PG&E Corporation (PCG) Earnings Call Transcript & Summary

Good day, everyone. My name is Kelly, and I'll be your conference operator for today. At this time, I'd like to welcome everyone to the PG&E management update call. Today's conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Mr. Jonathan Arnold, Vice President of Investor Relations. Please go ahead, sir.

Good afternoon, everyone, and thank you for joining us. With us today, we have Patti Poppe, Chief Executive Officer; Chris Foster, Executive Vice President and Chief Financial Officer; Tom Webb, our Senior Adviser; and Carolyn Burke, our newly elected EVP of Finance. Please note, we've scheduled 30 minutes for this call. [Operator Instructions] With that, it's my pleasure to hand over to our CEO, Patti Poppe.

Thank you, Jonathan. And let me please add my thanks to all of you for joining us this afternoon on such short notice. As you may have seen in our press release and our 8-K filing, I'm pleased and honored to be making 2 announcements today. First, Carolyn Burke has joined us as our new EVP of Finance. Carolyn is a highly skilled financial professional with deep hands-on experience of driving key financial performance and implementing enterprise-wide process improvement and culture change. She's also done this twice before at companies emerging from bankruptcy. These are exactly the kind of skills we need to be leveraged today at PG&E as we move further into the next phase of our journey to deliver the consistent operating and financial performance for our customers and our investors that you can rightly expect from us. Second, on May 4, Carolyn will replace Chris Foster as CFO. I'm sure nobody on this call needs me to remind them that Chris has played a huge role navigating the company through Chapter 11, establishment of the critical AB 1054 framework and setting us up on the strong recovery path we are on today. Chris is a very effective communicator, a sharp policy thinker as well as being an empathetic and respected leader. He's a dear friend to all of us at PG&E, and we will miss him as he sets off on a new journey with CenterPoint Energy, where he will be rejoining Jason Wells, PG&E's previous CFO and become their CFO. While it's difficult to see Chris go, we are excited for him, and his departure presents us with an opportunity to bring on another exceptional new leader onto our team. I'm grateful that Chris has graciously agreed to stay with us through the first quarter earnings call on May 4. This allows us the flexibility for a healthy transition period. Carolyn will join us, along with Chris, in most of our upcoming Investor Relations events. But for many of you, the first real opportunity to spend quality time with Carolyn may be at our Investor Day in California, which I'll remind you is on May 24 in the Bay Area followed by site visits in and around Napa County on May 25. We're all excited about the agenda we have in store for you at this event with a focus on giving you plenty of opportunities to see and hear for yourself about the progress we're making including from other key stakeholders. Now I'd like to offer you a little bit more background and help you see why Carolyn was the obvious choice to take over the finance leadership role from Chris. First, we were fortunate to have brought Carolyn in as a senior adviser to Chris and our entire finance organization in January. As such, Carolyn has been working very closely with the PG&E leadership team already for a couple of months now. She's been bringing her finance, organizational and process-oriented improvement skill set to bear, doing great work as we make the transition from bankruptcy recovery mode to more of a steady-state utility with a balanced growth profile. The same top-to-bottom transition we have brought to bear on our critical physical and wildfire risk mitigation efforts is now being deployed more widely across the whole PG&E organization. Our finance team is absolutely core to what we're doing here. And with Carolyn's leadership, I feel confident we can advance the core processes necessary to measure up with the very best in the industry. You heard me talk about waste elimination on our recent earnings call. As I said then, waste elimination is our fifth play from the Lean Management Playbook and a big focus for all of us at PG&E in 2023. Carolyn has extremely relevant prior experience in exactly these areas, and you might be interested to know that she was the primary architect of the PRIDE improvement programs, which were a hallmark program at Dynegy Energy where our Chairman, Bob Flexon, was CEO and which Carolyn will touch on more in her remarks in just a few moments. Carolyn and Chris will work side by side over the next couple of months, ensuring a smooth transition and allowing us to continue with the critical business of driving down both physical and financial risks, improving our customers' experience and delivering on our earnings per share growth target of at least 10% in 2023. As you know, we have a strong financial plan in place. And to be very clear, there is no change to our plans laid out on the fourth quarter earnings call, just sound execution underway. With that said, we're looking forward to seeing many of you out in California in May. And now I'll hand it over to Chris for a few words.

Thank you, Patti, and good afternoon, everyone. This is certainly an exciting time for me personally and definitely not an easy decision after spending the past 11-plus years as part of the PG&E team. I've had many great experiences along the way in the journey through Chapter 11 and out the other side gave me the opportunity to work with many fantastic people, both inside the company and among the financial community. More recently, I've gotten to see up close the deep cultural transition going on at PG&E under Patti's leadership, which should give you all great confidence in the company's continued progress. Coupled with that, the tools to execute the plan using the Lean operating system means we have the right structure in place for years to come. While the new opportunity I'm going to is exciting, leaving my PG&E family is not easy. But I know that the company has a first-class team in place and is absolutely on the right path to continue delivering the improved operating and financial performance, which customers and investors deserve. I've also had the opportunity to see what Carolyn can do in the months we spent together while she's been in the advisory role. She's been a key partner for me recently, and there's no doubt in my mind that she is going to hit the ground running. I know from first-hand experience that she is the right person to continue leading our finance organization through the enterprise-wide cultural change, which is already delivering essential improvement as you've been seeing. With that, I'll hand it over to Carolyn for a few words before Patti wraps up and we take your questions.

Good afternoon, everyone; and thank you, Patti, and Chris, for the introduction and your very warm welcome to the PG&E family. I couldn't be more excited about the opportunity to join the company at this moment in its journey. We are on a clear path towards recovery with an exceptional leadership team already in place. In the few months I have been here, I have witnessed momentum and real progress from the team, particularly as they have implemented waste elimination. And I also see plenty of room for further upside with the continued deployment of our simple, affordable model. This involves creating standards, measuring our performance and creating the capacity for repeatable efficiency gains. Finance has a significant contribution to play as a disciplined steward of balance sheet health and financial reporting. And this, in turn, allows us to continue maximizing investment on behalf of customers and investors. Let me share a bit more of my journey to PG&E. Most recently, I was CFO at Chevron Phillips Chemicals. CPChem is a petrochemical joint venture between Chevron and Phillips 66. Key element of my role there was driving business and cultural change while leading accounting, financial planning and analysis, treasury and tax. Earlier, I spent 7 years at Dynegy, where I was part of the executive team brought in to turn around financial, operational and cultural performance. And I emphasize the 3-pronged approach there because I am a true believer that a successful turnaround requires diligent focus for the full executive team on all 3 of those components. Dynegy grew from a small regional independent power producer, or IPP, emerging from bankruptcy into a multiregional integrated retail and power company. While I had several roles there leading many aspects of the enterprise, including my final role as EVP of Strategy and Administration, my proudest accomplishment is the launching and continuing success of PRIDE, Producing Results through Innovation by Dynegy Employees. Some of you may remember that PRIDE was their signature continuous margin and process improvement program and went through several rounds, resulting in over $400 million of savings along with nearly $1 billion in balance sheet efficiency, all of which were delivered consistently ahead of budget and schedule. It not only unlocked significant value from a financial perspective, but it was key to the cultural turnaround at the company because it both encouraged and celebrated greater employee ownership over Dynegy's success. Before that, I spent a few years at JPMorgan as the global controller for their commodities business as they grew that business. And prior to that, I was part of the new team recruited to NRG Energy when they emerged from bankruptcy. At NRG, I was the Corporate Controller and among other things, I was responsible for rebuilding the internal and external financial planning and analysis function, and reestablishing a strong control environment over financial operations. I think my experience matches up really well to the current stage of the PG&E journey. We clearly have a very deep well of internal talent, which, as Patti mentioned, has delivered us onto a path of recovery. I may be new to the regulatory -- the regulated utility world. I'm hardly unfamiliar with the model. Indeed, at both Dynegy and NRG, utilities for highly effective competitors whom we admired and studied, my prior experience as a financial executive in competitive commodity businesses and my past role as a director of a publicly traded utility give me some helpful insights as we look to build that continuous improvement muscle, which is going to be so essential to PG&E's simple, affordable model. So in closing, I just want to emphasize, I'm very excited to be here on the PG&E team. I'm very grateful to Chris for building an exceptionally strong team and a generous transition team -- transition time, and I look forward to getting to know all of you better in the coming weeks. With that, I'm going to hand it back to Patti for some quick closing remarks.

Thank you, Carolyn, and thank you, Chris. I have every confidence that the 2 of you are going to execute an efficient and thoughtful transition as we get ready for our Q1 earnings call in May. As I mentioned before, we're feeling good about our plans for this year and remain solidly on track to meet 2023 non-GAAP core EPS guidance of $1.19 to $1.23, our core EPS growth rate guidance of at least 10% in 2023 and 2024, and at least 9% for 2025 and 2026 remains intact, along with our 9.5% compound average rate base growth through 2027 and our commitment to no new equity in either 2023 or 2024. With that, we can't wait to see many of you in California in May, and the team is now available to take your questions. Operator, if you could please now open the lines to Q&A.

[Operator Instructions] We'll hear first today from Shar Pourreza with Guggenheim Partners.

It's actually Constantine here for Shar. And congrats to everyone on the transition.

Constantine, thanks for joining us.

Appreciate the reiterated financial plan and just maybe a quick question. In terms of the broader considerations for financial planning, do you think that this will impact any timing of internal reviews for cost management or financial decisions like dividend, capital allocation or any other expectations around the Analyst Day?

No, our plans continue to be as we stated at the end of the quarter, at the end of the year. And we're really excited about Carolyn's experience on financial transformation, and we actually think that she is a key enabler to us accelerating even additional waste elimination savings given all of her experience. So we think it strengthens the plan.

And maybe just could you help us contrast the skills and focus that you anticipate Carolyn will bring? Just kind of what's new that will be brought to the team and if there's any implied change in focus for kind of the financial execution portion of the story?

Yes. I mean I -- this is Carolyn, and I'll just say that I -- as noted, I've worked both at NRG and Dynegy, at the moment, particularly at NRG as they emerge from bankruptcy, so I'm very familiar with what a company has gone through and how controls can change through a bankruptcy and what's needed in terms of rebuilding the team, rebuilding the systems and rebuilding the controls. And that's going to be my primary focus. On a financial operational -- I have a financial operational background, and that will be my focus. And when you have that strength, that backbone, that helps unleash, I would say, significant cost savings in other areas of the business. And that's what we're looking to do here.

And I'll just pile on. This is Patti piling on to Carolyn. Her commitment to process and culture and her deep financial expertise is what made it such a logical decision for us given she was here as a consultant. She was working with us. And when Chris' opportunity came up, I had a lot of confidence in putting Carolyn in the role given what I had seen in just the last couple of months in her role here at the company.

Congrats again to the team, and best of luck, Chris. Speak soon.

Thanks, Constantine.

We'll hear next from Paul Zimbardo with Bank of America.

Just a quick one for me. Just given the 2 recent senior changes, Patti, are you aware of any other changes that are on the horizon? Or do you think you've got the new roster filled out?

We definitely have the new roster filled out. And one of the things that gives me a lot of comfort is knowing that our operating procedures and processes are strengthening our performance playbook, our Lean operating system, helps us to manage through changes in leadership like this. We have an operating cadence of management reviews. We have a plan for the year. We have key objectives clearly identified and monitored as Carolyn, since she's been here since the beginning of the year, just walks in and can step right into Chris' pace and continue to lead. It's the strength of an organization like that, which we are building. And so I feel very good about that, and the team who is here is definitely committed to the cause and excited about the future, and that includes me. To be perfectly clear. I'm not going anywhere, and I'm very excited about the team that we've built. And as the team evolves, that's the team for the time, and we certainly have it here at PG&E.

Okay. Great. Appreciate it. And congratulations again.

Thanks, Paul.

[Operator Instructions] At this time, we'll hear now from Ryan Levine with Citi.

Just one question. What was the process in selecting the new CFO? Was this over the course of several months? Did it include internal and external candidates? Or any color you could provide to how you came to the conclusion with Carolyn?

Yes. Great question, Ryan. We have a robust succession planning process, and we consider external candidates when appropriate. And so Carolyn has been on our radar for some time, thanks to Bob Flexon as we mentioned, our Board Chair. Bob had worked with Carolyn before. He's long sung her praises to us. We brought her in as a consultant. And so when this change occurred, it became very -- she became a very logical and leading candidate. She was interviewed by the Board, and they agreed with me that she's the right leader for the right time. So we're pretty excited that she will be taking on the role. We're grateful for her taking on the assignment.

And with no other questions at this time, I'd like to turn things back to the company for any closing remarks.

Okay. Thanks for joining us. As you can see, we will have an orderly transition. We're happy to have an opportunity to introduce you to Carolyn in the coming months, another good reason to come to California for Investor Day. Again, thanks so much for signing on today, and please be safe out there.

And again, that does conclude today's conference. Thank you all for joining us. You may now disconnect.