Thursday, December 21, 2017

Pacific Gas and Electric Having a Very Bad Day

As Bad As It Gets? PG&E Cuts Dividend, Tumbles 16% -- Barron's Blog

12:50 pm ET December 21, 2017 (Dow Jones) Print
By Andrew Bary 
A sharp drop today in shares of PG&E, the big California electric utility, could present a buying opportunity after the company surprised investors by suspending its quarterly dividend. The company did so because of the potential legal liability for October wildfires in Northern California that has resulted in insurance claims for property losses of $9.4 billion. 
Shares of PG&E ( PCG) are down $8.17 to $42.95, or 16%, following the announcement of the dividend suspension that begins in the current quarter. It had been paying a quarterly dividend of 53 cents a share. 
The stock is down 38% since Oct. 11, the day before the fires. That has cut more than $13 billion from the company's market value. "We continue to believe that, at its current price, PG&E stock capitalizes a worst-case scenario with respect to PG&E's liability for property damages, and presumed inability to recover these costs from ratepayers," wrote analyst Hugh Wynne of Sector & Sovereign Research of Connecticut in a client note this morning. "Less adverse outcomes therefore offer material upside," he wrote. 
By his calculation, PG&E stock now discounts around $17 billion of pre-tax, pre-insurance losses. The total insurance claims, by contrast, are $9.4 billion through November. There could be an additional $1 billion in claims from public entities. 
"The implication is that the market expects no recovery of these property damages by PG&E from ratepayers, and for PG&E to incur a further $6.3 billion of pre-tax costs due to legal costs, fines imposed by the California Public Utility Commission, personal injury claims, consequential damages or punitive damages," Wynne wrote. He has an Outperform rating on the stock. 
The shares now trade for just 12 times projected 2017 earnings, a sharp discount to the sector, which commands about 20 times earnings. PG&E could be liable for damages caused by the fires under a legal doctrine called inverse condemnation. 
This is how the company explained it in a press release late Wednesday announcing the dividend suspension: 
No causes have yet been identified for any of the unprecedented wildfires, which continue to be the subject of ongoing investigations. However, California is one of the only states in the country in which courts have applied inverse condemnation to events caused by utility equipment. This means that if a utility's equipment is found to have been a substantial cause of the damage in an event such as a wildfire -- even if the utility has followed established inspection and safety rules -- the utility may still be liable for property damages and attorneys' fees associated with that event. 
"After extensive consideration and in light of the uncertainty associated with the causes and potential liabilities associated with these wildfires as well as state policy uncertainties, the PG&E boards determined that suspending the common and preferred stock dividends is prudent with respect to cash conservation and is in the best long-term interests of the companies, our customers and our shareholders," said PG&E Corporation Chair of the Board Richard C. Kelly. "We fully recognize the importance of dividends and intend to revisit the issue as we get more clarity." 
The company said it planned to work with the state to address the negative "investment environment" caused by state law on inverse condemnation. 
Shares of another California utility, Edison International ( EIX), are down $4.63, or 7%, today to $63.67 and have fallen 20% since Southern California wildfires broke out earlier this month amid concerns about its legal liability under inverse condemnation. Edison shares hit a new 52-week low today and did those of PG&E. The Utilities Select Sector SPDR ETF ( XLU) has slumped fallen 1.1% to $52.40. 
More at Barron's Stocks to Watch blog, http://www.barrons.com/stocks-to-watch 
(END) Dow Jones Newswires

Wednesday, December 20, 2017

Edison International under fire

A Second Utility Giant Loses Billions as Wildfires Rage

 Updated on 
  • Some utility customers may be without power for next few days
  • Under California law, utilities can end up footing bill
California Fires Halt Filming, Send Edison Plunging
California Fires Halt Filming, Send Edison Plunging
Once again, thousands are fleeing wildfires in California. And, once again, the worry on Wall Street is that a major electric utility might end up on the hook for the damages.
Shares of Edison International resumed declines on Wednesday, a day after their biggest slump in 15 years wiped out more than $3 billion in market value. A fast-moving firefanned by high winds in Southern California’s Ventura and Santa Barbara counties charred 50,000 acres of land, burned hundreds of homes and damaged citrus crops. 
Authorities haven’t cited a cause. But, as with the conflagrations in the state’s famed wine country in October, stock-market investors are worried downed power lines may have played a role in sparking the flames. Under a controversial rule known as “inverse condemnation,” utilities are liable for property damage if their equipment is found to have contributed. In Northern California, similar speculation is centered on PG&E Corp., which has said it’s too soon to pinpoint a cause. Edison said it had no indication its equipment was the source of the latest fires.
“This is like catching a falling knife,” Shahriar Pourreza, an analyst for Guggenheim Securities, said of the stock slide. “Anyone who tells you this is an overreaction really has no idea about the state and what is happening there.”
Edison’s Southern California Edison unit warned that some customers should be prepared to go without electricity for the next few days because of fire damage while transmission lines face further threats. California Governor Jerry Brown declared a state of emergency in Ventura County after hundreds of homes and other structures were destroyed and tens of thousands of residents evacuated.
PG&E lost more than $7 billion in market value after state investigators said they were looking at the San Francisco-based utility’s equipment as a possible cause of deadly fires that tore through wine country.
Edison fell as much as 3.1 percent on Wednesday and traded at $68.75 as of 9:55 a.m. in New York. The stock slid 13 percent on Tuesday, its worst performance since October 2002. 
In an early morning update, the company said more than 14,000 of its customers were experiencing outages. Those numbers could change depending on wind and fire conditions through the week.
Based on the apparent origin of the fires and the performance of its system, Southern California Edison said Tuesday it had no indication its equipment was a source. In a statement, the company said the state fire service would be carrying out an investigation.

Denied Request

Under California law, utilities can ask regulators to spread the costs of wildfires to customers. Last month, however, California regulators denied a request by San Diego Gas & Electric to bill customers for expenses related to a decade-old wildfire.
“Based on our initial read of the facts, we expect Edison to absorb any financial implications of this fire, and view the significant stock price drop as an overreaction,’’ SunTrust Robinson Humphrey Inc. wrote in a note Tuesday. “However, we acknowledge that facts are still developing in the case, and the issue could remain an overhang for a while.’’
The fire-stoking winds whipping Southern California will last into Thursday, according to the National Weather Service.
— With assistance by Brian K Sullivan
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    Saturday, December 2, 2017

    Stubbed Toe



    I got up at night and stubbed my toe.  I turned on the light and was surprised to see how much damage there was.  The toenail on my big toe was broken all the way through half way down from one side to the other.  Half of it had actually come completely off.  What to do?  

    What I actually did was to go back to sleep.  I put a bandaid on it and thought about how I could avoid this.  It probably wouldn't have happened if I were wearing slippers, which I will be in the future.  Once I can get slippers on.  It probably wouldn't have happened if I had had a nightlight.  It's not the first time I've had an accident in the dark.  That's just asking for trouble.  

    I told a friend about it, and she gave me a cute little flashlight for walking around in the dark.  Yay!  

    What about missing toenails?   I bought Krazy glue and a set of false toenails.  I'm going to glue my poor toenail back together, and then put beautiful false toenails on my toes until this storm passes.