4,046
4,011
Total operating revenues
17,129
16,759
17,135
Operating Expenses
Cost of electricity
3,095
3,828
4,309
Cost of natural gas
734
671
746
Operating and maintenance
8,725
7,153
6,321
Wildfire-related claims, net of insurance
recoveries
11,435
11,771
—
Depreciation, amortization, and
decommissioning
3,234
3,036
2,854
Total operating expenses
27,223
26,459
14,230
Operating Income (Loss)
(10,094)
(9,700)
2,905
Interest income
82
76
31
Interest expense
(934)
(929)
(888)
Other income, net
250
424
123
Reorganization items, net
(346)
—
—
Income (Loss) Before Income
Taxes
(11,042)
(10,129)
2,171
Income tax provision (benefit)
(3,400)
(3,292)
511
Net Income (Loss)
(7,642)
(6,837)
1,660
Preferred stock dividend requirement of
subsidiary
14
14
14
Income (Loss) Available for Common
Shareholders
$
(7,656)
$
(6,851)
$
1,646
Weighted Average Common Shares
Outstanding, Basic
528
517
512
Weighted Average Common Shares
Outstanding, Diluted
528
517
513
Net Earnings (Loss) Per Common Share,
Basic
$
(14.50)
$
(13.25)
$
3.21
Net Earnings (Loss) Per Common Share,
Diluted
$
(14.50)
$
(13.25)
$
3.21
Reconciliation of PG&E Corporation’s
Consolidated Earnings (Loss) Attributable to Common Shareholders in
Accordance with Generally Accepted Accounting Principles (“GAAP”)
to Non-GAAP Core Earnings
Fourth Quarter and Year to Date, 2019 vs.
2018
(in millions, except per share
amounts)
Three Months Ended December
31,
Year Ended December
31,
Earnings
Earnings per Common Share
(Diluted)
Earnings
Earnings per Common Share
(Diluted)
(in millions, except per share
amounts)
2019
2018
2019
2018
2019
2018
2019
2018
PG&E Corporation’s Loss on a GAAP
basis
$
(3,617)
$
(6,873)
$
(6.84)
$
(13.24)
$
(7,656)
$
(6,851)
$
(14.50)
$
(13.25)
Non-core items: (1)
Wildfire-related costs (2)
3,847
7,282
7.27
14.03
8,761
8,914
16.59
17.24
Electric asset inspection costs (3)
120
—
0.23
—
557
—
1.05
—
Locate and mark penalty (4)
39
—
0.07
—
39
—
0.07
—
Chapter 11-related costs (5)
(30)
—
(0.06)
—
180
—
0.34
—
2019 GT&S capital disallowance (6)
—
—
—
—
193
—
0.37
—
Pipeline-related expenses (7)
—
8
—
0.02
—
33
—
0.06
Reduction in gas-related capital
disallowances (8)
—
—
—
—
—
(27)
—
(0.05)
PG&E Corporation’s Non-GAAP Core
Earnings (9)
$
360
$
417
$
0.68
$
0.80
$
2,074
$
2,069
$
3.93
$
4.00
(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 Use of
Non-GAAP Financial Measures.
(2)
The Utility incurred costs of $5.3 billion
(before the tax impact of $1.5 billion) and $12.2 billion (before
the tax impact of $3.4 billion) during the three and twelve months
ended December 31, 2019, respectively, associated with
wildfire-related costs related to the 2018 Camp fire, the 2017
Northern California wildfires, and the 2015 Butte fire. This
includes accrued charges of $5.0 billion (before the tax impact of
$1.4 billion) and $11.4 billion (before the tax impact of $3.2
billion) during the three and twelve months ended December 31,
2019, respectively, related to increases in the recorded liability
for third-party claims. The Utility incurred costs of $13 million
(before the tax impact of $4 million) and $278 million (before the
tax impact of $78 million) during the three and twelve months ended
December 31, 2019, respectively, for Utility clean-up and repair
costs. The Utility also incurred costs of $42 million (before the
tax impact of $12 million) and $152 million (before the tax impact
of $43 million) during the three and twelve months ended December
31, 2019, respectively, for legal and other costs. In addition, the
Utility incurred costs of $398 million (before the tax impact of
$108 million) during the three and twelve months ended December 31,
2019 related to the Wildfire Order Instituting Investigation (OII)
settlement. The Utility also recorded a charge of $86 million
(before the tax impact of $24 million) during the three and twelve
months ended December 31, 2019 related to a one-time bill credit
for customers impacted by the October 9, 2019 Public Safety Power
Shutoff (PSPS) event. These costs were partially offset by $189
million (before the tax impact of $53 million) recorded during the
three and twelve months ended December 31, 2019 for probable cost
recoveries of insurance premiums incurred in 2018 above amounts
included in authorized revenue requirements.
(in millions, pre-tax)
Three Months Ended December
31, 2019
Year Ended December 31,
2019
Three Months Ended December
31, 2018
Year Ended December 31,
2018
Camp, Northern California, and Butte
fire-related costs, net of insurance:
Third-party claims
$
4,988
$
11,435
$
11,500
$
14,000
Utility clean-up and repair costs
13
278
169
209
Legal and other costs
42
152
94
245
Accelerated amortization of prepaid
insurance premiums
—
—
185
185
Insurance recoveries
—
—
(1,836)
(2,229)
Subtotal Camp, Northern California, and
Butte fire-related costs, net of insurance
5,043
11,865
10,112
12,410
Wildfire OII settlement
398
398
—
—
PSPS customer bill credit
86
86
—
—
2018 Insurance premium cost recovery
(189)
(189)
—
—
2017 Insurance premium cost recovery
—
—
—
(32)
Total Wildfire-related costs
$
5,338
$
12,161
$
10,112
$
12,378
(3)
The Utility incurred costs of $167 million
(before the tax impact of $47 million) and $773 million (before the
tax impact of $216 million) during the three and twelve months
ended December 31, 2019, respectively, for incremental operating
expenses related to enhanced and accelerated inspections of
electric transmission and distribution assets, and resulting
repairs that are not probable of recovery.
(4)
The Utility recorded costs of $39 million
(not tax deductible) during the three and twelve months ended
December 31, 2019 associated with an incremental fine payable to
the State General Fund resulting from a presiding officer’s
decision in the Locate and Mark OII.
(5)
PG&E Corporation and the Utility
recorded a net benefit of $56 million (before the tax impact of $26
million) and incurred costs of $199 million (before the tax impact
of $19 million) during the three and twelve months ended December
31, 2019, respectively, directly associated with their Chapter 11
Cases. This includes legal and other costs of $101 million (before
the tax impact of $18 million) and $292 million (before the tax
impact of $45 million) during the three and twelve months ended
December 31, 2019, respectively ($38 million and $129 million of
legal and other costs during the three and nine months ended
December 31, 2019, respectively, are not tax deductible.) The
Utility also incurred $114 million (before the tax impact of $32
million) during the twelve months ended December 31, 2019 for
debtor-in-possession (“DIP”) financing costs. These costs were
partially offset by a reduction to interest expense on pre-petition
debt of $146 million (before the tax impact of $41 million) during
the three and twelve months ended December 31, 2019, and interest
income of $11 million (before the tax impact of $3 million) and $60
million (before the tax impact of $17 million) recorded during the
three and twelve months ended December 31, 2019, respectively.
(in millions, pre-tax)
Three Months Ended December
31, 2019
Year Ended December 31,
2019
Legal and other costs
$
101
$
292
DIP financing costs
—
114
Reduction of interest expense on
pre-petition debt
(146)
(146)
Interest income
(11)
(60)
Chapter 11-related costs
$
(56)
$
199
(6)
The Utility recorded costs of $237 million
(before the tax impact of $44 million) during the three and twelve
months ended December 31, 2019 for pipeline-replacement costs
disallowed in the 2019 GT&S rate case as a result of spending
above amounts authorized in the 2015-2018 rate case period. Due to
flow-through treatment related to deductible repairs, $80 million
of the loss does not generate a net tax benefit.
(7)
The Utility incurred costs of $11 million
(before the tax impact of $3 million) and $46 million (before the
tax impact of $13 million) during the three and twelve months ended
December 31, 2018, respectively, for pipeline-related expenses
incurred in connection with the multi-year effort to identify and
remove encroachments from transmission pipeline rights-of-way
(8)
The Utility reduced the estimated
disallowance for gas-related capital costs that were expected to
exceed authorized amounts by $38 million (before the tax impact of
$11 million) during the twelve months ended December 31, 2018. The
Utility had previously recorded $85 million (before the tax impact
of $35 million) in 2016 for probable capital disallowances in the
2015 GT&S rate case. From 2012 through 2014, the Utility had
recorded cumulative charges of $665 million (before the tax impact
of $271 million) for disallowed Pipeline Safety Enhancement
Plan-related capital expenditures.
(9)
“Non-GAAP core earnings” is a non-GAAP
financial measure. See Use of Non-GAAP Financial Measures.
Use of Non-GAAP Financial Measures
PG&E Corporation and Pacific Gas and
Electric Company
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.
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".
“Non-GAAP core earnings” is a non-GAAP financial measure and 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 "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 core EPS” also
referred to as “non-GAAP core earnings per share” is a non-GAAP
financial measure and is calculated as non-GAAP core earnings
divided by common shares outstanding (diluted). PG&E
Corporation uses 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 believes 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.
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.
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Investor Relations Contact: 415.972.7080 Media Inquiries
Contact: 415.973.5930 www.pgecorp.com
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