TLDR
- PG&E announced an $11.4 billion investment plan for California in 2027, deferring $2 billion of planned spending
- The company launched a strategic review covering regulatory, financial, operational and strategic options
- PCG stock surged after falling 18% on Monday following California Senate Bill 492 disappointing investors
- SB 492 failed to include wildfire liability caps or restructure the state wildfire fund beyond 2030
- Multiple analysts downgraded PCG, with BofA cutting its price target from $24 to $13
PG&E stock is trading around $14.02, up roughly 6%, as it attempts to recover from Monday’s brutal 18% sell-off that pushed the stock near its 52-week low of $13.08.
The utility announced on Wednesday it would invest approximately $11.4 billion in California in 2027. The company said it is deferring $2 billion of previously planned spending as part of a new strategic review.
That review will look at the full range of regulatory, financial, operational and strategic alternatives available to the company. This includes options related to how PG&E is organized and financed.
PG&E said the goal of the review is to help reduce customer costs tied to higher financing expenses. The company added that its debt financing needs would be reduced by $2 billion as a result.
Monday’s Sell-Off Explained
Monday’s steep decline came after PG&E commented on amended California Senate Bill 492. The company acknowledged the bill helps wildfire survivors and improves disaster preparedness.
But management was clear that SB 492 does not establish a long-term solution for California’s wildfire liability framework. The bill does not recapitalize or restructure the state wildfire fund, and it does not include a legal liability cap beyond 2030.
That leaves PG&E exposed to potentially uncapped wildfire liabilities after 2030. That is the core concern driving Wall Street’s negative reaction.
Analyst Downgrades Hit Hard
BofA Securities downgraded PG&E to Neutral from Buy on Tuesday. The firm cut its price target from $24 to $13, citing elevated wildfire liability risks.
Mizuho analyst Anthony Crowdell also downgraded PCG from Outperform to Neutral. He lowered his price target from $21 to $16.
BMO Capital analyst James Thalacker cut the stock from Outperform to Market Perform. His new price target is $21, down from $28, reflecting exposure beyond 2030.
Analysts noted that operational changes by management alone will not be enough to restore confidence. Structural legislative reform is needed, they said.
PG&E’s stock had already been under pressure before Monday. It remains near 52-week lows following the wave of analyst downgrades.
PG&E said it expects to outline an updated capital allocation plan in the near term as part of the strategic review.
PCG was trading at $14.02, up 5.65%, at time of writing on Tuesday.
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