Northern California wildfires captured in stunning images
PG&E Corp., facing millions of dollars in claims after the devastating wine country fires, eliminated its shareholder dividend Wednesday in a move that will save the utility hundreds of millions of dollars.
Big corporations rarely eliminate their quarterly shareholder dividends, and PG&E’s decision is a further indicator of the potentially enormous financial damage it faces over the October fires. PG&E, which owns Pacific Gas and Electric Co., said in a statement to the Securities and Exchange Commission in October that losses from the fires could exceed the $800 million worth of liability insurance it carries for big fires.
Shareholders responded immediately. PG&E’s stock fell 93 cents on Wednesday, to $51.12, on the New York Stock Exchange, and then dropped another $4.80 in after-hours trading, to $46.32.
The move Wednesday eliminates dividends starting with the fourth quarter.
PG&E had been paying its shareholders $2.12 a share per year in dividends, or 53 cents per quarter. With more than 500 million shares outstanding, the total dividend payout is more than $250 million every three months.
The utility also suspended paying dividends on preferred shares of stock.
Cal Fire and the Public Utilities Commission are investigating whether PG&E’s transmission lines played a role in the fires, which killed 44 people and destroyed thousands of homes. Multiple private lawsuits have been filed against the utility in the weeks since the fires.
“After extensive consideration and in light of the uncertainty associated with the causes and potential liabilities associated with these wildfires as well as state policy uncertainties, the PG&E boards determined that suspending the common and preferred stock dividends is prudent with respect to cash conservation and is in the best long-term interests of the companies, our customers and our shareholders,” PG&E Chairman Richard Kelly said in a prepared statement.
“We fully recognize the importance of dividends and intend to revisit the issue as we get more clarity. In the meantime, PG&E is committed to working with state policymakers to address the negative investment environment that strict liability under inverse condemnation is creating for California’s utilities. This ultimately hurts our customers and the state. The company also remains committed to supporting recovery and rebuilding efforts by those communities that were impacted by these devastating fires,” he said.
A Cal Fire investigation found that PG&E was responsible for the 2015 Butte Fire in Calaveras and Amador counties, which killed two people and burned 70,000 acres. PG&E’s losses from the Butte Fire could reach more than $1 billion.
In financial terms, the wine country fires are the most damaging in California’s history, with insurance claims topping $9 billion.