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Equity Value in PG&E Possible Even in Bankruptcy

Travis Miller

Travis Miller: The California utility PG&E decided that it's going to declare bankruptcy, most likely within the next 15 days. The California utility's been dogged by concerns about wildfire liabilities after the 2017 and 2018 wildfires in the state, some estimates up to $30 billion. 

Now, that scenario, about $30 billion of worst case, would wipe out the equity. What we think is that there might still be residual equity. This would make it a very unique bankruptcy situation, where PG&E actually could come out with positive equity value. In that case, you'd have liabilities that were more like the $15 billion range, which, again, some estimates seem reasonable when we're thinking about that. 2017 fires, we've already heard from regulators and legislatures about, and we think the 2018 fires could follow a similar path. But we still need some assurances from the governor in California, from politicians, from regulators, and from other stakeholders to determine exactly how much equity value can be left over. 

We continue to have the stock at a very high uncertainty rating. For current shareholders, this is not your typical utility investment. It pays no dividends, and it's going to be highly speculative, depending on how the bankruptcy scenarios work out. For new investors, we'd point them toward Edison International, a California utility that trades at a discount because of the whole California uncertainty, and other utility stocks that pay dividends in the 4% range.