UBS downgrades PG&E to neutral due to wildfire risks

UBS has downgraded PG&E Corp from "Buy" to "Neutral" due to concerns about wildfire risks and a lack of positive developments for the company. The investment bank has also reduced its price target for PG&E's stock from $22 to $19, reflecting a 30% discount compared to the average in the utility sector. The downgrade comes as UBS cited the potential depletion of California’s wildfire insurance fund following recent fires, as well as ongoing wildfire volatility. While PG&E has a strong investment outlook, there are worries about new legislation that might help address wildfire risks. At this moment, no suitable policies have been introduced. PG&E is expected to announce its plans for rate changes for the years 2027-2029 soon. The utility aims to keep annual bill increases between 2% and 4%. Additionally, a decision on the cost of capital for California’s utility companies is set for March 20. UBS is doubtful that PG&E will receive a BBB credit rating anytime soon. The company previously considered selling a minority share in its new energy division, which could have raised significant funds. However, there are currently no clear paths to improve its credit standing. The firm now applies a higher wildfire-related discount in its evaluation of PG&E, which it previously had set at 20%.