PG&E Corp. stock cratered Monday after the company said it will file for Chapter 11 bankruptcy protection amid the financial anguish stemming from its part in helping spark a wave of historic wildfires in California.
Shares of the company dropped nearly 50 percent in early trading Monday, one day after the company said Chief Executive Geisha Williams was stepping down.
The company provided the official 15-day advance notice that it and its wholly owned subsidiary, Pacific Gas and Electric, intend to file petitions to reorganize under Chapter 11 of the U.S. Bankruptcy Code on or about Jan. 29.
The company, California’s largest investor-owned utility, has 16 million customers across a 70,000-square-mile service area in Northern and Central California.
There was some speculation that perhaps PG&E was bluffing in order to force aid from California. CNBC’s David Faber said that sources told him that is not the case.
PG&E faces at least $30 billion in potential liability costs stemming from wildfires in 2017 and 2018, many allegedly started by the company’s equipment, that have led state officials to doubt the safety of the company’s electric distribution system.
Investigators have already determined PG&E’s equipment liable in at least 17 major wildfires in 2017. State investigators are still working to determine if the company’s equipment was partly responsible for November’s Camp Fire, which killed at least 86 people and destroyed about 14,000 homes, making it the state’s deadliest fire.
The company disclosed that some of its equipment malfunctioned in the area shortly before the fire started on Nov. 8. The company does not expect any impact to electric or natural gas service for its customers during the Chapter 11 process.
“While we maintain our view that liquidity remains intact and still has runway prior to formal claims from the wildfires, we see the potential move as an accelerated attempt to stem forthcoming claims and place existing claims in tandem with unsecured creditors,” Bank of America Merrill Lynch analyst Julien Dumoulin-Smith said Monday. We “do not expect shares to trade on fundamentals until more clarity from the company on its intent is disclosed.”
— With reporting by CNBC’s David Faber