PG&E shares plunge as earnings take hit from fire claims.
Wildfire claims hit utility’s bottom line, but profit still up over last year
PG&E shares plummeted Thursday after the company reported $1.62 billion in third- quarter losses that were unleashed in part by $2.55 billion in claims linked to wildfires.
The company warned that its total costs for 2019 in wildfire-related expenses and other matters could top a staggering $6 billion.
Excluding an array of one-time items such as the wildfire claims, PG&E reported an adjusted profit of $590 million, which was up 1.4 percent from $582 million in adjusted profits during the similar July-through-September quarter of a year ago, PG&E reported Thursday.
Costs arising from the recent Kincaid Fire in Sonoma County weren’t included in the onetime expenses that PG&E cited. However, expenses triggered by blazes of prior years were included.
“Estimated third-party claims related to the 2017 Northern California wildfires and the 2018 Camp fire” were part of the one-time items cited in the most recent financial results, PG&E said.
The 2017 fires involved blazes that torched the North Bay Wine Country and nearby regions and the 2018 inferno that roared through Butte County and essentially destroyed the town of Paradise.
These wildfire-related claims posted during the third quarter were the settlements with insurance companies that PG&E had previously announced.
They don’t include any settlements with people who have pursued compensation directly from PG&E in connection with the lethal infernos in Northern Califonia caused by PG&E during 2017 and 2018.
The third- quarter report arrived amid PG&E’s ongoing Chapter 11 bankruptcy case in federal court.
In January, PG& E filed for a $51.69 billion bankruptcy, seeking to reorganize its shattered finances, which buckled beneath a rising mountain of liabilities and wildfire- linked claims.
“We continue to make progress in our efforts to move expeditiously through the Chapter 11 process, and remain focused on a fair and prompt resolution of wildfire victims’ claims,” PG&E Chief Executive Officer William Johnson said in a prepared release.
PG&E’s stock nose-dived 13 percent and closed at $6.02.
During the third quarter, PG&E generated $4.43 billion in revenue, including $3.55 billion in electricity revenue and $878 million in natural gas revenue.
Compared to the year-ago quarter, total operating revenue rose 1.2 percent, electricity revenue increased by 2.5 percent, while gas revenue fell 4 percent.
Plenty of dark clouds have begun to gather and cast a growing shadow of doubts over PG&E’s financial condition, a forbidding reality that the utility acknowledged in its thirdquarter report.
Because of the grim landscape that the company must navigate, PG&E said Thursday it won’t provide any forecasts for future revenues or earnings.
“The continuing uncertainty related to the 2017 Northern California wildfires, the 2018 Camp fire, the 2019 Kincade fire, the Chapter 11 proceedings, and legislative and regulatory reforms” are among the factors, PG&E stated.
However, PG& E did say that the company could incur costs of $6.2 billion to $6.3 billion during 2019 for an array of matters.
Among the costs for 2019: deadly fires in 2017 and 2018, intensified inspections of its aging electricity system, bankruptcy matters, issues related to a gas transmission and storage regulatory proceeding, and a recently announced bill credit arising from PG&E’s blunders in connection with a deliberate power shut off in October.
“PG& E appears to be making substantial progress in its new wildfire management programs that include power shutoffs, but the recent Kincade Fire demonstrates that there are still possible risks to PG&E’s system,” CFRA Research analyst Christopher Muir wrote in a research note that analyzed the company’s third-quarter performance.
Muir also highlighted the prospect of potential intervention by state government leaders.
“The governor of California recently threatened to take over PG&E if the bankruptcy isn’t resolved by the start of the 2020 fire season,” Muir wrote in the research note. “We also see a substantial risk that share values could become worthless if a competing reorganization plan is adopted by the courts.”