Recent pricing pressure at California utility PG&E allows us to preview how Viewer's NLP model is not only applicable to earnings call transcripts, but also SEC filings analysis. A key feature when transcripts lack direct information to significant events.
November 14, 2018
PG&E Under Pressure: 2017 Wildfire Liabilities Come Due
Shares of California utility PG&E (PCG) are under significant pressure due to potential liability for the devastating campsite wildfire of 2017.
More importantly their earnings call featured a lack of direct information making it difficult to plan a course of action.
We applied Amenity’s Natural Language Processing capabilities to not only look at the PCG earnings call transcript, but also preview an upcoming Viewer feature: SEC filings analysis, to illustrate how you can gain critical insights when presented with limited information.
Viewer Quickly Shows PCG's Earnings Featured Many Questions on Liabilities, but Few Answers
The Amenity NLP model not only identifies critical financial insights within text, but also instances where there is a lack of information given in response to analyst questions:
"Greg, thanks for the question. The Safety and Enforcement Division has said that they are investigating, working alongside with CAL FIRE and others. We expect that they will issue a report once all of the CAL FIRE reports are out. We don’t really yet know the timing, and we don’t know what would result from that. Obviously, as you know that Public Utilities Commission has wide discretion to consider potential penalties if they found something as a result of that investigation or also could launch an Order Instituting Investigation. I think at this point, we don’t know yet where that proceeding will go but we’ve mentioned that is a factor that’s out there as well."
The possibility of a power shutoff was also mentioned on the call:
"I’ll tell you, actually, initiating that public safety power shutoff program couple of weeks ago was a very, very difficult decision, but from our point of view,it was the right one given the forecast that we have of extreme weather conditions. The real time weather modeling that our team was doing. And frankly, field observations from our employees. So as we took a look at all that, there was no doubt in our mind that we had to initiate it. And I would tell you,if we’re faced with similar conditions in the future, similar forecast, we’re going to do it again. It’s as we’ve talked about this in the past,it’s not a free play when you do a public safety power shutoff. There are clearly implications associated with that, but as we look at the potential implications of another ignition associated with these extreme wildfire conditions, we’ve got to take the broader public safety sort of considerations in mind and that’s what we’ve done."
But was ultimately not implemented:
"PG&E has determined that it will not proceed with plans today (Nov. 8) for a Public Safety Power Shutoff in portions of eight Northern California counties, as weather conditions did not warrant this safety measure."
New Feature Preview: Amenity's NLP Model Flags Critical Insights From SEC Filings
The following 8-K was posted the evening of November 13, indicating that insurance coverage may not be sufficient:
"The cause of the Camp Fire is under investigation. On November 8, 2018, the Utility submitted an electric incident report to the California Public Utilities Commission (the CPUC) indicating that on November 8, 2018 at approximately 0615 hours, PG&E experienced an outage on the Caribou-Palermo 115 kV
"Transmission line in Butte County. In the afternoon of November 8, PG&E observed by aerial patrol damage to a transmission tower on the Caribou-Palermo 115 kV
"Transmission line, approximately one mile north-east of the town of Pulga, in the area of the Camp Fire. This information is preliminary. Also on November 8, 2018, acting governor Gavin Newsom issued an emergency proclamation for Butte County, due to the effect of the Camp Fire.
"As previously reported, during the third quarter of 2018, PG&E Corporation and the Utility renewed their liability insurance coverage for wildfire events in an aggregate amount of approximately $1.4 billion for the period from August 1, 2018 through July 31, 2019. For more information about wildfire insurance and risks associated with wildfires, see PG&E Corporation and the Utility's quarterly report on Form 10-Q for the quarter ended September 30, 2018.
"While the cause of the Camp Fire is still under investigation, if the Utility's equipment is determined to be the cause, the Utility could be subject to significant liability in excess of insurance coverage that would be expected to have a material impact on PG&E Corporation's and the Utility's financial condition, results of operations, liquidity, and cash flows."
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This communication does not represent investment advice. Transcript text provided by S&P Global Market Intelligence.