PG&E Shares Keep Tumbling as California Rescue Chances Dim
January 16 2019 - 2:04PM
Dow Jones News
By Katherine Blunt and Alejandro Lazo
PG&E Corp. shares continued to fall Wednesday as prospects
dimmed that California politicians would step in to help the
embattled utility avoid a bankruptcy filing.
Shares were off about 8% at $6.36 in early-afternoon trading,
extending declines after PG&E said Monday it would file for
chapter 11 protection at the end of the month due to liabilities
stemming from its role in starting California wildfires.
The bankruptcy announcement triggered a selloff that has erased
more than $5 billion from the company's stock market value this
week. Shares have fallen by roughly 64% since Friday's close, and
since the end of October -- when they traded above $46 -- their
value has dropped by more than 86%.
Analysts said the continued plunge reflected mounting concerns
among investors that California Gov. Gavin Newsom and state
lawmakers won't offer the company an alternative to bankruptcy in
the near term. Public opposition to PG&E has grown in recent
months, complicating a state rescue.
"Investors are starting to realize this is going to be quite a
protracted process to figure out a solution that works for all
constituents," said Morgan Stanley analyst Stephen Byrd.
PG&E declined to comment.
The company's share price has been falling since mid-November,
when the Camp Fire, the deadliest wildfire in California history,
killed 86 people and destroyed about 14,000 homes in the northern
part of the state. PG&E's market value was below $3.6 billion
as of midday Wednesday, down from about $24 billion at the end of
October.
Both the S&P 500 and the Dow Jones Utility Average will
replace PG&E in their indexes on Friday.
State fire investigators haven't yet determined whether PG&E
equipment helped start the Camp Fire, but the company has disclosed
that some of its equipment malfunctioned in the area shortly before
the fire started. Investigators previously tied PG&E equipment
to at least 17 major fires in 2017.
In a securities filing Monday, PG&E called a bankruptcy
filing its "only viable option," citing more than $30 billion in
potential wildfire-related liability costs. It said it faced about
50 lawsuits related to the Camp Fire and more than 700 lawsuits in
connection with 2017 fires.
Rob Rains, an analyst with Washington Analysis LLC, wrote in a
note that the company's intent to file for bankruptcy protection
and subsequent statements from California officials imply "that a
rescue mission by elected leaders may not be forthcoming,
forecasting a potentially contentious bankruptcy proceeding."
California lawmakers last year passed legislation that provides
a path for PG&E to securitize some of its wildfire-related
liabilities from 2017 wildfires and pass those costs on to
ratepayers. But the law didn't explicitly address fires in 2018,
and lawmakers this week indicated there were no efforts under way
to expand the law.
State Assemblyman Chris Holden, who had been expected to
introduce legislation to extend the law to include 2018, has since
paused the effort.
"To the extent that the courts can help them restructure and put
them in a different position, I think that's obviously the choice
they've made," Mr. Holden said.
Mr. Newsom, who took office as governor this month, has stated
his desire to protect the interests of the state as well as fire
victims and PG&E customers as the company heads to bankruptcy
court. But he has stopped short of offering an alternative.
Write to Katherine Blunt at Katherine.Blunt@wsj.com and
Alejandro Lazo at alejandro.lazo@wsj.com
(END) Dow Jones Newswires
January 16, 2019 13:49 ET (18:49 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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