Two major banks downgraded PG&E Corp on Tuesday, citing shortcomings in California’s wildfire reform legislation that leave the utility exposed to uncapped liabilities beyond 2030.
Wells Fargo downgraded PG&E to Equal Weight from Overweight and reduced its price target to $24 from $25. BMO Capital Markets cut the stock to Market Perform from Outperform and slashed its target to $21 from $28. PG&E shares were trading at $16.60 as of Aug. 28, down $1.35, or 7.52%, on the day.
Analysts pointed to SB492, a bill signed into law in 2024, for failing to establish a mechanism to replenish California’s Wildfire Fund once depleted. The legislation also omitted a $6 billion per-event liability cap, a bar on insurer subrogation, and a repeal of the 2028 sunset for the continuation fund. BMO warned that uncapped wildfire liabilities could materially weigh on PG&E’s valuation, estimating a $10 per share drag compared with a prior $6 per share estimate.
BMO outlined three valuation scenarios for PG&E: a $3 per share valuation under an adverse wildfire and regulatory outcome, a $35 target if constructive reform passes in 2027, and a base-case target of $21. The firm projects adjusted EPS of $1.65 in 2026, $1.82 in 2027, and $1.98 in 2028.
Wells Fargo projected PG&E could repurchase about $3 billion of shares through 2030, averaging roughly $700 million to $800 million annually by moderating rate-base growth. BMO favored dividend increases, estimating a potential $0.50 per share payout in 2027, with remaining capital directed toward buybacks.
Wells Fargo maintained an Overweight rating on Sempra and an Underweight rating on Edison International.
