Release and Selected Exhibits
Presentation and Complete Earnings Exhibits
SAN FRANCISCO, Calif. — PG&E Corporation's (NYSE: PCG) third-quarter 2017 net income after dividends on preferred stock (also called "income available for common shareholders") was $550 million or $1.07 per share, as reported in accordance with generally accepted accounting principles (GAAP). This compares with $388 million, or $0.77 per share, for the third quarter of 2016.
The quarter-over-quarter increase reflects lower expenses primarily due to the absence of disallowed charges related to the San Bruno Penalty Decision, which impacted the third quarter of 2016, and also due to insurance proceeds in the third quarter of 2017 related to the court-approved settlement of the shareholder derivative suit, with no similar amount in 2016.
GAAP results include items that management does not consider part of normal, ongoing operations (items impacting comparability), which totaled $39 million pre-tax, or $0.05 per share, for the quarter. For the third quarter of 2017, these included third-party claims and legal costs associated with the Butte fire, which were partially offset by accrued insurance recoveries. Other items included costs for work to clear pipeline rights-of-way, legal and regulatory costs related to regulatory communications, and the net benefit of proceeds from insurance related to the court-approved settlement of the shareholder derivative suit.
In addition to reviewing third-quarter financial results on today's earnings call, PG&E will also provide an update on the company's response to the recent Northern California wildfires.
PG&E Corporation CEO and President Geisha Williams said: "This is a very difficult time for our customers affected by the recent devastating wildfires, and they continue to be in our thoughts and prayers. We recognize that PG&E is going to play a vital part in helping these communities rebuild and recover. We are committed to working together and supporting them throughout that process. We also remain focused on continued investment in vital infrastructure and technology to increase the resilience and the sustainability of California's energy economy for the future."
Northern California Wildfires Response
PG&E worked with first responders and local communities to safely restore approximately 360,000 electric customers and 42,000 gas customers who lost service during the recent Northern California wildfires. Fueled by extraordinary winds and unusually dry conditions, the numerous fires resulted in the loss of 43 lives and burned thousands of homes and businesses in several counties. PG&E has committed more than $3 million to date in assistance to the local communities affected by the fires.
In those instances where Cal Fire investigators or PG&E identified a site potentially involving our facilities, PG&E submitted incident reports to the California Public Utilities Commission (CPUC). These reports are factual in nature and do not reflect a finding of cause. The company is fully cooperating with Cal Fire and the CPUC in their investigations of these fires.
PG&E maintains a robust vegetation management program to prevent trees and other vegetation from contacting the company's equipment. Beginning in 2016, the company approximately doubled its previous spending on line clearing and tree removal to respond to the tree mortality crisis in California. The company also enhanced its mitigation efforts with additional patrols of high-risk areas using a combination of aerial surveillance, foot patrols and LiDAR technology.
Earnings from Operations
On a non-GAAP basis, excluding items impacting comparability, PG&E Corporation's earnings from operations in the third quarter of 2017 were $578 million, or $1.12 per share, compared with $471 million, or $0.94 per share, in the third quarter of 2016. The increase reflected growth in rate base earnings, as well as positive impacts related to the timing of taxes, the timing of operational spending, and the timing of the phase-two decision in the 2015 GT&S rate case. These were partially offset by the loss of certain tax repair benefits in the 2017 GRC.
PG&E Corporation is updating 2017 guidance for projected GAAP earnings in the range of $3.36 to $3.56 per share primarily due to the reinstatement of the company's liability insurance following the Northern California wildfires, as well as an increase in the expected third-party claims associated with the Butte fire, partially offset by accrued insurance recoveries. On a non-GAAP basis, the guidance range for projected 2017 earnings from operations remains unchanged at $3.55 to $3.75 per share, which assumes no material financial impact from the Northern California wildfires beyond the direct restoration and repair costs, the insurance reinstatement and some legal expenses.
Guidance is based on various assumptions and forecasts, including those relating to future authorized revenues, expenses, capital expenditures, rate base, equity issuances, and certain other factors. PG&E Corporation discloses historical financial results and provides guidance based on "earnings 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. See the accompanying tables for a reconciliation of earnings from operations to consolidated income available for common shareholders.
Supplemental Financial Information
In addition to the financial information accompanying this release, presentation slides for today's conference call with the financial community 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 Pacific Gas and Electric Company routinely provide links to 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. It is possible that these regulatory filings or information included therein could be deemed to be material information.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 "Events and Presentations" tab, in order to publicly disseminate such information.
Conference Call with the Financial Community to Discuss Financial Results
Today's call at 11:00 am, Eastern Time, is open to the public on a listen-only basis via webcast. Please visit http://investor.pgecorp.com/news-events/events-and-presentations/default.aspx for more information and instructions for accessing the webcast. The webcast call and the related materials will be available for replay through the website for at least one year. Alternatively, a toll-free replay of the conference call may be accessed shortly after the live call through November 16, 2017, by dialing (866) 415-9493. International callers may dial (205) 289-3247. For both domestic and international callers, the confirmation code 3278# will be required to access the replay.
About PG&E Corporation
PG&E Corporation (NYSE: PCG) is a Fortune 200 energy-based 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. For more information, visit http://www.pgecorp.com. In this press release, they are together referred to as "PG&E."
Management's statements providing guidance for PG&E Corporation's 2017 financial results and the assumptions and forecasts underlying such guidance, as well as statements regarding management's expectations and objectives for future periods, constitute forward-looking statements that reflect management's judgments and opinions. These statements, assumptions and forecasts are necessarily subject to various risks and uncertainties, the realization or resolution of which may be outside management's control.Actual results may differ materially. Factors that could cause actual results to differ materially include, but are not limited to:
- the impact of the Northern California wildfires, including the costs of restoration of service to customers and repairs to the Utility's facilities, and whether the Utility is able to recover such costs through CEMA; the timing and outcome of the investigations by Cal Fire and the CPUC, including as to the causes of the wildfires, and whether the Utility may have liability associated with these fires; and, if liable for one or more fires, whether the Utility would be able to recover all or part of such costs through insurance or through regulatory mechanisms, to the extent insurance is not available or exhausted; as well as potential liabilities in connection with fines or penalties that could be imposed on the Utility if the CPUC or any other law enforcement agency brought an enforcement action and determined that the Utility failed to comply with applicable laws and regulations;
- the Utility's ability to effectively manage capital expenditures and its operating and maintenance expenses within the authorized levels of spending and timely recover its costs through rates, and the extent to which the Utility incurs unrecoverable costs that are higher than the forecasts of such costs;
- the timing and outcomes of the two TO rate cases pending before the FERC, and other ratemaking and regulatory proceedings;
- the timing and outcome of the Butte fire litigation; the timing and outcome of any proceeding to recover costs in excess of insurance from customers, if any; the effect, if any, of the SED's $8.3 million citations issued in connection with the Butte fire may have on the Butte fire litigation; and whether additional investigations and proceedings in connection with the Butte fire will be opened and any additional fines or penalties imposed on the Utility;
- the timing and outcomes of the ex parte OII and the safety culture OII;
- the outcome of the probation and the monitorship, the timing and outcomes of the debarment proceeding, the SED's unresolved enforcement matters relating to the Utility's compliance with natural gas-related laws and regulations, and other investigations that have been or may be commenced, and the ultimate amount of fines, penalties, and remedial and other costs that the Utility may incur as a result;
- the outcomes of current and future self-reports, investigations or other enforcement proceedings that could be commenced or notices of violation that could be issued relating to the Utility's compliance with laws, rules, regulations, or orders applicable to its operations; and the timing and outcome of notices of violations in connection with the Yuba City incident;
- the ability of PG&E Corporation and the Utility to access capital markets and other sources of debt and equity financing in a timely manner on acceptable terms, and the amount and timing of additional common stock and debt issuances by PG&E Corporation;
- the impact that reductions in customer demand for electricity and natural gas have on the Utility's ability to make and recover its investments through rates and earn its authorized return on equity; whether the Utility is successful in addressing the changing industry landscape, including the impact of growing distributed and renewable generation resources, changing customer demand for natural gas and electric services, and an increasing number of customers departing for community choice aggregators;
- the impact of the increased cost of natural gas regulations;
- the timing and outcomes of the "Ghost Ship" and Valero refinery outage lawsuits;
- whether the Utility can continue to obtain insurance and whether insurance coverage is adequate for future losses or claims;
- changes in estimated environmental remediation costs, including costs associated with the Utility's natural gas compressor sites;
- the outcome of federal or state tax audits and the impact of any changes in federal or state tax laws, policies, regulations, or their interpretation, including as a result of the recent changes in the federal government;
- the impact of changes in GAAP, standards, rules, or policies, including those related to regulatory accounting, and the impact of changes in their interpretation or application; and
- the other factors disclosed in PG&E Corporation and the Utility's joint annual report on Form 10-K for the year ended December 31, 2016, their joint quarterly reports on Form 10-Q for the quarters ended March 31, June 30, and September 30, 2017, and other reports filed with the Securities and Exchange Commission (SEC), which are available on PG&E Corporation's website at http://www.pgecorp.com and on the SEC website at www.sec.gov.