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:

  • PCG (11/5)

"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:

  • PCG (11/5)

"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:

  • (11/8)

"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:

  • EDGAR Online

"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."

Join the Amenity Viewer Beta Program today to analyze earnings call transcriptions and enable you to spot outliers, identify critical insights, and understand key drivers.

This communication does not represent investment advice. Transcript text provided by S&P Global Market Intelligence.

Copyright ©2019. All rights reserved.

November 26, 2019

Deception Spotlight: Smucker Jammed on Revenue Growth

We highlight The J. M. Smucker Company (SJM) following the company’s 2Q20 earnings call on 22 November 2019. Despite beating EPS estimates, the underlying story remains unsettling. Focusing more on the longer-term, our analysis finds questions about revenue have triggered deceptive answers by management in earnings calls at an increasing rate, which may further erode confidence given the ongoing calls for top-line improvements. This sort of evidence may provide fodder for bear theses and be a honeypot for activists. We narrate the context for our concern and detail deceptive language detected by Amenity’s NLP models.
November 21, 2019

Amenity Portfolio Analytics: Warren Buffett's Portfolio at Berkshire Hathaway

We pilot a method for using Amenity's NLP solutions to analyze earnings calls for multiple companies and scoring their impact on portfolios of diverse, unevenly distributed holdings. We analyze Warren Buffett's holdings at Berkshire Hathaway as a test case and detail the Oracle of Omaha's Amenity Portfolio Score with attribution at the position level. We find that Berkshire Hathaway's portfolio score is significantly greater than the average company score in our universe (>12k companies, >10 years), which is a function of Buffett favoring companies with positive Amenity Scores.
October 30, 2019

Ahead of the Fed: S&P 500 Bank Barometer

We’re back on Fed Watch! With the Federal Reserve’s Open Market Committee expected to announce another rate decision at 2pm on 30 October 2019, markets have baked in more than a 90% likelihood of a 25 basis point cut. We've kept a close eye on regional and diversified banks as earnings season progresses to gauge how lower rates are impacting management commentary as well as their business and economic implications. We share our analysis context ahead of the Fed’s announcement and press conference.
October 24, 2019

Sizing-Up New CEOs at Nike & Under Armour

Under Armour and Nike announced recently that their current CEOs are stepping aside and handing over control to the next generation of apparel giant leaders. Both successors have extensive experience in the upper echelons of corporate management. And as a result, we have both incoming CEOs on the proverbial record. We use Amenity’s suite of NLP tools below to analyze and estimate the level of clarity we can expect from Patrik Frisk and John Donahoe when they take the reins.

Stay Informed: Join Our Newsletter

Keep up to date with our analyses and how we're making changes.