PG&E Corportation (PCG, Financial)
We continue to see immense value and potential in our position in Pacific Gas & Electric, which emerged from bankruptcy just two years ago. PG&E’s new CEO, Patti Poppe, has transformed the organization, creating a new leadership and safety culture around a talented, committed, and dynamic executive team that is rethinking the way the Company addresses the energy needs of Northern Californians. California is at the forefront of the new energy transition with aggressive renewable procurement goals and high electric vehicle adoption, yet the state faces escalating climate change risks due to extreme drought conditions and wildfires. These conditions present unique challenges to utilities operating in the state. Patti and her team have brought new and creative solutions to these challenges with her focus on a lean operating system and an ambitious undergrounding plan.
In April, PG&E Corporation reported a straightforward and uneventful set of a results, delivering on its promises to customers and investors. As investors, we celebrate that simplicity. At current prices, the Company trades at under 12x 2022 consensus earnings compared to the utility index average of 21x and below its closest California peer, Edison International, at 15x. While there is an overhang from shares to be monetized by the PG&E Fire Victim Trust, PG&E will benefit from the reinstatement of a cash dividend in 2023 and if, as hoped, it is included in the S&P 500 index. Over the next year, we think PG&E will continue to re-rate towards industry averages while also growing earnings at an industry-leading 10% per year. In this type of market environment, the financial equation of consistent earnings growth and multiple re-rating makes for a wonderfully boring story and a solid anchor for our portfolio as Third Point’s largest position.
From Daniel Loeb (Trades, Portfolio)'s Third Point first-quarter 2022 investor letter.
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