INTERNATIONAL – S&P Global Ratings on Monday stripped PG&E Corp of its investment-grade credit rating, citing indications of a significant deterioration in the political and regulatory environment for the California power utility.
S&P also kept PG&E’s ratings on credit watch negative and said it could further lower PG&E’s rating over the next few months if explicit steps are not taken by authorities to improve the regulatory compact.
“We could also lower the ratings by one or more notches if management does not clearly articulate specific steps it will take to preserve credit quality over the long term.”
PG&E said in November it could face “significant liability” in excess of its insurance coverage if its equipment was found to have caused last year’s fires in northern California.
S&P cut the rating on both PG&E and its Pacific Power & Gas Co operating utility to “B” from its previous rating of “BBB-,” the lowest tier of so-called investment-grade ratings.
The ratings agency said the downgrade reflects PG&E’s recent announcement that its board was reviewing the company’s management, finances, governance and structural options.
“We assess this announcement as the culmination of a decisive souring of the political and regulatory environment,” S&P said in a statement.
Earlier in January, sources told Reuters that PG&E Corp was exploring filing for bankruptcy protection. The company was considering the move, for some or all of its businesses, as it fears a massive charge in the fourth quarter related to potential liabilities from wildfires.
Credit ratings for PG&E and its Pacific Gas & Electric unit were downgraded by the three main ratings agencies in mid-November.