PCG 1Q2016 Earnings Note

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Market Price (5/4/2016): $59.14/share; ST-Target: $68/share; NIV: $102/share

PCG: Could 2016 be the breakout year?

Much of the San Bruno fallout is behind PCG with only the criminal trial pending, which was scheduled to begin March end but was delayed due to a government document dump on PCG; 13 counts dismissed leaving only 15. Impact of Butte Fire cast a pall on an otherwise good quarter. As expected, hydrology returned to relatively normal for PG&E due to El Nino, but flooding was issue for 1Q206 results too. PCG may issue close to high end of $600MM-$800MM in new equity. Capex plan for 2016-2019 has not changed material and PCG is on track to achieve 5%-7% CAGR through 2019. We’re intrigued with PCG’s pursuit of independent transmission projects with TransCanyon. Despite Butte fire impact, PCG remains set on increasing its dividend to better reflect its stronger financial position by yearend 2016. We expect dividend payout ratio to increase closer towards 60%-65%. Beyond the current pale, PG&E’s near-term investment program should drive shareholder value, but in the LT opportunities may be more limited, in our opinion.

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