PG&E, Edison Plunge as Wall Street Weighs California Wildfire Risk

(Bloomberg) -- PG&E shares saw their worst one-day plunge in 16 years, while utility peer Edison International is having its worst day since 2001 amid California wildfires that began in PCG’s service territory.

• PG&E fell as much as 38 percent in its biggest one-day decline since August 2002; the stock triggered at least one volatility halt as trading opened
  • Edison dropped as much as 25 percent, its biggest intraday fall since April 2001
• Evercore ISI analyst Greg Gordon (outperform) cut PG&E’s PT to $49 from $55, based on a $3.5 billion "exposure placeholder" for the Camp fire; says every $1b of higher exposure to Camp fire liability would hit Evercore’s PT by a little over $1/share
  • Gordon notes PG&E fell 16.5 percent on Friday, and stock is trading just above book value as at the end of third quarter of $37.60/share; shares are discounting over $20b of exposure to fire liabilities, and "it could trade lower, but we think there is value here"
• Goldman Sachs analyst Michael Lapides expects incremental investor concern for PG&E and Edison as the fires continue to grow
  • Notes California’s wildfire legislation that passed in late August (SB901) doesn’t contain provisions regarding wildfire recovery for potential 2018 fires
• Morgan Stanley’s Stephen Byrd writes PCG/EIX shares now reflect $17b/$5b for 2017-2018 fires, including a permanent 25%/20% discount to peers
  • Adds that "implied damage likely exceeds shareholder liability and underscores need for further reforms"
• PG&E has 9 buys, 9 holds, 0 sells avg PT $53: Bloomberg data
• YTD: PCG -11% vs S5UTIL Index +4%
• NOTE: Nov. 9, Big New Fire Could Boost Danger for PG&E Investors: BI React

To contact the reporter on this story: Michael Bellusci in Toronto at mbellusci2@bloomberg.net

To contact the editors responsible for this story: Courtney Dentch at cdentch1@bloomberg.net, Christiana Sciaudone

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