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PG&E stock falls amid fears of its role in Northern California fire

PG&E stock falls amid fears of its role in Northern California fire
Flames from the Camp fire burn near a home atop a ridge near Big Bend, Calif., on Nov. 10. (Josh Edelson / AFP/Getty Images)

PG&E Corp.’s shares, which soared Friday, slumped again Monday after the company disclosed that a second power line failed the morning California’s deadliest fire began and a state official criticized the makeup of the company’s board.

A circuit in the Butte County community of Concow failed around 6:45 a.m. on Nov. 8, the utility said Friday in a filing. The California Department of Forestry and Fire Protection, known as Cal Fire, collected equipment on that circuit and “has secured a location near PG&E facilities,” the company said.

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At least 77 people have died in the Camp fire, which is about 65% contained. About 150,000 acres have been scorched and more than 11,000 homes destroyed. Heavy rain is forecast Wednesday, which could help firefighters but raises the risk for mudslides because trees and brush have been lost.

PG&E stock, which was down 4.8% shortly before noon, has been on a roller-coaster ride over the past week. It dropped 46% from Nov. 12 to Thursday, then leaped 38% on Friday after a state regulator said he didn’t want to see the utility slide into bankruptcy.

But late Friday, Michael Picker, head of the California Public Utilities Commission, singled out PG&E’s board as an impediment to reform and said he isn’t ruling out carving up the company as officials launch a deep corporate review. Meanwhile, the latest disclosure on equipment problems opened new questions for the company.

In a research note, Morgan Stanley analysts saw both “material upside” and big risk if the state’s largest utility were to undergo a breakup.

“The key risk is that the regulator (and potentially the Legislature) would seek greater asset coverage for wildfire-related damages extending beyond the value of the electric utility," Morgan Stanley analysts led by Stephen Byrd wrote in a research note Monday.

One way to compensate wildfire victims would be to set aside cash flows from PG&E’s electric distribution business, according to the Morgan Stanley note. The utility also owns a natural gas distribution company valued at $22 to $26 a share while its regulated generation fleet has potential value of $10 to $12 a share, Morgan Stanley said.

San Francisco-based PG&E has filed two incident reports since the fire began — and seen about half its market value, roughly $12 billion, vanish in little more than a week. It previously told state regulators that aerial inspection found damage to a transmission tower near Pulga, which is east of Concow.

“The information provided in the report is preliminary, and there has been no determination on the cause,” PG&E said in a statement Friday.

Scott McLean, a Cal Fire spokesman, declined Sunday to reveal the location of that potential ignition point. “The investigation is going to be more than likely a lengthy one,” he said.

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