PG&E shareholders smolder while California burns as stock tumbles 31%

UPDATE:  10.25.2019 8:30PM

With the Wall Street Journal it is always about the bottom line for investors, while Northern California is once again ablaze.

Wall Street Journal 10.25.2019

The failure of a PG&E Corp. PCG -30.56%  power line minutes before a wildfire broke out in California’s wine country starkly shows how the company’s electric system continues to pose risks to the safety of millions of residents, even as it takes desperate measures to reduce the threat of fire.

The San Francisco-based utility, which provides gas and electric service to 16 million people, or roughly one in 20 Americans, disclosed that one of its high-voltage transmission lines malfunctioned shortly before the Kincade Fire ignited Wednesday evening in Sonoma County.

California investigators won’t determine the official cause for some time. But the news that PG&E equipment may have sparked another fire sent the company’s shares down nearly 31% on Friday, heightening concerns about the future of the utility, which sought bankruptcy protection in January citing an estimated $30 billion in fire-related liabilities. Shareholders and bondholders alike worried that additional fire costs could dim their prospects for financial recovery.


Officials haven’t determined the cause of the blaze, but PG&E filed a public report Thursday stating it became aware of a broken wire on one of its transmission lines in the area seven minutes before the fire began.
PG&E I 10.25.2019

PG&E shares dropped 24%, tumbling $1.70 to $5.50 each in early New York Stock Exchange trading, after the Kincade fire spread through Sonoma County in northern California.  The company’s $3 billion bond due 2034 fell about 3.5% to 106.63 cents on the dollar and was the third most actively traded bond Friday with $130 million changing hands, according to data from MarketAxess.

The action reflects expectations that the firm may face some liability for starting the blaze, traders said—an outcome that would likely reduce any potential recoveries by investors in PG&E’s Chapter 11 bankruptcy proceeding.

Among the issues at hand Friday: PG&E could be solely responsible for wildfire claims that arise before it emerges from bankruptcy, while payment for postbankruptcy claims could be shared through a statewide wildfire fund that is being set up to help shore up the finances of California utilities.

Close to 2,000 residents of the county in Northern California have been evacuated as the fire quickly grew to over 10,000 acres, fueled by strong winds and dry conditions. PG&E has been under intense pressure in the state for its role in previous fires and for a program of blackouts that aim to limit the likelihood of blazes.