Economy

Giant utility facing California wildfire claims explores bankruptcy, sources say

Giant utility facing California wildfire claims explores bankruptcy, sources say”

Pacific Gas & Electric Company (PG&E) was getting hit hard Monday, down more than 18% at $19.93 a share, after a report out late Friday said it was considering filing for bankruptcy protection.

Despite the news, UBS analyst Daniel Ford raised his price target from $26 to $29, saying it assumes PG&E is "not liable for Tubbs and reflects a higher $15.1B net liability ($11.3B prior) for 2017 and 2018 due to the Camp fire but a lower cost of funding (7.5% versus 9.0% WACC)".

The California wildfires that scorched millions of acres across the Golden State in late 2018 caused widespread devastation, with loss of human life and property damage just some of the ways that the fires touched the lives of thousands of Californians.

The California attorney general told a judge last week that PG&E could face charges as serious as involuntary manslaughter or murder if investigators determine that reckless operation or maintenance of power equipment caused any recent wildfires in the state.

The parent company of California's largest utility said Friday it is assessing its finances and structure in its effort to confront a growing liability threat from wildfires blamed on the company. The Blue Ribbon panel is expected to study the costs of California wildfires and make recommendations to the state legislature and governor. The company could be engaged in similar brinkmanship now, he said. The filing isn't certain, the people said, but it may be enough to force the hand of state legislators who could come up with a rescue package. "Last year, they were able to fool the legislature with the narrative of bankruptcy or bailout, and the legislature gave them a bailout".

"While we think that sufficient support for such a bill could eventually be rallied, exploitive tactics and a reticence toward change will not improve PCG's public profile and will not significantly accelerate the process for legislation", the two analysts wrote, referring to the company's ticker.

Bankruptcy "should be considered a credible risk by shareholders", they said.

PG&E announced the assessment Friday in a news release, citing "the growing wildfire threat". "We recognize the need to balance the interests of many stakeholders while maintaining safe, reliable and affordable services for our customers, which is always our top priority", the company said in a statement.

"We want to tap fresh perspectives and additional expertise to help address the changing nature of PG&E's business and the challenges it faces now and in the future", the board said in a statement.

The prospect of a state takeover may not offer a panacea, Bloomberg Intelligence analyst Kit Konolige said. "The assumption that whatever you put in place of PG&E would be better - that's really unproven".



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