Shares of PG&E (NYSE:PCG) fell more than 13% on Thursday after the bankrupt California utility reported third-quarter results and raised 2019 cost estimates, warning that its complicated restructuring could take longer than expected to complete. Most of the news was worrisome for shareholders, who are holding out hope the company's equity will retain some value upon PG&E's emergence from bankruptcy protection.
PG&E, which filed for bankruptcy in January to deal with more than $30 billion in liabilities stemming from the 2018 Camp fire in Northern California, actually reported adjusted earnings per share that came in $0.10 above expectations. But investors were understandably more focused on the utility raising its 2019 full-year cost guidance to $6.2 billion to $6.3 billion, up from $3.8 billion to $4.1 billion, due to costs associated with fires.
The utility also warned its bankruptcy could extend beyond its mid-2020 target date, adding further uncertainty.
Shares of PG&E have lost nearly 90% of their value in the last year, but unlike with most bankruptcies, shareholders have held out hope that the stock would not be wiped out as part of the reorganization. Those hopes have been dented by a court decision to allow alternative plans filed by creditors to be considered along with the company's official restructuring plan. New rounds of fires, which potentially create new victims and added costs, threaten to further cut into the value of PG&E shares by the time the utility does eventually exit protection.
Income-focused investors are typically drawn to utility stocks for their predictable cash flows and dividends, but PG&E today is far from your typical utility and is best left untouched by long-term investors. There is a variety of potential paths for the company to take out of bankruptcy, including a suggestion by some California lawmakers to turn PG&E into a customer-owned cooperative, and no real way of knowing what the utility's fate will ultimately be.