Wildfire reform remains unresolved, UBS Group AG downgrades The Pacific Gas and Electric (PCG.US) rating to "Neutral"

UBS Group AG downgraded California utility company The Pacific Gas and Electric (PCG.US) from "Buy" to "Neutral" and lowered its target price from $19 to $14, citing increasing risks that the company will make no progress on wildfire liability reform this year, as well as the company's decision to withdraw its long-term earnings growth rate guidance while announcing a strategic review. The company's shares fell 3.5% in Wednesday trading, hitting their lowest level since September 2022. UBS Group AG analyst Gregg Orrill said California Governor Newsom recently discussed convening a special legislative session on artificial intelligence but did not mention wildfire issues, while gubernatorial candidate Xavier Becerra has been more vocal in pushing for wildfire reform, delaying a potential catalyst for The Pacific Gas and Electric's stock price. Orrill lowered his long-term earnings per share (EPS) growth forecast for The Pacific Gas and Electric from 9% to 8.5%, citing his compounding calculation of the company's $2 billion in deferred capital expenditures between 2027 and 2030; he also noted that tax loss selling pressure and interest rate risk further reduce the stock's appeal. The analyst also cut his fiscal 2028 EPS estimate from $1.95 to $1.90 and lowered his five-year capital expenditure outlook by $6 billion to $65.5 billion. This follows the company's recent deferral of $2 billion in 2027 capital expenditures from its "growth" category.