No. of Recommendations: 1
From Bloomberg:
"The trial that PacifiCorp lost in June marked the first time a jury was asked to assess how much property owners in large-scale fires should be compensated for losses blamed on a utility's equipment. In the past, other companies, including California-based PG&E Corp., have settled such claims rather than test their luck defending them before a jury.
Allegations that PacifiCorp failed to heed hazardous weather warnings and shut off power in its service areas before toppled power lines ignited blazes led jurors in state court in Portland to find the company liable and award an average of $5 million to each of 17 property owners.
The company said at the trial that it could end up on the hook for $11 billion ' more than its net worth ' and possibly get pushed into bankruptcy if owners of some 2,500 properties in the class-action case are awarded similar damages in future proceedings."
No. of Recommendations: 3
The following is from the Q2 BRK release:
'PacifiCorp has accrued cumulative estimated pre-tax probable losses associated with the 2020 wildfires of $1,018 million through June 30, 2023, or $608 million net of probable insurance recoveries.'
This was the first time I can find where there was any mention of PacifiCorp related accruals for the fires listed in a BRK filing. It appears there is some insurance coverage I guess, but not enough to prevent a bankruptcy level event.
So what does this mean to BRK as a whole? If BRK were to cover the full $11B (only $10B after the current accruals but I'll just ignore it) out of earnings that's less than 6mo of net earnings from Ops. Painful maybe but really only a short blip of no value growth perhaps.
I don't keep detailed files of for the various Ops companies so I skimmed the last two ARs. Oddly enough the net earnings for the various utilities were not broken out in the 2022 AR, but they were in the 2021 AR. In 2021 PacifiCorp's after tax earnings were $889M, 2020 was $741M, and 2019 was $773. Call it an average of $800M and put a 12-15 multiple on it for an IV of $9.5B-$12B? I guess it would make sense why they would indicate bankruptcy as a potential outcome based on those numbers.
My conclusion, even bk seems to be a non-event for BRK. A one time -3.5% reduction in ops earnings. A less than -2% hit to IV. Anti-fragile indeed.
What am I missing?
Jeff
