PG&E Corp., the bankrupt California utility owner, reported its biggest loss ever and said it’s “probable” its equipment will be blamed as an ignition point for the deadliest wildfire in California history.
The blaze, called the Camp Fire, raged across Northern California for two weeks in November, destroying the town of Paradise, killing 85 people and prompting PG&E to file for Chapter 11 last month. The company will take a $10.5 billion charge in connection to the fire, resulting in the record $6.9 billion fourth-quarter loss, according to a filing Thursday.
Investors have been waiting to see if PG&E, California’s largest utility owner, would take additional fire-related charges after recording a $2.5 billion pretax hit for blazes in the second quarter of 2018. In the nearly four months since the Camp Fire, PG&E has lost $16 billion in market value, removed Chief Executive Officer Geisha Williams and filed the largest-ever U.S. utility bankruptcy.
“Management has concluded that these circumstances raise substantial doubt about PG&E corporation’s and the utility’s ability to continue as going concerns,” the company said in the filing.
PG&E said in Thursday’s filing that it told investigators a transmission line near the ignition point malfunctioned 18 minutes before the Camp Fire broke out on Nov. 8. The company also said it would take an additional $1 billion charge for Northern California fires in 2017. PG&E said in June it was recording a $2.5 billion pretax hit for those blazes.
Authorities began probing power lines as a possible cause of the Camp Fire within hours of it breaking out. The company’s statement that its equipment would probably be deemed as an ignition point comes five weeks after the California Department of Forestry and Fire Protection cleared the utility of blame for a separate deadly blaze — the 2017 Tubbs Fire — that devastated Northern California’s wine country.
“There’re may be people who hoped the exposure wouldn’t be this large or that the Camp Fire wound be found not to be their fault,” Kit Konolige, an analyst for Bloomberg Intelligence, said in an interview. “Obviously it’s not a positive.”
The company’s shares fell 1.7 percent percent to $17.51 at 10:34 a.m. in New York after earlier declining as much as 8.8 percent.
The company has taken a total of $14 billion in pretax charges related to the 2018 Camp Fire and the 2017 Northern California wildfires to date, which reflects the lower end of the range of estimated losses the company faces from such wildfires. Those charges will be “partially offset by probable insurance recoveries of $2.2 billion,” according to the filing. PG&E said it filed a request for state regulators for a waiver of its equity level requirements.
Investors are watching to see if California lawmakers pass legislation to protect PG&E and other utilities from claims arising from future blazes. Governor Gavin Newsom has formed a ”strike team” to devise a strategy within weeks to address the issue.
PG&E is also under pressure from lawmakers, regulators and shareholders — including New York investment firm BlueMountain Capital Management LLC — to revamp management. The company has said no more than five of its 10 board members will seek re-election, and that the new board will have 11 directors.