The Mercury News Weekend

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

- By George Avalos gavalos@bayareanew­sgroup.com

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.”

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