PG&E profits plunge in fourth quarter while utility confronts wildfire costs
PG&E profits plunge in fourth quarter while utility confronts wildfire costs
09 February 2018
Published by https://www.mercurynews.com
PG&E’s profits nose-dived in the fourth quarter of 2017, as costs related to lethal wildfires in the North Bay Wine Country during the period began to mount, the utility reported Friday.
Over the final three months of 2017, PG&E earned $327 million, or 63 cents a share, from operations, which was down 51.6 percent from the same period a year earlier. The operating profits excluded certain one-time items.
Wall Street had forecast profits of 68 cents a share. PG&E shares rose 0.9 percent, or 33 cents, and closed at $38.57 Friday.
PG&E jolted investors Friday when it declined to provide any guidance for financial results during 2018. The company was already in hot water with investors after it revealed in December it would suspend its dividend because it wasn’t sure about the extent of its liability linked to the wildfires.
“We know the dividend suspension was difficult news for our long-term investors,” Geisha Williams, the company’s chief executive officer, told analysts during a conference call to discuss the results. “The decision was driven by the level of uncertainty about the potential causes and liabilities associated with the fires.”
San Francisco-based PG&E incurred costs of $82 million connected with the the deadly Northern California infernos during the October-through-December quarter of 2017, the utility said.
Costs for the Northern California wildfires — at present — are expected to range from $100 million to $150 million, Jason Wells, PG&E’s chief financial officer, told the analysts. Insurance is expected to cover just $65 million to $100 million.
Total insurance claims for the Wine Country wildfires had reached $9.4 billion in December, however.
“All of this reflect the enormity of the uncertainty about the financial burden on PG&E,” said Paul Patterson, an analyst with Glenrock Equities. “Suspending a dividend is something that a utility does not do lightly.”
During 2017, electricity revenue totaled $13.12 billion, down 5.3 percent, while gas revenue totaled $4.01 billion, up 30.1 percent.
The analysts pressed PG&E executives several times for concrete information regarding the dollar value of the claims so far in the Wine Country fires, when the dividend might resume and the magnitude of the company’s liability.
PG&E offered little insight, other than to note it has embarked on a wide-ranging effort to overturn California’s application of a policy called inverse condemnation, under which a utility can be held liable if any of its equipment was a “substantial” cause of a fire, even if the company acted properly.
“We believe the legal theory behind it is severely flawed,” Williams said. “We’re challenging it aggressively on three fronts, in the regulatory, legal and legislative arenas.”
PG&E customers also might be saddled with higher power bills to pay for the company’s liability if PG&E is successful in its efforts, Williams has warned.
