Losses Balloon at PG&E as Wildfire Expenses Add Up -- WSJ

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (August 10, 2019).

PG&E Corp. (PCG) reported a steep second-quarter loss as the utility contended with costs associated with wildfire- related lawsuits, bankruptcy and efforts to repair and improve its electric grid in Northern California.

The parent of Pacific Gas & Electric Co. on Friday posted a loss of $2.55 billion, or $4.83 a share, compared with a loss $984 million, or $1.91 a share, during the same quarter last year.

It recorded a pretax charge of $3.9 billion, or $3.1 billion post-tax, related to claims stemming from a series of deadly wildfires in 2017 and 2018. That figure reflects a $1 billion settlement PG&E (PCG) reached earlier this year to compensate more than a dozen California cities, counties and agencies for fire-related losses, as well as the company's efforts to settle other claims tied to fires sparked by its equipment.

PG&E (PCG) has to date recorded more than $17 billion in wildfire-related charges, a total that exceeds its current market capitalization. The company sought bankruptcy protection in January, citing more than $30 billion in potential liability costs.

State fire investigators in May concluded that one of the company's high-voltage transmission lines sparked the deadliest fire in California history, the Camp Fire, which killed 86 people and destroyed the town of Paradise in November. They have also found the company's equipment responsible for 18 wildfires in 2017, in most cases because trees made contact with lower-voltage lines.

PG&E (PCG) has for months been spending heavily to ramp up inspections and repairs in an effort to make its electric system safer ahead of wildfire season. The company earlier this year discovered nearly 10,000 problems throughout its network of power lines, and it said it has repaired almost all of the ones that posed a high safety risk.

"We recognize we are operating from a deficit when it comes to public trust, and to regain that trust, we must sustain excellent operational performance day after day, month after month, year after year," Chief Executive Bill Johnson said Friday.

A Wall Street Journal investigation last month found that PG&E (PCG) knew for years that its aging power lines could fail and spark wildfires, yet it repeatedly failed to make necessary upgrades. U.S. District Judge William Alsup, who is overseeing PG&E's (PCG) federal probation resulting from a 2010 natural-gas pipeline explosion, ordered the company to respond to the article "on a paragraph-by-paragraph basis."

The company acknowledged the central findings of the article but disputed the suggestion that it had neglected maintenance.

PG&E (PCG) is working to propose a reorganization plan with help from some of its largest shareholders. Earlier this week, two hedge funds that together hold about 7.8% of the company's stock proposed to raise $15 billion in equity to support its emergence from bankruptcy.

PG&E (PCG) said Friday that the plan would have no immediate impact on its electricity prices and satisfy its debt obligations, wildfire claims settlements and power-purchase contracts.

The company is considering issuing tax-exempt bonds to support the plan, people familiar with the matter have said. To do so, the company would likely have to seek legislative approval.

At a hearing last month in the U.S. Bankruptcy Court in San Francisco, a judge deferred a request by bondholders to terminate PG&E's (PCG) exclusive authority over restructuring terms, granting attorneys for California Gov. Gavin Newsom and PG&E (PCG) a two-week delay to craft a protocol for evaluating alternative chapter 11 proposals.

Excluding special items, the company posted a per-share profit of $1.10 in its latest quarter, above the consensus forecast of 99 cents a share from analysts polled by FactSet.

The San Francisco company missed revenue estimates, as sales fell 6.9% to $3.94 billion. Analysts were expecting $ 4.44 billion in revenue.

The company delayed releasing second-quarter results by two weeks. Shares of PG&E (PCG), which have fallen 23% year to date, slipped 2.1% to $18.12 in Friday trading.

PG&E (PCG) hasn't offered earnings guidance for the remainder of 2019, citing uncertainty associated with lawsuits and its restructuring effort.

Write to Katherine Blunt at Katherine.Blunt@wsj.com and Kimberly Chin at kimberly.chin@wsj.com

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