March 20, 2019

Giant utility facing California wildfire claims explores bankruptcy, sources say

08 January 2019, 01:15 | Hattie Nash

Giant utility facing California wildfire claims explores bankruptcy, sources say

Following the deadly and destructive Camp Fire an aerial view of the Northern California town of Paradise is seen on Nov. 15 2018

In weighing a bankruptcy filing, PG&E Corp. officials - whether intentionally or not - are putting the pressure on California legislators to bail them out.

The company is considering whether to file for bankruptcy protection in as soon as weeks to organize the billions of dollars in potential liabilities from wildfires its equipment may have ignited, people familiar with the situation said Friday.

PG&E could be on the hook for tens of billions of dollars for its potential role in California's devastating Camp Fire past year - the deadliest and most destructive wildfire in the state's history. In a PG&E report last month, the company outlined employee reports of damaged power towers minutes before the Camp Fire broke out. PG&E stock rose 1.9% Friday in regular trading, as the S&P 500 index rose 3.4%.

Sources said the company could still receive financial help through legislation that would let it pass on to customers costs associated with fire liabilities, staving off a bankruptcy filing.

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Shares of California utility PG&E tumbled Monday, because investors are anxious it may go bankrupt. PG&E has already confessed that it was aware of a high voltage transmission tower close to the place where the wildfire is believed to have started.

PG&E has faced penalties for failing to meet regulatory standards in previous incidents and is now under probation for its role in a pipeline explosion in San Bruno that killed eight people and injured more than 50.

"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.

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It said its board of directors is engaging outside experts for advice on wildfire safety, but it did not identify any potential plans to address liability or safety.

Also in December, PG&E requested a 12% rate hike in 2020 to help fund a community wildfire safety program, insurance liabilities, and core gas and electric operations. "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".

Earlier on Friday, PG&E said in a statement that it's already weighing changes to both its board and how its businesses are structured. One option under consideration: Selling its natural gas business after a bankruptcy filing, the people familiar with the matter said.

The prospect of a state takeover may not offer a panacea, Bloomberg Intelligence analyst Kit Konolige said.

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But that is just a possibility, according to sources contacted by Reuters.

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