PACIFIC GAS & ELECTRIC Co

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.

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 capital 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 pay significant federal cash taxes until at least 2031. In 2024, California enacted a new law to suspend the use of net operating losses and limit the use of business credits for tax years 2024 to 2026. As a result, PG&E Corporation expects to pay state income taxes in 2026. See “Tax Matters” above 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 Part II, Item 8.

As of December 31, 2025, PG&E Corporation and the Utility had access to approximately $4.5 billion of total liquidity comprised of $353 million of the Utility’s Cash and cash equivalents, $360 million of PG&E Corporation’s Cash and cash equivalents, and $3.8 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 unsecured 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 unsecured credit rating remains below investment grade with one of the major credit rating agencies, 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 and the DOE Loan Guarantee Agreement contain various restrictive financial covenants. One financial covenant requires that the ratio of total consolidated debt to total consolidated capitalization as of the end of each fiscal quarter be no more than 70% for PG&E Corporation and 65% for the Utility.

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. PG&E Corporation’s and the Utility’s various credit agreements and the DOE Loan Guarantee Agreement contain provisions that may result in an event of default if there was a failure to meet payment terms or observe other covenants under other financing arrangements that could result in an acceleration of payments due. Such provisions are referred to as “cross-default” provisions. As of December 31, 2025, PG&E Corporation and the Utility remain in compliance with all financial covenants.

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 consist of AB 1054 and SB 901 fixed recovery charge collections that are to be used to service the associated bonds. As of December 31, 2025, PG&E Corporation and the Utility had cash and cash equivalents of $360 million and $353 million, respectively.

Financial Resources

Equity Financings

PG&E Corporation does not expect to undertake any equity issuances through 2030. 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, the timing and terms of other financings, and the outcome of the Wildfire-Related Securities Claims. See “Wildfire-Related Securities Litigation” in Note 14 of the Notes to the Consolidated Financial Statements in Part II, Item 8.

Debt Financings, Credit Facilities, and Term Loans

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

For more information, see “Credit Facilities and Term Loans” and “Long-Term Debt Issuances and Redemptions” in Note 4 of the Notes to the Consolidated Financial Statements in Part II, Item 8.

DOE Loan Guarantee Agreement

As of the date of this report, the Utility has not borrowed any advances under the facility. While the Utility has continued to work with the DOE, the Utility is not able to predict the timing or amount of any funds it may receive from the facility in the future.

For more information about the DOE Loan Guarantee Agreement, see “Liquidity and Financial Resources” in Item 7: “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the 2024 Form 10-K.

Other Financings

Citizens Energy Corporation

On January 29, 2025, the Utility entered into an amended and restated agreement with Citizens Energy Corporation (“Citizens”) pursuant to which the Utility may lease to Citizens entitlements to certain transmission assets. A portion of the costs associated with each project that is expected to be subject to such a lease will 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.

PG&E Corporation has announced a dividend policy entailing consistent dividend increases targeting a dividend payout ratio of approximately 20% of core earnings by 2028. No dividend is payable unless and until declared by the applicable Board of Directors. The Board of Directors of PG&E Corporation retains authority to change the common stock dividend target and dividend payout ratio at any time. Future dividend decisions determined by the Board may be impacted by earnings, cash flows, credit metrics, and other business conditions.

For information on dividend declarations and payments, see Notes 6 and 7 to the Consolidated Financial Statements in Part II, Item 8.

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 year ended December 31, 2025 and 2024.

The Utility’s cash flows were as follows:

Operating Activities

The Utility’s cash flows from operating activities primarily consist of receipts from customers less payments of cash operating expenses. Net cash provided by operating activities increased by $767 million, or 9%, in 2025 compared to 2024. This increase was primarily due to:

•an increase in collections driven in part by recoveries related to DCPP extended operations;

•a decrease in non-wildfire related insurance costs; and

•a decrease in wildfire-related payments, net of recoveries.

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 Recoveries under AB 1054 and SB 254” in Note 14 of the Notes to the Consolidated Financial Statements in Part II, Item 8);

•the timing and amount of costs in connection with the portion of the 2023-2025 WMP that are being recovered through rates and the portion of the costs previously incurred in connection with the 2021-2022 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 and natural gas 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 in Part II, Item 8.

Investing Activities

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, and self-insurance investments.

The following table summarizes changes in key components of the Utility’s investing cash flows for the year ended December 31, 2025, compared to December 31, 2024.

Net cash used in investing activities increased by $0.9 billion, or 8%, in 2025 compared to 2024. This increase was primarily due to a $349 million payment for the purchase of the Oakland General Office, as discussed in Note 2 of the Notes to the Consolidated Financial Statements in Part II, Item 8, along with higher investments in new business, capacity projects, and distribution system hardening. These increases were partially offset by lower funding related to self‑insurance investments in 2025 compared to 2024.

Future cash flows used in investing activities are largely dependent on the timing and amount of capital expenditures. The Utility estimates that it will invest $12.4 billion in capital expenditures in 2026.

Financing Activities

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 financings, dividend payments, and equity contributions from PG&E Corporation.

The following table summarizes changes in key components of the Utility’s financing cash flows for the year ended December 31, 2025, compared to December 31, 2024.

Net cash provided by financing activities decreased by $433 million, or 13%, during the year ended December 31, 2025 as compared to the same period in 2024. The decrease was primarily due to:

•$3.8 billion decrease in equity contributions received from PG&E Corporation;

•$1.1 billion increase in repayments of long-term debt, net of proceeds;

•$2.7 billion decrease in net borrowings under term loan;

•$1.4 billion of proceeds related to the issuance of senior secured recovery bonds under the AB 1054 securitization in 2024, with no similar transaction in 2025;

•$2.0 billion decrease in proceeds related to short-term debt issuance;

•$980 million decrease in proceeds related to the DWR loan; and

•$325 million increase in dividend payments.

Partially offset by:

•$6.6 billion increase in net borrowings under credit facilities.