PG&E Falls After Reporting Second Power-Line Failure in Fire

(Bloomberg) -- PG&E Corp.’s shares, which spiked on Friday, slumped again after disclosing 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 Concow, Butte County, failed at about 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.

At least 77 people have died in the Camp Fire, which is 65 percent contained. About 150,000 acres have been scorched and more than 10,000 homes were destroyed. Heavy rain is forecast Wednesday, which could help fire fighters but raises the risk for mudslides because trees and brush have been lost.

The stock, which fell 8 percent at 9:33 a.m., has been on a roller-coaster ride over the past week, falling 46 percent between Monday and Thursday, then gaining 38 percent on Friday after a state regulator said he didn’t want to see the utility slide into bankruptcy.

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 in an interview Sunday to reveal the location of that potential ignition point. “The investigation is going to be more than likely a lengthy one,” he said.

--With assistance from Mark Chediak, David R. Baker and Michael Bellusci.

To contact the reporters on this story: Brian Eckhouse in New York at beckhouse@bloomberg.net;Jim Efstathiou Jr. in New York at jefstathiou@bloomberg.net

To contact the editors responsible for this story: Joe Ryan at jryan173@bloomberg.net, Reg Gale, Will Wade

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