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RBC upgrades PG&E with utility 'finally moving past' San Bruno

RBC CapitalMarkets on July 15 upgraded PG&ECorp. shares to "outperform" from "sector perform"and increased the price target to $71 from $60, with the expectation that thecompany will continue to overcome regulatory burdens related to the San Bruno,Calif., pipeline rupture.

"Weare upgrading PCG to Outperform, as we expect its valuation gap with peers tocontinue closing as investors become more comfortable with the post-San Brunoutility," RBC analyst Shelby Tucker wrote in a note to investors.

RBC saidthe company's dividend increaseand its intention to reach a 60% dividend payout ratio indicate that PG&Eis "finally moving past the San Bruno issues."

"[PG&E]benefits from a strong capital investment program and a favorable regulatoryenvironment at its utility, [PacificGas and Electric Co.], that should be supportive of rate basegrowth in the range of 5–7% through 2019. Our expectation is that EPS growthwill largely keep pace with rate base growth, while the dividend will grow at9%+ per year to achieve the 60% payout ratio target by 2019," RBC noted.

Recently, ajudge ruled that thejury in the criminal caseagainst Pacific Gas and Electric needs to hear about the San Bruno pipelineexplosion to move the case forward, although the case is notexplicitly about the incident.