On Wednesday, Mizuho (NYSE:MFG) Securities adjusted its financial outlook for PG&E Corporation (NYSE:PCG), increasing the utility company's price target to $26.00, up from the previous $24.00. The firm has sustained its Outperform rating on the stock. The revision comes in response to PG&E's recent request to the California Public Utilities Commission (CPUC) for a new rate structure tailored for large loads.
PG&E's proposal, submitted late last week, suggests a system where transmission-level customers would pay upfront for the costs associated with connecting to the electric grid. This advance payment is intended to expedite the connection process and deter non-committed inquiries. Customers who utilize the full amount of load they initially requested would be eligible to receive a refund of their prepayment.
Mizuho supports the initiative, stating that the proposed rate structure should achieve several benefits. Firstly, it is expected to accelerate the hookup process for new customers. Secondly, it would protect current PG&E customers from potential costs associated with load requests that do not come to fruition. Lastly, it would negate the necessity for PG&E to seek favorable financing options since the customer would be funding the infrastructure improvements themselves.
The significance of this proposal is underscored by the size of PG&E's service area, which experiences a peak load of approximately 20 gigawatts and a daily load around 10 gigawatts. According to Mizuho, the new load requests could play a crucial role in 'straightening out' the 'duck curve'—a term used to describe the imbalance between peak demand and renewable energy production—and in improving the overall efficiency of the grid usage.
In other recent news, PG&E Corporation has reported significant developments. The company announced the completion of a $500 million sale of 7.375% Fixed-to-Fixed Reset Rate Junior Subordinated Notes due in 2055, raising the total outstanding principal amount for this series to $1.5 billion. The sale was facilitated by a consortium of underwriters including Barclays (LON:BARC) Capital Inc., BofA Securities, Inc., Mizuho Securities USA LLC, and Wells Fargo (NYSE:WFC) Securities, LLC.
PG&E also reported a 10% increase in its third-quarter 2024 core earnings per share (EPS), with an updated EPS guidance range of $1.34 to $1.37 for 2024. In addition, the company has expanded its five-year capital plan by $1 billion, now totaling $63 billion through 2028. This includes plans to reduce $2 billion in corporate debt by 2026 and raise $3 billion in equity through an at-the-market program.
The company reported a significant reduction in major fires linked to its equipment and successful claims from the state Wildfire Fund. Furthermore, PG&E plans to invest an additional $5 billion in customer-driven projects, having already secured $8 billion in capital.
InvestingPro Insights
PG&E Corporation's (NYSE:PCG) recent proposal for a new rate structure aligns well with its current financial position and market performance. According to InvestingPro data, PCG has a market capitalization of $45.98 billion and is trading near its 52-week high, with a price that is 99.77% of its peak. This strong market performance is reflected in the company's 20.44% price total return over the past year.
InvestingPro Tips highlight that PCG is trading at a low P/E ratio relative to its near-term earnings growth, with a PEG ratio of 0.34 for the last twelve months as of Q3 2024. This suggests that the stock may be undervalued considering its growth prospects, which could support Mizuho's increased price target.
The company's financial health appears solid, with revenue of $24.83 billion and an EBITDA of $9.318 billion for the last twelve months as of Q3 2024. PCG's operating income margin stands at a healthy 21.47%, indicating efficient operations.
It's worth noting that InvestingPro offers 7 additional tips for PCG, providing investors with a more comprehensive analysis of the company's prospects. These insights could be particularly valuable as PG&E navigates regulatory changes and implements its new rate structure proposal.
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