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Home / Business / PG & E warned investors against catastrophes. It was mostly ignored

PG & E warned investors against catastrophes. It was mostly ignored



(Bloomberg) – PG & E Corp. He repeatedly told investors that weather-related catastrophes were a risk, but many did not value enough until the company was about to go bankrupt.

The company has added warnings to its database Regulatory filings and bids specifying how catastrophes such as forest fires, droughts and floods could impact on results or affect operations. However, until mid-November, the company's bonds were trading above par in the coming decades, suggesting that financial managers consider these risks manageable.

Now the investors pay attention. The market value of PG & E fell from nearly $ 24 billion at the end of September to around $ 3.5 billion. Most bonds trade between 70 and 80 cents against the dollar. The sudden declines underscore how difficult it is for investors to analyze risks related to disasters and possibly even climate change rather than the usual business difficulties.

"Many people believe that the risk of climate change in the future is such that it is not about influencing the bonds, but then you have that," said Jens Peers, US Chief Investment Officer of Natovais Investment Managers division Mirova, which manages assets of approximately 10.7 billion US dollars. Mirova has already partially stayed away from PG & E because the explosion of the San Bruno gas pipeline in 2010 was convicted.

The California electricity and gas utility said it will file for bankruptcy this month after the forest fires in 2017 and 2018, leaving it with potential liabilities of $ 30 billion or more. The current market prices for bonds suggest that investors assume that the securities are being hit in some form. A spokesman for the company declined to comment.

Before the start of regular trading in New York, PG & E fell 13 percent. Shares have fallen more than 85 percent on 8 November since the outbreak of Camp Fire, the deadliest fire in history.

PG & E has not hidden its vulnerability to the effects of climate change. Geisha Williams, who left the position of chief executive officer over the weekend, had consistently argued that California's concerns over fires far exceeded PG & E. He described the fire as a "climate-driven extreme weather" in a profit call last summer. In a prospectus for a bond exchange in April, the company's Pacific Gas and Electric Co. Power Department warned that climate change and natural disasters could cause damage.

The company planned to invest more in safety in recent years and made it It is a key element of its CEOs by the end of 2017. Around the same time, the company set up the Community Wildfire Safety program and has since expanded the program, to expand its network of weather stations and carry out inspections of the electrical infrastructure in the event of a high risk of fire

Information on catastrophes is common among US utilities. Money managers and analysts focusing on environmental, social and governance issues have, however, been worried about PG & E for some time. The market research and analysis firm MSCI Inc. first reported forest fires in 2016 as a significant risk to PG & E. Investors after it was determined that the company's equipment triggered the butter wildfire in 2015. More recently, the environmental, social and governmental research firm Sustainalytics has identified forest fires and other environmental risks as "serious" for the company.

Of the approximately 1,200 green and sustainable equity funds tracked by Bloomberg, only 34 of PG & E shares held recent filings. But many conventional money managers value environmental risks less.

"People are becoming familiar with risks that have never been a problem before, then suddenly," said Henry Peabody, who helps manage Eaton Vance's $ 460 billion fixed income. "The risk sneaks in places where you least expect it."

(Stock price updates in paragraph 6).

– With support from Eliza Ronalds-Hannon, Chaz Weiner, and Jim Efstathiou Jr.

To contact the reporters on this story: Molly Smith in New York at [email protected], Emily Chasan in New York at [email protected]; Janine Wolf in New York at [email protected]

To contact the responsible editors for this story: Nikolaj Gammeltoft at [email protected], Janet Paskin, Dan Wilchins

For more articles of this nature, see bloomberg. com

© 2019 Bloomberg LP


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