Bank of America revised its view on PG&E Corp., downgrading the utility to Neutral from Buy on Tuesday and lowering its price objective to $13 from $24. The firm said California's newly enacted Senate Bill 492 enhances certain protections for wildfire victims but stops short of creating a lasting liability and financing structure PG&E needs to support its extensive capital plans.
The bank detailed its assessment of the legislation, saying the statute expedites compensation for survivors, curbs speculative claims, increases executive accountability and sets a statewide wildfire mitigation strategy. However, BofA emphasized that the law does not materially change the treatment of utility liability, insurance subrogation or inverse condemnation - elements it views as critical for restoring investor confidence and improving access to affordable capital.
As a result of the legislative outcome, BofA trimmed its projection for PG&E's capital deployment. The bank said the company's current $73 billion capital plan through 2030 and its target of more than 9% annual earnings-per-share (EPS) growth from 2027 to 2030 were premised on a more favorable wildfire liability framework. In its updated model, BofA assumes PG&E will forgo $7.3 billion of investment from roughly $23 billion earmarked for capacity and new-business projects. The firm stressed that this is its own modeling assumption rather than company guidance.
Under BofA's revised assumptions, forecasted EPS growth through 2030 falls to about 7%. The bank now estimates EPS of $1.78 in 2027 and $1.90 in 2028, versus its prior estimates of $1.79 and $1.96 for those years. BofA noted that spending for safety, reliability, compliance and other essential obligations is expected to remain preserved despite the reduced capital outlook.
BofA also outlined how a pullback in investment could shift the company's financial profile. If the $7.3 billion of foregone investment were instead returned to shareholders - an outcome the bank models hypothetically and which PG&E has not announced - the utility's dividend yield could rise to about 6.5% and payout ratios could reach roughly 43% to 50%. BofA cautioned that any return-of-capital plan would be speculative since PG&E has not put forward such a program.
Another theme highlighted by BofA is the unsettled status of the Wildfire Fund. The bank said the fund, as structured under the legislation, remains a vulnerability because it does not provide the long-term loss-absorbing capacity or durability PG&E sees as necessary to attract lower-cost capital. That unresolved framework, BofA added, could make advancement toward investment-grade credit ratings less certain.
Looking ahead, BofA flagged PG&E's investor update on Wednesday as the next key catalyst. Investors, the bank said, will focus on any announced changes to capital spending, growth targets and shareholder-return plans. According to BofA, a smaller-than-expected reduction in capital spending or an ongoing commitment to the 9% plus growth target could be supportive for the shares, while a larger-than-modeled cut could weigh on earnings expectations.
Using a valuation input price of $13.27 in its analysis, BofA's new $13 price objective implies roughly 2% downside from that reference point, partially offset by a projected dividend yield of about 6.6% and a potential total return near 4.5% under its assumptions.
Context and implications
This reassessment by BofA leaves several open questions for investors and highlights the interplay between public policy on wildfire liability and utility capital planning. The bank's updated modeling offers a scenario where capital projects are pared back, EPS growth is moderated, and shareholder returns could rise if foregone investments are redirected - though the latter remains hypothetical without company action.