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Pacific Gas and Electric (PG&E) California Screaming

bernorange

By bernorange
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bernorange

bernorange 8362

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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.

The gyrations in PG&E’s stock could intensify pressure on the state Legislature to bail out the utility from its wildfire-related liabilities and create a smooth path for the utility to pass along those costs to its customers.

...

https://www.mercurynews.com/2019/01/07/pge-review-of-asset-sales-bankruptcy-company-shakeup-rattles-wall-street/amp/

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Moody’s on Thursday joined S&P in lowering PG&E Corp’s (PCG.N) credit rating deeper into junk territory, citing a challenging environment for the California power provider as it faces billions of dollars in liabilities related to wildfires.

https://www.reuters.com/article/us-pg-e-ratings-moodys/moodys-lowers-pges-credit-rating-to-junk-joins-sp-idUSKCN1P42U3

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... with two junk ratings, PG&E will now be required to use cash as collateral to guarantee power contracts, according to the company’s latest quarterly filing, which estimates the utility will have to fully collateralize as much as $800 million of positions.

That... is a problem because PG&E had only $430 million of cash on its books in September, precipitating what now appears to be an imminent liquidity crisis, one which as a result of some $30 billion in wildfire legal liabilities will quickly escalate into a solvency inferno, to use a term closely associated with California utility companies.

Meanwhile, assuming that PG&E somehow survives the upcoming insolvency, its junk credit ratings will assure that the company will have to pay more to borrow for years to come. In fact, the company's 3.5% bonds due next year are currently yielding more than 9.9%, far above where most high-yield securities are paying and a level reserved for deeply distressed credits. ...

https://www.zerohedge.com/news/2019-01-10/pge-gets-aig-ed-moodys-downgrade-triggers-800mm-collateral-call-liquidity-crisis

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In a remarkable four-page document, a federal judge in San Francisco this week said that even though it’s impossible to throw utility company PG&E in prison, his court plans to impose more punishment against the company by having the court and its agents act as what amounts to the company’s safety chaperone.

In an order filed Wednesday, federal judge William Alsup proposed adding new terms to PG&E’s probation for its six federal felony convictions, repeatedly expressing distrust in the company's honesty and ability to safely manage its power grid.

The company's electric operations are under scrutiny as CAL FIRE investigates the cause of the Camp Fire, which became the deadliest wildfire in California history when it killed 86 people in Butte County last November. CAL FIRE also blamed PG&E equipment for starting 18 fires in 2017.

PG&E's probation officer accused the company of probation violations this week, part of its sentence for its six federal felony convictions stemming from the 2010 San Bruno gas explosions.

In response, the court says it plans to force PG&E to adopt strict new safety practices, including mandatory power shut-offs during high wind—regardless of the inconvenience it would cause to customers.

It's the latest in a series of legal, financial, and regulatory problems that could threaten the company's very existence.

...

https://www.abc10.com/amp/article?section=news&subsection=local&topic=wildfire&headline=how-bad-are-things-at-pge-a-federal-judge-plans-to-chaperone-it&contentId=103-505e5da7-496b-4e0b-b0c1-87a9dd28d41c

So I'm imagining that PG&E is "TBTF" in the sense that millions of people depend upon it to live, so govco can't let it fail.  But can California afford to bail it out or prop it up?

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Trey3216

Trey3216 15347

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14 minutes ago, bernorange said:

https://www.mercurynews.com/2019/01/07/pge-review-of-asset-sales-bankruptcy-company-shakeup-rattles-wall-street/amp/

https://www.reuters.com/article/us-pg-e-ratings-moodys/moodys-lowers-pges-credit-rating-to-junk-joins-sp-idUSKCN1P42U3

https://www.zerohedge.com/news/2019-01-10/pge-gets-aig-ed-moodys-downgrade-triggers-800mm-collateral-call-liquidity-crisis

https://www.abc10.com/amp/article?section=news&subsection=local&topic=wildfire&headline=how-bad-are-things-at-pge-a-federal-judge-plans-to-chaperone-it&contentId=103-505e5da7-496b-4e0b-b0c1-87a9dd28d41c

So I'm imagining that PG&E is "TBTF" in the sense that millions of people depend upon it to live, so govco can't let it fail.  But can California afford to bail it out or prop it up?

Looks like the Texas grid is going to have to take on some extra burden 

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Bernard

Bernard 879

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PCG has a market cap $45 Billion back in September. Current market cap is $9 Billion. The company earns nearly $2 Billion per year in net income. They certainly have the balance sheet to deal with the liquidity crisis. Potential liabilities for the fires however, are massive. They have insurance, but perhaps not enough. 

Bernard

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Bernard

Bernard 879

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1 hour ago, bernorange said:

 

So I'm imagining that PG&E is "TBTF" in the sense that millions of people depend upon it to live, so govco can't let it fail.  But can California afford to bail it out or prop it up?

PGC can fail without customers being affected. PGC goes BK. Shareholders get wiped out. Debtors end up owning the company. The underlying business with generated nearly $2 Billion a year in net income isn’t going anywhere. The power plants aren’t going to shit down. 

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Wally Fairway

Wally Fairway 5559

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14 minutes ago, Bernard said:

PCG has a market cap $45 Billion back in September. Current market cap is $9 Billion. The company earns nearly $2 Billion per year in net income. They certainly have the balance sheet to deal with the liquidity crisis. Potential liabilities for the fires however, are massive. They have insurance, but perhaps not enough. 

Bernard

A liquidity crisis can still hit them, depending on their relationship with lenders and line of credit availability with lowered debt ratings. That balance sheet can't save them if they have a cash crisis, which they are working on by trying to sell assets
I'm pretty sure that PG&E is a zombie at this point.

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Bernard

Bernard 879

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47 minutes ago, Wally Fairway said:

A liquidity crisis can still hit them, depending on their relationship with lenders and line of credit availability with lowered debt ratings. That balance sheet can't save them if they have a cash crisis, which they are working on by trying to sell assets
I'm pretty sure that PG&E is a zombie at this point.

Their credit rating is junk, but that doesn't mean they can't borrow money. It's just more expensive. They have a lots of assets that can serve as collateral for secured loans at rates far below junk bond pricing. Asset sales, as you mentioned, are also an option to raise cash. They aren't broke by a long shot, yet. The X Factor is eventual liability cost for the fires, but that won't be settled for years.

Not sure how you define "zombie" company. They are in trouble for sure. Future BK and re-capitalization that wipes out the shareholder wouldn't surprise me.

The underlying business isn't going anywhere though. Certain posters above think the whole operation is going to shut down. 

Bernard

 

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MAROON

MAROON 445

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interesting that they have $0 secured debt, all unsecured.  So wildfire claims and debt claims would potentially be on equal footing in a bk. 

 

Ya, they might go bk to restructure this mess, but those plants are going to keep on humming and generating cash flow ($5.9bil CFO in 2017)

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Lhorn

Lhorn 4915

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4 hours ago, closetojumping said:

PG&E is a truly evil company and I continue to cheer for their failure. They're the biggest, most successful serial killer in American history. 

I'm interested to hear your thoughts (and I mean that in a genuine way, not being snarky).  Are you talking about lack of foresight or maintenance of utility infrastructure leading to failures, causing wildfires?  I have no love for PG&E but that's mainly because I write them a check every month.

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Txzen

Txzen 498

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22 minutes ago, Lhorn said:

I'm interested to hear your thoughts (and I mean that in a genuine way, not being snarky).  Are you talking about lack of foresight or maintenance of utility infrastructure leading to failures, causing wildfires?  I have no love for PG&E but that's mainly because I write them a check every month.

Let's see, San Bruno, the 2017 fires, the 2018 Camp Fire to start with (to say nothing of the whole groundwater/Erin Brockovich saga). 

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Trey3216

Trey3216 15347

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That was quick:

 

https://seekingalpha.com/news/3422615

 

• PG&E (NYSE:PCG) says it is preparing to file for Chapter 11 bankruptcy to "support the orderly, fair and expeditious resolution of its potential liabilities resulting from the 2017 and 2018 Northern California wildfires."

• PG&E shares -53% pre-market.

• PG&E Corp. and its wholly owned subsidiary, Pacific Gas & Electric Co., say they plan to file a petition on or around Jan. 29, as companies are required by California law to give a 15-day advance notice to the state of its intention to file a Chapter 11 petition.

• The company says it does not expect the bankruptcy proceedings to have any impact on its electric or natural gas service.

• Yesterday, CEO Geisha Williams stepped down and was replaced by general counsel John Simon, who will serve as the interim CEO.

Edited by Trey3216
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Bernard

Bernard 879

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Wow. That BK was way faster than I expected. I guess the DIP financing out there is cheaper than anything else they could find in midst of a crisis. 

CEO be like: “All my future equity based pay just turned to dust. Fuck it. I’m outta here.”

Bernard

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AUS-97HORN

AUS-97HORN 11809

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i read an article that they are expected to be liable for almost $30B in damages from wildfires started by bad electric wiring in 2017 & 2018..... not even including the Camp Fire damages yet, because they still havent determined the original cause of that blaze.

So they declare BK and keep the lawsuits down.    the shareholders and victims of the wildfires get screwed, yet the company survives and moves on.

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Orange&White

Orange&White 5528

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35 minutes ago, AeroHorn said:

I am about to buy this water heater (hybrid water heaters!), which has a $300 rebate from PG&E. I hope the rebate is still on.

https://www.homedepot.com/p/Rheem-Performance-Platinum-50-gal-10-Year-Hybrid-High-Efficiency-Smart-Tank-Electric-Water-Heater-XE50T10HD50U1/303419574

Well, that's it. Your $300 will be the final straw. Tens of millions of Californians will be without electricity or hot water. I really hope you're happy you selfish son-of-a-bitch.

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AeroHorn

AeroHorn 752

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15 minutes ago, Orange&White said:

Well, that's it. Your $300 will be the final straw. Tens of millions of Californians will be without electricity or hot water. I really hope you're happy you selfish son-of-a-bitch.

But don't you think a Californian being able to talk about another hybrid thingy is worth it? 

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XYZ

XYZ 2154

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2 hours ago, AeroHorn said:

I am about to buy this water heater (hybrid water heaters!), which has a $300 rebate from PG&E. I hope the rebate is still on.

https://www.homedepot.com/p/Rheem-Performance-Platinum-50-gal-10-Year-Hybrid-High-Efficiency-Smart-Tank-Electric-Water-Heater-XE50T10HD50U1/303419574

Oh yeah, you are totally gonna get that rebate check. Sit tight.

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HouTex

HouTex 1878

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Whoever had the brass balls (or dumb luck) to buy PCG stock last week below $6.50/share is making out like a bandit. Closed today at $13.95/share. 
Bernard

Yep. This is a travesty. The bankruptcy will cost shareholders about $500+ million in legal/professional fees and the fire claims will get resolved. It's looking like the fire claims are bullshit by the way. California sucks.
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Updawg

Updawg 2268

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PG&E said in its court filing Wednesday that complying with all of Alsup’s proposals could cost as much as $150 billion and require massive rate hikes.

 

The proposals would require the utility to remove an estimated 100 million trees, causing significant environmental consequences, it said.

 

In addition, the measures would interfere with the “role of state and federal regulators without fully accounting for the risks that some of those actions may create” or assessing whether those costs are necessary, PG&E said.

 

The court filing adds that shutting down power affects first responders, critical medical care and essential services such as water delivery.

 

U.S. prosecutors urged Alsup on Wednesday to work with a court-appointed monitor to determine ways PG&E could prevent its equipment from starting wildfires.

 

In its court filing, the U.S. attorney’s office in San Francisco said Alsup should refrain from immediately imposing new requirements on the utility.

 

Alsup is overseeing a jury verdict against PG&E involving the deadly explosion of a company gas pipeline in 2010.

 

The judge is eyeing the wildfire requirements as part of PG&E’s probation in the criminal case.

 

Alsup has noted that California fire investigators have determined that PG&E caused 18 wildfires in 2017 — 12 of which could result in criminal prosecution.

 

https://www.marketwatch.com/story/pge-says-judges-plan-to-impose-wildfire-safeguards-would-cost-150-billion-2019-01-23

 

 

 

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bernorange

bernorange 8362

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PG&E Corp. and its Pacific Gas & Electric Co. utility filed for Chapter 11 bankruptcy in a defensive maneuver that sets the stage for a major restructuring of California’s largest utility. ...
...
The filing, which listed $51.7 billion in total debts and $71.4 billion in assets. allows the company to keep operating while it works out a plan to turn the business around and pay off creditors. A bankruptcy, and potentially a sale, may represent the best way for lawmakers and regulators to “remake the public face of the company for customers,’’ said Katie Bays, a Washington-based analyst at Height Securities LLC.

The utility’s issues “are long-running and structural," Bays said by telephone. "If PG&E cannot do this, if they cannot reform their safety culture on their own, they maybe need a new leader to come in there and achieve fundamental reforms.’’
...
PG&E said it had about $840 million of insurance coverage for liabilities, including wildfires, for the year starting Aug. 1, 2017. It renewed that wildfire-related liability insurance coverage for the year starting Aug. 1, 2018 in the aggregate amount of $1.4 billion.
...
The utility’s top creditors include Bank of New York Mellon Corp., Citibank, Mizuho and Bank of America Corp. Bank of New York Mellon holds the largest unsecured claim, totaling $3 billion, court filings show. The first meeting of creditors has been set for Feb. 26.
...

https://www.bloomberg.com/news/articles/2019-01-29/pg-e-files-for-bankruptcy-while-facing-billions-in-fire-damages?srnd=premium

Their 1.4B insurance isn't enough to cover the expected 30B+ damages from the wildfires...

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AUS-97HORN

AUS-97HORN 11809

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PGE now thinks their equipment is going to be found as the culprit to the Camp Fire......

not sure how that impacts the BK declaration, since they already anticipated that.

 

does that mean the victims of the Camp Fire, and their families now have a creditor stake in the BK?

 

https://www.cnn.com/2019/02/28/us/pge-camp-fire-responsibility/index.html

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bernorange

bernorange 8362

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In what could be the biggest implementation yet of California’s strategy of shutting off power to prevent wildfires, the state’s largest utility announced Monday that blackouts were possible later this week in a large swath of the Bay Area and Northern California.

Citing the potential for extremely dry air and steady winds of up to 30 mph, with gusts that experts said could be twice as strong, Pacific Gas & Electric announced it was considering a public safety power shut-off for 29 counties between Wednesday morning and Thursday afternoon.

On Tuesday, Southern California Edison announced it too was considering preventive power outages. The utility said, in advance of possibly strong Santa Ana winds, power could be cut off to more than 106,000 customers in parts of eight Southern California counties.

...

https://www.latimes.com/california/story/2019-10-08/california-utility-says-it-could-shutdown-power-to-nearly-30-counties-ahead-of-wildfire-friendly-weather

Did a search to see what came of the PG&E legal woes.  Found this:

Quote

...
PG&E is currently going through a reorganization bankruptcy. The judge has set an October 21 deadline for fire victims to file their claims. If you haven’t already contacted an attorney, you should act now.
...

https://www.norcalfirelawyers.com/pge-fire-settlements/

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