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’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.

PG&E Corporation and the Utility have various contractual commitments which impact cash requirements. These commitments are discussed in “Purchase Commitments” in Note 11 of the Notes to the Condensed Consolidated Financial Statements in Item 1.

As of June 30, 2024, PG&E Corporation and the Utility had access to approximately $3.3 billion of total liquidity comprised of approximately $1.1 billion of the Utility’s cash and cash equivalents, $255 million of PG&E Corporation’s cash and cash equivalents and $2.0 billion of availability under PG&E Corporation’s and the Utility’s revolving credit facilities.

Credit Ratings

Credit ratings 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.

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 June 30, 2024, the Utility had contributed $625 million to Pacific Energy Risk Solutions LLC, 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 10 of the Notes to the Condensed Consolidated Financial Statements in Item 1.

Financial Resources

Equity Financings

PG&E Corporation does not plan to issue any equity in 2024, except for employee compensation purposes. 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.

Debt Financings

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

On February 28, 2024, the Utility completed the sale of (i) $850 million aggregate principal amount of 5.550% First Mortgage Bonds due 2029, (ii) $1.1 billion aggregate principal amount of 5.800% First Mortgage Bonds due 2034 and (iii) $300 million aggregate principal amount of 6.750% First Mortgage Bonds due 2053. The Utility used the net proceeds for the repayment of borrowings outstanding under the Utility’s revolving credit facility pursuant to the Utility Revolving Credit Agreement.

AB 1054 Securitization

On July 24, 2024, the Utility and PG&E Recovery Funding LLC (the “Issuing Entity”) entered into an Underwriting Agreement with Goldman Sachs & Co. LLC, Citigroup Global Markets Inc. and J.P. Morgan Securities LLC, as representatives of the underwriters party thereto with respect to the purchase and sale of $1.42 billion aggregate principal amount of senior secured recovery bonds, series 2024-A, to be issued by the Issuing Entity. The issuance is expected to close in August 2024.

Credit Facilities and Term Loans

As of June 30, 2024, PG&E Corporation and the Utility had $500 million and $1.5 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. 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 16, 2024, the Utility amended its existing term loan agreement to combine its $400 million 2-year tranche loan maturing April 19, 2024 and its $125 million 364-day tranche loan maturing April 16, 2024 into a single loan of $525 million maturing April 15, 2025. The 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 alternative base rate plus an applicable margin of 0.375%.

On June 26, 2024, the Utility amended its existing receivables securitization program to, among other things, extend the scheduled termination date from June 9, 2025 to June 26, 2026.

On June 28, 2024, the Utility amended its existing bridge term loan credit agreement to, among other things, (i) extend the maturity date from August 15, 2024 to December 16, 2024, and (ii) modify the mandatory prepayment provision to require the Utility to prepay term loans outstanding under such credit agreement, subject to certain exceptions, with 100% of the net cash proceeds received by the Utility from the issuance of debt securities or incurrence of any debt under any bank credit facilities (excluding AB 1054 securitizations and the Utility’s revolving credit agreement). After giving effect to a prepayment of $100 million on April 15, 2024, the total aggregate principal amount of term loans outstanding under such credit agreement is $2.0 billion.

For more information, see “Credit Facilities and Term Loans” in Note 4 of the Notes to the Condensed Consolidated Financial Statements in Item 1.

Other Financings

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. The costs related to such leased entitlements are and will continue to be excluded from the Utility’s FERC transmission rates for the duration of the applicable lease. 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 approvals of pending or forthcoming filings.

Dividends

Utility

On February 13, 2024, the Board of Directors of the Utility declared dividends on its outstanding series of preferred stock totaling $3.5 million, which was paid on May 15, 2024, to holders of record as of April 30, 2024. On May 16, 2024, the Board of Directors of the Utility declared dividends on its outstanding series of preferred stock totaling $3.5 million, payable on August 15, 2024, to holders of record as of July 31, 2024.

On each of February 13 and May 16, 2024, the Board of Directors of the Utility declared common stock dividends of $450 million and $500 million, which were paid to PG&E Corporation on March 25 and June 3, 2024, respectively.

On each of February 13 and May 16, 2024, the Board of Directors of PG&E Corporation declared a quarterly common stock dividend of $0.01 per share, each declaration totaling $21 million, which were paid on April 15 and July 15, 2024, to holders of record as of March 28 and June 28, 2024, respectively.

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 the six months ended June 30, 2024 and 2023.

The Utility’s cash flows were as follows:

Operating Activities

Net cash provided by operating activities increased by $487 million, or 19%, during the six months ended June 30, 2024, as compared to the same period in 2023. The increases were primarily due to:

•a decrease in amounts paid for natural gas due to a decrease in natural gas commodity prices; and

•an increase in collections through rates as a result of the 2023 GRC final decision.

•an increase in climate credits issued to customers; and

•lower returns for collateral posted in 2024 due to a decrease in the volatility of gas prices.

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 and from cost recovery applications (see “Cost Recovery Proceedings” below for more information).

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, 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 10 of the Notes to the Condensed Consolidated Financial Statements in Item 1);

•the timing and amount of costs in connection with the 2023-2025 WMP and the costs previously incurred in connection with the 2020-2022 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 11 of the Notes to the Condensed Consolidated Financial Statements in Item 1.

Investing Activities

The following table summarizes changes in key components of the Utility’s investing cash flows for the six months ended June 30, 2024, compared to June 30, 2023.

Net cash used in investing activities increased by $805 million, or 18%, during the six months ended June 30, 2024, as compared to the same period in 2023. The increase was primarily due to a $565 million increase in purchases of customer credit trust investments, net of proceeds from sales, in 2024. In addition, capital expenditures increased by $256 million in 2024 compared to 2023 primarily due to being able to complete more planned capital work in 2024 as result of fewer 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 10 of the Notes to the Condensed Consolidated Financial Statements in Item 1) and to the customer credit trust, including $650 million to be contributed by March 2025 (see Note 5 of the Notes to the Condensed Consolidated Financial Statements in Item 1).

Financing Activities

The following table summarizes changes in key components of the Utility’s financing cash flows for the six months ended June 30, 2024, compared to June 30, 2023.

Net cash provided by financing activities increased by $899 million, or 50%, during the six months ended June 30, 2024, as compared to the same period in 2023. The increases were primarily due to:

•a $2.7 billion increase in net borrowings under credit facilities; and

•$600 million in proceeds related to the DWR loan in 2024, with no similar transaction in 2023.

•a $2.4 billion decrease in proceeds related to issuance of long-term debt.

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. Additionally, the Utility’s future cash flows from financing activities will be affected by the timing and outcome of the Utility’s ability to procure financing from other sources, dividend payments, and equity contributions from PG&E Corporation.