01—Abstract
Summary
Summary of the 10-K filed February 23, 2023. Cited figures are marked; the original filing is the authoritative source.
PG&E Corporation and its principal operating subsidiary, Pacific Gas and Electric Company (the Utility), filed a combined 2022 Annual Report on Form 10-K.
PG&E Corporation is a holding company whose primary asset is the Utility, a regulated electric and natural gas utility serving Northern and Central California. Net income attributable to common shareholders was $1.80 billiona in 2022, compared with a loss of $102 million in 2021, with the swing largely driven by income tax benefits tied to the Fire Victim Trust's sales of PG&E Corporation shares and the recognition of SB 901 securitization items. Total operating revenues were $21.68 billion, and total capital expenditures were $9.6 billion for 2022.
The filing's central investor concern is wildfire liability. The company has recorded probable losses of $1.025 billionb for the 2019 Kincade fire, $400 million for the 2020 Zogg fire, $1.175 billion for the 2021 Dixie fire, and $100 million for the 2022 Mosquito fire, each before available insurance and recoveries. The Utility also faces a criminal prosecution over the Zogg fire in which the company states its total losses could materially exceed accrued amounts, and it discloses that the Wildfire Fund and AB 1054 protections may not fully mitigate its exposure.
Other notable items include $300 millionc accrued for wildfire-related securities claims, a pending CPUC decision on the 2023 general rate case with a requested 2023 revenue requirement of $15.82 billion, and a CPUC-approved 2023 cost of capital with a 10% return on equity. Balance-sheet and capital-structure points include total assets of $118.6 billion, long-term debt of $47.7 billion at PG&E Corporation consolidated level, and the reinstatement of Utility common stock dividends in June 2022 at $425 million per quarter. PG&E Corporation's ability to pay its own common dividends remains restricted until it recognizes $6.2 billion in Non-GAAP Core Earnings after emergence from Chapter 11.
02—Key points
Key Highlights
- Consolidated 2022 net income attributable to common shareholders of $1.80 billion, versus a $102 million loss in 2021; diluted EPS was $0.84.
- Total operating revenues of $21.68 billion in 2022, up from $20.64 billion in 2021.
- Recorded probable wildfire losses before insurance: $1.025 billion (2019 Kincade fire), $400 million (2020 Zogg fire), $1.175 billion (2021 Dixie fire), and $100 million (2022 Mosquito fire).
- Criminal charges against the Utility over the 2020 Zogg fire remain pending, with a trial date set for June 6, 2023; the company says total losses could materially exceed accrued liabilities.
- Requested 2023 General Rate Case revenue requirement of $15.82 billion; a decision is scheduled for the third quarter of 2023. The 2023 cost of capital decision adopted a 10% return on equity.
- SB 901 securitization of $7.5 billion of 2017 wildfire claims was completed through $3.6 billion (Series 2022-A) and $3.9 billion (Series 2022-B) recovery bonds issued in 2022.
- Capital expenditures of $9.6 billion in 2022, with forecasts of $7.9 billion to $11.2 billion for 2023; the Utility reinstated common stock dividends of $425 million per quarter in June 2022.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 23, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $21.68B$20.64B | +5.0% |
| Operating Income | $1.84B$1.88B | −2.4% |
| Interest Expense | $1.92B$1.60B | +19.7% |
| Net Income | $1.81B-$88.00M | +2161.4% |
| EPS (Basic) | $0.91$-0.05 | +1920.0% |
| EPS (Diluted) | $0.84$-0.05 | +1780.0% |
| Shares Outstanding (Basic) | 1.99B1.99B | +0.1% |
| Shares Outstanding (Diluted) | 2.13B1.99B | +7.4% |
05—Questions
Frequently Asked Questions
How much wildfire liability has PG&E recorded, and could it be higher?
As of December 31, 2022, the company recorded aggregate probable losses of $1.025 billion for the 2019 Kincade fire, $400 million for the 2020 Zogg fire, $1.175 billion for the 2021 Dixie fire, and $100 million for the 2022 Mosquito fire, all before available insurance. These amounts reflect the lower end of the reasonably estimable range. The filing states that the company believes losses could be greater, excluding categories such as fines, punitive damages, and evacuation costs, and it says total Zogg fire losses could materially exceed the accrued amount if the Utility is convicted.
What recoveries are available to offset wildfire costs?
The company records probable recoveries from insurance, the Wildfire Expense Memorandum Account, FERC transmission rates, and the Wildfire Fund. At year-end 2022 these totaled $1.208 billion for the 2021 Dixie fire and $105 million for the 2022 Mosquito fire. Insurance receivables were $430 million for Kincade, $370 million for Zogg, $530 million for Dixie, and $45 million for Mosquito. The filing notes that recovery is not assured, particularly because the CPUC has not yet applied the AB 1054 prudency standard.
Why did the company report a large net income in 2022 after a loss in 2021?
The filing attributes much of the improvement to income tax benefits from the Fire Victim Trust's sales of PG&E Corporation common stock, which produced an aggregate tax benefit of $870 million in 2022, and to a $2.1 billion swing in income tax benefit year over year. Operating income also rose, while the company recorded $608 million of net SB 901 securitization charges, partly offsetting these gains.
What are the company's dividend and capital restrictions?
The Utility reinstated its common stock dividend in June 2022 and paid $425 million in each of three quarters in 2022. PG&E Corporation may not pay common dividends until it recognizes $6.2 billion in Non-GAAP Core Earnings after its July 1, 2020 emergence date. The CPUC also requires the Utility to maintain at least 52% equity on average, and PG&E Corporation's debt covenants restrict certain borrowings and liens.
What are the main risks to the company's debt and equity holders?
Total indebtedness was approximately $4.68 billion at PG&E Corporation and $45.6 billion at the Utility as of December 31, 2022. The company also faces possible dilution from issuing shares for allowed HoldCo Rescission or Damage Claims, potential cash payments on allowed Subordinated Debt Claims, and sales of shares by the Fire Victim Trust, which held shares equal to 22.19% of common stock at emergence. The filing additionally notes that an ownership change under Section 382 could limit the use of net operating loss carryforwards of $26.6 billion federal and $25.2 billion California.
06—Continue