PCG PG&E Corporation

By Katherine Blunt and Alejandro Lazo 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (January 17, 2019).

PG&E Corp. shares fell and then recovered Wednesday as prospects dimmed that California politicians would step in to help the embattled utility avoid a bankruptcy filing.

After falling more than 8%, PG&E shares rebounded late and closed up 1.7% or 12 cents, at $7.03. That stopped several days of 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 60% since Friday's close, and since the end of October -- when they traded above $46 -- their value has dropped by about 85%.

Analysts said the recent 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 closed at $3.64 billion on Wednesday, down from about $24 billion at the end of October.

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 customers. 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 17, 2019 02:47 ET (07:47 GMT)

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