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Why Shares of PG&E Are Falling Today

By Lou Whiteman – Aug 15, 2019 at 1:19PM

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There's a fresh twist in the company's ongoing reorganization saga.

What happened

Shares of PG&E (PCG 1.37%) traded down 8% on Thursday at midday after a court-appointed monitor submitted a report that claims the utility has been careless in its efforts to manage trees that could pose wildfire threats. This poses a potential complication to the company's hopes for a smooth trip through bankruptcy protection.

So what

PG&E filed for bankruptcy protection in late January as part of a plan to deal with upward of $30 billion in wildfire liabilities stemming from a blaze last fall. The so-called Camp Fire in northern California, which resulted in 85 deaths and massive property damage, was sparked by a PG&E power line.

The company has been attempting to reorganize and work out a plan involving California's legislature that would create a fund to help manage future liabilities. But the new report, issued by former deputy U.S. attorney general Mark Filip, found that PG&E has failed to identify and trim thousands of trees near power lines and has been deficient in record keeping and inspector training.

Power transmission lines.

Image source: Getty Images.

"Not only is PG&E falling short of its [vegetation management goals] for the year, but the quality of the completed work is questionable," the report, as quoted by the San Francisco Chronicle, states.

There is some risk that the report could make it more difficult for PG&E to get its reorganization plan through the courts. U.S. District Judge William Alsup has been critical of PG&E over its past failures that led to the fires, and state lawmakers are under pressure to make sure PG&E is held accountable before agreeing to any new funds that could help ease future costs.

Alsup has given PG&E until Sept. 3 to respond to the report and has set a hearing to discuss the finding on Sept. 17.

Now what

There's real value in the PG&E assets, and it is in the best interest of California lawmakers to ensure a steady and stable power utility for the state's citizens, so there is reason for hope that agreements can be sorted and PG&E will emerge as a viable company and, potentially, a good long-term investment. But this latest development is a reminder of just how complicated the reorganization is and how many different things can go wrong.

Buying into PG&E right now is a speculation and not an investment, and those who take the plunge need to be prepared for volatility. There are still many more chapters to be written in the PG&E story before anyone knows the outcome.

Lou Whiteman 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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