Buffett-owned utility warns of strained liquidity from wildfire trials

By Jonathan Stempel

(Reuters) -A utility owned by Warren Buffett’s Berkshire Hathaway warned on Monday it could face strained liquidity and lose its investment-grade status after a judge sped up the pace of trials over the 2020 Labor Day weekend wildfires in Oregon.

PacifiCorp has already set aside $2.85 billion, including $100 million in the third quarter, for lawsuits seeking $55 billion over the burning of more than 2,000 structures and 500,000 acres in Oregon and northern California.

Victims blaming the Portland, Oregon utility say it was negligent in failing to shut off power lines during a windstorm. The U.S. government and Oregon are also suing PacifiCorp over damage to natural resources. PacifiCorp has denied negligence.

In a regulatory filing, PacifiCorp said a Multnomah County, Oregon judge’s recent decision to roughly quadruple the pace of trials in the so-called James litigation “will cause significant financial strain on PacifiCorp’s liquidity and will put pressure on PacifiCorp’s credit metrics.”

PacifiCorp said the more aggressive schedule, including dozens of trials in 2026 and over 100 more in 2027 and 2028, could leave it “unable to obtain the required funding to meet its liquidity needs due to cash requirements for judgments.”

It also said a downgrade to junk status could make it harder to serve customers, buy power, address outages, and pay suppliers and bondholders. PacifiCorp said it expects to have sufficient liquidity “beyond a year.”

Neither PacifiCorp nor its parent Berkshire Hathaway Energy, both units of Buffett’s Omaha, Nebraska-based conglomerate, immediately responded to requests for comment.

PAYOUTS AND APPEALS

The utility faced $52 billion of claims in the James litigation, where 109 plaintiffs have been awarded $589 million in a series of mini-trials.

PacifiCorp has filed appeals, and called the chance of a giant overall payout “remote.”

The utility has agreed to pay wildfire claimants more than $1.5 billion overall, including a $125 million settlement last month with 93 Oregon wineries and vineyards.

Berkshire paid $5.1 billion for PacifiCorp in 2006.

At Berkshire’s annual shareholder meeting in May, Buffett said, “we made some mistakes” in not shielding PacifiCorp better from wildfire liability.

Berkshire Vice Chairman Greg Abel, who succeeds Buffett as chief executive on January 1, said PacifiCorp cannot make keeping the lights on a priority during wildfire threats, but also cannot be an “insurer of last resort” when damage occurs.

(Reporting by Jonathan Stempel in New York; Editing by Bill Berkrot)