Thank you for standing by and welcome to the PG&E Corporation Fourth Quarter 2020 Earnings Release and Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] Thank you. I would now like to hand the conference over to, Matt Fallon, Senior Director, Investor Relations, PG&E. Mr. Fallon, please go ahead.

Good morning. Thank you for participating in PG&E's fourth quarter 2020 earnings conference call. Joining us today are Patti Poppe, our Chief Executive Officer, and Chris Foster, Vice President and Interim Chief Financial Officer. I want to remind you that our discussion will include forward-looking statements about our outlook for future financial results, which are based on assumptions, forecasts, expectations, and information currently available to Management. Some of the important factors that could affect the Company's actual financial results are described on the second page of today's fourth quarter earnings call presentation. The presentation also includes a reconciliation between non-GAAP and GAAP measures and can be found online along with other information at investor.pgecorp.com. We also encourage you to review our annual report on Form 10-K for the year ended December 31, 2020. With that, let's move on to the person you all want to hear from, Patti Poppe.

Thank you, Matt. And good morning, everyone. I am so delighted to be with you for my very first PG&E earnings call today. I've been here almost two months, and have learned a lot by engaging with my coworkers, and many external stakeholders. All highlights today, our 2020 results, our 2021 and long-term outlook and what I've learned so far from careful listening, and importantly, what we're doing about it right now. We delivered solid Q4 non-GAAP core earnings of $0.21 per share in the fourth quarter, and $1.61 for the full year. We're affirming non-GAAP core earnings of $0.95 to $1.05 per fully diluted share for 2021. In addition, we're rolling forward our five-year plan, which takes us through 2025. I'm happy to report that we successfully executed the sale of our transmission tower wireless licenses, delivering on our goal to reduce our 2021 equity needs. Our 2021 equity needs are now down to a range of zero to $400 million. We have visibility on our investments and we're increasing the quality of the plan and our guidance. Today, we're introducing a 2021 to 2025, non-GAAP core EPS CAGR of 10%. As we bring our new leadership team into place, we're building a clear sky playbook based on a lean operating system and delivering a regionalized hometown experience. We're evaluating our work plan focused on what's best longer-term for our customers. We're already acting on all of this and we're happy to share more with you today. You'll hear more about this in future quarters as well. Chris will provide an update and more details on the financials in just a minute. First, a recap of 2020, it was a challenging year, and I am so impressed with how our PG&E team stepped up. I'd like to take a…

Thank you, Patti, and good morning, everyone. As Patti mentioned earlier, we made substantial progress against the goals we set forth in 2020, including on the financial and regulatory front. I'll hit a few highlights, then go into more detail. We met our EPS guidance planning at $1.61 for the year. We reduced our equity needs to a range of zero to $400 million, reducing our prior range of $450 million to $750 million as a result of our successful non-core asset sale. We also made progress on our longer-term savings goal, including achieving over $300 million in savings from a combination of contracted work savings and from monetizing excess renewable energy credits in 2020. And we closed our critical regulatory cases that provide multi-year financial clarity. I plan to cover our 2020 results and regulatory updates first, then focus on 2021 and beyond. I'll walk through new term targets and favorable updates to our 2021 financing needs as well as our longer-term financial plan. And we see improvements in our prior projection, getting us to a 10% earnings per share growth CAGR. As I mentioned, we met our earnings guidance for 2020 and are maintaining the 2021 range we set out of $0.95 to a $1.05. Let's start with 2020. Slide 9 shows our result for both the fourth quarter and the year. Non-GAAP core earnings per share for the year came in at $2 billion. GAAP earnings including non-core items are also shown here. The non-core items listed here are also consistent with the full year 2020 guidance range and includes a $60 million net charge in the fourth quarter is all related wildfire cost, after applying insurance receivables. Moving to Slide 10. This shows the quarter-over-quarter comparison for non-GAAP core earnings of $441 million or $0.21 in…

Thank you, Chris. The path to reestablish PG&E is simple, the implementation is our challenge, will meet the challenge and here's how. We have a best-in-class emergency response playbook and we'll build on it by writing the PG&E clear sky playbook. I'm putting together a team of senior leaders that are ready writing and implementing that lean playbook that can predictably deliver our commitments and our outcomes. We're building the best of centralized functions, standards, processes and scale and we'll deliver a regionalized hometown experience for the communities and customers we serve. And finally, our system requires substantial capital investment, and our customers deserve more discipline cost performance. We'll adopt better processes that improve our safety, quality, delivery and cost. As a result, our work will deliver for our customers and for our investors. These initial priorities are the steps on the path to a new era at PG&E, focused on people, planet, and prosperity with laser like focus on performance. Operator, please open the line for questions.

Certainly. [Operator instructions] Richard Ciciarelli with Bank of America. Your line is open.

Hey, good morning. It's Julien here. Thanks for the time and opportunity. And I should add...

Hey Julien, nice to hear your voice.

Likewise, I should have my congratulations to you, Patti, as well as the portion of the management team here. It's a pleasure, congrats, all. But with this, can we speak a little bit more about equity and ability to reduce them that further? So, a couple different questions within this. Securitization, can you speak to what's reflected in your updated expectations here? And then secondly, just want to be very explicit about the asset sales here and that contributing to your narrowed range here as well, if you don't mind.

Sure, Julien this is Chris. Hi. Happy to take that one. I think there's really two factors to think about. First, let's start with the underlying assumption. Embedded within the zero to $400 million guidance is the as filed original case that we put forward to the CPUC. Should the alternative we filed be approved, it could further reduce that equity need, which would take us down potentially is that low into the range, again, zero to $400 million. That's because we have spaced out the two contributions, a billion dollars in 2021 and a billion dollars in 2024. As it relates to the Tower's transaction, that definitely helped us to bring down the original high end of $700 million - excuse me, $750 million, to where we are today at $400 million. We consistently articulated as you know upon completion of that transaction, we will be focused on reducing our financing needs overall. And it certainly heavily contributed to our equity needs reduction.

Got it. Excellent. And then secondly, Patti if I can put it back to you here. Obviously, short time here thus far, but the safety certification process, I suppose this is going to be an annual conversation here. But when we think about this, going forward, and just getting these on a timely basis, how do you think about improving that process to just give folks and all stakeholders visibility on that, if you don't mind?

Yeah, this is actually an area Julien that I'm pretty excited about. And I feel good about our ability to build a transparent system. So, anybody and anyone who wants to can be aware of the status of our wildfire mitigation plans, it's a perfect application of our clear sky playbook is to prepare and prevent disaster. And so, we're actually leveraging our lean playbook, we've got four basic plays, and we're going to apply them to our wildfire mitigation plan. We're actually in the process, we've already initiated building out a control center at our San Ramon facility, where we'll be able to observe the progress, monitor problem, solve, establish standards, continuously improve. I am finding, we've got some incredibly talented people here, they just need a process, we need a system to make visible our commitments. And that enables us to make and meet our commitments. And so, the work that we're going to do, I think, will give the commission the visibility that they need. We welcome their partnership. We welcome their oversight, the policymakers have a lot at stake with our success. And they've shared that with me. And so, our job is to make it easy for them to regulate us, easy for them to monitor us. Because I can tell you this, no one's going to be looking closer at us than us. And so, we're going to be watching our performance. And we're going to be utilizing our clear sky playbook to do just that. And that should make those filings and that process much more streamlined, Julien.

Got it. All right. I'll leave it there. Thank you, guys. Best of luck.

Thank you.

Steve Fleishman with Wolfe Research. Your line is open.

Yeah. Hi. Good morning, Patti. Congrats.

Good morning, Steve.

Good to hear your voice. Yes. So, I guess one question, so it sounds like in the past the long-term growth rate was the net income growth and now it's an EPS growth. So, to degree that you do need future equity in the plan because your investment is higher that's some of that's embedded in the growth [Indiscernible].

That's of course is embedded, and that's what made us feel pretty confident about our forward look on EPS, and shifting today, EPS oriented long-term growth target. But Chris, why don't you add a couple points on that?

Sure thing, Patti. That's right, Steve. As you think about the growth that's embedded in our rate base update, there's over $2 billion an additional investment there. And so, what we've what we put forward is an EPS growth rate that absolutely includes future equity needs through that time period.

Okay, great. And then secondly, just on the back last year when there was the uncertainty over the wildfire safety certificate, there was also some mention by the commission of the kind of enhanced oversight process. Is there any update on that? And that obviously hasn't happened. So, should we view that as a good sign or is that still kind of a potential event to watch?

Yeah, Steve, we have not had official notification or close out of the letter that was sent at the end of last year on enhanced enforcement. So, honestly, Steve, I don't think we'd be surprised if that action happened. The first step is just a corrective action plan. And frankly, that's what we're building out. We've been working very closely with the wildfire staff at the commission to make sure that our plans meet expectations. But it's certainly within the realm of possibility that the commission might take that step. And frankly, we welcome it. I don't see that as a bad thing, Steve. It all comes down to this. Look, we've got to do what we said we're going to do. Our plan for 2021 wildfire mitigation is good. It has enhanced over 2020. 2020 was better than 2019. We're using more technology, we're doing more fire prevention with our enhanced vegetation management, with our better visibility. We're using technology tools that are honestly impressive. I'm impressed by them. And we're reducing the impact PSPS events. So, all of that being said, we have confidence in our plan. We welcome additional oversight. I wouldn't be concerned if additional oversight and the enhanced enforcement was initiated because the commission has a job to do. And we welcome the visibility. And as I said, we're building out our lean operating system to really drive home the performance of that wildfire mitigation plan, and it'll provide all the visibility and transparency that's required.

Great, congrats again, Patti. Thanks.

Thanks, Steve.

Ryan Levine with Citi. Your line is open.

Hi, everybody. One for Patti. Is this new clear sky playbook you fully written at this point, or is it more in the initial drafting stages? Is there a timeline that you expect this playbook to be fully written?

That's a great question. One of the things that excites me, is this team I'm building, in addition to very impressive talent I'm finding here at PG&E, we're going to have the best of the best influencing this playbook. So certainly, people know that I have a lean orientation and lots of experience. So, I have a point of view on this matter. But we're hiring some really talented people. Marlene Santos is going to bring a playbook. And so, trust me, we're going to lean into that next era playbook of Marlene's. Berkshire Hathaway has a playbook and Adam brings that with them. And so, we will be looking for the best of the best lean operating system that matches the PG&E needs and addresses what we need to address here most. But I will say the basic plays of our lean operating system will include visual management, operating reviews, problem solving and standards. It's clear to me and my - already and just the two months I've been here that those plays are essential to us being able to keep our promises and do what we say we're going to do. And so, the kind of the framework of the playbook is written. But we'll have the best of the best, certainly adding to that playbook and making sure that it reflects the specific needs of the PG&E team. So, in terms of, on your question on timing, we expect to have the fundamentals of the playbook written by midyear. But we'll be always continually updating and improving our playbook. But that's the spirit of lean operating system, we're never going to be satisfied. Right. We could have best ever performance and still be dissatisfied. And so, that playbook will ever be an evolution. And so, I wouldn't suggest that there's a finish line to it, but we will be getting better every day.

And then, in terms of the wildfire mitigation plan that came out earlier this month. Was there any changes to that you wanted to call out in terms of your forecast time horizon for any more meaningful opportunities around that effort that you could envision to evolve in the coming years?

Well, I'll hone in on the work. And I'll let Chris weigh in just a second on the financial implications. But the work itself, the big change for 2021 over 2020 is the risk orientation of the plan. 2020, we've got a lot of work done, we did a lot of vegetation management and system hardening. But it was more based on volume of work. And what we're transitioning in 2021 to which I think will really meet the needs of both the system and certainly a lot of the observers that we have is that we're transitioning to a risk prioritized system. And so, it's really important that we prioritize the work that we're doing to maximize the amount of risk we reduce every single year. And so, we're targeting a 20% reduction of the highest risk areas of the system. And so, we're going to be focused on that as well as additional technology, additional weather stations, additional cameras, our weather meteorology system is really very advanced, and we're going to continue to advance it. And so, more to come on all on the work. And that's a big change for 2021 but in terms of the financials, I'll turn it over to Chris.

Sure, thanks, Patti. Hi, Ryan. The way I would think about this, as we've got the three-year wildfire mitigation plan fully embedded in our five-year forecast from the financial side. What we're able to do though, as we improve the plan and see the work plan longevity here. What we're able to do is work with our colleagues to reduce costs and be more efficient along the way. I mentioned this a little bit earlier. But we have been able through improved contracting, already been able to take out a few $100 million out of the business. And so, as we improve the ability to take out the riskiest miles every year that Patti's referencing, the work plan will be tighter year over year as well. But at this stage, ultimately, all three years of what was filed here back in February is currently reflected in the five-year plan.

Great, thanks.

Jonathan Arnold with Vertical Research. Your line is open.

Good morning, guys. And congratulations, Patti.

Good morning Jonathan.

Just a quick one on, you've obviously assembled an impressive group of new leaders. Are we done with that process or is there still more to come?

I'm sorry, Jonathan, can you repeat your question?

Yeah. Just curious on the leadership team, if you're pretty much done with what you're planning there, or there's more to come?

Thank you. No, we're not done. There's more to come. And I think you'll like what you see. We still have an engineering role, which we've highlighted as an important role, I think for PG&E, because we've spent so much time responding to crisis, that I think there's been a loss of the ability to focus on the horizon, to get focused on the future of the clean energy transformation and how that clean energy transformation overlaps with the need for wildfire prevention. And I think, there's a really exciting opportunity where new technologies with the right engineering team can mitigate our multiple risks, supply shortages in the summer, wildfire mitigation, as well as our clean energy transformation. And so, we're definitely we've got some great names coming. I'm not going to, we've broken up news today. We'll be sharing the additional news here in the coming weeks of additional talent that's joining the team.

Okay, great. Thank you and maybe more for Chris. I guess, Chris could you perhaps just explain, it may be a reminder, just this the charge to do with the grantor trust a bit more and maybe focus on the implications for cash and timing and the like? And if there's any sort of knock-on impact on financing needs? And if recall that, you'd wanted to - you've been wanting to elect the grantor trust, so, my assumption is that, this is an outcome that, although there's going to be an upfront charge, it would be helpful.

Sure, Jonathan, thanks for the question. Happy to take it too and I appreciate it because definitely, I want to simplify this. This is ultimately good tax planning for the company. The bottom line is, if we are able to elect the grantor trust construct, which we're on a good path, we've noted here today that we've had current ongoing discussions with the Fire Victim Trust and from IRS. So, we believe it's likely we'll be able to make that election. What would happen, there is no impact to financing needs. And let me unpack that a little bit. So, PG&E will be required to take that $1.3 billion noncash charge reversing the deferred tax asset we created. And that's ultimately just an advantage that we gain here, right, because now, the advantage of the grantor trust is, we're able to experience the benefit of the share price appreciation that would occur. So, we'll reverse that charge as soon as we recognize income in future period, which depends on the price at which the Fire Victim Trust sells the stock. So, should we elect the grantor trust, which we'll do by April, there are no financing changes, we will benefit from a tax standpoint, and the Fire Victim Trust would benefit as well from the construct from a tax planning purpose?

Great. And that's probably, we kept it simple. Thank you.

Michael Lapides with Goldman Sachs. Your line is open.

Hey, Patti, and team congrats to everybody on your new roles. My question is a little more longer term and trying to think about the work that company will do to help the state achieve its goals and vice versa. Anytime, I've seen a regulated utility succeed over the long-term. And succeed is probably defined in terms of providing reliable, safe, low cost, clean power whereas low cost as possible. It also comes with supportive policymaking and regulation. Those two things tend to go hand in hand. When you look at how California policies set up and align right now, and the things that are in place, but also the things that might be on your wish list, things that maybe aren't in place today, but could exist tomorrow, whether it's policy, whether it's regulation or something else, what would be on that wish list?

Well, good morning. Thank you for asking the question. A couple of things. First, one thing I will share. As a newcomer to the California scene, I have been pleasantly surprised by the regulatory environment and the construct. I think, outside of California, I told myself things about what was true here and now that I am here. There's some really good components of our regulatory construct multiyear general rate cases with attrition adjustments. Many of you know that I have not - I have long advocated for annual filings, because you need flexibility and adjustment. But as I see the California construct, we have these long-term rate cases and filings and outcomes that provide long-term certainty to revenue. But we still have balancing accounts that allow for that flexibility to adjust and adapt as needs and conditions for our customers change. And I like that a lot. That's a good part of the construct, the decoupling the pass-throughs costs associated with commodity procurement. All of these elements make for a pretty solid regulatory construct, when we do what we said we would do. And so, it comes back to that whole thing. So, my wish list, Michael, truly is that we are reliable again, and our word stands. And so that's the focus of our efforts, it's the focus of our attention. Now, to your point about the long-term aspirations of policymakers here around clean energy and affordable energy. You may be aware that the commission held a non-bond event yesterday, and I was very optimistic about what I heard from that event. There's a real recognition that there's a risk that the entire clean energy transition, the cost of it is born in a residential electric bill. And that, in many ways is basically a regressive tax. Its tax policy borne out in electric bills. And the good news is, that was part of the conversation yesterday that we need to make sure that we have holistic cost sharing for the clean energy transition. And frankly, if we do our job, right, we can help reduce costs. And certainly, the unit cost of energy should go down as electrification takes hold both in buildings vehicles. So, I do think, if I had a wish list outside of my own wish list that we do what we say we're going to do, the rest of my wish list would be that we as California come together and find a holistic set of solutions that meet the expectations of our citizens. I find the ambitions inspiring, and we do it together as a state and that we don't finger point and sub optimize, but rather we work together to come for a great outcome, the best outcome for Californians, which frankly, then can be a role model for the rest of the world.

Got it. Thank you, Patti.

Yep, thank you.

[Operator instructions] Jeremy Tonet with JP Morgan. Your line is open.

Hi, good morning.

Good morning, Jeremy.

Patti, just want to say thanks for all the observations, congratulations as well, but maybe just kind of taking a step back just as far as what brought you to this position that you felt compelled to take it and just as you look at PCG versus your experience at CMS, just wondering if it makes sense to contrast what you see here? Or maybe just ask more directly as the CMS way the right fit for PCG? Or could the clear sky playbooks look different?

Well, first of all, a little shout out to all my friends at CMS. They know I love them. And I think about them all the time. I was compelled by the mission here at PG&E. And this is what I'm finding, both in the people who are here, the people who stayed, they say when the going gets tough, the tough get going. And this team has got going. I mean, this PG&E team that I have met is resilient and strong and they are here and they have stayed, and I'm proud of them and grateful for them for their endurance. The additional team members we're bringing along and the reason I am here is because we felt compelled by this cause that the people of California need PG&E to be strong. We need PG&E to have the capability to answer the call that the citizens and the policymakers are defining. And so, when I thought about both the citizens of California, and I thought about the people who work at PG&E, at the end of the day, Jeremy, I just couldn't turn away. And I think people know, I had a pretty good gig back there in Michigan. But to sit and not do my part, just didn't feel like an acceptable choice. So, I came out, and I'm happy to report again, that people are coming with me. And it's really, it's a mission worth serving. Now, I'll also say that it won't be the CMS playbook. It will be the PG&E playbook. We have to write our own based on the current conditions and needs of the system. And but the lean concepts are universal. And they weren't written at CMS, had they were written 100 years ago. Deming wrote some of the early fundamentals and lots of companies have implemented them. And I've seen it implemented well, and I've seen it implemented poorly. And we're going to implement it well. I do think my years of experience do bring visibility and perspective about what good looks like when we talk about a lean implementation. And so, the team and I here are writing that playbook. And we're going to implement it. And I'm highly confident that it will provide the certainty and the transparency and the ability to deliver outcomes, not just activity, but outcomes for the sake of the people that we serve.

Great. That's very helpful. Thanks for that. And maybe just a separate question on the SBA agreement. Just if you could walk us through what happens if, god forbid, there was a cause of a fire from the telco asset. Just how would that work exactly there?

Sure. So, in terms of the agreement, the way to think about it, Jeremy's at a high level, in all situations, PG&E retains the ability to have appropriate and safe access to its facilities. That's everything from pole loading, ensuring that any new facilities that are cited, are done so only in a situation where we know ahead of time that the additional weight is appropriate. It also means that if there's impacts to the facilities, certainly in that situation, it would be evaluated for a liability at that stage. But ultimately, where we're focused is and this is really the impetus behind the agreement was to ensure that going forward, PG&E maintain the flexibility to manage our assets as we need to do and that flexibility remains with this agreement.

Great. I'll stop there. Thank you.

Thanks, Jeremy.

There are no further questions at this time. I will now turn the call back over to Patti Poppe for final remarks.

Thanks, Jack. Well, thanks everyone for the discussion today. It really was good to be with all of you. We are looking forward to staying in touch in the coming months and certainly most importantly, restoring your trust and your confidence in the PG&E team. Thanks again for joining us today.

This concludes today's call. We thank you for your participation. You may now disconnect.