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California firefighters on Friday are furiously trying to contain massive wildfires that have been tearing through the Los Angeles area since Thursday night. (SOUND BITE) (ENGLISH) LOS ANGELES FIRE CHIEF RALPH TERRAZAS: “In terms of fire activity, we’re at zero percent containment. The size right now is 4,700 acres-plus. We’ve calculated that the fire’s moving at a rate of 800 acres per hour.” The so-called Saddleridge fire has engulfed homes in the San Fernando Valley and forced massive evacuations, snarling traffic for miles. Some shelters are already at full capacity. No cause has been cited. Dry conditions and high winds a lethal combination in the days to come. (SOUND BITE) (ENGLISH) LOS ANGELES FIRE CHIEF RALPH TERRAZAS: “These weather conditions are significant in terms of brush threat. The relative humidity has dropped to as low as three percent. Right now it’s seven percent. The winds were sustained at about 20 to 25 miles per hour with gusts over 50 miles per hour. So as you can imagine the embers from the wind have been travelling a significant distance, which causes another fire to start.” Much of the state is on high alert, with utility company Pacific Gas & Electric cutting power in several areas to prevent their lines from sparking. That irked California Governor Gavin Newsom, who, while respecting the safety measure, described the outage as too broad and said it resulted from years of mismanagement. PG&E is on the hook for potentially $30 billion for previous wildfires linked to its transmission wires and other equipment. It filed for bankruptcy in January. Separately, another blaze called the Sandalwood fire is sweeping through an area east of L.A., triggered by burning trash in a dumpster. That fire was only 10 percent contained as of Friday morning.
(Bloomberg) -- An unprecedented blackout that plunged millions of Californians into the darkness for days is over.And nobody can say when the next will hit.Even as PG&E Corp. declared an end to last week’s shutoffs -- a deliberate move to keep its power lines from sparking the kind of blazes that forced the utility into bankruptcy -- the company warned that more will come. “It’s a future we must be ready for given the conditions and risks that we face,” Chief Executive Officer Bill Johnson told reporters.California has six weeks left in the wildfire season -- a time punctuated by dry, hot weather and high winds that have for years been the fuel for deadly and devastating blazes. While both PG&E and California state officials alike acknowledged that the shutoffs that began on Wednesday could have been better orchestrated, neither questioned their need.Climate change has made for more extreme conditions. In November 2018, a PG&E power line sparked the deadliest blaze in California history. And a year earlier, a series of wildfires devastated the state’s wine country. That, state and company officials said, necessitates more extreme measures.Mother Nature’s CallBy Friday, PG&E had restored power to 97% of those affected by the blackouts. On Sunday, 100% of customers had their lights back on. In all, roughly 738,000 homes and businesses went down in cities surrounding San Francisco. More than half of the state’s 58 counties were affected. When they’ll go dark again is Mother Nature’s call, Johnson said. “It really is weather-dependent -- where the wind is, where the conditions are.”Read More: Darkness, Frustration, Fire: Five Tumultuous Days in CaliforniaEven as the lights flickered back on, California firefighters were battling several infernos in Southern California. One that began in the hills north of the San Fernando Valley in the Los Angeles area -- now called the Saddleridge fire -- had burned about 8,000 acres as of Sunday and was less than 50% contained, destroying or damaging 32 structures. Another at the edge of the Sierra Nevada mountains had scorched more than 5,500 acres.For more on California’s blackouts, listen to this podcast.The Los Angeles Fire Department was still investigating the cause of the Saddlebridge fire. Sparks were reported at a transmission tower owned by Edison International’s Southern California Edison utility, but fire officials said it would take at least a week for them to come up with any substantial findings. Edison said in a statement Sunday that it would “fully cooperate with investigations.”The impact on Edison is expected to be minimal, according Citigroup Inc. analysts including Praful Mehta said in a report over the weekend. The utility has $750 million in wildfire insurance and now has the backing of a statewide wildfire insurance fund, they said. Investor concerns over the Saddleridge fire sent the stock sliding 3.9% on Oct. 11, the biggest weekly decline in more than four months.Undervalued StockBack in Northern California, PG&E said it had found 50 instances of weather-related damage in the course of inspecting lines following high winds. “There’s some vindication -- that’s not the right word,” Johnson said late Friday, but the fact that the utility discovered so many safety issues that could have ignited a wildfire made the blackout well worth it, he said.Johnson promised better communication going forward. For days, both ahead of the blackout and during it, the company’s website was down, overwhelmed by people trying to find out whether they would be cut off and for how long. Call centers were similarly flooded. Text messages to homes and businesses affected were few and far between.Read More: Dark Shops, Spotty Phones, Rotting Fish: Life in a Mass BlackoutThe operational act of turning off and on power actually “went really well,” Johnson said. But he committed to better notifications, more phone alerts, shorter call wait times and a website “that works no matter how much traffic is on it.”California officials will have their own say on what more should be done. Governor Gavin Newsom has blasted PG&E over the shutoffs, saying the company should have been more surgical -- and never would’ve been in this situation if it had invested in its infrastructure more heavily. He also called on state utility regulators to review PG&E’s actions.A spokeswoman for the California Public Utilities Commission said the agency, as a policy, reviewed all intentional outages by California utilities. PG&E said it will file a report with the agency detailing the damages it discovered.To contact the reporters on this story: Lynn Doan in San Francisco at email@example.com;Mark Chediak in San Francisco at firstname.lastname@example.org;Hailey Waller in New York at email@example.comTo contact the editors responsible for this story: Lynn Doan at firstname.lastname@example.org, Kevin MillerFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
The Dollar found strong support early, as the markets considered the implications on existing tariffs on the economic outlook. Brexit chatter also weighed.
(Bloomberg Opinion) -- However frothy valuations currently seem to be, optimists can always argue they’re justified by strong earnings. In the past four years, S&P 500 operating earnings per share have grown by nearly 40%.Those numbers, however, may be as airy as the asset prices they support. The U.S. government’s national income and product accounts -- which cover a broader number of businesses than the S&P, use tax returns and adjust for certain accounting practices -- suggest that corporate profits actually peaked in 2014 and have been stagnant since. The national accounts also show significant downward revisions to corporate profit margins over the previous five years. While one would expect some discrepancies between that data and S&P numbers, which are based on Generally Accepted Accounting Principles (GAAP), the gulf is too wide to be ignored.What’s going on? In many cases, accounting choices appear to be distorting results. In early 2019, General Electric Co. reported GAAP losses of $2.43 per share; under adjusted figures it earned $0.65 per share. Tesla Inc. reported full-year GAAP losses of $5.72 per share but “non-GAAP” losses were only $1.33 per share. Over 95% of S&P 500 companies regularly use at least one non-GAAP measure, up about 50% over the last 20 years.One question is how companies choose to recognize income. In the case of long-term, multi-year contracts, such as construction projects, reported revenue can be based on a formula: a portion of the total contract amount, calculated as costs incurred in the relevant period as a percentage of total forecast costs. Understating estimated final costs allows margins to be increased and greater revenue to be recognized up front. Following the collapse of Carillion PLC, the firm was found to be aggressive in recording income which was sensitive to small changes in assumptions. Given the trend to converting sales of products (such as software) into long-term service contracts, these risks are only going to grow. Companies can understate expenses. Many tech companies use non-GAAP accounting to strip out the cost of employee stock options, for instance, thereby showing higher earnings. WeWork sought to redefine traditional earnings before interest, tax, depreciation and amortization as something called “community-based EBITDA.” The new measure conveniently excluded normal operating expenses such as marketing, general and administrative expenses, development and design costs.Spending may be treated as an asset, to be written off in the future rather than when expended. A recent JPMorgan Chase and Co. research report found software intangible assets (the amount spent but not yet expensed) averaged up to 15% of adjusted costs for a sample of European banks. The idea is to better match expenses to the period over which they are expected to benefit the business. But the practice may overstate current earnings.Related-party transactions can distort a company’s true financial position. Saudi Arabia slashed the tax rate on large oil companies to 50% from 85%, even though the government depends on the profits of Saudi Arabian Oil Co. for 80% of its revenues. Aramco will still pay most of its profits to the state, but as dividends rather than tax. That means reported profits will be higher, potentially increasing the company’s valuation ahead of a highly anticipated initial public offering. Complex structures can mask liabilities. Tesla, for instance, faces potential payments related to its SolarCity business. Before being bought by Tesla in 2016, SolarCity regularly sold future cash flows to outside investors in exchange for upfront cash. Tesla assumed these obligations and has continued the practice. The obligations now reportedly total over $1.3 billion.To reduce unfunded pension liabilities, some companies have borrowed at low available interest rates to inject money into the funds. That’s fine as long as fund returns -- generally assumed to be around 6% to 8% -- are higher than the cost of borrowing. If returns come in lower, however, the companies in question will have to raise their contributions, affecting future earnings.New business models often disregard potential costs. If Lyft Inc. and Uber Technologies Inc. drivers are reclassified as employees as proposed in California, then hidden employment costs would need to be recognized, perhaps retrospectively. Newly listed fitness company Peloton Interactive Inc. faces a $300 million lawsuit from music publishers who claim the company used their songs in workouts without paying licensing fees.Finally, stated asset values can be misleading. Goodwill, the difference between acquisition price and the fair value of actual assets acquired, now averages above 50% of acquisition price. Goodwill values are notoriously uncertain. In 2018, GE unexpectedly wrote off $23.2 billion of goodwill arising from its acquisition of Alstom SA.The problem is compounded by private markets, where funding rounds can establish questionable valuations. Recent investments into WeWork valued the company at over $40 billion, more than three times the projected pricing of its abandoned IPO. A recent proposal to get Saudi businesses to make anchor investments in Aramco ahead of its IPO could also inflate its valuation.“Fake” financials, as some would call them, undermine markets. With a correction looking increasingly likely, investors need to start working with regulators and standard setters now to close accounting loopholes, while scrutinizing underlying data more closely. Otherwise, the more creatively companies are allowed to manage their financial position for short-term gain, the bigger the bill is going to be.(Corrects definition of goodwill in twelfth paragraph.)To contact the author of this story: Satyajit Das at email@example.comTo contact the editor responsible for this story: Nisid Hajari at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Satyajit Das is a former banker and the author, most recently, of "A Banquet of Consequences."For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Californians have always lived in the shadow of calamity -- from earthquakes, mudslides, flooding, fires and droughts.But the move this week from the state’s largest power company represented a new type of burden: a widespread, intentional hardship designed to prevent something much worse.Facing a powerful windstorm, PG&E Corp. cut off power to wide swaths of California rather than risk its lines sparking a deadly wildfire like the ones that ravaged the state over the past two years and sent the company into bankruptcy. The outage hit 34 of the state’s 58 counties -- including the heavily populated San Francisco Bay area -- and led to backlash, frustration and confusion.Two of California’s smaller utilities to the south, Edison International’s Southern California Edison and Sempra Energy’s San Diego Gas & Electric, made a similar -- albeit more measured -- calculation. Over the course of three days, roughly 2.3 million people would lose electricity in the world’s fifth-largest economy.Here’s how the largest deliberate power outage in California’s history unfolded. (All times local.)Monday, 10:15 a.m.PG&E issues its first news release warning of a “fire weather watch” that may lead to power shutdowns in 29 counties, without saying how many customers may be affected. Until this time, the utility has largely deployed shutoffs in slices of the Napa Valley and along the foothills of the Sierra Nevada mountains, where it had just cut electricity over the weekend to about 10,000 customers due to windy conditions.Monday, 9:02 p.m.The size and scope of PG&E’s plans start to come into focus. The company says it may need to turn off the lights to more than 600,000 homes and businesses starting early Wednesday. The announcement includes dozens of cities in the San Francisco Bay area, such as Oakland, San Jose and Berkeley.“This is shaping up to be one of the most severe dry wind events we’ve seen in our territory in recent years,” Michael Lewis, senior vice president of electric operations, says in a statement.Tuesday, 10 a.m.As the news of potential outages spreads, Californians mobilize for what could be the largest planned blackout of its kind in history. State and local authorities ready their emergency operations centers. Residents rush out to snap up generators, flashlights, batteries, ice and bottled water, leaving hardware and grocery store shelves empty. Stanford professor Michael Wara calculates that a two-day outage could have an economic impact of about $2.6 billion.Tuesday, 1:36 p.m.PG&E confirms that it will shut off power for almost 800,000 customers in stages, starting just after midnight. Four new counties are added to its list, bringing the total to 34. It tells customers to prepare for an “extended outage.”The utility’s website is flooded with traffic and crashes, leaving residents frustrated and confused. Customers report having trouble reaching the utility’s call center.Tuesday, 3 p.m.Governor Gavin Newsom calls PG&E’s actions warranted while acknowledging the massive disruption the blackout represented.“No one is happy about it, no one is satisfied, but no one should be surprised, because we have been anticipating this moment for a year,” Newsom says at a bill-signing event in Oakland. The blackout “shows that PG&E finally woke up to their responsibility to keep people safe,” he says.State Senator Jerry Hill, a frequent PG&E critic, says the company went too far. “They need to spend the billions they’ve already received to harden the system,” he says at the event. “I think they’re in crisis and will do anything to prevent another wildfire.”Anger spreads among other politicians. State Senator Scott Wiener calls it a “completely unacceptable state of affairs.”Tuesday, 7 p.m.At the utility’s first press conference since the shutoff warning, PG&E representatives apologize for the problems with the company’s website and say they are working to address the issue. The company also says it is rushing to get generators to the California Department of Transportation so it can keep open a critical freeway tunnel that connects parts of the East Bay.Wednesday, 12:01 a.m.The first phase of the shutoff starts, affecting about 500,000 customers in more than 20 counties.Wednesday, 7 a.m.More than a million Californians wake up without power, including many in wine country. The website with outage information remains down. PG&E says the shutoffs will spread by noon to cities surrounding San Francisco, then later delays the second phase after wind patterns change.Wednesday, 2 p.m.Stores are shut in the counties hit by early outages. Safeway supermarkets bring in back-up generators and refrigerated trailers upon availability.At Sonoma County’s Russian River Brewing Company -- famed for its Pliny the Younger cult beer -- a 2-megawatt generator keeps the business running. The generator is too big, burning $8,000 to $10,000 of diesel per day. But nearby wineries had already snapped up all the smaller ones, says Russian River co-owner Natalie Cilurzo.In many areas without power, wind speeds have yet to pick up, leading to criticism the outage was unnecessary.“It’s a beautiful day here,” Cilurzo says. “We’re all kind of scratching our heads.”Napa Democrat Bill Dodd expresses a similar concern, saying “many of my constituents are disturbed that the power was shut down before the winds started to pick up.”Wednesday, 2:35 p.m.In the midst of the power tumult, PG&E is dealt a blow in its bankruptcy case. The judge overseeing the process issues a ruling that strips PG&E of its exclusive control over its reorganization, allowing bondholders and wildfire victims to offer a competing plan that all but wipes out current shareholders.Wednesday, 10:45 p.m.The blackout spreads to more densely populated parts of the Bay Area, including Oakland. With WiFi down, people flood LTE networks on their cell phones, crippling the systems and virtually killing access to cellular data for all within shutoff zones.Thursday, 2:30 a.m.Just hours after PG&E shuts off power to Moraga, an affluent rural town about 20 miles east of San Francisco, residents awake to police warning them to seek shelter at a local church. Despite the dead electrical lines, a wildfire has broken out.Roughly 140 homes are evacuated, and inoperable traffic lights create delays of an hour or more as cars clog the single-lane road leading out of town. The fire eventually is contained with no damage to houses.Thursday, 6 a.m.PG&E says it has restored power to 126,000 customers, easing fears that the blackout could drag on for days.As Wall Street trading opens, PG&E shares plunge more than 30% on concern that the bankruptcy judge’s ruling could lead to a total wipeout for shareholders. Analysts warn the stock could fall to zero.Meanwhile, Bay Area residents awaken to darkness and adjust to disrupted routines. In Oakland, a doughnut shop serves doughnuts but no coffee. Credit card machines are down, so patrons pay with cash only.At a clearly powerless sushi restaurant, a man begins unloading a box of fresh tuna to deliver. “They ordered it,” he shrugs.Thursday, 10 a.m.The normally bustling University of California, Berkeley, is nearly devoid of students, with classes canceled due to the blackout. Just north of campus, a strip of shops and restaurants still has power, but closes anyway.“There is no business,” says Ray Woo, owner of the TC Garden restaurant next to the university. “Nobody is coming. There aren’t any students.”Thursday, 11:55 a.m.A small wildfire is spotted beneath a PG&E transmission line on a steep ridge just south of San Francisco. It is quickly contained, and firefighters don’t announce a cause.Thursday, 5 p.m.Newsom blasts PG&E’s handling of the shutoff. He blames the outage on the utility’s “greed and mismanagement” and calls for a “major reorganization” of the company. But while the governor says future planned blackouts must be more surgical, he defends the practice itself, saying it could have saved lives during last year’s deadly Camp Fire if PG&E had chosen to do it then.Thursday, 6 p.m.In his first public statements since the outage began, PG&E Chief Executive Officer Bill Johnson apologizes for the way the company handled its communication of the shutoffs.“This isn’t how we want to serve you,” he says. “We are in the business of providing power. Not taking it away.”Johnson says the company made a determination that the blackouts were necessary for safety reasons, to ensure “zero risk” of sparks.Thursday, 9:40 p.m.A brush fire pops up on the northern edge of Los Angeles, and fanned by strong winds, starts marching westward. The Saddleridge fire soon closes a portion of the Interstate 5 freeway into the city and nears the Aliso Canyon natural gas storage facility, site in 2015 of the largest gas leak in U.S. history.Lights are starting to come back on in the Bay Area. Around 11 p.m., PG&E says it has restored power to more than half of the 738,000 customers who lost it, including all in the northernmost counties the company serves.Friday 1 p.m.The Saddleridge swells to 7,542 acres, forcing the evacuation of 23,000 homes. At least 25 structures have burned, and one civilian suffered a heart attack, dying at the hospital. Fire officials say they’re investigating reports of sparks flying from a transformer at the start of the blaze.Friday 6 p.m.PG&E says only 84,000 customers remain without power. It aims to have service restored to almost all homes and businesses by early Saturday.The outages may not have been in vain: The utility said it found 30 instances where tree branches had fallen on its power lines or knocked them down.“There’s some vindication -- that’s not the right word -- the fact that there were 30 plus things that could’ve caused a fire and didn’t,” made the blackout worth it, Johnson says.Saturday, 2 p.m.PG&E says it’s restored power to 99.5% its customers affected as of 1 p.m.About 735,000 customers in California had power restored within 48 hours after getting the all clear earlier in the week, Sumeet Singh, vice president of the community wildfire safety program at the utility, said in a press conference on its social media platforms. About 2,500 are still without power in the state, he added.The utility also said it found 50 cases of damage or hazard, up from 30 the day before.\--With assistance from Lizette Chapman, Lynn Doan, Jeffrey Taylor and Hailey Waller.To contact the reporters on this story: David R. Baker in San Francisco at email@example.com;Mark Chediak in San Francisco at firstname.lastname@example.orgTo contact the editors responsible for this story: Lynn Doan at email@example.com, Kara WetzelFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
GE has frozen its pension for 20,000 workers and is offering buyouts to others. It marks another step in the death of the pension.
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see nVent...
(Bloomberg) -- Several wildfires are raging in Southern California, including a blaze at the edge of Los Angeles that’s led to the evacuation of 25,000 homes and a sprawling natural gas-storage site that once sprung the biggest U.S. gas leak.The Aliso Canyon gas field operated by Sempra Energy’s Southern California Gas Co. was evacuated after the blaze, named the Saddleridge fire, broke out Thursday in hills north of the San Fernando Valley, the company said in a statement. About 100,000 people were displaced, police said.The fire has burned more than 7,500 acres and is about 13% contained, authorities said. A cause hasn’t been determined. It comes after California utilities cut power to more than 2 million people to avoid having live wires topple during windstorms and spark wildfires in the state’s largest-ever preemptive blackout. Power has been restored to 97% of PG&E Corp.’s affected customers.East of Los Angeles, another fire -- named Sandalwood -- in Riverside County has burned 823 acres. Further west, the Wendy blaze in Ventura County has burned 91 acres, according to the California Department of Forestry and Fire Protection.For more, listen to this mini-podcast on California’s wildfire blackouts.Edison International’s Southern California Edison utility had begun to restore power to customers it had cut power, but about 14,000 homes and businesses remained in the dark as of late Friday. The company warned 110,000 were still at risk of losing service. It wasn’t immediately clear whether the Saddleridge fire broke out in Edison’s territory or that of Los Angeles Department of Water and Power. Both operate in the area. The Los Angeles Fire Department said it was investigating reports of sparks flying from a transformer at the time of the blaze, which began along the 210 Freeway near Yarnell Street in Sylmar.READ MORE: Governor Slams PG&E as Epic Blackout EbbsAs they battle the blaze, crews have staged firefighting equipment around the Aliso Canyon storage site, according to SoCalGas. The facility does not appear to have suffered damage, and there are no indications of leaks, the utility said in a statement at 10 a.m. local time Friday. The company said it doesn’t anticipate that any of the field’s wellheads will be damaged.The blaze also prompted authorities to partially close several freeways including parts of Interstate 5, the West Coast’s main north-south artery.In 2015, employees discovered a massive gas leak at Aliso Canyon, forcing thousands of residents to evacuate for months. Sempra has already reported more than $1 billion in costs associated with the incident.(Updates with PG&E restoration in third paragraph)\--With assistance from Christopher Palmeri, Naureen S. Malik, Nathan Crooks, Hailey Waller and Nic Querolo.To contact the reporter on this story: David R. Baker in San Francisco at firstname.lastname@example.orgTo contact the editors responsible for this story: Lynn Doan at email@example.com, Pratish NarayananFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- PG&E Corp. rejected a $2.5 billion offer from San Francisco to buy the bankrupt utility giant’s wires within the city’s limits.San Francisco’s offer significantly undervalues the company’s assets and a deal wouldn’t be in the best interests of its customers, PG&E Chief Executive Officer Bill Johnson said in an Oct. 7 letter to Mayor London Breed. He went on to say the company doesn’t need to sell its businesses to finance a restructuring and emerge from bankruptcy.“We cannot accept your offer,” Johnson said in the letter. “If we ever do consider such sales, we have a duty to obtain the highest and best value for these assets.”San Francisco has framed its takeover bid as a way for PG&E to raise money and help cover an estimated $30 billion in liabilities tied to devastating wildfires that its equipment ignited in 2017 and 2018. The damages from those blazes are what forced the company in January to enter the biggest utility bankruptcy in U.S. history. Now, the company has found itself competing with the likes of Pacific Investment Management Co. and activist investor Elliott Management Corp. over a restructuring plan.PG&E has proposed a reorganization that would allow existing shareholders to preserve some of their stake in the company. The plan creditors led by Pimco and Elliott are pushing would all but wipe out current investors. The company’s shares were virtually unchanged in after-markets trading.Not SurprisedSan Francisco officials said they weren’t deterred by the brush-off from PG&E.“We aren’t surprised by PG&E’s response so far,” the mayor and City Attorney Dennis Herrera said in a statement. “We’re also not giving up. Now more than ever, it is clear that we must take back control of San Francisco’s electric service and achieve energy independence.”State Senator Scott Wiener, a San Francisco Democrat who has backed a deal, said the rejection wasn’t surprising but that supporters will continue to press for one in bankruptcy court. “We’re not going to give up,” he said by telephone. “Bankruptcy is an unpredictable process and we’ll see what happens.”Wiener said he was also looking at what could be done to move a deal forward on the state level. He declined to provide details.‘Not So Welcome’While California’s investor-owned utilities have traditionally held a lot of sway in Sacramento, PG&E is “not so welcome and powerful anymore,” Wiener said.This week, the utility orchestrated the biggest preemptive blackout in state history to keep its power lines from starting wildfires amid high winds. The shutoffs drew outrage from homeowners and businesses, leading Governor Gavin Newsom to publicly blast PG&E for years of “greed and mismanagement.”“PG&E’s performance in general, and in particular with this massive blackout, has shifted the politics,” Wiener said. “More and more people understand that it’s not up to the task.”(Updates with city’s comment in seventh paragraph.)To contact the reporters on this story: Mark Chediak in San Francisco at firstname.lastname@example.org;Romy Varghese in San Francisco at email@example.comTo contact the editors responsible for this story: Lynn Doan at firstname.lastname@example.org, ;Elizabeth Campbell at email@example.com, Michael HythaFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
The mayor of Cloverdale California says plenty of people blame troubled utility PG&E for recent blackouts but they should blame the California Public Utilities Commission.
Refiners have had a mixed October so far. Marathon Petroleum (MPC), Valero Energy (VLO), and Phillips 66 (PSX) are up, but HollyFrontier (HFC) has slumped.
(Bloomberg) -- Faced with mounting public anger over massive blackouts, California Governor Gavin Newsom blasted PG&E Corp. for years of “greed and mismanagement” as the bankrupt utility restored power to more than half those left in the dark.Newsom’s comments came as many PG&E customers questioned whether it overreacted to a windstorm that didn’t prove as powerful in Northern California as forecast. The company cut electricity to more than 2 million people -- the largest preemptive blackout in the state’s history -- to prevent its power lines from sparking wildfires.The Democratic governor, who on Wednesday called the blackouts “appropriate under the circumstances,” took a dramatically harsher tone Thursday, blaming PG&E for not hardening its grid and saying the outage was the result of years of bad choices. His comments came just before PG&E’s chief executive officer made his first public appearance since the blackout began, apologizing to customers for the “hardship” the power failures have caused while defending the decision.“It’s decisions that were not made that have led to this moment in PG&E’s history,” Newsom said at a Thursday evening press conference. “This is not, from my perspective, a climate change story as much as a story about greed and mismanagement, over the course of decades.”By Friday morning, the company had restored service to nearly 60% of the 738,000 homes and businesses affected, according to a statement. Workers are now inspecting thousands of miles of transmission lines to make sure they are safe to transmit power.READ MORE: Dark Shops, Spotty Phones, Rotting Fish: Life in a Mass BlackoutThe violent winds, meanwhile, are ebbing in Northern California. Still, fire risk remains high in much of the southern half of the state, with strong winds and humidity “about as low as it can go,” said Marc Chenard, a senior branch forecaster with the U.S. Weather Prediction Center.About 6,000 square miles of Southern California face extreme fire conditions Friday, including San Bernardino, Fontana and Thousand Oaks, the U.S. Storm Prediction Center said. Edison International’s Southern California Edison utility has cut power to more than 21,000 homes and businesses but warns outages could eventually impact another 223,000. Sempra Energy’s San Diego Gas & Electric Co. cut power to about 400 customers.Illustrating the danger, a fire erupted late Thursday on the northern edge of Los Angeles. By morning, the wind-driven flames forced the evacuation of 25,000 homes and threatened California’s largest natural gas storage facility, Aliso Canyon, site of the biggest gas leak in U.S. history in 2015. The blaze’s cause hasn’t been determined.For more, listen to this mini-podcast on California’s wildfire blackouts.As PG&E worked to restore power, its shares took a beating on Wall Street Thursday, falling 29% after the utility was stripped of exclusive control over its bankruptcy process and a judge allowed competing plans from wildfire victims and bondholders to advance. The stock bounced back a bit Friday, gaining 1.1% at 2:11 p.m. in New York.Newsom said he wanted to see a “major reorganization of this entity” and said PG&E was too large to move quickly. But the governor stopped short of saying what kind of structural changes he preferred. He suggested the company needed to be far more surgical about future outages, saying some counties didn’t need to be included in this week’s blackouts. He acknowledged, however that such preemptive power cuts should remain an option for the state’s utilities when faced with dangerous winds.PG&E, he noted, made a decision last November not to cut power near the town of Paradise during a windstorm. A transmission line then sparked the Camp Fire, the state’s deadliest blaze, which killed 86 people.“Zero risk”Newsom called on California utility regulators to review PG&E’s actions. A spokeswoman for the California Public Utilities Commission said the agency, as a policy, reviewed all intentional outages by California utilities.PG&E filed for bankruptcy in January, facing an estimated $30 billion in liabilities from two consecutive years of deadly wildfires blamed on its equipment.CEO Bill Johnson, who took over in May, said the company made a determination that the blackouts were necessary for safety reasons, to ensure “zero risk” of sparks. He told reporters at a San Francisco press conference that started an hour after the governor’s that it’s “very likely” the company will need to cut power again in the future. Johnson said the utility will try to be more “surgical” about shutoffs.‘We Failed’The main failure was in communicating with customers about the outages, company officials said. Johnson said the utility posted outage maps with inconsistent or inaccurate information, its website crashed and its call center was overwhelmed. “We failed our customers,” said Laurie Giammona, senior vice president and chief customer officer for PG&E.Johnson asked local residents not to take their frustrations out on PG&E workers, saying some employees had been shot at, punched and sworn at.“The buck stops with me,” he said.(Adds outage detail in seventh paragraph. An earlier version corrected a quote in the headline, first and fourth paragraphs.)\--With assistance from Brian K. Sullivan, Samuel Dodge and Christopher Palmeri.To contact the reporters on this story: David R. Baker in San Francisco at firstname.lastname@example.org;Mark Chediak in San Francisco at email@example.comTo contact the editors responsible for this story: Lynn Doan at firstname.lastname@example.org, Joe Ryan, Joe RichterFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- PG&E Corp. is teaching an unpleasant lesson to Wall Street equity traders who counted on utilities as a safe haven.Investors rattled by trade wars and hints of a recession drove PG&E shares as much as 2.8% higher on Wednesday even as the utility was cutting power to millions of customers across California. That faith proved misplaced a day later as the stock crashed almost 32% after an unfavorable ruling in the company’s bankruptcy proceedings.The whipsaw illustrates both the allure of utility stocks and the danger of blindly investing in them as a class. With big, stable revenues and limited exposure to international trade, the companies represent an investment tailor-made for the current moment. And yet while customers are unlikely to stop buying their products no matter the state of the economy, individual firms still face their own, specific risks.“You may cut back on your electricity use during a recession, but you’re still going to use electricity,” said Paul Patterson, an analyst at Glenrock Associates. “It’s not a discretionary item.” But “utilities can fall dramatically in value, individually,” he said.The Standard & Poor’s utilities index has risen 21% this year and hit an all-time high last month. Individual utility owners such as Southern Co. and Dominion Energy Inc. are also trading at record highs. The gauge was little changed at 12:37 p.m. in New York.Timothy Winter, who helps manage over $30 billion at Gabelli Funds LLC as an associate portfolio manager, says the rise in utility stocks has been driven by the industry’s ability to increase earnings on a sustainable basis amid massive infrastructure investments. About 10% of funds managed by Gabelli are invested in utilities, and Winter says a new fund is being planned for investments in green energy alternatives.Strong Fundamentals“Fundamentals are stronger than they have ever been -- that is because earnings and dividends are growing stronger than they have ever grown before on a sustainable basis,” Winter said. “Many of us in the industry are calling it the golden era of the utilities.”The broader stock market has substantially outperformed the sector since the 1980s, but utilities have consistently offered slow and steady returns over the years. The industry has “solid growth prospects,” and global utilities remain undervalued, Jean-Hugues De Lamaze, senior portfolio manager at Tortoise Advisors UK in London, said.Still, risks abound, as illustrated by PG&E. The company’s latest stock collapse was sparked by a bankruptcy court judge ruling that its bondholders could submit their own reorganization plans for the company, potentially wiping out shareholders. The company had already slumped over 75% over the past year after wildfires its equipment caused saddled the utility with $30 billion in liabilities. The shares were up 5.8% on Friday.The company is carrying out the largest blackout ever orchestrated in California to prevent electrical lines igniting wildfires during a period of high winds. The unprecedented power shutdown has ensnared millions of people, many in the San Francisco Bay area, and raised the prospect that much of a major metropolitan area could go days without electricity.For more, listen to this mini-podcast on California’s wildfire blackouts.Utility HeadwindsIt’s not just PG&E that faces headwinds. Dominion and Duke Energy Corp., for example, back a $7.5 billion gas pipeline project that has been tied up in court. Southern is still working on a $28 billion nuclear plant expansion -- the only such project in the U.S.If interest rates start rising again, some of the money now flowing into utility stocks could shift to bonds instead, according to Andy Smith, utilities analyst for Edward Jones. However, it’s possible the market has entered an extended period of higher valuations for utility stocks, rather than a short-term spike, he said.“I don’t see anything bringing them back down, other than interest rates,” Smith said.(Updates with utility index move in fifth paragraph.)To contact the reporters on this story: David R. Baker in San Francisco at email@example.com;Gerson Freitas Jr. in São Paulo at firstname.lastname@example.orgTo contact the editors responsible for this story: Lynn Doan at email@example.com, Pratish Narayanan, Reg GaleFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
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(Bloomberg) -- Takeda Pharmaceutical Co. is nearing the sale of a portfolio of assets in the Middle East, Africa and Russia to separate buyout firms that could help the drugmaker raise about $1 billion to reduce debt, according to people familiar with the matter.The Japanese company is in advanced talks to sell over-the-counter and prescription-drug assets in Russia to Stada Arzneimittel AG, the German pharmaceutical firm owned by Cinven and Bain Capital, the people said, asking not to be identified because the deliberations are private.It’s also close to reaching an agreement to sell its assets in the Middle East and Africa to Acino International AG, a Swiss company owned by Nordic Capital and Avista Capital Partners, they said.No final decision has been made and talks could still fall apart or face delays, the people said. Representatives for Takeda, Stada, Cinven, Bain, Nordic Capital and Avista declined to comment.Shares of Takeda rose 0.9% to close at 3,720 yen Friday in Tokyo.Takeda is also seeking to sell other over-the-counter and prescription-drug businesses in Latin America, Asia and western Europe, Bloomberg News reported last month.The drugmaker is aiming to raise about $10 billion of disposals, simplifying its portfolio and cutting debt after its $62 billion takeover of Shire Plc. The company is looking to divest non-core businesses outside Japan where the company isn’t an industry leader and doesn’t have critical mass in the market.In May, Takeda agreed to sell eye-disease medicines to Novartis AG for as much as $5.3 billion.(Updates with background on previous disposal in last paragraph)\--With assistance from Michael Hytha.To contact the reporters on this story: Manuel Baigorri in Hong Kong at firstname.lastname@example.org;Sarah Syed in London at email@example.comTo contact the editors responsible for this story: Fion Li at firstname.lastname@example.org, ;Dinesh Nair at email@example.com, Amy Thomson, Aaron KirchfeldFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.