Bloomberg/ San Francisco
PG&E Corp, the California utility that went bankrupt in January after its equipment sparked deadly wildfires, expects as much as $6.3bn in after-tax costs from the blazes, its Chapter 11 case and the recent blackouts.
The troubled power giant reported a $1.6bn loss for the third quarter. It was driven by $2.5bn pre-tax charge for claims related to the 2017 Northern California wildfires and the 2018 Camp fire, the company said in a statement on Thursday. PG&E is not providing 2019 earnings guidance.
“Obviously it’s a big write down but the key remains how the bankruptcy will get resolved,” Bloomberg Intelligence analyst Kit Konolige said in an interview.
People survey damage done by the Kincade Fire at the Garden Creek Vineyards in Geyserville, California on October 31.
The earnings are the first PG&E has reported since its mass blackouts last month intended to keep power lines from sparking wildfires during windstorms, which drew outrage from state lawmakers and raised the spectre of a government takeover. Despite the shutoffs, blazes continued to erupt. PG&E’s equipment has been identified as a possible cause of at least three.
The biggest of those blazes, the Kincade fire in Sonoma County, began Oct. 23 shortly after PG&E equipment malfunctioned in the area. While the cause has yet to be determined, it’s “reasonably possible” the company will incur a loss related to the blaze, PG&E said in a filing on Thursday. “The utility could be subject to significant liability in excess of insurance coverage,” the PG&E said.
The prospect of more wildfire liabilities is critical for PG&E. Since filing for Chapter 11 in January, the judge overseeing its case has warned another big blaze blamed on its equipment would upend the bankruptcy and potentially wipe out shareholders.
During October, PG&E enacted four massive blackouts to keep power lines from toppling in high winds and igniting more fires. The company expects to spend about $90mn for one-time customer credits related to shutoffs on Oct. 9, according to company slides.
The company’s earnings come days after California Governor Gavin Newsom met face to face with PG&E Chief Executive Officer Bill Johnson and pressed him to quickly strike a deal with investors. Newsom has said the state won’t hesitate to take over the company if it doesn’t act soon.
PG&E’s reorganisation has drawn some of biggest names on Wall Street, including a group of bondholders led by billionaire Paul Singer’s Elliott Management Corp and Pacific Investment Management Co The bondholders have aligned themselves with wildfire victims to pitch a restructuring plan that would all but wipe out existing PG&E shareholders, including Seth Klarman’s Baupost Group LLC.
PG&E stock has plunged 30% since the start of October, when the company lost its exclusive right to pitch a reorganisation plan and became the subject of attacks over its blackouts and wildfires.
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