Shares of beleaguered California utility Pacific Gas & Electric (PG&E) soared on Jan. 24 after a state agency said the company bore no responsibility for a 2017 wildfire in the state.
A statement from the California Department of Forestry and Fire Protection (Cal Fire) on Thursday said, “After an extensive and thorough investigation, Cal Fire has determined the Tubbs Fire, which occurred during the October 2017 Fire Siege, was caused by a private electrical system adjacent to a residential structure. Cal Fire investigators did not identify any violations of state law, Public Resources Code, related to the cause of this fire.”
PG&E faces liabilities of as much as $30 billion in connection to its role in a series of wildfires in California in 2017 and 2018 that left more than 100 people dead. Most of the damages are related to the Camp Fire in late 2018, which resulted in 86 deaths. The utility is expected to file for bankruptcy protection as soon as Jan. 29.
The company on Thursday issued a statement after the Cal Fire finding, saying that despite being exonerated in the Tubbs Fired, the utility still faces “extensive litigation, significant potential liabilities and a deteriorating financial situation, which was further impaired by the recent credit agency downgrades to below investment grade.”
The statement continued: “Resolving the legal liabilities and financial challenges stemming from the 2017 and 2018 wildfires will be enormously complex.” The utility noted “thousands of wildfire victims and others who have already made claims and likely thousands of others we expect to make claims.”
The utility this week pushed back against a judge’s proposal that it spend up to $150 billion to cut trees and upgrade its equipment as part of its wildfire mitigation program.
The company’s stock price rose above $13 a share on Thursday after bottoming at $5.07 on Jan. 15, off almost 90% from its 52-week high of $49.42. The stock opened at $7.90 on Thursday.
Hedge Funds Buying Shares
As PG&E’s stock price dropped, hedge funds have bought up shares in the company. BlueMountain Capital Management, a New York hedge fund, on Thursday released an open letter to shareholders saying it plans to announce a full slate of new directors for PG&E’s board by Feb. 21, three months prior to the company’s annual meeting. BlueMountain says it manages funds that own more than 11 million shares of PG&E’s common stock. It in letter, BlueMountain said it is “time for shareholders to step up” and replace the present board.
“The Current Board has not only failed the company and its shareholders; it has failed its customers; it has failed its employees; and, it has failed the people of California. The company has lost the public’s trust, and it has severely damaged its relationship with regulators and elected officials,” the letter said.
PG&E has previously said it is looking for new board members and interviewing candidates. James Noonan, a PG&E spokesman, in a statement said the utility is looking for “experienced professionals with the goal of adding fresh perspectives to augment its existing expertise in safety, operations, and other critical areas.” Noonan also said a bankruptcy filing that would allow the company to reorganize is “the only viable option for PG&E.”
Noonan also said, “During this process, PG&E will work collaboratively to fairly balance the interests of wildfire victims, customers, employees, creditors, shareholders, the financial community and business partners to create a sustainable foundation for the delivery of safe service in the years ahead.”
BlueMountain in its letter, which was also filed with the Securities and Exchange Commission, mentioned criticism of PG&E from California officials and also said the current board should be accountable for a number of the company’s problems in recent years, including the 2010 San Bruno pipeline explosion and the series of wildfires. The letter also referenced allegations in the wake of the San Bruno incident that PG&E falsified gas pipeline safety records.
“The current board is accountable for these failures … it is well past time for a change,” the letter said.
BlueMountain said it thinks PG&E stock could be valued at more than $50 per share. It called the plan to seek Chapter 11 bankruptcy protection “ill-advised,” and said a new board could decide to “exit bankruptcy on an expedited basis” if it determines the company is solvent.
—Darrell Proctor is a POWER associate editor (@DarrellProctor1, @POWERmagazine).