PG&E Sinks as Wall Street Weighs 'Posturing' Around Bankruptcy

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PG&E Sinks as Wall Street Weighs 'Posturing' Around Bankruptcy

PG&E could be on the hook for tens of billions of dollars for its potential role in California's devastating Camp Fire previous year - the deadliest and most destructive wildfire in the state's history.

The company is considering whether to file for bankruptcy protection as soon as February, people familiar with the situation said Friday.

The shares were down 23 percent in pre-market trading. They'll have to decide whether to allow the company to pass some of the costs of the fire through to taxpayers, Katie Bays and Clayton Allen, analysts at Height Securities LLC, said in a note on Monday.

A bankruptcy filing is not PG&E's preference for addressing liabilities from the catastrophic blazes, some of the sources said.

Three major insurance companies are suing PG&E over the billions of dollars in claims they expect to face from the Camp Fire. "We recognize the need to balance the interests of many stakeholders while maintaining safe, reliable, and affordable services for our customers, which is always our top priority".

But that is just a possibility, according to sources contacted by Reuters.

The Sacramento Bee reports that PG&E is already facing multiple lawsuits from wildfire survivors.

A new law signed by California governor Jerry Brown past year, requires the commission to consider a utility's finances when evaluating damages caused by wildfires, in order to determine the maximum amount it can pay without harming customers.

FILE - Firefighter Jose Corona sprays water as flames from the Camp Fire consume a home in Magalia, California, Nov. 9, 2018.

The company said on Friday that it was reviewing its "structural options" and assessing its operations, finances, management, structure and governance. "Last year, they were able to fool the legislature with the narrative of bankruptcy or bailout, and the legislature gave them a bailout".

Under California law, PG&E is held entirely liable if lawyers can prove the fire is linked to the utility's power lines or other equipment, a fact that sent shares of the company tumbling following the start of the fire.

The utility has borrowed more than $3 billion under credit lines available to it, a move companies in financial distress will often make to shore up cash.

And a month later, The California Public Utilities Commission opened a proceeding into the company falsifying safety documents for natural gas pipelines between 2012 and 2017. It had amassed too much debt by buying electricity, which it was then not allowed to recoup by increasing rates for its customers.

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