PG&E Plunges After Judge Allows Trial on Whether It Caused Wildfire
August 19 2019 - 5:46PM
Dow Jones News
By Katherine Blunt
PG&E Corp. shares plunged after a judge allowed a trial on
whether its equipment caused the second-worst wildfire in
California history, a case that could add billions of dollars to
the liabilities the bankrupt company faces.
California fire investigators concluded in January that PG&E
equipment didn't cause the Tubbs fire, the deadliest in a series of
wildfires that burned California's wine country in 2017. But
attorneys representing fire victims strongly dispute that finding
and persuaded the judge overseeing PG&E's chapter 11 proceeding
on Friday to permit a state civil trial on the issue.
PG&E shares on Monday closed down more than 25% at a
seven-month low of $10.67 as investors grappled with the
possibility that the company could face billions of dollars in
additional liability costs as it restructures in bankruptcy
court.
Citi analyst Praful Mehta on Monday cut his "buy" rating on
PG&E, estimating that the fire could add $15 billion to
PG&E's liability costs.
He said there is "significant risk" of a jury deciding that
PG&E should be held responsible for the fire given the
company's continuing problems with operating its electric grid
safely.
"We think that a jury trial brings a lot of other dynamics in
play, especially given PG&E's history of poor safety and
operational culture," he said.
PG&E filed for chapter 11 protection in January, citing more
than $30 billion in potential liabilities tied to a series of fires
in 2017 and 2018 that collectively killed more than 100 people.
That calculation included the Tubbs fire, which killed 22 people
and burned nearly 37,000 acres mainly in Napa and Sonoma
counties.
As the company prepared its bankruptcy filing, California fire
investigators determined that a private electrical system ignited
the Tubbs fire and said it found no evidence that PG&E had
violated state law.
Now, lawyers representing fire victims and insurance companies
say they have evidence that could prove that PG&E's equipment
was involved in the blaze.
Mike Danko, a trial lawyer representing victims of the 2017 and
2018 fires, said the state investigation into the Tubbs fire failed
to consider video evidence and other information indicating that
the blaze may have been sparked by PG&E equipment. He said he
expects a trial within five months and plans to join other lawyers
in preparing additional evidence.
"We're going to lay it all out," he said. "All the cards related
to Tubbs should be flipped up on the table."
PG&E in a statement Friday said that it stands by the state
investigators' findings.
"Regardless of the next legal steps, Cal Fire has already
determined that the cause of the 2017 Tubbs Fire was not related to
PG&E equipment, " the company said.
The trial complicates PG&E's effort to devise a
restructuring plan with the goal of emerging from bankruptcy in
less than a year. California lawmakers last month passed
legislation creating a fund to help the state's largest utilities
handle wildfire liability costs going forward. PG&E is required
to exit bankruptcy by June 30, 2020 in order to participate in
it.
PG&E has said it intends to file a restructuring plan in the
coming weeks. The judge overseeing the bankruptcy case last week
affirmed the company's exclusive right to craft that framework as
its creditors and insurers pushed to file their own plans.
Dov Gertzulin, founder of PG&E bondholder DG Capital
Management, said, "This is a disappointment to investors. Two Cal
Fire teams determined PG&E has no responsibility for the Tubbs
fire....This adds more uncertainty to the process. There's a chance
the jury might award tort claimants a high number."
PG&E's 6.05% senior notes due in 2034 are down more than 2
cents to 109 cents on the dollar from Friday, according to
MarketAxess.
--Soma Biswas contributed to this article.
Write to Katherine Blunt at Katherine.Blunt@wsj.com
(END) Dow Jones Newswires
August 19, 2019 17:31 ET (21:31 GMT)
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