Ladies and gentlemen, thank you for standing by and welcome to the PG&E Corporation Second Quarter 2020 Earnings Release 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] I would now like to hand the conference over to your speaker today, Chris Foster, Vice President, Treasury and Investor Relations, PG&E Corporation. Thank you. Please go ahead.

Thank you, Stephanie. And thanks to those of you on the phone, for joining us. Before I turn it over to Bill Smith, I want to remind you that our discussion today 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. Also joining us this morning are John Simon, Executive Vice President Law Strategy and Policy and Jason Wells, Executive Vice President and CFO. Some of the important factors that could affect the Company's actual financial results are described in the second page of today's second quarter earnings call presentation. The presentation also includes the reconciliation between non-GAAP and GAAP measures and could be found online along with other information at investor.pgecorp.com. We also encourage you to review our quarterly report on Form 10-Q that was filed with the SEC earlier today. And the discussion of risk factors that appears there and in the 2019 Annual Report on Form 10-Q. With that, I'll hand it over to Bill.

Thanks, Chris, and good morning everyone. We are excited to return to our traditional format. Today's call marks a milestone for us and we're excited to share our post emergence vision for the coming years. We've emerged from bankruptcy as a stronger company the complex legal matters are now resolved in major regulatory cases establishing our revenues are either approved or settled. We also have a good line of sight on a regulatory framework for the next three years, our financial plan displays strong growth and enables a path for the company to get back to investment grade. Our remarks today will focus on changes we made on governance, progress on our wildfire plan and preparations ahead of the 2020 wildfire season. I will conclude with an update on key regulatory matters. Jason, will then cover the financials, including updated guidance, kind of walk through the quarterly financial results. Our focus now turns to building on the many changes we've put in place in bankruptcy. We've set the foundation for an improved Company. At the same time, we will never forget the impacts to the communities we serve and those who lost their lives as a result of catastrophic wildfires in recent years. Our mandate is to rebuild the trust of our customers while delivering operational excellence. We'll do that by focusing on responsive customer service and system investments and focus on risk reduction, safety and reliability. Organizational changes to help deliver on this mandate are already well underway. First, at the Board level a 11 new directors were ceded at the start of this month. These Directors were carefully chosen based on their individual skills and backgrounds and are well suited to [indiscernible] our Company for years to come. One of our initial priorities as a Board is to…

Thank you, Bill and good morning everyone. I plan on covering three items, some of which are highlighted here on the financial summary on Slide 6. First, given the clarity resulting from the emergence from Chapter 11 and the resolution of key regulatory proceedings. -- Now benefit from -- as -- wildfire fund as well as from -- lastly, I'll briefly cover our results for the quarter. Stepping back to the more traditional earnings format -- Chapter 11 emergence. We plan to provide a slightly longer view of our earnings potential and a greater level of detail than in the past. We've provided some of the basic assumptions impacting GAAP and non-GAAP core earnings for you on Slide 7. We've also provided a traditional, look at CapEx and rate base growth, the latter of which is growing at roughly 8% our assumption for rate -- order due to our anticipated timeline for cost recovery of the -- rate case audit results -- million. We now have that amount included in rate base and earning a return-on-equity in 2021, there was no impact to our capital forecast for the year. One item to note is that CapEx is reflective of the $3.2 billion in wildfire mitigation spend but does not earning equity -- under AB 1054. However, this amount is not included in these rate base projections. Moving to our earnings guidance elements. First, we are updating earnings core earnings per share guidance for 2020. Second, -- non-GAAP core earnings per share guidance and updating our potential equity needs for 2021. We do about if we now go to Slide 10 starting with 2020 earnings guidance, we have updated our earnings factors to reflect the anticipated non-GAAP core earnings of roughly $2 billion for the full-year. That translates into approximately a…

[Operator Instructions] Your first question comes from Steve Fleishman with Wolfe Research. Please go ahead.

Yes, thanks. Hi, good morning and nice to have you all back, doing…

Good Morning Steve.

A couple of operational questions just on the wildfire preparation. The it's not the year just based on looking full-year that you're kind of how much you're on track or not. Could you just how you're progressing with those categories and…

Steve, this is Bill. I'd be glad to do that. We are really on chart on target with all of the -- as I mentioned a couple that we had a little bit of a delay. Starting on were related to weather stations and the HD cameras, those were impacted by some assembly issues at factories that were closed down temporarily in some things of that nature. But, we are on plan to be on target and get -- everything completed in some of these cases we're ahead of target. So for example on the veg management, we're actually running ahead of -- where we are on temporary generation, we're going to overshoot that target by about 50%. So we're doing very well. Overall, the two items that were a little bit delayed early on. We've got a recovery plan in place. So we feel very solid about getting all of this program executed as scheduled.

Okay. And then just any comment on the departure of the Utility, CEO.

No, I think, I think during an emergence like this, it's a lot of times people reevaluate what's going on and so this is not an expected situation we're situated with the leadership team we have in place and we're actively bringing in the next generation of leaders for the new PG&E. So, we're all set.

Okay, great. And then just on the thinking about 2021 in the securitization assumptions, -- just do things change -- dramatically for some reason the securities. And is it or would it be kind of I think you have other alternatives and worst case but just Sumeet could you give maybe a little bit of color there.

Sure, happy to do so. Steve, this is Jason. While we have confidence in the securitization application being improved. I mean I think it was a strong statement of support, by governor -- when he said it was in the best interest of the public to see that securitization application approved we did as a fallback measure as part of our plan of reorganization. We asked the CPUC to approve extension of that temporary debt the $6 billion -- we asked for a -- waiver to the capital structure in the event that securitization application is not approved, so from financing risk associated with the securitization application. I would say that the one impact if not approved, would be there would be incremental unrecoverable debt on that $6 billion in 2021 and beyond.

Okay. And I apologize, I have one last question, the grantor trust discussion that you mentioned in the release that kind of in terms of the Fire Victim Trust how you treat it. Could you maybe just give a little bit of a punchline on how to interpret that. And what that discussion means?

Sure. As I mentioned in my prepared remarks, we took a $620 million charge this quarter to reduce the deferred tax asset associated with the stock that we issued to the Fire Victims Trust. We had originally recorded -- as asset based on the settlement value of $6.75 billion. As a result of -- then that original assume asset -- billion of value attributed to that trust. At that reduction in the deferred tax asset assumes that we maintain the tax reduction based on a qualified settlement fund which essentially the tax deduction is recognized at the time, but the stock is issued to the Fire Victim Trust, however, we are pursuing a different election for the deduction -- and that would be the cross-election actually allows us to deduct the value of the stock when it is sold, and so as the stock value increases over time it would allow us to recognize a larger tax deduction. There are a couple of technical to -- convert to that grant to our trust that we are we'd expect clarity on that likely around the end of the calendar year.

Okay, thank you very much. Appreciate all questions.

Your next question comes from Stephen Byrd with Morgan Stanley, please go ahead.

Hi, good morning.

Good Morning, Stephen.

Thanks for that really thorough update on a lot of topics. Just a couple of items here. I guess from my end. Just in terms of the cost of wildfire insurance you laid out the amount of coverage. I was just curious, generally in terms of commentary in terms of just availability and cost of that. What's your general sense of sort of the magnitude in cost that you're seeing these days.

No, we are certainly seeing tightening in the liability insurance market well, AB 1054 provides significant financial stability to the utility's, the fact that inverse still applies mean sort of the first dollar of loss falls on liability insurers and as a result we've seen sort of tightening capacity in that market and a significant increase in costs, as I mentioned in liability insurance at $757 of which relates to wildfire claims. The total cost of that program at $750 million, it's obviously a significant increase over what we were doing several years ago and I think it sort of reflective of what will be an ongoing trend of higher liability insurance costs going forward.

Understood. That's helpful. And then I guess, stepping back, when you look at the overall business I guess I'm thinking a lot about optimization -- and then not related to wildfire risk, but just sort of cost optimization across the entire PG&E footprint, whether that be how do you go about procurement, looking at real estate that is owned is there a potential in your mind for a kind of a more thorough review now that sort of you've re-emerged and just looking across that the whole business in terms of here's where either operating costs, not related to safety, again, but just, other areas could be reduced or real estate could be monetized just thinking more broadly, are there such opportunities?

Yes, Stephen. Thanks for the question. I think there are pretty extensive of opportunities available for the company. We are cognizant of maintaining the affordability of our service particularly as we continue to invest significantly in our gas and electric systems. I think you've touched on a couple of the programs that are at the forefront of the start of our work on cost optimization and that is selling underutilized assets, things like as you mentioned real estate could also include has included selling excess renewable energy credits. I also think you've touched on another opportunity that we see an opportunity for significant improvement around and that's our third-party spend the company spent about $10 billion annually with third-party suppliers, there was a number of contracts that we had to enter into over the last couple of years to incentivize crews to come out west to accelerate the work on our wildfire system, those contracts include premiums to attract that significant level of work that was needed on our system. However, what we are doing now with third-party suppliers is we are bundling that work and committing to longer term plans in order to bring the cost structure down over-time, we've seen a couple of really good examples in our vegetation management inspection programs and look forward to continuing to work with our third-party suppliers on the rest, sort of those elements. There is an opportunity for the company to redesign, some of our work management related capabilities, but our focus is on the upcoming fire season and so, we will grow into that sort of process redesign over the coming couple of years.

You're next question comes from Jonathan Arnold with Vertical Research. Please go ahead.

Good morning, everyone.

Good morning Jonathan.

And can I just ask on the timing of the CEO search process you I think you mentioned you were going to announce a new CIO soon, but any sense of just what the sort of likely time frame for the leadership announcement would be and then also on that topic do you anticipate still having a separate Utility and Co-CEO. It is, could be as a reminder on where you stand on that Governance question?

Sure. Thanks for the question. This is Bill. The search is being launch for the CEO as we speak, so that process is underway. The target deadline is to have someone in that role permanent -- by the end of the year fortunately, there is no -- flexibility to be in the role as long as I need to be, but we're really looking for getting the next generation of the leadership team fully in place and get that flows. So, that team can start executing their plan going forward. So we think that it's reasonable to have that individual in place by the end of the year and that's still our target. But what's most important is finding the right person. So, there's nothing artificially imposing a deadline on that particular item. With regard to the Utility head. There is a requirement to have some separation between the corporation and the Utility. I don't think it will be a CEO per se, I think will likely go back to the way it had been for a number of years with the President of the Utility more if you think about it more of a President and Chief Operating Officer. That seems to make more sense, I think it's been a little bit confusing to a lot of constituents with the dual CEO title, but there are some requirements to keep separation between the Utility in the Corporation and we'll obviously continue to honor those.

Great, thank you, Bill. And then Matt just on one other question on the equity for the 2021 if I believe in the disclosure statement you sort of talked about that being one possibility, but you might also pay down debt a little slower, presumably, if you didn't like the price on the potential equity issuances that should we take what you're doing today more as a definitive statement that you plan to do this piece with equity or is it still possible you might choose not to.

Jonathan, thanks for the question. I mean, I do think we retain that flexibility as we look at, there is equity needs. Right. Let me clarify a couple of things first he equity that I mentioned that revised range to $450 million to $750 million that's contingent on the securitization application. We also have had an opportunity given sort of the earnings forecast improvements as well as some timing and cash flows have been able to sort of generate a reduction in that contingent equity need. As I also mentioned, we are exploring certain divestiture of non-core assets with sort of a more natural owner and so that would also has an opportunity sort of bring us to the lower end of the range that I mentioned and then into the point that you raised. We do have some flexibility around the timing of the holding company debt pay down, but I want to reiterate we are also committed to improving our balance sheet health and achieving investment grade credit ratings. And so I would anticipate, if the securitization application is issued equity in that general range next year.

Your next question comes from [indiscernible] with Citi. Please go ahead.

Good morning.

Good morning.

In terms of the $757 million insurance. I think in your prepared remarks, you mentioned potential to expand that further new operator around the potential or what you'd call would be as we get closer to wildfires here?

Yes, we're currently as conducting this call is still in the market with a number of different risk transfer policies, and so we think that there is still some -- that we are continuing to pursue our goal would be to try to achieve the billion [ph] for that it's prescribed under AB 1054 I will say, I think [Technical Difficulty] full level, but there is some additional capacity -- in the market that we're pursuing.

And then in terms of the issuance assumption for '21 beyond asset sales, are there any other key drivers of where you may be within the range as the securitization?

No, the reduction in the equity range really improved earnings forecast some of the cash flow benefits that I mentioned really bring us to sort of I call it -- it's the disposition of some non-core assets that would drive us to the lower end of that range that we provided.

Next question comes from Michael Lapides with Goldman Sachs. Please go ahead.

Hey guys, Thank you for taking my question. All of the upper you've put in over the last two years, especially over the life 18 or 20 months, which has been hectic obviously just curious, can you, Jason talk about the holding company debt. So I think it was around $4.8 billion. And then the temporary short-term debt the $6 billion. Can you walk us through a path -- over the next couple of years of what you want those balances to be two or three years from now and how you get there.

Thanks, Michael. Great to be back on a formal earnings call again. With respect to the holding company debt as part of our plan of reorganization we committed to the State of California that we would not reinstate our common stock dividend until we had achieved $6.2 billion of non-GAAP core earnings, that's roughly about three years post emergence. And so those retained cash flows provide significant capacity to pay down that holding company debt. We are anticipating paying down roughly a little more than $3 billion of that debt over the next five years with the majority of that debt being paid down over the retained cash flows from that suspended dividend. I think with respect to the $6 billion in temporary debt there is really two paths to pay that debt down the first path is the securitization application that is in front of the commission to the extent that application is approved the $7.5 billion of proceeds from that securitization will be used to pay down a $6 billion in temporary debt if, and we think it's unlikely the securitization application is not approved. We have asked the Commission for a permanent capital structure waiver on that $6 billion temporary debt and what we have committed to is using the shareholder funded net operating losses as we realize those shareholder net operating losses, we will use those cash flows to pay down that $6 billion in temporary debt over time. And so those would be the two pathways to addressing that debt at the utility level.

Got it. And if I think about when you guide for 2021 guidance the unrecoverable interest expense that you lay out in the guidance slide how much is that all just tied to the HoldCo debt into the temporary debt or is there anything else that's contributing to that?

There are sort of the three sort of factors that I would, there is some incremental debt above authorized levels; First, we raised about $2.5 billion of incremental debt at the utility to fund half of the wildfire fund contribution upon emergence that has no impact on our equity ratio because we have an equal amount of equity to offset it on a ratio standpoint, but it is $2.5 billion of debt above authorized levels that contributes to under recovery. And then, as a result of the securitization application and the impact on the equity ratio we do have a modest amount of incremental Utility debt in 2021 that is contributing to that unrecoverable interest expense that will effectively get paid down in 2022 and 2023. Those are sort of the three sources beyond again the holding company and the temporary debt we discussed.

Your next question comes from Richard Sutherland with JPMorgan. Please go ahead.

Hi, good morning. Thanks for taking my questions here. Maybe turning back to the insurance premium question by that we've touched on a couple of times. Could you speak to the AB 1054 requirements and any changes there possible should you be under situation, we are not going for recovery of the premiums.

Thanks, Richard for the question. No, I wouldn't anticipate any change to that fundamental structure that in AB 1054 -- in AB 1054 as past really sets sort of the foundation for eligibility for the state wildfire fund that damages that exceed $1 billion utilities are encouraged to secure risk transfer up to that level given kind of all of the issues that California is currently undertaking. I don't necessarily see an amendment AB 1054 that would modify that, that expected level of risk transfer liability insurance.

Got it. Thank you. And then just on Kincade real quickly, you spoke a little bit about this in the script, but curious in terms of reaching the expected impact of the costs in 2020 here what hurdles from, I guess the CPUC or other parties -- standpoint remain to kind of tying it up?

Hi, Richard, it's John. I will say on Kincade. It's very early in the process and I won't speculate on tying it up what makes it really difficult to give more certainty in the answer is, a couple of things; First, we don't have the evidence fire has that their concluding there and after the fire. So they have things as you probably know, we don't have the report which lays out their determination, we'd certainly like to see it. What I can tell you is meant is the cause of Kincade. We would work for an expeditious for the timing and so with a -- question.

[Operator Instructions] Your next question comes from Paul Fremont with Mizuho. Please go ahead.

Thank you very much and congratulations for being back I guess my first question. Can you just confirm the dollar amounts doing the pipe and the convert, including all the over allotment that are sort haven't been finalized.

Yes. Thanks, Paul. For the question. The over allotment feature the backstop of the green shoe -- the structures were put in place to ensure that we raised a total of $9 billion across the pipe, the mandatory convertible equity as well as the common equity and so we have issued the total $9 billion as a result of the expiration of that over allotment feature at this time.

Great. And can I just get the convert dollar amount that because that's obviously going to affect the future share count.

Paul, it's Chris. I'll make sure we follow up with you separately on that.

Great. Then is a secure, would you expect the securitization to -- have you receive regulatory approvals…

Generally speaking, there is a 90 day -- applications. I don't think that -- I think in terms of Bill's prepared remarks references in the second quarter, we took into consideration, the timing of the decision is well, as the appeal window. So we think it is sometime sort of early in the second quarter.

Your next question comes from Travis Miller with Morningstar. Please go ahead.

Good morning. And definitely appreciate you guys during the call and taking the questions. Quick question, you answered most of them, but for the CEO search how much input -- is the --are you going to seek or do you have to seek from legislators, governor's office and other non- Utility entities?

This is Bill. Thanks for the question. There is no formal requirement obviously, we will look for someone -- that would be a good fit in California and someone that the stakeholders here would be comfortable with. There is no formal requirement for approval, but that process basically is what we went through in feeding the new Board. And the new Board is extremely talented group of people and I think we'll do the same thing with the CEO search. So I'm really, really pleased at the prospects of having high caliber challenge for obviously the last couple of years, but there is nothing that will keep this Corporation in my opinion from being able to perform in top quartile, if not top decile level, we just got some work to do and I think it's a great opportunity for the right person coming in. So, I have no concerns about any inability to find someone that's a nice fit for the environment here in California.

Okay, great, thanks. And then one other quick follow-up on Kincade, what is the time line or the ability or the amount that you'd have access to the AB 1054 fund and how that might impact the insurance recovery that you've booked so far.

Thanks, Travis. I'll answer the first part, maybe, Jason you can answer the second part in terms of the wildfire fund AB 1054 is available for claims costs after insurance above $1 billion for the reasons I was mentioning earlier it's very early for us, no evidence no report we haven't paid any claims side there. So in terms of tapping into that fund won't speculate on that and maybe, Jason on the second part.

Yes. Thanks, John. Right now because the accrual estimate is below the $1 billion threshold. There's been no recognition of cost recovery from the states wildfire fund it we would only begin to record a receivable for our the cost exceeded $1 billion, up $4 billion threshold one thing though that I will point out is that we do have and are -- eligible about 10% of those costs through our transmission and rate cases, we have to wait and see what the underlying report by fire -- before we can see that cost recovery, but in the event that -- there our substantive violations identified, then we have the opportunity to again speak about 10% of the net cost through the Transmission Owner rate case process.

Thank you. Travis for that question, Stephanie, thanks for helping us to organize the call today. Everyone, thanks for joining for our call today. Have a safe day and fell free to ask us if you have additional questions. Thank you very much.

Thank you, this concludes today's conference call. You may now disconnect.