Pacific Gas and Electric Company

Earnings & guidance (reaffirmed) - Q3 core EPS: $0.41; 1st 9 months core EPS: $1.24 vs $1.14 YoY (on track for full-year guidance). - 2026 core EPS guidance reaffirmed: $1.64–$1.66 (~+10% vs 2025 midpoint). - 2027 core EPS guidance reaffirmed: $1.78–$1.82 (~+9% at midpoint). - Company will not provide guidance beyond 2027 while the strategic review is underway (but plans/financing objectives extend further).

Key challenge/risk: wildfire liability reform is not done (driving credit/financing discount) - Management says comprehensive wildfire policy reform has not yet been enacted, leaving “tail risk” under the current framework. - Even with improvements since SB 901 (2018) → AB 1.0/1.05 → SB 254 (last year), they argue the framework still keeps PG&E from getting to better-than-current credit metrics. - Credit-rating pressure: Fitch revised outlook to negative during the quarter; S&P emphasized heightened risk for California IOUs. Management frames this as the main constraint to further ratings improvement. - Negative point for investors: current wildfire-linked structure leads to a “discount” on financing costs (explicitly discussed as burdening even businesses with less/no wildfire exposure).

Strategic review: goal is investment-grade credit; evaluating structure to unlock value - On Sept 2, PG&E launched a review of how the company is organized and financed; stated intent to share outcome “no later than next summer.” - Primary objective: achieve investment-grade credit ratings, viewed as critical to maximizing value for customers/owners. - Potential pathways (not prejudged): - Regulatory reforms - Reassessing capital allocation priorities - Corporate structure changes (e.g., ring fencing, potential sales/separations) to better match wildfire risk to financing cost. - Investment-grade target metric: management modeling aims for mid-teens FFO-to-debt. - Timing risk/opportunity: they acknowledge legislative uncertainty, but say they are moving with “urgency” and could pursue actions faster if opportunities emerge.