Fitch says PG&E’s bankruptcy will not hurt California’s credit rating

FAN Editor
FILE PHOTO: PG&E crew work on power lines to repair damage caused by the Camp Fire in Paradise,
FILE PHOTO: PG&E crew work on power lines to repair damage caused by the Camp Fire in Paradise, California, U.S. November 21, 2018. REUTERS/Elijah Nouvelage/File Photo

January 17, 2019

(Reuters) – Fitch Ratings said on Thursday power company PG&E Corp’s <PCG.N> planned bankruptcy will not at this point hurt the credit quality of California.

The credit ratings agency, however, said the state’s wildfires and the inverse condemnation rule will remain a long-term risk for the publicly-owned utilities.

Inverse condemnation is an old California rule that exposes the state’s utilities to liabilities from wildfires regardless of their negligence, as long as their equipment is involved.

PG&E could not be immediately reached for comment.

Earlier in the day, shareholder BlueMountain Capital Management LLC said the U.S. power company’s decision to file for bankruptcy was unnecessary.

BlueMountain said nearly two months after the Camp Fire around 18 Wall Street analysts had found the company solvent with a consensus equity valuation of $20 billion.

“At the very least, the board should wait to take its case to shareholders at the upcoming annual meeting,” the asset manager said in a letter to PG&E’s board. The company’s shareholders are scheduled to meet on May 22.

Earlier this week, the biggest U.S. power utility by customers said it was preparing for Chapter 11 bankruptcy protection as soon as this month amid pressure from potentially crushing liabilities linked to California’s catastrophic wildfires in 2017 and 2018.

The asset manager said the utility should consider asset sales or alternative financing, if needed.

BlueMountain Capital Management held a 0.8 percent stake in PG&E, as of Sept. 30, 2018, according to Eikon data from Refinitiv.

Shares of the utility, which have slumped more than 52 percent this week, were up nearly 7 percent at $7.51 in early trading.

(Reporting by Debroop Roy in Bengaluru; Editing by Shinjini Ganguli and Arun Koyyur)

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