Investing.com -- Moody’s Ratings has improved the ratings of PG&E (NYSE: PCG ) Corporation and Pacific Gas & Electric, affecting over $45 billion of debt securities. On March 27, 2025, the agency upgraded PG&E Corporation’s ratings, including its senior secured debt ratings to Ba2 from Ba3, and withdrew the corporation’s Ba1 corporate family rating, Ba2-PD probability of default rating and SGL-2 Speculative Grade Liquidity rating. Pacific Gas & Electric’s ratings were also upgraded, including its senior secured first mortgage bonds rating to Baa1 from Baa2, and a Baa3 Issuer rating was assigned to the utility.

All of PG&E’s debt is secured on a first lien basis by most of the utility’s real assets and certain tangible assets. The parent’s senior secured debt is secured by a pledge of the stock in PG&E.

The upgrades reflect PG&E’s ongoing progress in reducing wildfire risk, strengthening its financial profile and improving its relationships with key stakeholders, according to Jeff Cassella, Moody’s Ratings VP – Senior Credit Officer. The upgrades also take into account the support from California’s wildfire legislation (AB1054), which includes continued access to the state’s wildfire insurance fund and credit positive shareholder liability cap and cost recovery provisions.

Since its emergence from bankruptcy in 2020, PG&E has invested over $20 billion in wildfire mitigation. This has reduced the risk of the utility’s infrastructure causing a catastrophic fire and the potential liabilities that may result. Since 2020, PG&E has not experienced any catastrophic wildfires that have had a material financial impact on the company, which has also supported the upgrade.

The company’s credit worthiness is supported by the provisions within AB1054 and the expectation that the wildfire insurance fund will remain available and accessible. The financial impact of future wildfire events should be mitigated by PG&E’s ability to attain approval of its annual wildfire safety certificate from regulators, which allows for the presumption of the company’s prudence as part of the enhanced prudency standard and protects the company with a liability cap on reimbursement to the wildfire fund if the company is found imprudent.

In the near term, California regulator approval of PG&E’s latest wildfire mitigation plan covering the 2026 – 2028 period, expected to be submitted in April, is required for the utility to continue to request and receive its annual safety certificate. Over the long term, SB 884, signed into law in September 2022, provides legislative support for PG&E’s plan to bury 10,000 miles of its power lines in high fire risk areas over the next 10 years.

Moody’s also expects PG&E’s financial profile to continue to strengthen and remain supportive of credit quality including PG&E Corporation’s ratio of cash flow from operations pre-working capital changes (CFO pre-W/C) to debt of low-to-mid-teens and the utility’s ratio of CFO pre-W/C to debt in the mid-to-high-teens excluding the impact of securitization debt, over the next few years. The company indicated that it may pay down $2 billion of this debt by the end of 2026.

As of December 31, 2024, PG&E Corporation had about $940 million of cash and cash equivalents on its balance sheet which included $705 million of cash at the utility. The company’s liquidity is also currently bolstered by the company’s modest common stock dividend growth policy.

The stable outlooks for both PG&E Corporation and Pacific Gas & Electric reflect the utility’s ongoing progress in reducing its exposure to wildfire risk and continued key stakeholder support. It reflects Moody’s expectation that the utility will maintain access to the state’s wildfire insurance fund and other key provisions of AB1054. The stable outlooks also consider their solid financial profiles as Moody’s expects PG&E Corporation’s ratio of CFO pre-W/C to debt to be in the low-to-mid-teens and the utility’s ratio of CFO pre-W/C to debt to be in the mid-to-high teens, excluding the impact of securitization, over the next two years.

The ratings could be upgraded or downgraded depending on various factors, including the utility’s ability to continue reducing catastrophic wildfire risk and maintaining the required wildfire safety certificate and access to the wildfire insurance fund, among other things. The company’s ability to sustain its current financial profile will also be important for potential rating upgrades or downgrades.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.