NOTE 5: COMMON STOCK AND SHARE-BASED COMPENSATION

PG&E Corporation had 514,755,845 shares of common stock outstanding at December 31, 2017. PG&E Corporation held all of the Utility’s outstanding common stock at December 31, 2017.

In February 2017, PG&E Corporation amended its February 2015 EDA providing for the sale of PG&E Corporation common stock having an aggregate price of up to $275 million. During 2017, PG&E Corporation sold 0.4 million shares of its common stock under the February 2017 EDA for cash proceeds of $28.4 million, net of commissions paid of $0.2 million. There were no issuances under the February 2017 EDA for the three months ended December 31, 2017. As of December 31, 2017, the remaining sales available under this agreement were $246.3 million.

In addition, during 2017, PG&E Corporation sold 7.4 million shares of common stock under its 401(k) plan, the Dividend Reinvestment and Stock Purchase Plan, and share-based compensation plans for total cash proceeds of $366.4 million.

Dividends

Ordinarily, the Board of Directors of PG&E Corporation and the Utility declare dividends quarterly. Under the Utility’s Articles of Incorporation, the Utility cannot pay common stock dividends unless all cumulative preferred dividends on the Utility’s preferred stock have been paid. Under their respective credit agreements, PG&E Corporation and the Utility are each required to maintain a ratio of consolidated total debt to consolidated capitalization of at most 65%. Based on the calculation of this ratio for each company, no amount of PG&E Corporation’s retained earnings and $218 million of the Utility’s retained earnings was subject to this restriction at December 31, 2017. Additionally, the Utility’s net assets, and therefore its ability to pay dividends, are restricted by the CPUC-authorized capital structure, which requires the Utility to maintain, on average, at least 52% equity. Based on the calculation of this ratio, $14.3 billion of the Utility’s net assets were restricted at December 31, 2017. Additionally, as a result of this requirement, the Utility’s ability to pay dividends in the future could be impacted by future potential liabilities. On December 20, 2017, the Board of Directors of PG&E Corporation suspended quarterly cash dividends on PG&E Corporation’s common stock, beginning with the fourth quarter of 2017 due to uncertainty related to the causes of and potential liabilities associated with the Northern California wildfires. (See “Northern California Wildfires” in Note 13 below.)

For the first quarter of 2017, the Board of Directors of PG&E Corporation declared a common stock dividend of $0.49 per share quarterly. In May 2017, the Board of Directors of PG&E Corporation approved a new annual common stock cash dividend of $0.53 per share quarterly. In 2017, total dividends declared were $1.55 per share.

Long-Term Incentive Plan

The PG&E Corporation LTIP permits various forms of share-based incentive awards, including restricted stock awards, restricted stock units, performance shares, and other share-based awards, to eligible employees of PG&E Corporation and its subsidiaries. Non-employee directors of PG&E Corporation are also eligible to receive certain share-based awards. A maximum of 17 million shares of PG&E Corporation common stock (subject to certain adjustments) has been reserved for issuance under the 2014 LTIP, of which 14,327,157 shares were available for future awards at December 31, 2017.

The following table provides a summary of total share-based compensation expense recognized by PG&E Corporation for share-based incentive awards for 2017, 2016, and 2015:

(in millions)	2017		2016		2015
Restricted stock units	$	40	$	53	$	47
Performance shares		45		55		46
Total compensation expense (pre-tax)	$	85	$	108	$	93
Total compensation expense (after-tax)	$	50	$	64	$	55

The amount of share-based compensation costs capitalized during 2017, 2016, and 2015 was immaterial. There was no material difference between PG&E Corporation and the Utility for the information disclosed above.

Restricted Stock Units

Restricted stock units generally vest equally over three years. Vested restricted stock units are settled in shares of PG&E Corporation common stock accompanied by cash payments to settle any dividend equivalents associated with the vested restricted stock units. Compensation expense is generally recognized rateably over the vesting period based on grant-date fair value. The weighted average grant-date fair value for restricted stock units granted during 2017, 2016, and 2015 was $66.95, $56.68, and $53.30, respectively. The total fair value of restricted stock units that vested during 2017, 2016, and 2015 was $57 million, $36 million, and $57 million, respectively. The tax benefit from restricted stock units that vested during each period was not material. In general, forfeitures are recorded rateably over the vesting period, using historical averages and adjusted to actuals when vesting occurs. As of December 31, 2017, $33 million of total unrecognized compensation costs related to nonvested restricted stock units was expected to be recognized over the remaining weighted average period of 1.46 years.

The following table summarizes restricted stock unit activity for 2017:

	Number of	Weighted Average Grant-
	Restricted Stock Units	Date Fair Value
Nonvested at January 1	1,923,010	$	51.26
Granted	658,395		66.95
Vested	(1,172,194)		48.44
Forfeited	(29,976)		61.07
Nonvested at December 31	1,379,235	$	60.93

Performance Shares

Performance shares generally will vest three years after the grant date. Upon vesting, performance shares are settled in shares of common stock based on either PG&E Corporation’s total shareholder return relative to a specified group of industry peer companies over a three-year performance period or, for a small number of awards, an internal PG&E Corporation metric. Dividend equivalents are paid in cash based on the amount of common stock to which the recipients are entitled.

Compensation expense attributable to performance share is generally recognized rateably over the applicable three-year period based on the grant-date fair value determined using a Monte Carlo simulation valuation model for the total shareholder return based awards or the grant-date market value of PG&E Corporation common stock for internal metric based awards. The weighted average grant-date fair value for performance shares granted during 2017, 2016, and 2015 was $77.00, $53.61, and $68.27, respectively. There was no tax benefit associated with performance shares during each of these periods. In general, forfeitures are recorded rateably over the vesting period, using historical averages and adjusted to actuals when vesting occurs. As of December 31, 2017, $46 million of total unrecognized compensation costs related to nonvested performance shares was expected to be recognized over the remaining weighted average period of 1.42 years.

The following table summarizes activity for performance shares in 2017:

	Number of	Weighted Average Grant-
	Performance Shares	Date Fair Value
Nonvested at January 1	1,838,855	$	58.65
Granted	745,724		77.00
Vested	(81,501)		53.74
Forfeited (1)	(755,050)		66.30
Nonvested at December 31	1,748,028	$	63.40

(1) Includes performance shares that expired with zero value as performance targets were not met.