PG&E Corp. (NYSE: PCG) shares fell by 14 percent on Thursday after the board had announced to suspend the quarterly cash dividend beginning in the fourth quarter of 2017. Shares have hit a new 52-week low after the announcement.
The company decided to suspend the dividend due to “uncertainty related to causes and potential liabilities associated with the extraordinary October 2017 Northern California wildfires.”
PG&E said there hasn’t been anything confirmed for the cause of the fires, as investigations continue, but it mentions that “California is one of the only states in the country in which courts have applied inverse condemnation to events caused by utility equipment.”
This means that if a property or equipment is found to have caused substantial damage, even after passing inspections, it can still be held liable for damages and attorneys’ fees associated with the event.
"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," said PG&E Corporation Chair of the Board, Richard Kelly.
In November, PG&E slashed its earnings forecast due to the previous major wildfires in October. PG&E has said in legal filings that fires frequently result from downed power lines, which led to nearly 15 lawsuits against PG&E.
“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,” added Kelly,
“The company also remains committed to supporting recovery and rebuilding efforts by those communities that were impacted by these devastating fires.”