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 September 30, 2024, PG&E Corporation and the Utility had access to approximately $5.2 billion of total liquidity comprised of $712 million of the Utility’s Cash and cash equivalents, which includes $305 million related to PERS, $183 million of PG&E Corporation’s Cash and cash equivalents and $4.3 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, Restricted Cash, and Restricted Cash Equivalents

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 and restricted cash equivalents 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 September 30, 2024, PG&E Corporation and the Utility had Cash and cash equivalents of $183 million and $712 million, respectively.

As of September 30, 2024, the Utility had contributed $768 million to PERS, its wholly-owned subsidiary and captive insurance company for the administration of wildfire liability self-insurance. As of September 2024, $305 million was classified as Cash and cash equivalents, $8 million was classified as Restricted cash and restricted cash equivalents due to minimum capital and surplus requirements, and $449 million was classified as Other current assets due to investments in short-term securities. 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

Utility

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.

On September 5, 2024, the Utility completed the sale of (i) $1.0 billion aggregate principal amount of Floating Rate First Mortgage Bonds due 2025 and (ii) $750 million aggregate principal amount of 5.900% First Mortgage Bonds due 2054. The Utility used the net proceeds for the repayment of a portion of borrowings outstanding under its existing bridge term loan credit agreement.

On August 1, 2024, PG&E Recovery Funding LLC issued approximately $1.42 billion of Series 2024-A Senior Secured Recovery Bonds. The senior secured recovery bonds were issued in three tranches: (1) approximately $300 million with an interest rate of 4.838% due June 1, 2035, (2) approximately $373 million with an interest rate of 5.231% due June 1, 2042, and (3) approximately $746 million with an interest rate of 5.529% due June 1, 2051. The $1.41 billion net proceeds were used by the Utility to reimburse itself for previously incurred fire risk mitigation capital expenditures through the repayment of a portion of loans outstanding under the Utility Revolving Credit Agreement.

For more information, see “AB 1054 Securitization” in Note 4 of the Notes to the Condensed Consolidated Financial Statements in Item 1.

On September 11, 2024, PG&E Corporation completed the sale of $1.0 billion aggregate principal amount of 7.375% Fixed-to-Fixed Reset Rate Junior Subordinated Notes due 2055. These notes will initially bear interest at the rate of 7.375% per annum, and beginning March 15, 2030 and every five year anniversary thereafter, the interest rate will be reset to an amount that is equal to the five-year U.S. Treasury rate plus 3.883% (but not below 7.375%). PG&E Corporation used the net proceeds for general corporate purposes, including to prepay in full, all loans outstanding under its existing term loan agreement in an aggregate principal amount equal to $500 million.

Facilities and Term Loans

As of September 30, 2024, PG&E Corporation and the Utility had $500 million and $3.8 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 prepayments of $100 million on April 15, 2024 and $1.75 billion on September 5, 2024, the total aggregate principal amount of term loans outstanding under such credit agreement is $250 million.

On July 25, 2024, the Utility amended its existing revolving credit agreement to extend the maturity date for commitments representing $4.196 billion in the aggregate from June 22, 2028 to June 22, 2029 (subject to a one-year extension at the option of the Utility). The remaining $204 million of commitments will mature on June 22, 2028.

On July 25, 2024, PG&E Corporation amended its existing revolving credit agreement to, among other things, (i) extend the maturity date from June 22, 2026 to June 22, 2027 (subject to a one-year extension at the option of PG&E Corporation), and (ii) remove the cash coverage ratio covenant.

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 each of February 13 and May 16, 2024, the Board of Directors of the Utility declared dividends on its outstanding series of preferred stock totaling $3.5 million, which were paid on May 15 and August 15, 2024, respectively, to holders of record as of April 30 and July 31, 2024. On September 19, 2024, the Board of Directors of the Utility declared dividends on its outstanding series of preferred stock totaling $3.5 million, payable on November 15, 2024, to holders of record as of October 31, 2024.

On each of February 13, May 16, and September 19, 2024, the Board of Directors of the Utility declared common stock dividends of $450 million, $500 million, and $500 million, which were paid to PG&E Corporation on March 25, June 3, and September 20, 2024, respectively.

On each of February 13, May 16, and September 19, 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, July 15, and October 15, 2024, to holders of record as of March 28, June 28 and September 30, 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 nine months ended September 30, 2024 and 2023.

The Utility’s cash flows were as follows:

Operating Activities

Net cash provided by operating activities increased by $1.7 billion, or 38%, during the nine months ended September 30, 2024, as compared to the same period in 2023. The increases were primarily due to:

•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 nine months ended September 30, 2024, compared to September 30, 2023.

Net cash used in investing activities increased by $1.5 billion, or 22%, during the nine months ended September 30, 2024, as compared to the same period in 2023. The increases were primarily due to a $641 million increase in net purchases of customer credit trust investments, net of proceeds from sales, and a $449 million increase in purchases of self-insurance investments in 2024. In addition, capital expenditures increased by $440 million in 2024 compared to 2023 primarily due to an increase in capital work related to electric distribution, transmission and substation projects.

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, customer credit trust, and self-insurance investments which are partially offset by the amount of cash used to purchase new nuclear decommissioning trust, customer credit trust investments, and self-insurance 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 $10.8 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 nine months ended September 30, 2024, compared to September 30, 2023.

Net cash provided by financing activities increased by $266 million, or 13%, during the nine months ended September 30, 2024, as compared to the same period in 2023. The increases were primarily due to:

•$1.4 billion in proceeds related to the issuance of Series 2024-A senior secured recovery bonds, with no similar transaction in 2023;

•$999 million in proceeds related to issuance of short-term debt, with no similar transaction in 2023; and

•$980 million in proceeds related to the DWR loan in 2024, with no similar transaction in 2023.

•a $1.9 billion increase in repayments under term loan credit facilities; and

•a $1.7 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, dividend payments, and equity contributions from PG&E Corporation.