PG&E plunges on fears the embattled utility could face $18 billion in damages

A charred vehicle was left in the middle of Honey Run Road as the Camp Fire continues with zero containment in Paradise, Calif., on Friday, Nov. 9, 2018.

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Shares of embattled utility PG&E plummeted on Monday after a judge ruled that a jury can decided whether the company should pay up to $18 billion in damages to wildfire victims.

The California supplier of gas and electricity fell to $10.05 — about 30% — on the week’s first day of trading before paring one-day losses to about 27%. The plunge represented its worst day on Wall Street since PG&E first announce plans to file for bankruptcy in January.

U.S. Bankruptcy Judge Dennis Montali on Friday said that a court trial can decide if PG&E is responsible for the 2017 Tubbs fire, which killed 22 people and destroyed more than 5,600 buildings.

That fire, the second-most destructive in the state’s history, preceded the 2018 Camp Fire, which became California’s worst. PG&E is also facing responsibility for that blaze.

« Regardless of the next legal steps, Cal Fire has already determined that the cause of the 2017 Tubbs Fire was not related to PG&E equipment, » PG&E said in an emailed statement. « PG&E has made significant progress in further refining a viable, fair, and comprehensive plan of reorganization that will compensate wildfire victims, protect customer rates, and put PG&E on a path to be the energy company our customers need and deserve. »

Still, Montali’s decision was enough to spark investor concerns across Wall Street, with analysts like Citi’s Praful Mehta categorizing the development as « too risky. »

« Even though Calfire had clearly noted that PG&E equipment wasn’t involved in starting the Tubbs fire, we think that a jury trial brings a lot of other dynamics in play, especially given PG&E’s history of poor safety and operational culture, » the analyst wrote on Monday, downgrading the stock to a sell rating.

The decision marks a critical development for PG&E, which earlier this year was thought to be absolved of responsibility for the Tubbs fire when California investigators concluded that the flame was the result of a private electrical system. The company did, however, manage to retain control of its multibillion-dollar bankruptcy plan, a win for the company in the face of growing investor angst.

PG&E filed for Chapter 11 in January, facing up to $30 billion in potential wildfire liabilities.

« This risk of a significant liability for Tubbs is now very real and adds a lot of uncertainty to the PCG story, » Mehta added. The analyst believes the company is worth $4 per share, less than half its current value.

Source: CNBC

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