The leaders of PG&E Corp. expect that the utility will grow its profits by 10% next year, a point higher than their prior forecast, thanks to a $1 billion increase in its rate base and capital spending plans.
The added spending, which investors have already funded through a debt sale, has pushed PG&E’s five-year annualized rate base growth to 10% from 9.5%, CEO Patty Poppe and CFO Carolyn Burke told analysts and investors Nov. 7. And more is likely to follow: PG&E last month requested that the California Public Utilities Commission approve another $3.1 billion of work in the next two years.
“We’re seeing about a 10% year-over-year growth rate in new customer connection requests,” Poppe said on a conference call discussing PG&E’s third-quarter earnings. “We want to fulfill that demand. And the good news is much of that demand can be fulfilled at a continually improving unit cost, which we’ll be driving for by improving how we do our work, the way we contract for that work, the way we schedule and bundle that work.”
Like many other utilities around the country, PG&E is catching up to faster load growth and adding to its capex plans. Those now call for the company to $52.4 billion in the next four years, which is $600 million more than three months ago—on top of an additional $400 million that’s been allocated for projects this year. Operating cash flow will fund the bulk of that spending and Poppe and Burke expect they’ll raise about $3 billion by selling stock at regular intervals. Burke said doing that “is easily achievable for a utility of our size.”
What won’t contribute to the capital budget are asset sales, something that PG&E’s leaders had previously contemplated. A little more than two years ago, they laid out a plan to sell nearly half of the company’s non-nuclear generation assets via a subsidiary called Pacific Generation. The CPUC rejected that approach in May, shortly after it was reported that PG&E was in deal talks with private-equity giant KKR & Co., and Burke last week said such a transaction is now off the table.
“Pac Gen is definitely not something we’re moving forward with,” she said. “We don’t really see that as a primary source of efficient financing in the future.”
PG&E posted a third-quarter net profit of $579 million on total operating revenues of $5.94 billion. Those numbers are up 66% and 1%, respectively, with the bottom line booming thanks to a drop of more than $400 million in the company’s operating and maintenance costs as well as lower securitization charges versus 2023’s third quarter.
Shares of PG&E (Ticker: PCG) rose slightly to $20.36 on the Nov. 7 earnings report. In afternoon trading Nov. 12, they were changing hands at $21.10. They’re up nearly 20% from six months ago, which has grown the company’s market capitalization to $55.2 billion.
