01—Abstract
Summary
Summary of the 10-K filed February 25, 2021. Cited figures are marked; the original filing is the authoritative source.
PG&E Corporation (PCG) and its principal operating subsidiary, Pacific Gas and Electric Company (the Utility), filed this combined 2020 Annual Report on Form 10-K.
The companies emerged from Chapter 11 on July 1, 2020, under the Plan confirmed June 20, 2020, and the filing states that substantial doubt about their ability to meet obligations within one year has been alleviated. PG&E Corporation reported a 2020 net loss attributable to common shareholders of $1.3 billiona ($1,318 million), compared with a $7.7 billion loss in 2019, while the Utility reported net income available for common stock of $397 million. Consolidated operating revenues were $18.47 billion, and wildfire-related claims, net of insurance, fell to $251 million from $11.44 billion.
Wildfire-related liabilities remain the dominant risk: the company recorded a $625 millionb loss for the 2019 Kincade fire and a $275 million loss for the 2020 Zogg fire, before available insurance, and states that losses could be greater. The balance sheet and cash flows reflect the restructuring. Total assets were $97.86 billion, and long-term debt was $37.29 billion at PG&E Corporation on a consolidated basis.
Operating cash flow was negative $19.13 billionc, driven by $18.8 billion of payments on pre-petition wildfire claims and $5.2 billion of Wildfire Fund contributions. Financing inflows included $12.9 billion of equity contributions from PG&E Corporation to the Utility. The filing states that PG&E Corporation's ability to pay common dividends is restricted until it recognizes $6.2 billion in Non-GAAP Core Earnings after the Effective Date, and that the Fire Victim Trust holds 22.19% of common stock on the Effective Date basis.
Key regulatory and legal exposures include the probation court's expanding conditions, a potential CPUC Enhanced Oversight and Enforcement Process, pending PSPS penalty proposals (including an intervenor proposal of $166 milliond), and the wildfire insurance and AB 1054 Wildfire Fund arrangements. The Utility states it expects capital expenditures of $7.5 billion to $8.3 billion in 2021.
02—Key points
Key Highlights
- Emerged from Chapter 11 on July 1, 2020; the filing states substantial doubt about going-concern status has been alleviated.
- PG&E Corporation 2020 net loss attributable to common shareholders of $1.3 billion, versus $7.7 billion in 2019; Utility income available for common stock of $397 million.
- Wildfire-related claims, net of insurance recoveries, were $251 million in 2020 versus $11.44 billion in 2019.
- Recorded pre-insurance losses of $625 million for the 2019 Kincade fire and $275 million for the 2020 Zogg fire; the filing states losses could exceed these amounts.
- Operating cash flow was negative $19.13 billion, reflecting $18.8 billion of pre-petition wildfire claim payments and $5.2 billion of Wildfire Fund contributions.
- PG&E Corporation issued common stock and equity units for about $9.0 billion of gross proceeds in July 2020 to fund Plan distributions.
- Common dividends are restricted until $6.2 billion of Non-GAAP Core Earnings is recognized after the Effective Date; the Fire Victim Trust holds 22.19% of common stock as of the Effective Date.
- Utility 2020 GRC final decision approved a 2020 revenue requirement of $9.102 billion, with 2021 and 2022 increases of $316 million and $364 million.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 25, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $18.47B$17.13B | +7.8% |
| Operating Income | $1.75B-$10.09B | +117.4% |
| Interest Expense | $1.26B$934.00M | +34.9% |
| Net Income | -$1.32B-$7.64B | +82.8% |
| EPS (Basic) | $-1.05$-14.50 | +92.8% |
| EPS (Diluted) | $-1.05$-14.50 | +92.8% |
| Shares Outstanding (Basic) | 1.26B528.00M | +138.1% |
| Shares Outstanding (Diluted) | 1.26B528.00M | +138.1% |
05—Questions
Frequently Asked Questions
Is the company still at risk of financial distress after emerging from bankruptcy?
The filing states that substantial doubt about the ability to meet obligations within one year has been alleviated following emergence. However, it also reports $37.29 billion of consolidated long-term debt, a Utility Term Loan and receivables facility maturing in 2021 and 2022, and ongoing wildfire liabilities that could be material and exceed insurance or Wildfire Fund coverage.
How large are the wildfire liabilities and insurance recoveries?
The filing records a $625 million pre-insurance loss for the 2019 Kincade fire, with a $430 million insurance receivable, and a $275 million pre-insurance loss for the 2020 Zogg fire, with a $219 million insurance receivable. It states that the Utility's coverage for wildfire events is $867.5 million, subject to a $60 million self-insured retention, and that losses could exceed the recorded amounts.
When can PG&E Corporation pay common dividends?
PG&E Corporation may not pay common dividends until it recognizes $6.2 billion in Non-GAAP Core Earnings following the Effective Date. Probation conditions also prohibit dividends until the Utility complies with vegetation management requirements. The filing states that the timing of dividend payments on both common and preferred stock is uncertain.
What are the main near-term regulatory and enforcement risks?
The filing identifies several: a possible CPUC Enhanced Oversight and Enforcement Process after a November 2020 CPUC President letter; proposed PSPS penalties, including an intervenor proposal of $166 million; and new probation conditions proposed by the federal court on vegetation management and PSPS. The filing states that the outcomes cannot be predicted and that material penalties could result.
What is the outlook for capital spending?
The Utility estimates it will incur between $7.5 billion and $8.3 billion in capital expenditures in 2021. The 2020 GRC decision also approved average annual capital investments of approximately $4.5 billion over the 2020 to 2022 GRC period.
06—Continue