PG&E Shares Jump After California Clears Company in 2017 Blaze -- Update
January 24 2019 - 7:49PM
Dow Jones News
By Katherine Blunt
PG&E Corp. shares surged after California fire investigators
said the utility didn't cause the deadliest in a series of 2017
state wildfires.
California fire investigators said the Tubbs Fire, which killed
22 people and destroyed nearly 37,000 acres mainly in Napa and
Sonoma counties, was caused by a private electrical system near a
residential structure, ending speculation that PG&E might have
been liable for the blaze.
Shares in PG&E, which said last week that it was planning to
seek bankruptcy protection by month's end in response to
wildfire-related liability costs, rose Thursday by 75% to close at
$13.95.
The California Department of Forestry and Fire Protection said
it found no evidence of violations of state law related to the
cause of the Tubbs Fire. It has previously found that PG&E
equipment helped spark 18 other wildfires during a spate of deadly
fires that hit the state in 2017.
State officials have yet to determine whether PG&E equipment
helped cause the Camp Fire, the state's deadliest fire to date,
which killed 86 people last year. PG&E has disclosed that a
high-voltage line malfunctioned in the region where the Camp Fire
began, failing some 15 minutes before the start of the blaze was
reported in November.
Even after Thursday's jump, the company's shares are still down
41% this month and on track for their worst monthly decline since
November, when PG&E fell 43%.
PG&E has said it could face as much as $30 billion in
potential liability costs related to the 2017 and 2018 wildfires.
That estimate, however, included the possibility it could be found
liable for the Tubbs Fire. A company spokeswoman didn't immediately
offer a revised estimate and said its liability costs could still
exceed that number.
"Regardless of today's announcement, PG&E still faces
extensive litigation, significant potential liabilities and a
deteriorating financial situation, which was further impaired by
the recent credit agency downgrades to below investment grade," the
company said in a written statement.
PG&E faces substantial challenges in grappling with the
fallout from the spate of wildfires, which have called into
question the safety of its electric grid and the effectiveness of
its risk-mitigation practices. The California Public Utilities
Commission has expanded an existing probe into the company's safety
practices and is considering whether the company should be broken
up.
PG&E is shaking up its board of directors as part of a plan
to improve its safety practices. The company has said it also plans
to invest billions of dollars to reduce fire risk within its
70,000-mile service territory by installing weather stations and
cameras and enhancing inspections and tree-trimming practices,
among other things.
BlueMountain Capital Management LLC, a hedge fund that recently
raised its stake in PG&E, has questioned the utility's plan to
seek bankruptcy protection, arguing that the company isn't yet
insolvent and that its ultimate liabilities from fires remain
unclear. On Thursday, the hedge fund said it would mount an effort
to replace PG&E's 10-member board during its meeting in May and
encouraged other shareholders to support a proxy fight.
"The news from Cal Fire that PG&E did not cause the
devastating 2017 Tubbs fire is yet another example of why the
company shouldn't be rushing to file for bankruptcy, which would be
totally unnecessary and bad for all stakeholders," BlueMountain
Capital said in a written statement.
PG&E said earlier this month that it faced about 50 lawsuits
related to the Camp Fire on behalf of 2,000 individual plaintiffs,
and more than 700 lawsuits on behalf of at least 3,600 plaintiffs
in connection with the 2017 fires.
California Gov. Gavin Newsom said Thursday that he had discussed
the findings of the state investigation with PG&E executives.
He expressed worries that the findings might complicate efforts by
fire victims to seek compensation for damages.
"It's made it more challenging and that's a concern I have," he
said. "It's certainly a concern that plaintiffs' attorneys
have."
Mike Danko, a California trial lawyer who represents victims of
the Tubbs Fire and other wildfires, said the Tubbs blaze accounts
for a substantial percentage of the litigation resulting from the
2017 fires. He said his group, the Northern California Fire
Lawyers, is representing about 150 cases related to that fire.
California's findings will make it more challenging to recoup
damages under the state's principle of inverse condemnation, which
renders utilities liable for property damage caused by their
equipment even if they aren't found negligent, he said. But he
expected the litigation to continue.
"We won't be giving up," Mr. Danko said. "But it has become a
more difficult case than the other cases."
--Alejandro Lazo and Becky Yerak contributed to this
article.
Write to Katherine Blunt at Katherine.Blunt@wsj.com
(END) Dow Jones Newswires
January 24, 2019 19:34 ET (00:34 GMT)
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