PG&E Corp. shares plunged Monday after a judge ruled that a jury can determine whether it should pay as much as $18 billion in damages to wildfire victims.
The California utility giant fell as much 28%, to $10.22, at 9:35 a.m. in New York, the most during intraday trading since January. The company’s bonds also declined.
On Friday U.S. Bankruptcy Judge Dennis Montali lifted a freeze on lawsuits tied to the 2017 Tubbs fire, which killed 22 people and destroyed more than 5,600 structures in Sonoma and Napa counties. The move opens the door for victims pursuing claims against PG&E to start preparing for a trial.
“It was a little out of left field that the judge allowed the Tubbs fire litigation to go to an outside jury,” Kit Konolige, a Bloomberg Intelligence analyst, said in an interview. “That’s a big negative surprise.”
In a separate ruling, Montali sided with the utility and rejected requests from two groups of creditors who wanted to propose their own ways to restructure the company. Montali said opening up the bankruptcy to competing plans at this point would have led to “expensive, lengthy and uncertain disputes” that wouldn’t benefit the fire victims.
PG&E has outlined its plan to exit the biggest utility bankruptcy in U.S. history, promising to largely protect the value of its shares. The company says it plans to file the proposal by September 9.
Days before the company filed for bankruptcy, California fire officials said the utility didn’t cause the 2017 Tubbs fire. Instead, investigators ruled it was sparked by a private electrical system outside a home near Calistoga.
But attorneys for a group of victims and insurance companies that paid damages have disputed the state’s findings in bankruptcy court papers. They say their evidence indicates the fire was started by PG&E equipment and want a jury to decide whether the company is to blame for the biggest of the 2017 wine country fires. The lawyers also say that PG&E failed to cut power to the area despite the high fire risk.
Under California law, the Tubbs victims will get a trial within five months, Mike Danko, a lawyer representing fire victims said in an email.
PG&E’s 6.05% bonds due March 2034 fell 3 cents on the dollar to 108.25 Monday, the biggest decline since January, data compiled by Bloomberg show.
–With assistance from Caleb Mutua.
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