PG&E Corp

Overview

PG&E Corporation and the Utility expect to be able to generate and obtain adequate cash to meet their cash requirements in the short-term and in the long-term.

PG&E Corporation and the Utility rely on access to debt and equity markets and credit facilities to finance their capital requirements and support their liquidity needs. The CPUC authorizes the Utility’s capital structure, the aggregate amount of long-term and short-term debt that the Utility may issue, and the revenue requirements the Utility is able to collect to recover its cost of service. The Utility generally utilizes retained earnings, equity contributions from PG&E Corporation and long-term debt issuances to maintain its CPUC-authorized long-term capital structure consisting of 52% common equity, 47.5% long-term debt, and 0.5% preferred equity and relies on short-term debt, including its revolving credit facilities, to fund temporary financing needs. The CPUC has granted the Utility a temporary waiver from compliance with its authorized regulatory capital structure until June 2025. The Utility is on track to comply with its authorized regulatory capital structure when the waiver terminates.

PG&E Corporation’s ability to fund operations, make scheduled principal and interest payments, fund equity contributions to the Utility, and pay dividends depends on the level of cash on hand, cash received from the Utility, and PG&E Corporation’s access to the capital and credit markets. Generally, PG&E Corporation and the Utility expect that capital expenditures, debt maturities, and PG&E Corporation common stock dividends will exceed operating cash flows. As a result, they expect to finance future cash needs in excess of operating cash flows primarily through the capital and credit markets.

Additionally, due to its existing tax attributes, PG&E Corporation does not expect to be a significant federal cash taxpayer until at least 2029. See “Tax Matters” above and “Inflation Reduction Act” in Legislative and Regulatory Initiatives below for a discussion of events that could limit PG&E Corporation’s ability to use its net operating losses.

PG&E Corporation and the Utility have various contractual commitments which impact cash requirements. These commitments are discussed in “Purchase Commitments” in Note 15 of the Notes to the Consolidated Financial Statements in Item 8.

As of December 31, 2023, PG&E Corporation and the Utility had access to approximately $3.1 billion of total liquidity comprised of approximately $442 million of Utility’s cash and cash equivalents, $193 million of PG&E Corporation’s cash and cash equivalents and $2.5 billion of availability under PG&E Corporation’s and the Utility’s revolving credit facilities.

Credit Ratings

PG&E Corporation’s and the Utility’s credit ratings may be affected by the ultimate outcome of pending enforcement and litigation matters. Credit rating downgrades may impact the cost and availability of short-term borrowings, including credit facilities, and long-term debt costs. In addition, some of the Utility’s commodity contracts contain collateral posting provisions tied to the Utility’s credit rating from each of the major credit rating agencies. Contracts which may require collateral postings include the Utility's power and natural gas commodity, transportation, services, and environmental products agreements. Because the Utility’s credit rating remains below investment grade, the Utility generally does not receive unsecured credit from its energy procurement counterparties and it may be required to increase its collateral postings if its credit rating is downgraded.

Restrictive Debt Covenants

PG&E Corporation’s and the Utility’s credit agreements contain various financial covenants. PG&E Corporation and the Utility must maintain a total consolidated debt to total consolidated capitalization ratio of no more than 70% and 65% for PG&E Corporation and the Utility, respectively, as of the end of each fiscal quarter. In addition, if revolving loans are outstanding under the Corporation Revolving Credit Agreement as of the last day of a fiscal quarter, PG&E Corporation must comply with a fixed charge coverage covenant.

The failure to comply with the financial covenants contained in these financing arrangements could result in an event of default and the acceleration of the loans under the financing arrangements. As of December 31, 2023, PG&E Corporation and the Utility remain in compliance with all financial covenants.

Cash, Cash Equivalents, and Restricted Cash

Cash and cash equivalents consist of cash and short-term, highly liquid investments with original maturities of three months or less. PG&E Corporation and the Utility maintain separate bank accounts and primarily invest their cash in money market funds. In addition to cash and cash equivalents, the Utility holds restricted cash that primarily consists of AB 1054 and SB 901 fixed recovery charge collections that are to be used to service the associated bonds.

As of December 31, 2023, the Utility had contributed $340 million to its wholly-owned subsidiary and captive insurance company for the administration of wildfire liability self-insurance, of which approximately $8 million was classified as Restricted cash due to minimum capital and surplus requirements (see “Self-Insurance” in Note 14 of the Notes to the Consolidated Financial Statements in Item 8).

Financial Resources

Equity Financings

PG&E Corporation does not plan to issue any equity in 2024, except for employee compensation purposes. PG&E Corporation and the Utility are pursuing the potential sale of a minority interest in Pacific Generation. (See “Application with Pacific Generation for Approval to Transfer Non-Nuclear Generation Assets” below.) Factors that could affect PG&E Corporation’s planned equity issuances include liquidity and cash flow needs, capital expenditures, interest rates, its share price, its earnings, the timing and outcome of ratemaking proceedings, and the timing and terms of other financings, including the potential sale of a minority interest in Pacific Generation.

Debt Financings

The Utility generally issues first mortgage bonds and secured debt to meet its long-term debt funding requirements.

On January 6, 2023, the Utility completed the sale of (i) $750 million aggregate principal amount of 6.150% First Mortgage Bonds due 2033 and (ii) $750 million aggregate principal amount of 6.750% First Mortgage Bonds due 2053. The net proceeds were used for the repayment of borrowings outstanding under the Utility’s revolving credit facility pursuant to the Utility Revolving Credit Agreement.

On March 30, 2023, the Utility completed the sale of $750 million aggregate principal amount of 6.70% First Mortgage Bonds due 2053. The Utility intends to disburse or allocate an amount equal to the net proceeds to finance or refinance, in whole or in part, new or existing eligible green projects and eligible social projects. Pending full disbursement or allocation of an amount equal to the net proceeds from this offering to finance or refinance eligible projects, the Utility expects to use the net proceeds for the repayment of borrowings outstanding under the Utility Revolving Credit Agreement.

On June 5, 2023, the Utility completed the sale of (i) $850 million aggregate principal amount of 6.100% First Mortgage Bonds due 2029, (ii) $1.15 billion aggregate principal amount of 6.400% First Mortgage Bonds due 2033, and (iii) $500 million aggregate principal amount of 6.750% First Mortgage Bonds due 2053. The net proceeds were used for the repayment of $375 million aggregate principal amount of 3.25% First Mortgage Bonds due June 15, 2023 and for general purposes, including for the repayment of borrowings outstanding under the Utility’s revolving credit facility pursuant to the Utility Revolving Credit Agreement. The Utility used the remaining net proceeds to repay the $500 million aggregate principal amount of 4.25% First Mortgage Bonds due August 1, 2023 at maturity.

On November 8, 2023, the Utility completed the sale of $800 million aggregate principal amount of 6.950% First Mortgage Bonds due 2034. The Utility used the net proceeds to repay a portion of the $900 million aggregate principal amount of 1.70% First Mortgage Bonds due November 15, 2023 at maturity.

Credit Facilities and Term Loans

As of December 31, 2023, PG&E Corporation and the Utility had $500 million and $2.0 billion available under their respective $500 million and $4.4 billion revolving credit facilities. The Utility also has access to the Receivables Securitization Program, under which the Utility may borrow the lesser of the facility limit and the facility availability. The facility limit fluctuates between $1.25 billion and $1.5 billion depending on the periods set forth in the transaction documents. Further, the facility availability may vary based on the amount of accounts receivable that the Utility owns that are eligible for sale to the SPV and the portion of those accounts receivable that are sold to the SPV that are eligible for advances by the lenders under the Receivables Securitization Program.

Utility

On April 18, 2023, the Utility amended its existing term loan agreement to extend the maturity of the $125 million 364-day tranche loan thereunder from April 19, 2023 to April 16, 2024. The 364-day tranche loan bears interest based on the Utility’s election of either (1) Term Secured Overnight Financing Rate (“SOFR”) (plus a 0.10% credit spread adjustment) plus an applicable margin of 1.375%, or (2) the alternate base rate plus an applicable margin of 0.375%.

On June 9, 2023, the Utility entered into an amendment to the Receivables Securitization Program to, among other things, extend the scheduled termination date from September 30, 2024 to June 9, 2025 and increase the low end of the facility limit from $1.0 billion to $1.25 billion.

On June 22, 2023, the Utility amended its existing revolving credit agreement to, among other things, (i) extend the maturity date to June 22, 2028 (subject to two one-year extensions at the option of the Utility), (ii) increase the maximum letter of credit sublimit to $2.0 billion, and (iii) increase the uncommitted incremental facility to up to $1.0 billion.

On November 15, 2023, the Utility entered into a Bridge Term Loan Credit Agreement (the “Bridge Term Loan Credit Agreement”), pursuant to which the lenders made available to the Utility term loans in the aggregate principal amount equal to $2.1 billion (the “Term Loans”). The Utility borrowed the entire amount of the Term Loans on November 15, 2023. The Term Loans have a maturity date of August 15, 2024. The Utility is required to prepay loans outstanding under the Bridge Term Loan Credit Agreement, subject to certain exceptions, with 100% of the net cash proceeds received by the Utility from the issuance or incurrence of any debt by its subsidiary, Pacific Generation. Borrowings under the Bridge Term Loan Credit Agreement bear interest based on the Utility’s election of either (1) Term SOFR (as defined in the Bridge Term Loan Credit Agreement) (plus a 0.10% credit spread adjustment) plus an applicable margin of 1.25% or (2) the alternate base rate plus an applicable margin of 0.25%.

On June 22, 2023, PG&E Corporation amended its existing revolving credit agreement to, among other things, extend the maturity date to June 22, 2026 (subject to two one-year extensions at the option of PG&E Corporation).

On December 8, 2023, PG&E Corporation entered into an amendment to its existing term loan agreement to, among other things, extend the maturity date from June 23, 2025 to June 23, 2027, and reduce the applicable margin from 300 basis points to 250 basis points. The term loan bears interest based on Adjusted Term SOFR plus an applicable margin of 2.50%.

On December 4, 2023, PG&E Corporation used the net proceeds from the Convertible Notes, together with cash on hand, to prepay $2.15 billion of aggregate principal amount of the term loans under the term loan agreement. See “Convertible Notes” below. In addition, on December 8, 2023, PG&E Corporation used other available funds to prepay $11 million of aggregate principal amount of the term loans under the term loan agreement. As a result of the early extinguishment of these term loans, PG&E Corporation recognized $26 million of unamortized discount and issuance costs in Interest expense in the Consolidated Financial Statements for the year ended December 31, 2023. The outstanding aggregate principal amount of term loans outstanding after giving effect to these prepayments and the amendment to the term loan agreement is $500 million.

For more information, see “Credit Facilities and Term Loans” in Note 4 of the Notes to the Consolidated Financial Statements in Item 8.

Convertible Notes

On December 4, 2023, PG&E Corporation issued $2.15 billion aggregate principal amount of 4.25% Convertible Senior Secured Notes due December 1, 2027 (the “Convertible Notes”). The Convertible Notes bear interest at an annual rate of 4.25% with interest payable semiannually in arrears on June 1 and December 1 of each year, beginning on June 1, 2024. The net proceeds from this offering were approximately $2.12 billion, after deducting the Initial Purchasers’ discounts and commissions and PG&E Corporation’s offering expenses. PG&E Corporation used the net proceeds to prepay $2.15 billion outstanding under its term loan agreement.

For more information, see “Convertible Notes” in Note 4 of the Notes to the Consolidated Financial Statements in Item 8.

Other Financings

PG&E Corporation and the Utility are pursuing additional financing sources in order to more efficiently finance their operations.

The Utility is seeking financing through the Energy Infrastructure Reinvestment category of the DOE’s Clean Energy Financing Program to help fund California’s clean energy transition.

On February 20, 2024, the Utility entered into an agreement with Citizens Energy Corporation (“Citizens”) pursuant to which the Utility may lease to Citizens entitlements to certain transmission assets to be constructed or otherwise not yet in service. The Utility may offer Citizens up to five lease options over the term of the agreement, for a total investment by Citizens of up to $1.0 billion. If Citizens exercises and the parties close on a lease option, the Utility will receive an upfront payment as prepaid rent for that lease, which is expected to average approximately $200 million per lease, and the rate base associated with the leased entitlements will go into Citizens’ rate base, rather than the Utility’s, for 30 years. The transactions contemplated by the agreement are subject to FERC and CPUC approval.

Dividends

Utility

On each of December 15, 2022, February 16, 2023, May 18, 2023, September 14, 2023, and December 13, 2023, the Board of Directors of the Utility declared dividends on its outstanding series of preferred stock totaling $3.5 million, which were paid on February 15, 2023, May 15, 2023, August 15, 2023, November 15, 2023, and February 15, 2024, respectively. In addition, on February 14, 2024, the Board of Directors of the Utility declared dividends on its outstanding series of preferred stock, payable on May 15, 2024, to holders of record as of April 30, 2024.

On each of February 16, May 18, September 14, and December 13, 2023, the Board of Directors of the Utility declared common stock dividends of $425 million, $450 million, $450 million, and $450 million, which were paid to PG&E Corporation on February 28, June 21, September 29, and December 20, 2023, respectively.

On November 27, 2023, the Board of Directors of PG&E Corporation declared a quarterly common stock dividend of $0.01 per share, totaling $21 million, which was paid by January 16, 2024, to holders of record as of December 29, 2023.

On February 14, 2024, the Board of Directors of PG&E Corporation declared a quarterly common stock dividend of $0.01 per share, payable on April 15, 2024, to holders of record as of March 28, 2024.

Utility Cash Flows

PG&E Corporation’s consolidated cash flows consist primarily of cash flows related to the Utility. The following discussion presents the Utility’s cash flows for 2023 and 2022.

See “Liquidity and Financial Resources” in Item 7 of the 2022 Form 10-K for discussion of the Utility’s cash flows for 2022 compared to 2021.

The Utility’s cash flows were as follows:

Operating Activities

Net cash provided by operating activities increased by $1.3 billion, or 33%, in 2023 compared to 2022. The increases were primarily due to wildfire insurance premium payments of $778 million and a payment made to the Fire Victim Trust of $592 million in 2022, with no similar payments made in 2023.

The Utility’s cash flows from operating activities primarily consist of receipts from customers less payments of operating expenses, other than expenses such as depreciation and amortization that do not require the use of cash. The Utility’s receipts from customers are expected to increase primarily as a result of increases in the Utility’s rate base.

Future cash flow from operating activities will be affected by various factors, including:

•the timing and amount of costs in connection with the 2019 Kincade fire, the 2021 Dixie fire, and the 2022 Mosquito fire and the timing and amount of any potential related insurance, including funds available from self-insurance (see “2023 General Rate Case” in the “Regulatory Matters” section below for more information), the Wildfire Fund, and regulatory recoveries;

•the timing and amount of costs in connection with future wildfires and the timing and amount of any potential related insurance, including funds available from self-insurance and the Wildfire Fund (see “Wildfire Fund under AB 1054” in Note 14 of the Notes to the Consolidated Financial Statements in Item 8);

•the timing and amount of costs in connection with the 2020-2022 and 2023-2025 WMPs and the costs previously incurred in connection with the 2019 WMP that are not currently being recovered through rates (see “Regulatory Matters” below for more information);

•the timing and outcomes of the Utility’s pending and future ratemaking and regulatory proceedings, including the extent to which PG&E Corporation and the Utility are able to recover their costs through regulated rates as recorded in memorandum accounts or balancing accounts, or as otherwise requested; and

•the timing and amount of electric commodity price volatility and differences between commodity costs and revenue collections.

PG&E Corporation and the Utility do not have any off-balance sheet arrangements that have had, or are reasonably likely to have, a current or future material effect on their financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources, other than those discussed under “Purchase Commitments” in Note 15 of the Notes to the Consolidated Financial Statements.

Investing Activities

The following table summarizes changes in key components of the Utility’s investing cash flows for the year ended December 31, 2023, compared to December 31, 2022.

Net cash used in investing activities decreased by $907 million, or 9%, in 2023 compared to 2022. The decrease was primarily due to a $1.3 billion decrease in purchases, net of proceeds, related to customer credit trust investments in 2023. This decrease was partially offset by a $145 million intercompany loan repayment in 2022, with no similar transaction in 2023, and a $130 million increase in capital expenditures, primarily due to new customer connections and responses to winter storm events.

The Utility’s investing activities primarily consist of the construction of new and replacement facilities necessary to provide safe and reliable electricity and natural gas services to its customers. Cash used in investing activities also includes the proceeds from sales of nuclear decommissioning trust and customer credit trust investments which are partially offset by the amount of cash used to purchase new nuclear decommissioning trust and customer credit trust investments. The funds in the decommissioning trusts, along with accumulated earnings, are used exclusively for decommissioning and dismantling the Utility’s nuclear generation facilities. Pursuant to SB 901, the funds in the customer credit trust, along with accumulated earnings, are used exclusively to fund a monthly credit to customers.

Future cash flows used in investing activities are largely dependent on the timing and amount of capital expenditures. The Utility estimates that it will incur $10.4 billion of capital expenditures in 2024. Additionally, future cash flows used in investing activities could be impacted by the timing and amount of contributions to the self-insurance captive (see “Self-Insurance” in Note 14 of the Notes to the Consolidated Financial Statements in Item 8) and to the customer credit trust, including $1.0 billion to be contributed in 2024 (see Note 5 of the Notes to the Consolidated Financial Statements in Item 8).

Financing Activities

The following table summarizes changes in key components of the Utility’s financing cash flows for the year ended December 31, 2023, compared to December 31, 2022.

Net cash provided by financing activities decreased by $2.9 billion, or 42%, in 2023 compared to 2022. The decreases were primarily due to:

•$8.4 billion in proceeds from AB 1054 and SB 901 recovery bonds in 2022, with no similar transactions in 2023;

•$312 million in proceeds related to the DWR loan in 2022, with no similar transaction in 2023; and

•a $245 million decrease in net borrowing under credit facilities.

•a $3.2 billion decrease in repayments related to short-term and long-term debt;

•a $1.2 billion increase in borrowings related to long-term debt; and

•a $2.1 billion increase in borrowings under term loan credit facilities.

Cash provided by or used in financing activities is driven by the Utility’s financing needs, which depend on the level of cash provided by or used in operating activities, the level of cash provided by or used in investing activities, the conditions in the capital markets, and the maturity date or prepayment date of existing debt instruments (see “Contractual Repayment Schedule” in Note 4 of the Notes to the Consolidated Financial Statements in Item 8). Additionally, the Utility’s future cash flows from financing activities will be affected by the timing and outcome of the potential sale of a minority interest in Pacific Generation to one or more investors to be identified, dividend payments, and equity contributions from PG&E Corporation.