Pacific Gas & Electric Co. · NYSE:PCG
Pacific Gas & Electric — PG&E Corp (PCG, PCG-PA, PCG-PB, PCG-PC, PCG-PD, PCG-PE, PCG-PG, PCG-PH, PCG-PI) — Q3 2017 Earnings Presentation
69 slides from Pacific Gas & Electric's earnings presentation, Nov 3, 2017
Slide 1: Business Update November 3, 2017
BUSINESS UPDATE November 3, 2017 Exhibit 99.1
Slide 2: Forward-Looking Statements
Forward-Looking Statements 2 Statements contained in this slide presentation regarding PG&E Corporation’s three-year financial outlook, including without limitation 2017-2019 capital expenditures, rate base growth and dividend growth and policy; statements regarding 2017 guidance and related assumpt
Slide 3: Well-positioned to Deliver Strong Returns
Well-positioned to Deliver Strong Returns A Strengthened Company Key Advantages Robust Growth Profile Significant safety, reliability and operational improvements Improved customer satisfaction One of the greenest utilities in the country Constructive regulatory and policy environment Multiple infra
Slide 4: Agenda
Agenda Key advantages Robust growth profile A strengthened company
Slide 5: PG&E System At a Glance
PG&E System At a Glance Key Highlights 2016 Revenue Sources California Public Utilities Commission Federal Energy Regulatory Commission Electric Transmission ~7% Gas Transmission & Storage ~3% Employees Californians served Net income (2016) Ratebase (2016) Miles of electric lines MW utility-owned ge
Slide 6: Safety Forms the Foundation of Operational and Financial Success
Safety Forms the Foundation of Operational and Financial Success 50% of short-term variable compensation tied to safety performance Developed industry-leading public safety dashboard Significant utility leadership experience on the Board and executive team Embraced a continuous improvement mindset a
Slide 7: Improved Safety and Reliability: Gas Metrics
Improved Safety and Reliability Gas Metrics (1) Emergency response time recorded in minutes; (2) Open Grade 2 and 2+ leaks; (3) Third party damages per 1,000 Underground Service Alert (USA) tickets. Major Progress from 2010-2016: Achieved international certifications in gas safety excellence program
Slide 8: Improved Safety and Reliability: Electric Metrics
Improved Safety and Reliability Electric Metrics (1) Percentage of time PG&E personnel are on-site within 60 minutes of receiving a 911 electric-related call; (2) Average outage duration experienced by all customers served measured in minutes; (3) Percentage of customers experiencing 5 or more susta
Slide 9: Customer Satisfaction has Improved Each Year Since 2012
Customer Satisfaction has Improved Each Year Since 2012 Unwavering commitment to customer satisfaction J.D. Power Survey Results, 2011-2017 Electric Residential 3nd Quartile Gas Residential 4th Quartile Electric Business 1st Quartile Gas Business 2nd Quartile
Slide 10: Projected Strong Growth
Projected Strong Growth ~$34.4B Ratebase ($ in B) ~$39B ~6.5-7% CAGR Dividend ~60% Payout Ratio + ~8% See the Forward Looking Statements for factors that could cause actual results to differ materially from the guidance presented and underlying assumptions. + ~8%
Slide 11: Agenda
Agenda Key advantages Robust growth profile A strengthened company
Slide 12: Key Strengths
Key Strengths 1 One of the greenest utilities in the country 2 3 Constructive regulatory framework 4 California clean energy policies Multiple infrastructure investment drivers
Slide 13: Key Strength #1: One of the Greenest Utilities in the Country
KEY STRENGTH #1: ONE OF THE GREENEST UTILITIES IN THE COUNTRY Focused on Sustainability Nearly 2x More Carbon Free and Renewable Energy Than The U.S. Average in 2016 69% 36% Shaping California Model for Energy Efficiency Ranked #1 with ~20% of all U.S. rooftop solar >325,000 solar customers PG&E Cus
Slide 14: Key Strength #2: Constructive Regulatory Framework
KEY STRENGTH #2: CONSTRUCTIVE REGULATORY FRAMEWORK California’s Regulatory Mechanisms PG&E’s industry-leading risk management aligns with CPUC safety focus Revenues decoupled from sales Balancing accounts reduce cost volatility Forward-looking test year rate cases Risk-informed rate making Separate
Slide 15: Key Strength #3: California Clean Energy Policies
KEY STRENGTH #3: CALIFORNIA CLEAN ENERGY POLICIES California’s Climate Goals California is Targeting: 50% renewables by 2030 1.5M electric vehicles by 2025 2X energy efficiency in existing buildings by 2030 California Greenhouse Gas Reduction Goals and Historic Emissions* Million metric tons CO2e PG
Slide 16: Electric Vehicles Present Growth Opportunities
KEY STRENGTH #3: CALIFORNIA CLEAN ENERGY POLICIES Electric Vehicles Present Growth Opportunities See the Forward Looking Statements for factors that could cause actual results to differ materially from the guidance presented and underlying assumptions. Projected EV Landscape 600K EVs on PG&E’s grid
Slide 17: Key Strength #4: Multiple Infrastructure Investment Drivers
Key Strength #4: Multiple INFRASTRUCTURE INVESTMENT Drivers California Policies Drive Infrastructure Investment Gas investments (e.g., pipeline replacement, in-line inspection capability) Electric investments (e.g., substation upgrades, cable upgrades) Generation asset upgrades Grid modernization Re
Slide 18: Agenda
Agenda Key advantages Robust growth profile A strengthened company
Slide 19: Focus Areas for Growth
Focus Areas for Growth PG&E’s operating plan provides a strong foundation for future success Enhance safety and reliability 1 Enable California’s clean energy economy 2 Ensure customer affordability 3
Slide 20: Growth Focus #1: Enhance Safety and Reliability
GROWTH FOCUS #1: ENHANCE SAFETY AND RELIABILITY Continue to Upgrade Our System Investments to systematically modernize infrastructure % of Gas Transmission System Piggable Annual Projected Miles of Gas Distribution Main Replacement % Penetration of Automated Switches in Urban Areas % of Urban Substa
Slide 21: Growth Focus #2: Grid Modernization Will Require Significant Investment
GROWTH FOCUS #2: ENABLE CALIFORNIA’S CLEAN ENERGY ECONOMY Grid Modernization Will Require Significant Investment Grid Storage Enables renewable integration Grid Control and Monitoring Increased remote control and sensor technology reduce outages and enable self-healing grid Grid Data Analytics Advan
Slide 22: Growth Focus #3: PG&E Bills Lower Than the National Average
GROWTH FOCUS #3: ENSURE CUSTOMER AFFORDABILITY PG&E Bills Lower Than the National Average PG&E Average Residential Bills Are 30% Below National Average PG&E’s Electric Bundled Rates Have Grown In Line With Inflation USA Continued focus on keeping customer bills affordable ~30%
Slide 23: Growth Focus #3: Strategies to Manage Declining Load
GROWTH FOCUS #3: ENSURE CUSTOMER AFFORDABILITY Strategies to Manage Declining Load Flexible Electric Portfolio Constructive Regulatory Mechanisms Revenues decoupled from sales Cost allocation mechanisms for departing customers Modernizing Rate Structures Focus on Continuous Improvement Residential R
Slide 24: Going Forward: Well-Positioned for Industry Changes
GOING FORWARD Well-Positioned for Industry Changes Industry Changes PG&E Strategies Decarbonized Economy Customer Choice Integrate renewables and distributed energy resources Enable electric vehicle adoption Expand energy storage options Enhance energy efficiency programs Flexible procurement portfo
Slide 25: Three-year Financial Outlook
Three-year Financial Outlook Cap ex growth 1 Ratebase growth 2 Dividend growth and policy 3
Slide 26: Robust Cap Ex Supports Strong Returns
Robust Cap Ex Supports Strong Returns See the Forward Looking Statements for factors that could cause actual results to differ materially from the guidance presented and underlying assumptions. ~$5.7B ~$6.3B ~$6B 2017 2018 2019 Capital Expenditures ($ in B) 2017-2019 General Rate Case Gas Transmissi
Slide 27: Ratebase Supports Strong Returns
Ratebase Supports Strong Returns See the Forward Looking Statements for factors that could cause actual results to differ materially from the guidance presented and underlying assumptions. Base Case Assumptions: 2017 General Rate Case through 2019 2015 Gas Transmission & Storage rate case Phase 2 de
Slide 28: Dividend Policy Supports Strong Total Shareholder Return
Dividend Policy Supports Strong Total Shareholder Return Targeting 55-65% payout ratio over time See the Forward Looking Statements for factors that could cause actual results to differ materially from the guidance presented and underlying assumptions. ~60% Payout Ratio + ~8% + ~8%
Slide 29: In Summary: Solid Growth Strategy Positions PG&E for Success
IN SUMMARY Solid Growth Strategy Positions PG&E for Success A Strengthened Company Key Advantages Robust Growth Profile Significant safety, reliability and operational improvements Improved customer satisfaction One of the greenest utilities in the country Constructive regulatory and policy environm
Slide 30: Appendices
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Slide 31: Table of Contents
Table of Contents Appendix 1: Q3 2017 Earnings Results and 2017 Guidance Slides 32 – 37 Appendix 2: Q3 2017 Supplemental Earnings Materials Slides 38 – 48 Appendix 3: Supplemental Material on Tax Reform Slide 49 Appendix 4: Leadership Bios Slides 50 – 56 Appendix 5: Overview of Key Regulatory Cases
Slide 32: Q3 2017 Earnings Results
APPENDIX 1 – Q3 2017 EARNINGS RESULTS AND 2017 GUIDANCE Q3 2017 Earnings Results Earnings from Operations is not calculated in accordance with GAAP and excludes items impacting comparability. See Appendix 2, Exhibit A for a reconciliation of Earnings per Share (“EPS”) on a GAAP basis to Earnings fro
Slide 33: Q3 2017: Quarter over Quarter Comparison
APPENDIX 1 – Q3 2017 EARNINGS RESULTS AND 2017 GUIDANCE Q3 2017: Quarter over Quarter Comparison Earnings from Operations is not calculated in accordance with GAAP and excludes items impacting comparability. See Appendix 2, Exhibit A for a reconciliation of Earnings per Share (“EPS”) on a GAAP basis
Slide 34: 2017 Earnings Per Share Guidance
APPENDIX 1 – Q3 2017 EARNINGS RESULTS AND 2017 GUIDANCE 2017 Earnings Per Share Guidance as of November 2, 2017 See the Forward Looking Statements for factors that could cause actual results to differ materially from the guidance presented and underlying assumptions. See Appendix 2, Exhibit E for PG
Slide 35: 2017 Assumptions
APPENDIX 1 – Q3 2017 EARNINGS RESULTS AND 2017 GUIDANCE 2017 Assumptions as of November 2, 2017 Capital Expenditures ($ millions) Authorized Ratebase (weighted average) ($ billions) Return on Equity: 10.4% Equity Ratio: 52% Authorized Cost of Capital* Other Factors Affecting Earnings from Operations
Slide 36: 2017 Items Impacting Comparability
APPENDIX 1 – Q3 2017 EARNINGS RESULTS AND 2017 GUIDANCE 2017 Items Impacting Comparability as of November 2, 2017 (1) Total cost of rights-of-way program expected to range from $450 million to $475 million (2) Fines and penalties range excludes any additional potential future fines or penalties beyo
Slide 37: 2017 Equity Issuance
APPENDIX 1 – Q3 2017 EARNINGS RESULTS AND 2017 GUIDANCE 2017 Equity Issuance as of November 2, 2017 37 See the Forward Looking Statements for factors that could cause actual results to differ materially from the guidance presented and underlying assumptions. September 30, 2017 shares outstanding: ~5
Slide 38: Q3 2017 Supplemental Earnings Materials Table of Contents
Exhibit A: Reconciliation of PG&E Corporation’s Consolidated Income Available for Common Shareholders in Accordance with Generally Accepted Accounting Principles to Earnings from Operations Slides 39-40 Exhibit B: Key Drivers of PG&E Corporation’s Earnings per Common Share from Operations Slide 41 E
Slide 39: Exhibit A: Reconciliation to Earnings from Operations (1 of 2)
APPENDIX 2 – Q3 2017 SUPPLEMENTAL EARNINGS MATERIALS Exhibit A: Reconciliation of PG&E Corporation’s Consolidated Income Available for Common Shareholders in Accordance with Generally Accepted Accounting Principles (“GAAP”) to Earnings from Operations Page 1 of 2 All amounts presented in the table a
Slide 40: Exhibit A: Reconciliation to Earnings from Operations (2 of 2)
APPENDIX 2 – Q3 2017 SUPPLEMENTAL EARNINGS MATERIALS Exhibit A: Reconciliation of PG&E Corporation’s Consolidated Income Available for Common Shareholders in Accordance with Generally Accepted Accounting Principles (“GAAP”) to Earnings from Operations Page 2 of 2 Future fines or penalties may be imp
Slide 41: Exhibit B: Key Drivers of EPS from Operations
APPENDIX 2 – Q3 2017 SUPPLEMENTAL EARNINGS MATERIALS Exhibit B: Key Drivers of PG&E Corporation’s Earnings per Common Share (“EPS”) from Operations Third Quarter and Year to Date, 2017 vs. 2016 (in millions, except per share amounts) See Exhibit A for a reconciliation of EPS on a GAAP basis to EPS f
Slide 42: Exhibit C: Operational Performance Metrics
APPENDIX 2 – Q3 2017 SUPPLEMENTAL EARNINGS MATERIALS Exhibit C: Operational Performance Metrics Q3 Actual EOY Target Meets YTD Target (1) Safety (includes both public and employee safety metrics) Nuclear Operations Safety Unit 1 Performance Indicator Unit 2 Performance Indicator 97.0 90.0 90.5 87.6
Slide 43: Definitions of 2017 Operational Performance Metrics
APPENDIX 2 – Q3 2017 SUPPLEMENTAL EARNINGS MATERIALS Definitions of 2017 Operational Performance Metrics from Exhibit C Safety Public and employee safety are measured in four areas: (1) Nuclear Operations Safety, (2) Electric Operations Safety, (3) Gas Operations Safety, and (4) Employee Safety. The
Slide 44: Exhibit D: Sales and Sources Summary
APPENDIX 2 – Q3 2017 SUPPLEMENTAL EARNINGS MATERIALS Exhibit D: Pacific Gas and Electric Company Sales and Sources Summary Third Quarter and Year to Date, 2017 vs. 2016 Includes other sources of electric energy totaling 5,561 million kWh and 2,782 million kWh for the three months ended September 30,
Slide 45: Exhibit E: 2017 EPS Guidance (1 of 2)
APPENDIX 2 – Q3 2017 SUPPLEMENTAL EARNINGS MATERIALS Exhibit E: PG&E Corporation’s 2017 Earnings per Share Guidance Page 1 of 2 All amounts presented in the table above are tax adjusted at PG&E Corporation’s statutory tax rate of 40.75 percent, except as indicated below. “Items impacting comparabili
Slide 46: Exhibit E: 2017 EPS Guidance (2 of 2)
APPENDIX 2 – Q3 2017 SUPPLEMENTAL EARNINGS MATERIALS Exhibit E: PG&E Corporation’s 2017 Earnings per Share Guidance Page 2 of 2 “Butte fire-related costs, net of insurance” refers to the costs associated with the Butte fire, net of insurance. The Utility currently is unable to estimate the low and h
Slide 47: Exhibit F: 2017 General Earnings Sensitivities
APPENDIX 2 – Q3 2017 SUPPLEMENTAL EARNINGS MATERIALS Exhibit F: 2017 General Earnings Sensitivities PG&E Corporation and Pacific Gas and Electric Company These general earnings sensitivities on factors that may affect 2017 earnings are forward-looking statements that are based on various assumptions
Slide 48: Exhibit G: Use of Non-GAAP Financial Measures
APPENDIX 2 – Q3 2017 SUPPLEMENTAL EARNINGS MATERIALS Exhibit G: Use of Non-GAAP Financial Measures PG&E Corporation and Pacific Gas and Electric Company: Use of Non-GAAP Financial Measures PG&E Corporation discloses historical financial results and provides guidance based on “earnings from operation
Slide 49: Supplemental Material on Tax Reform
APPENDIX 3 – SUPPLEMENTAL MATERIAL ON TAX REFORM Tax Reform Helps Affordability and Creates Potential for Future Investments See the Forward Looking Statements for factors that could cause actual results to differ materially from the guidance presented and underlying assumptions. 1. Lower Corporate
Slide 50: Leadership Bios: Geisha J. Williams
APPENDIX 4 – LEADERSHIP BIOS Geisha J. Williams Geisha J. Williams Chief Executive Officer (CEO) and President PG&E Corporation Geisha J. Williams was elected CEO and President of PG&E Corporation, effective March 1, 2017. Williams has more than three decades of experience in the utility industry. W
Slide 51: Nick Stavropoulos
Nick Stavropoulos President & Chief Operating Officer Pacific Gas and Electric Company Nick Stavropoulos serves as President and Chief Operating Officer of Pacific Gas and Electric Company and has more than 35 years of experience in the U.S. and international energy industry. He oversees a diverse w
Slide 52: Leadership Bios: Anthony F. Earley, Jr.
APPENDIX 4 – LEADERSHIP BIOS Anthony F. Earley, Jr. Anthony F. Earley, Jr. Executive Chair PG&E Corporation Anthony F. Earley, Jr., is Executive Chair of the Board of PG&E Corporation. Earley joined PG&E in September 2011 as Chairman, Chief Executive Officer, and President after 17 years at DTE Ener
Slide 53: Leadership Bios: Jason P. Wells
APPENDIX 4 – LEADERSHIP BIOS Jason P. Wells Jason P. Wells Senior Vice President and Chief Financial Officer PG&E Corporation Jason P. Wells is Senior Vice President and Chief Financial Officer for PG&E Corporation. Wells oversees the financial activities of the $50 billion company including account
Slide 54: John R. Simon
John R. Simon Executive Vice President and General Counsel PG&E Corporation John R. Simon serves as Executive Vice President & General Counsel for San-Francisco-based PG&E Corporation. In his role, he oversees Law; Regulatory Affairs; Communications and Marketing; Land and Environmental Management;
Slide 55: Patrick M. Hogan
Patrick M. Hogan Senior Vice President of Electric Operations Pacific Gas and Electric Company Patrick M. Hogan is Senior Vice President of Electric Operations at Pacific Gas and Electric Company. Hogan oversees PG&E's electric transmission and distribution system, which delivers safe and reliable e
Slide 56: Leadership Bios: Jesus Soto Jr.
APPENDIX 4 – LEADERSHIP BIOS Jesus Soto Jr. Jesus Soto Jr. Senior Vice President, Gas Operations Pacific Gas and Electric Company Jesus Soto Jr. is the Senior Vice President of Gas Operations for Pacific Gas and Electric Company. He is responsible for overseeing and executing the day-to-day operatio
Slide 57: Leadership Bios: David S. Thomason
APPENDIX 4 – LEADERSHIP BIOS David S. Thomason David S. Thomason Vice President and Controller PG&E Corporation Vice President, Chief Financial Officer and Controller Pacific Gas and Electric Company David S. Thomason is Vice President and Controller of PG&E Corporation, as well as Vice President, C
Slide 58: Overview of Key Regulatory Cases: Separate Rate Cases
APPENDIX 5 – OVERVIEW OF KEY REGULATORY CASES Separate Rate Cases Maintain Focus on Specific Assets Key Next Steps Implementation of GT&S decisions Implementation of GRC decision Hearings (TO18) and Settlement Talks ( TO19) General Rate Case Gas Transmission and Storage Case Transmission Owner Cases
Slide 59: 2017 CPUC General Rate Case
APPENDIX 5 – OVERVIEW OF KEY REGULATORY CASES 2017 CPUC General Rate Case On May 11, the CPUC adopted the settlement agreement jointly submitted by PG&E, ORA, TURN, and 12 other intervening parties (In Millions) 2017 2018 2019 Approved Increase Consistent with Settlement $ 88 $ 444 $ 361 The decisio
Slide 60: 2015 CPUC Gas Transmission and Storage Rate Case
APPENDIX 5 – OVERVIEW OF KEY REGULATORY CASES 2015 CPUC Gas Transmission and Storage Rate Case On December 1, 2016, the CPUC voted out a final Phase 2 decision consistent with the proposed decision Revenue Requirement ($ millions) Utility Requested Revenue Requirement Phase 2 Decision Revenue Requir
Slide 61: FERC Transmission Owner Rate Case
APPENDIX 5 – OVERVIEW OF KEY REGULATORY CASES FERC Transmission Owner Rate Case TO19 (2018 Revenues) July 26, 2017 – Filed TO19 with FERC requesting $1.8 billion revenue requirement, a ~$75 million increase over the filed TO18 request ROE (inclusive of 50 basis points adder)10.75% Cap ex~$1.4B WAVG
Slide 62: Distributed Resources
APPENDIX 5 – OVERVIEW OF KEY REGULATORY CASES Distributed Resources Distribution Resources Plan (DRP) Integrated Distributed Energy Resources (IDER) The DRP proceeding is about integrating cost effective DERs into the utility’s planning, operations, and investment decisions; the DRP proceeding is ev
Slide 63: CPUC Cost of Capital
APPENDIX 5 – OVERVIEW OF KEY REGULATORY CASES CPUC Cost of Capital Capital Structure 2017 Cost 2018-19 Cost (1) Common Equity 52% 10.40% 10.25% Preferred Stock 1% 5.60% 5.60% Long-Term Debt 47% 5.52% 4.89% Weighted Average Cost of Capital 8.06% 7.68% On July 13, 2017, the CPUC approved a joint petit
Slide 64: Electric Vehicle Infrastructure
APPENDIX 5 – OVERVIEW OF KEY REGULATORY CASES Electric Vehicle Infrastructure Light Duty Electric Vehicle Infrastructure December 15, 2016 – CPUC voted out a final decision authorizing $130M of spend ($109M capital, $21M expense) Medium to Heavy-Duty Transportation Electrification January 20, 2017 –
Slide 65: Energy Storage
APPENDIX 5 – OVERVIEW OF KEY REGULATORY CASES Energy Storage Energy Storage RFO AB 2868 CPUC Storage Rulemaking (R.10-12-007) established 1,325 MW target for all IOUs (580 MW target for PG&E) by 2024 with up to 50% utility ownership of transmission and distribution projects CPUC’s Decision establish
Slide 66: Residential Rate/NEM Decisions
APPENDIX 5 – OVERVIEW OF KEY REGULATORY CASES Residential Rate/NEM Decisions Residential Rate Design OIR Decision NEM 2.0 The CPUC reviewed residential rate structure and issued a decision in July 2015 which ordered: Transitioning from 4 to 2 tiers by 2019, with 1:1.25 ratio; currently at 2 tiers, w
Slide 67: Breakdown of 2016 Total Revenue Requirement
APPENDIX 6 Breakdown of 2016 Total Revenue Requirement 2016 Revenue Requirement ($ in M) 56% Base Includes costs to own and operate our assets Earning the authorized rate of return depends on ability to manage costs within rate case outcomes 31% Procurement Pass Through 13% Public Purpose Programs P
Slide 68: Description of Gas System Safety Recognition
APPENDIX 7 Description of Gas System Safety Recognition ISO 55001 API 1173 ISO (International Organization for Standardization) 55001 enables the development of an effective asset management system so that an organization can achieve its objectives consistently and sustainably over time. ISO consist
Slide 69: Credit Metrics and Ratings
APPENDIX 8 Credit Metrics and Ratings PG&E Corporation Senior Unsecured Debt A- A3 BBB+ Short-term Debt F2 P-2 A-2 Outlook Stable Stable Stable Fitch Moody’s S&P Pacific Gas and Electric Company Senior Unsecured Debt A A2 A- Short-term Debt F2 P-1 A-2 Outlook Stable Stable Stable