Pacificorp Bonds

[RadMan24]

As a few folks have mentioned and highlighted in recent months, Pacificorp is being challenged legally for causing wildfires (ignoring high wind warnings to shut down power) on Labor Day in 2020. Berkshire disclosed that the liability is approximately $7b and recent Bloomberg articles have estimated it could be as much as $11 billion, if all civil damages are paid out based on recent jury decisions. 

 

Here is pacificorp's statement: https://www.pacificorp.com/about/information-wildfire-litigation.html

 

Example of news article: https://www.oregonlive.com/business/2023/06/wildfires-bankrupted-californias-largest-utility-what-will-happen-to-oregons-pacificorp.html

 

Litigation website: https://www.pacificorpfirelitigation.com/

 

Currently, its been noted that the bond prices have taken a huge hit. The 30 year bonds issued in 2007 have a YTM of 6.3%. https://markets.businessinsider.com/bonds/5_750-pacificorp-bond-2037-us695114cd86?miRedirects=1

 

Similary, the 10 year bonds issued in 2019 have a 5.9% YTM.

 

Anyone think these are interesting, or at least watching to see if those yields get even juicier? Of course, the riskfree 3 month treasury bill is 5.3%. Biggest risk Berkshire lets the subsidiary go through Ch. 11 due to liability claims. 

[Xerxes]

Radman

 

the way you wrote this post it makes sound like PacifiCorp is a BRK’ subsidiary

 

am I missing something obvious ?

[Malmqky]

Just now, Xerxes said:

Radman

 

the way you wrote this post it makes sound like PacifiCorp is a BRK’ subsidiary

 

am I missing something obvious ?

PacifiCorp is a wholly owned subsidiary of BRK?

[Xerxes]

Right. My bad. 
I got confused. 
 

thought the situation in Hawaii was a concern for Hawaiian Electric … not BRK’ PacificCorp 

 

espresso machine wasn’t working this morning 

[RadMan24]

To clarify: PacificCorp is a subsidiary of Berkshire Hathaway Energy, which is..as you know..owned 90% or so by Berkshire. 

 

Nothing to do with Hawaii...just Oregon wildfires from a few years ago. 

[rogermunibond]

RadMan - I've noticed this as well.  PacificCorp now yielding 6.8% and has been joined by 30 year paper from other western utilities.  SCE, Tucson Electric, Entergy, Evergy all yielding > 6%.  Even 30 year paper of BHE the parent of PacificCorp and Nevada Power is trading at 6.48%.

 

It's like some investment grade bond PMs have decided that wildfire risk is just too much.

Edited November 1, 2023 by rogermunibond