EQUITY

9 Months Ended

Sep. 30, 2023

Equity [Abstract]

EQUITY

EQUITY

Settlement of Equity Units

During 2020, PG&E Corporation issued 16 million PG&E Corporation equity units. The equity units represent the right of the unitholders to receive, on the settlement date, between 137 million and 168 million shares of PG&E Corporation common stock. The common stock received was based on the value of PG&E Corporation common stock over a measurement period specified in the purchase contract component of each equity unit and was subject to certain adjustments as provided therein. The common stock received by these unitholders was originally valued at approximately $1.3 billion and recognized in shareholders’ equity by PG&E Corporation upon the issuance of the equity units. During the nine months ended September 30, 2023, all equity units were settled, resulting in the issuance of 137 million shares of PG&E Corporation common stock, valued at approximately $1.3 billion.

Ownership Restrictions in PG&E Corporation’s Amended Articles

Under Section 382 of the IRC, if a corporation (or a consolidated group) undergoes an “ownership change,” net operating loss carryforwards and other tax attributes may be subject to certain limitations (which could limit PG&E Corporation or the Utility’s ability to use these deferred tax assets to offset taxable income). In general, an ownership change occurs if the aggregate stock ownership of certain shareholders (generally five percent shareholders, applying certain look-through and aggregation rules) increases by more than 50% over such shareholders’ lowest percentage ownership during the testing period (generally three years). The Amended Articles limit Transfers (as defined in the Amended Articles) that increase a person’s or entity’s (including certain groups of persons) ownership of PG&E Corporation’s equity securities to 4.75% or more prior to the Restriction Release Date (as defined in the Amended Articles) without approval by the Board of Directors of PG&E Corporation.

On July 8, 2021, PG&E Corporation, the Utility, ShareCo and the Fire Victim Trust entered into the Share Exchange and Tax Matters Agreement, pursuant to which PG&E Corporation and the Utility made a “grantor trust” election for the Fire Victim Trust effective retroactively to the inception of the Fire Victim Trust. As a result of the grantor trust election, shares of PG&E Corporation common stock owned by the Fire Victim Trust are treated as held by the Utility and, in turn, attributed to PG&E Corporation for income tax purposes. Consequently, any shares owned by the Fire Victim Trust, along with any shares owned by the Utility directly, are effectively excluded from the total number of outstanding equity securities when calculating a person’s Percentage Stock Ownership (as defined in the Amended Articles) for purposes of the 4.75% ownership limitation in the Amended Articles. Shares owned by ShareCo are also effectively excluded because ShareCo is a disregarded entity for income tax purposes. For example, although PG&E Corporation had 2,611,251,771 shares outstanding as of October 18, 2023, only 2,065,764,591 shares (that is, the number of outstanding shares of common stock less the number of shares held by the Fire Victim Trust, the Utility and ShareCo) count as outstanding for purposes of the ownership restrictions in the Amended Articles. As such, based on the total number of outstanding equity securities and taking into account the shares of PG&E Corporation common stock known to have been sold by the Fire Victim Trust as of October 18, 2023, a person’s effective Percentage Stock Ownership limitation for purposes of the Amended Articles as of October 18, 2023 was 3.75% of the outstanding shares. At various dates throughout 2022 and during the nine months ended September 30, 2023, the Fire Victim Trust exchanged Plan Shares for an equal number of New Shares in the manner contemplated by the Share Exchange and Tax Matters Agreement; in each case, the Fire Victim Trust thereafter reported that it sold the applicable New Shares. During the nine months ended September 30, 2023, the Fire Victim Trust’s sale of PG&E Corporation common stock in the aggregate amount of 180,000,000 shares resulted in an aggregate tax benefit of $822 million recorded in PG&E Corporation’s and the Utility’s Condensed Consolidated Financial Statements. Cumulatively through September 30, 2023, the Fire Victim Trust has sold 410,000,000 shares resulting in an aggregate tax benefit of approximately $1.7 billion recorded in PG&E Corporation’s and the Utility’s Condensed Consolidated Financial Statements. As of October 18, 2023, to the knowledge of PG&E Corporation, the Fire Victim Trust had sold 410,000,000 shares of PG&E Corporation common stock in the aggregate and owned 67,743,590 shares.

As of the date of this report, it is more likely than not that PG&E Corporation has not undergone an ownership change and consequently, its net operating loss carryforwards and other tax attributes are not limited by Section 382 of the IRC.

Dividends

Utility

On each of December 15, 2022, February 16, 2023, and May 18, 2023, the Board of Directors of the Utility declared dividends on its outstanding series of preferred stock totaling $3.5 million, which were paid on February 15, May 15, and August 15, 2023, respectively. On September 14, 2023, the Board of Directors of the Utility declared dividends on its outstanding series of preferred stock totaling $3.5 million, payable on November 15, 2023, to holders of record on October 31, 2023.

On each of February 16, May 18, and September 14, 2023, the Board of Directors of the Utility declared common stock dividends of $425 million, $450 million, and $450 million, which were paid to PG&E Corporation on February 28, June 21, and September 29, 2023, respectively.

PG&E Corporation

On December 20, 2017, the Boards of Directors of PG&E Corporation suspended quarterly cash dividends on PG&E Corporation common stock, beginning the fourth quarter of 2017. Subject to the dividend restrictions described in Note 7 of the Notes to the Consolidated Financial Statements in Item 8 of the 2022 Form 10-K, any decision to declare and pay dividends in the future will be made at the discretion of the Boards of Directors and will depend on, among other things, results of operations, financial condition, cash requirements, contractual restrictions and other factors that the Boards of Directors may deem relevant.