PG&E’s major review of finances, operations, management rattles Wall Street amid bankruptcy fears

San Jose Mercury News (CA)

Jan. 07--PG&E shares plummeted on Monday amid a wide-ranging internal review by the embattled utility that raised the prospect of asset sales, a management shakeup and even bankruptcy due to mounting legal, criminal and regulatory challenges unleashed by lethal wildfires that scorched Northern California in 2017 and 2018.

In late-session trades on Monday, the utility behemoth's stock nose-dived 22 percent. PG&E declined comment about the stock market decline.

"The board is actively assessing PG&E's operations, finances, management, structure, and governance," the company said in a statement on Friday.

This sort of review by a publicly held company of its own operations can include studying sales or spin-offs of operating units, as well as an assessment about whether the company should consider a bankruptcy filing if it is unable to meet its financial obligations.

"There is no set timeline, but the process is well underway," PG&E spokeswoman Lynsey Paulo said. "No decisions have been made and no options have been ruled out."

San Francisco-based PG&E's widening challenges could prompt state lawmakers and Gov. Gavin Newsom, who took over as California's chief executive on Monday, to craft solutions and bailouts to keep the state's largest utility afloat financially.

"If the financial viability of PG&E is in jeopardy, then state policy makers would have to think long and hard about how to address that," said Paul Patterson, an analyst with Glenrock Equities, an investment firm.

San Francisco-based PG&E is facing potential wildfire liabilities that have increased dramatically.

As of the end of September 2018, PG&E estimated that wildfire-related claims against the company totaled $2.79 billion, nearly five times as much as the $561 million in such wildfire claims the company reported as of the end of December 2017, according to a company regulatory filing with the Securities and Exchange Commission.

PG&E is a convicted felon for crimes it committed before and after a fatal explosion of one of its' natural gas lines that killed eight people in San Bruno in 2010. The company was found guilty in 2016 for committing six felonies linked to the fatal blast. In 2015, the state Public Utilities Commission imposed a $1.6 billion penalty on PG&E for causing the disaster, the largest financial punishment ever levied on an American utility.

The state Legislature could come under fresh pressure to craft new ways to steady PG&E's finances.

"It's not the Legislature's responsibility to bail out a company that has shown negligence and disregard for public safety," said state Sen. Jerry Hill, whose district includes parts of Santa Clara and San Mateo counties as well as San Bruno. "The disclosures about possible bankruptcy are intentional to attempt to control the narrative in Sacramento.

The state Legislature has already shielded PG&E from financial hazards in connection with the Wine Country fires in October 2017, and legislation that critics have blasted as a bailout of the utility. The legislative package also created a path for PG&E to ward off liabilities for wildfires that began in 2019 or years after.

However, what was missing from the legislation was any protection for wildfires in 2018, such as the blazes that tore through Butte County and essentially destroyed the town of Paradise.

"Last year in January, the Legislature chose to bail out PG&E after the company's surrogates warned about bankruptcy," Hill said. "A year later, PG&E is back using the same playbook."

In a Nov. 13 filing with the SEC, PG&E disclosed it had borrowed $3 billion under its existing credit facilities.

"No additional amounts are available" from PG&E's respective revolving lines of credit.

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