PG&E prepares bankruptcy filing after California wildfires
PG&E Corporation, owner of the biggest U.S. power utility by customers, said on Monday it is preparing to file for Chapter 11 bankruptcy protection as soon as this month amid pressure from potentially crushing liabilities linked to California’s catastrophic wildfires in 2017 and 2018.
PG&E, which provides electricity and natural gas to 16 million customers in northern and central California, faces widespread litigation, government investigations and liabilities that could potentially exceed 30 billion U.S. dollars due to the fires, the company said.
The most recent fire last November killed at least 86 people in the deadliest and most destructive blaze in California history.
Its shares plunged 52 percent on Monday to 8.38 U.S. dollars, giving it a market capitalization of less than 4.5 billion U.S. dollars. The stock is down more than 80 percent from late 2017, before wildfires devastated PG&E's service areas. Bond prices also fell sharply on Monday.
PG&E's chief executive officer was replaced on Sunday by General Counsel John Simon on an interim basis.
San Francisco-based PG&E is working on lining up roughly 5.5 billion U.S. dollars in so-called debtor-in-possession financing to help operations during bankruptcy proceedings.
The utility said the bankruptcy process will not affect electric or natural gas services for customers. Company advisers expect that it may take up to two years to emerge from bankruptcy.
In theory, California politicians could avert PG&E's bankruptcy with legislative action. Last year, the state approved a law helping utilities recoup costs from fires in 2017, but not blazes in 2018.
PG&E said in a securities filing it could potentially raise more money and avoid seeking bankruptcy protection, but argued such a move would be complex, uncertain and expensive.
Moody's and Standard & Poor's recently cut PG&E's credit rating into junk territory, citing concerns about wildfire liabilities.
A bankruptcy filing could help the company deal with such fundamental problems as the prospect of continually being exposed to financial fallout from future wildfires, the company said. Many PG&E customers live near dry forests where rain has become increasingly rare, thus create conditions for potential future blazes.
Energy companies that supply PG&E could be hit by its bankruptcy. One of the most exposed is Kinder Morgan, the second largest North American pipeline operator, analysts said.
PG&E, which drew down remaining amounts on credit lines totaling 3.3 billion U.S. dollars in November, had about 1.5 billion U.S. dollars of liquidity as of Friday. A notice to employees about a pending bankruptcy could potentially dry up PG&E's access to capital.