Morningstar | New Faces Set To Lead PG&E Through Bankruptcy
Northern California wildfires, notably the ones in October 2017 and November 2018, have PG&E in bankruptcy for the second time in the past two decades.With as much as $30 billion of wildfire liabilities looming, PG&E will work through regulatory, legal, and political processes to determine winners and losers. PG&E remains solvent, and we think shareholders can exit bankruptcy with value, albeit much less value than before the wildfires began.PG&E has always faced public and regulatory scrutiny as the largest utility in California. On the positive side, PG&E will play a key role in implementing the state's aggressive energy modernization and environmental policies, resulting in investment and growth opportunities that top its peers.However, the 2017 and 2018 wildfires could leave shareholders with little in a worst-case scenario. Wildfire legislation passed in August 2018 could help preserve some equity value, but the state's inverse condemnation strict liability standard will remain a post-bankruptcy risk. The wildfire losses should easily top the $3 billion of lost shareholder value related to fines, rate refunds, and unrecovered investment following the 2010 San Bruno gas pipeline explosion. PG&E suspended its dividend in late 2017, and it won't come back anytime soon. The dividend cut came just one year after shareholders received their first dividend increase in six years, dating back to the San Bruno disaster.On a normalized basis, California has a mostly constructive regulatory framework that supports industry-leading core earnings growth. Aside from wildfire impacts, we expect 6% annual earnings growth based on $6 billion of planned annual investment and constructive outcomes in the 2020-22 general rate case and other rate proceedings.Beyond 2022, California's quest to modernize the grid, meet state energy policy goals, and address distributed generation offers a long runway of growth. Its 10.25% allowed return on equity, which is locked in through 2019, is among the highest in the country.PG&E is a holding company that conducts its business through Pacific Gas and Electric Company (Utility), a public utility engaged in the sale and delivery of electricity and natural gas to customers. The Utility generates electricity and provides electric transmission and distribution services throughout its service territory in northern and central California to residential, commercial, industrial, and agricultural customers. The Utility provides natural gas transportation services to small commercial and residential customers and to industrial, commercial, and natural gas-fired electric generation facilities that are connected to the Utility's gas system in its service territory.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.