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PG&E Will Take a Big Hit from California's Wildfires -- but How Big?

By Motley Fool Staff – Nov 23, 2018 at 9:34AM

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The largest U.S. utility company has billions of dollars in culpability for the blazes.

The fires spreading out across California in recent weeks stemmed from a number of sources, but at least one was apparently sparked by faulty PG&E (PCG -1.13%) equipment, and the company's liability is going to take a toll.

In this segment from Motley Fool Money, host Chris Hill and analysts Aaron Bush, Matt Argersinger, and Jason Moser consider the wild moves the stock has taken as investors try to gauge how heavy a toll it might be, as well as what's ahead for the company.

A full transcript follows the video.

This video was recorded on Nov. 16, 2018.

Chris Hill: The wildfires in California are being felt on Wall Street as shares a PG&E have been all over the place lately. Shares of California's largest utility have been falling this week until Friday, Matty, when the shares rebounded more than 30%. What is going on here?

Matt Argersinger: Have we ever talked about PG&E?

Hill: I don't think we have.

Argersinger: It's actually the country's largest utility company. It's California's largest utility company. Over 16 million people use PG&E in some form or fashion to get energy. This is a really tragic story, what's happening in California, these devastating wildfires. We know we've seen all the property damage, and, of course, the loss of life. The problem with PG&E is that there's a good chance that electrical equipment failure on their part has caused at least one of the fires, if not more. If you think about the damage that we've already seen, the loss of life, people are already suing PG&E. So, the liabilities here could run up well into to the billions. The problem is, they're already liable for about $1.7-1.8 billion in damages from last year's fires in California that they were found to be liable for.

It's really bad news for the company. Coming into Friday, actually, the stock was down 40% in just the week to a 15-year low. It's bouncing back on Friday though because the California Public Utilities Commission president has said that allowing the state's largest utility company to go bankrupt is probably not a good idea. That could be so. Certainly, a bankruptcy of that size, for a company that's so influential, touches so many lives in California, would probably be a problem. It might prevent the company from fixing a lot of damage that's being caused. It's really a tough story. It's evolving, as we see. But there's no question that this is a company that's going to have billions and billions of dollars' worth of liabilities now and into the future. Speculating on whether or not they can actually get through it is probably not a great idea.

Chris Hill has no position in any of the stocks mentioned. Jason Moser has no position in any of the stocks mentioned. Matthew Argersinger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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