Good morning, and welcome to the PG&E fourth quarter earnings conference call. [Operator Instructions] At this time, I would like to introduce your host, Chris Foster, Senior Director of Investments with PG&E. Thank you and enjoy your conference. You may proceed Mr. Foster.

Thank you, Keira, and thanks to those of you on the phone for joining us. Before I turn it over to Geisha Williams, I want to remind you that our discussion today will include forward-looking statements about our financial outlook which are based on assumption, forecasts, expectations and information currently available to management. Some of the important factors that could affect the company's actual financial results are described in the second page of today's fourth quarter earnings call presentation. The presentation also includes a reconciliation between non-GAAP and GAAP measures. We also encourage you to review the 2017 annual report on Form 10-K that will be filed with the SEC late today and the discussion of risk factors that happens there. With that, I'll hand it over to Geisha.

Thank you, Chris, and good morning everyone. I know that the Northern California wild fires continue to be top of mind and I will spend the majority of my remarks on that topic today. I will also touch on the progress we continue to make in our core operations including improving our ability to prepare for and response to potential wildfires. Finally, I will address how we are developing and implementing innovative solutions that both better serve our customers and help to advance California's clean energy goals. Jason will then address tax reform impacts followed by a walk through the financial results for the quarter. The record wildfires both in Northern and Southern California have had an extraordinary impact. They were absolutely tragic for the communities and families who lost loved ones and property and who continue to be in our thoughts as we support their recovery. They have had profound financial and economic consequences for the state and of course they have significantly impacted the utilities. At this point, Cal Fire is continuing its investigations and we still don’t have a conclusion on the causes of the fires. But across the state there is a growing recognition that we need comprehensive solutions and that we have to think differently about how we prevent, how we respond to and recover from wild fires, as well as the importance of infrastructure resilience. Governor Brown has acknowledged this in his public comments. So have members of the legislature and so had CPUC President Picker and other CPUC commissioners. We all recognized that California is facing a new normal when it comes to climate threats. I couldn’t agree more and looking ahead we understand these challenges aren't going away, we have to adapt. That includes working together to manage and mitigate climate risk.…

Thank you, Geisha and good morning everyone. First, I would like to address 2018 guidance. Given the uncertainty stemming from the October 2017 Northern California wild fires, we will be not be providing 2018 earnings per share guidance on today's call. We will revisit it as we have better clarity into potential liabilities, if any, related to the Northern California wild fires. I will, however, be addressing CapEx and rate-based guidance for 2018 and 2019, as well as sharing how we are thinking about at equity. I want to emphasize that this guidance assumes no additional impact from the October 2017 Northern California wild fires beyond what we are providing on today's call. So today I will start by covering the expected impacts from tax reform and then transition to our fourth quarter results. Slide four outlines the expected impacts from the Tax Cuts and Jobs Act signed into law in December. Income taxes are a significant component of our cost of service so we expect tax reform changes to provides benefits for our customers in the long-run and we also expect these changes to generate higher rate based growth for our shareholders. There are also impacts to PG&E cash flows and financing needs as well as a transition charge we recorded in the fourth quarter. I will talk about those in a minute. But first I want to emphasize that we are very early in the overall implementation of tax reforms. Our guidance reflects best expectations today but there is work to be done if we get all the details ironed out and ultimately the CPUC will need to authorize how and when tax reform is implemented. In early January we informed the CPUC that we would file our plan to implement tax reform by the end of March.…

[Operator Instructions] Our first question comes from the line of Jonathan Arnold with Deutsche Bank. You may proceed.

Thank you for the update. A question on -- you obviously, I guess, will see more discussion in the 10-Q but you haven't taken any incremental reserves against the Butte fire this quarter, I think. Is that correct?

That is correct.

And in the last quarter you had said, you didn’t have enough information to determine the high end because there were large number of claims you didn’t know enough about, I think. So is that still the case or is the fact that you are not taking a charge a reflection of your view of the strength of your legal position and the challenge you filed in front of the court. I was just curious if you could give us some sense of what's driving the sort of reserving policy there.

Sure. Well, we continue to make progress settling some of the cases in the fourth quarter. We still don’t have detail for about 25% of the total claims related to the Butte fire. But also importantly, as Geisha mentioned, we feel strongly about the strength of our challenge. The application of inverse condemnation as it relates to investor-owned utilities. And so we need both further clarity as it relates to claims data as well as progress on a legal front.

In order to sort of have a probable number you could estimate, is that the right way to think? So it is no more probable or estimable than it was last quarter, is that where we are, Jason?

That’s correct. We still feel that the $1.1 billion that we have accrued so far for the Butte related fire to be appropriate.

Okay. And then just one other on this co-area, if possible. So it sounds like you are saying that whatever you said about equity before, you now see the dividend suspension covering that in the next couple of years. Have I understood that right? And just the...

We didn’t give any guidance on the length of the dividend suspension. What we try to provide was just the underlying drivers of our base equity needs. You will have to make an assumption about any potential liabilities, any arising from the Northern California wild fires as well as the length of the dividend suspension.

No. Sure. I wasn’t getting of that. But I think you did say that you felt that given what you laid out as the current needs, that would fall under the amount of equity created by the dividend suspension and you are turning off the drip. So there is really not going to be very much issuance under internal programs for the time being. Is that fair?

We will continue issuing under the internal programs but with the dividend suspended we expect less from the drip. The drip has historically contributed roughly $60 million a year to our internal equity needs. That combination of continuing to issue under the internal programs coupled with the suspension of the dividends provides us sufficient financing for our ongoing capital.

So $60 million of the drip component of the 300 to 400 roughly?

That’s correct. Yes.

Okay. Great. Thank you. And then just on -- so it feels like the commission has kind of somewhat encouraged the idea that you would want to address inverse condemnation in the court. And you talked about building an equity cushion against any charges on the 2017 fires. Is there a case to be made that you might request some kind of waiver from the 52% equity? You felt that the inverse condemnation discussion was still pending and live but you are right up to the point where you did need to take a charge. I am just curious kind of if that’s something you could even do or if you think it would be a good idea.

Well, I appreciate the question, Jonathan. I mean right now we still don’t even have the cause of the fires, so it premature to talk about sort of potential liability and courses of action. That being said, we do have the file waiver with the CPUC if we believe we will be out of compliance with our regulated capital structure.

Has that something you have ever done before with success or?

We actually have filed that as part of the energy prices but it was never ruled on by the commission given they ultimately disposed off the overall resolution of the bankruptcy proceeding.

Thank you. Our next question comes from the line of Steve Fleishman with Wolfe Research. You may proceed.

So first just, I am not sure if you can answer this, but should we expect to get any more color on the claims that have been filed for the Northern California fire in your 10-K?

Good morning. It's John Simon. I am the General Counsel here. We do discuss the number of claims and there they are filed and briefly the status of where we are in those cases. There has been, just to highlight this for you, about 107 or so complaints filed against PG&E. We don’t know if they have all been served by the way, but we know they have been filed. They have been coordinated in the San Francisco superior court and at this point there is a -- I believe there is a case management conference coming up towards the end of February. That’s the point where we will learn a little bit more about what the procedure is going forward. But that’s about where we are.

How about the dollar value?

We don’t have much insight into the dollar value at this point. We do know that those complaints are asserting for the most part either property damage claims under inverse or personal injury claims under negligence. And that’s about all we know. Very early on.

Okay. When would we likely get more info on the dollar value of claims.

Honestly, I think that’s going to be a while. So right now those cases are at the very early stages of procedure and process. There is no schedule set. I think over the course of discover, which again hasn’t even no schedule set on that, over the course of the next year, year and half or so, we might get more visibility into it but it's hard to know for sure.

Okay. My other question is just on, I am sure you all listen to the commission's session related to, I think director at the financial community this week. And I guess my sense on the takeaway from that is that they don’t have any understanding there is a potential crisis here for the investor-owned utilities as you are going to have to have to take on all these costs under inverse with if you did cause the fires and so I guess I would curious your take of that but more importantly, what are you doing to make sure they understand how bad this could be and that the implications it has? Or do they understand it and they are just not communicating it given all their rules.

This is Steve Malnight. I wanted to say, I think we were also disappointed with the comments and the tone from the webinar earlier this week. You think it's important to put it in a little bit context. First of all you mentioned this was the rules that were applied against that discussion. Clearly, it was a little bit of a new forum for them and they were very cautious about delving into anything that could be an ex parte, so there wasn’t really discussions about inverse or other things. And when you look at the broader suite of comments from the commissioners, I think looking at the San Diego WEMA case with President Picker and Commissioner Guzman Aceves concurrence where they clearly noted that the logic for applying inverse condemnation in investor-owned utilities was unsound and they urged the legislature and courts to address the issue. I think there is some context in other places where there is maybe more recognition than was shown in that discussion. So I think from our perspective, we are taking every opportunity available to not only talk to the commission and the commissioners but also really all the policy makers across California and Sacramento and others. As Geisha said, this is a bigger challenge than just the investor-owned utilities. It's bigger challenge than just PG&E and it really calls for a significant and comprehensive state-wide solution. So we are very active in every place we can be to share that message and to explain that. We are also partnering with the other investor-owned utilities, labor and other interested parties in seeking out comprehensive solutions. So we are going to continue to work that hard and take every opportunity we can.

Thank you. Our next question comes from the line of Stephen Byrd with Morgan Stanley. You may proceed.

I wanted to just talk about the process, I think Geisha had mentioned there will be hearing on March 15. I wondered if it would be possible to get some sense for the process and timeline after that hearing. How we should think about that case playing out, and I guess it depends on ultimately the decision made by the court on that. But just curious if you could give a little more color around how to think about next steps after that hearing.

Sure, Steven. John Simon. You know, the hearing as you mentioned is scheduled for March 15. We filed briefs. There is briefing schedule which I don’t know of the top of my head leading up to that hearing. We don’t know at that hearing what actually is going to happen. There is options. The judge may rule right then and there. He may listen to arguments and then set some sort of time table after that. So it's really hard to know and I wouldn’t want to speculate on what the judge is going to do there. Several have asked about, so what happens after that. You know whomever looses that motion, whether it's the plaintiffs, I will speak for PG&E, if we lose that motion we would then expect to seek permission from the court of appeals to appeal that decision. That’s an appeal that isn't automatically granted but we would file papers asking for permission to purse that appeal. There is a timeline on that. It's a little unpredictable. But two months to six months, I think, is a fair estimate of considering a [writ] [ph] on appeal. If the writ is granted then we go ahead and get into a briefing situation on the appeal. An appeal could take, again this is a wide range there because one doesn’t completely know but nine months to two years on an appeal is not uncommon. If we seek a writ and the writ is denied then the appeal stops at that point and we would then look to appeal any sort of judgment on any Butte case to again re-raise the issue if we lose. So that’s really, I think, the best insight we can give you on how this could play out.

That’s helpful. And then I guess just adding on to that. Both for this decision as well as I guess the San Diego case which we expect ultimately to go to the California Court of Appeals as well. If you do have victory on one of these court cases or one of other utilities do, would that decision effectively apply to the Northern California claims and cases that are likely to be arising as per Steve Fleishman's question earlier in terms of all the case filed. In other words, are those decisions timely enough to be able to apply to these upcoming cases that you likely would have for the Northern California fires.

We would most certainly argue they do. It depends a little bit on what the decision says and how it's written. I would say there is a good chance that a decision from the trial court but particularly in appeals court would be considered and applied by another court considering a wild fire case. It's not completely certain on that point, Steven, and I don’t want to overly speculate, but that would then get worked out in the courts over the next couple of years.

Okay. Great. And sorry for all the questions. Just one last one on, really on -- I am thinking about co-leasing of equipment with the telecom companies. And there sometimes is a telecom equipment involved as well. What is your general take on how if at all that could intersect with the overall investigation or whether or not that might imply some involvement or causation from the telecom equipment side of things? Or is that too uncertain at this point.

Well, to re-stress what Jason and Geisha said, it's very early and the investigations are ongoing. I will tell you, what we do know is that after the 2017 wild fires. Cal Fire, which is the lead investigation agency sent letters to various companies with respect to asking us to make sure we preserve evidence which of course we are doing. They sent those letters also to some telecoms, I don’t know which ones off of the top of my head. So I think we have to see how the investigations play out and see which facilities, if any, we are talking about here. But I think, it's potentially a bigger world than just PG&E involved in litigation. That’s really, as far as I know.

If I could add something to that, Steven, this is Geisha. When you look at the fire footprint for these 21 fires, something like 75% of the poles that are in the impacted area are jointly used. In other words, they have both PG&E equipment and telecom equipment. Only 25% of the poles are just PG&E. So that also should give you a little bit of flavor in terms of the potential impact.

Thank you. Our next question comes from the line of Michael Lapides with Goldman Sachs. You may proceed.

Couple of easy questions for you. First of all, can you remind us which of the telecom companies overlap with your service territory in the area impacted by the October 2017 wild fires. Is it just the wire line telephone, is it the cable, is it both?

Michael, this is Jason. It's hard to say definitively over that fire footprint, but what I would say is cable and telecom both have quite a bit of equipment on our poles up there. And it would be the traditional large cable and telecom companies owning that equipment.

Got it. Can you all talk a little bit about whether, I am trying to think a little bit about when you would start actually paying out claims, meaning the cash that you settle as part of the October 2017 wild fire process. We wait obviously until you get the Cal Fire report and kind of some of the other reports, maybe your own as well. Would you start kind of resolving those complaints as early an as soon as possible to get through them. I am just trying to think about cash flow and liquidity.

Michael, this is Jason. It's just really way too early in that process. We don’t really know the cause of the fires. It's hard to kind of give, kind of any estimate on when claims will be resolved. I will just provide some anecdotal evidence as it relates to the Butte fire though. That fire, it took about seven months or so to publish the results of the investigation on the causes of fire. We didn’t start settling claims for probably about another six months or so. So it was a good year sort of after the fire before we started to settle on [dues] [ph]. Obviously the Northern California wild fires are a much more complex set of fires but right now we just don’t have any better visibility to time any cash flows.

Got it. And then last thing. Like we saw in the San Diego case and you all have seen in Butte. Even if the inverse condemnation is reversed, there is still exposure of potential private kind of negligence related lawsuits. How do you kind of think through that process and how that process would work relative to a process where inverse condemnation is kind of the governing statute or governing rule.

It's John Simon, Michael. Very different theories and negligence which is reasonable in the standard of care is determined by the [try or] of fact at the end of the day after a trial. And so you know, you think about those cases very differently whereas inverse is strict liability and utilities conduct and even if we did everything right, really doesn’t matter. In a negligence case it's all about, as I said, standard of care. So it's lengthier process that’s determined in court down the road. We think as we have said in the Butte case, that we exercised all reasonable standards of care and we are prepared to defend ourselves in court on a negligence claim if we get to that.

Got it. Last one. How long did it take in the Butte case before you had a good handle on what the total number of claims that were submitted was like, I can just kind of go through the 10-Qs and go through the amounts that got you up to the $1.1 billion. But can you just remind us, you know how much time that took before all the claims actually got filed before you had a chance to evaluate.

It’s possible some more claims could in. So we had -- it was fairly stable on the number of claims filed. But at the two year anniversary of the Butte fire, which is the time at which the statute limitations expired for personal injury claims. We got a large spike of claims, which is where we sit today. The statute limitations runs on property damages at the three year anniversary of the fire. That’s why I said it's possible more claims could come in. Our experience in Butte was most of them did come in within a year or so of the event. But again, we had that spike towards the two-year anniversary on the statute and could see more when the property damage statute expires. It's hard to come up with a rule of thumb on the cadence and timing of when claims are filed. That’s sort of our best view of what happened.

Thank you. Our next question comes from the line of Greg Gordon with Evercore ISI. You may proceed.

A couple of questions. Just I want to be clear I understood what I heard with regard to your plans for equity. In the Q3 disclosures you said you needed about $400 million to $500 million a year of equity. And you disclosed just today, you are saying tax increases debt by $200 million a year this year and next year. On the other hand you are not -- have generated $1 billion of cash by virtue of not paying the dividend for as long as you are not doing that annualized. So are you saying that you are going to issue $600 million to $700 million a year or are you simply giving us for the next two years, for '18, or are you saying that would theoretically be your equity need in the normal course of business framework but the actual amount of equity you are going to issue is going to be different from that. I am just not clearly on exactly what your guidance was today.

Sure. Thanks for the question, Greg. A couple of things there. On the Q3 call, our $400 million to $500 million forecast for equity related to 2017. On the Q3 call we provided qualitative guidance on 2018 and 2019 equity needs, which was we would essentially be able to largely meet our expected equity needs in 2018 and 2019 through our internal programs which on average generated $350 million. Rolling forward to today's discussion of equity, what we wanted to provide was sort of the underlying changes in the base equity needs. And so the principal change from the Q3 call for 2018 and 2019 guidance of roughly $350 million annually was that we now expect to need $200 million more in both 2018 and 2019 weighted to tax reform. We also have small incremental equity needs related to the items impacting comparability, which I disclosed. Offsetting those equity needs, we will continue to issue equity under our internal programs although we expect the numbers to be less this year, given the suspension of the dividend. At the same time since we are not paying out a dividend, that more than offsets the equity we would have had to raise. Ultimately what we try to do here with this guidance is provide sort of the underlying equity drivers so that you can make your assumptions around any potential equity from -- potential liabilities from the Northern California wild fires as well as your view on the assumptions for the length of the dividend suspension. What we have tried to do is provide those components.

Yes, that’s actually very clear. But I guess it begs the question, like do you expect to keep your internal programs, sort of at a minimum in terms of the equity you are going to issue this year which you were also very clear on saying would be 350 in the normal course of business but probably $60 million lower, all things equal, given that there is now no dividend that the drip would therefore not generate any proceeds.

Yes. We do intend to keep the internal programs on. While they on average generated $350 million annually, there was some variability. The ranges for the last three years were between $300 million to $400 million. We know though that it could be as much as $60 million less as a result of the dividend suspension. So there will be some variability as to what those internal programs generate. But those are the components.

Okay. That’s 100% clear. Thanks. My second question is, relative from a quarterly cash -- from a cash flow perspective, when you look at your PG&E subsidiary and you look at the corporate parent. Now that you have suspended the dividend, is cash actually flowing up to the parent to fundamentally cover the parent interest and overhead obligations or is PG&E essentially a closed system at this point. Not dividend in cash up to the parent and does the parent have any other cash sources other than the equity you are issuing to cover its costs. And approximately, what are those costs on a quarterly and annual basis.

Well, the decision to suspend the dividend was both at the utility as well as PG&E Corporation. So, no, there is no more cash flowing from the utility to the corporation. That being said, as I mentioned, we are continuing to issue equity under the internal programs. And just to sort of frame the ongoing sort of cost of the corporation. We have about $350 million in holding company debt which is starting to mature in 2019. But we don’t really have much in the way of incremental overhead. And beyond sort of the sources of cash from the internal programs, we also have accessed the commercial paper markets at the holding company. So we have sufficient liquidity at the holding company despite not having dividends from the utility to the holding company.

Okay. So unallocated corporate expenses like advertising or incentive compensation, things like that. What you look at what's not being paid for in rates that’s unrecoverable, that’s parent. It's not a meaningful number at any given quarter?

No, the majority of those costs for things such as advertising, compensation which is not recovered in the rate cases, are really cross-borne by the utility as below the line costs. They are not charged back to customers but those are essentially cost that are incurred at the utility level. So we have minimal overhead costs at the holding company.

Thank you. Our next question comes from the line of Christopher Turnure with JPMorgan. You may proceed.

I wanted to understand, one, as it relates to the Buttes proceedings, you continued to settle claims even knowing that you are challenging the June 22 decision there. And then secondly, can you just remind me if you had appealed that June decision on any other grounds then just challenging the punitive damage element of it.

Christopher, John. Let me take these both. The first one, we are well aware that the outcome of our inverse condemnation motion could impact both the timing and valuation of any settlements. We are monitoring that very carefully. We really are gearing for the motion right now. And what we had some court ordered mediations to try to reach settlements where we have been very diligent and careful about not getting ahead of that motion. With respect to your second question, the company took a writ to the court of appeals on the trial judge's denial of our motion to strike punitive damages from the Butte case. That’s what's up on appeal right now and that appeal writ has been taken. So we are now in the process of briefing that issue before the court of appeals. There is nothing else before the court of appeals on Butte but as I mentioned earlier, depending on the outcome of the inverse decision, we would seek a writ to the court of appeals on that.

So, sorry, that’s for the punitive damage element only?

Yes.

So not an appeal of the entire decision?

Correct.

You may want [indiscernible] what we are going to do on March 15.

And just as a reminder, on March 15, different issues and punitive damages, March 15 is the issue of our motion to get inverse condemnation dismissed out of Butte. So there is many things happening on the legal front in Butte. Punitive damages, getting those eliminated. And the inverse condemnation and getting that dismissed.

Right, right. What I was trying to distinguish was from that June decision other than the punitive damage element, how successful or unsuccessful were you on challenging that decision. Even though that goes back in time obviously.

Yes. On the punitive decision?

No, just on -- I guess, we could break it into two, just say obviously you didn’t want inverse condemnation applied there on what were your options at that time for that.

Yes. We didn’t take a writ to the court of appeals on the Butte judges initial denial of our motion to get rid of inverse condemnation. But we would do that now. I think what's changed as we have talked about, is the CPUC's decision on San Diego's WEMA case where the CPUC basically indicated that they didn’t believe inverse condemnation as a court was relevant to their decision on spreading costs. So that’s sort of the intervening fact as to why we have renewed our motion in Butte and that’s where we are on that.

Okay. I hear you. It seems kind of surprising to me that outside of the CPUC rejection, you guys didn’t feel like you have a good enough legal case to challenge that up to a higher court at that time.

The basis for that denial, back in the summer, the original motion was the fact that there was no evidence historically of the CPUC denying cost recovery under inverse claims. Essentially the previous cases where inverse condemnation was applied to investor-owned utilities were settled at levels that were covered by insurance and therefore there were no cost recovery applications directly heard by the commission. Given that is the basis for the ruling this past summer and given the fact that the commission denied San Diego's WEMA application, we now have direct evidence that investor-owned utilities do not have the ability to adjust rates for the costs associated with inverse condemnation. So sort of facts changes pretty significantly over those six months.

Got you. Okay. Hopefully, you will prevail there. My second question is a little bit broader and speaks to one of the earlier questions. You have cut your dividend here, clearly sending a strong message but the CPUC does not seem to appreciate the gravity of this situation at all, in my opinion. So is there something else that you could do to really the point home that this is going to hurt customers in the end. Like you guys cutting your CapEx or taking some other action to protect shareholders.

Thank you for the question. I want to emphasize one part of that, the statement about the decision just around the dividend sending a strong message. By no way or no means was the underlying message a consideration for the suspension dividend. The decision to suspend the dividend was essentially governed by the California corporate code and our consideration of our ability to pay a lawful dividend under that code. That been said, as a result of that decision, it is strong evidence that the commission needs to evaluate the impact inverse condemnation is having on investor and utilities. We are aggressively pursuing multiple challenges and trying to bring awareness to policymakers and the state on this issue. We do believe given some of the comments that the commissioners and President Picker have made in other forums as well as a number of the messages that key policy makers and the state have made around the need to address comprehensive solutions for the impacts of climate change. We believe while the awareness of the issue is understood and we are working constructively to find a comprehensive solution.

Chris, thank you. This is Chris. Keira, thanks for helping us with the call today. It's 9 o'clock. I want to also thank everyone for joining us and have a safe day. Thank you.

Ladies and gentlemen, thank you for attending. This now concludes the conference. Enjoy the rest of your day.