Morningstar

Why PG&E Isn't Worth Zero

Why PG&E Isn't Worth Zero
Securities In This Article
PG&E Corp
(PCG)

Travis Miller: As we expected, the troubled California utility PG&E filed for bankruptcy on Tuesday. What it does now is kicks off a process where we really don't know what's going to happen. What we do know, and are pretty sure of, is that there will be equity value left for shareholders. We think there will be about $12.50 left for shareholders at the end.

This brings up a unique question as to how that will be a positive equity value when typically you think about bankruptcy as wiping out shareholders. The situation here is a little different in that at the end of the day, regulators do have to end up with a healthy utility. What that means is health access to the capital markets. For equity shareholders, they need assurance that the wildfire liabilities will not continue, and will be capped at some reasonable level. Right now that looks like $8 billion to $10 billion. If they ultimately reach that goal and reach that amount, then there should be value leftover for shareholders.

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About the Author

Travis Miller

Strategist
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Travis Miller is a strategist, AM Resources, for Morningstar*. He covers energy and utilities. North American regulated utilities and independent power producers have been the main focus of his research for more than 17 years. The companies in his coverage include some of the largest U.S. utilities as well as a mix of small- and mid-cap utilities.

Before joining Morningstar in 2007, he was a reporter for several Chicago-area newspapers, including the Daily Herald in Arlington Heights, Illinois. Previously, Miller was director of the utilities equity research team at Morningstar.

Miller holds a bachelor’s degree in journalism from Northwestern University’s Medill School of Journalism. He also holds a master’s degree in business administration from the University of Chicago Booth School of Business, with concentrations in accounting and finance. He is a Level III candidate in the Chartered Financial Analyst® program.

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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