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We have maintained our Neutral recommendation on PG&E Corp. (PCG - Analyst Report) on Sep 23, 2013.

Why the Reiteration?

PG&E Corp. has a solid portfolio of regulated utility assets that offer a stable earnings base and substantial long-term growth potential. The company strives to optimize generation margins by improving its cost-structure, performance and reliability of its nuclear as well as fossil units.

Going forward, the company’s earnings growth will be driven by favorable decisions from the California Public Utilities Commission (CPUC) and Federal Energy Regulatory Commission, as well as long-term supply agreements, diversification into alternative power sources and infrastructure improvement programs like advanced metering infrastructure program resulting in rate base growth.

The CPUC provides the company with ample regulatory support through progressive mechanisms like decoupling. Decoupling insulates the top line of the company from lower customer usage and weather vagaries.

The company’s strong balance sheet and cash flows provide substantial financial flexibility and cushion in the present challenging business environment. As of Jun 30, 2013, the company had no cash borrowings and $91 million of letters of credit outstanding under its $3.0 billion revolving credit facility.

The company has been consistently paying dividends and currently pays an annual dividend of $1.82 per share. This brings the average dividend yield to 4.32%.

Despite these positives, the present unfavorable macro backdrop, headwinds in the California economy, tepid demand for electricity, accidental charges and power-price volatility remain matters of concern.

Other Stocks to Consider

PG&E Corp. presently retains a Zacks Rank #3 (Hold). Stocks that are worth considering in the space are The AES Corp. (AES - Analyst Report), Brookfield Infrastructure Partners L.P. (BIP - Snapshot Report) and Integrys Energy Group, Inc. (TEG - Analyst Report), all with a short-term Zacks Rank #2 (Buy).

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