Mounting Oregon Wildfire Claims Threaten Ratings of Berkshire’s PacifiCorp

Core Viewpoint - PacifiCorp, a utility owned by Berkshire Hathaway Energy, is at risk of losing its investment-grade credit rating due to increased litigation costs from the 2020 Oregon wildfires, which could lead to significant financial strain and potential downgrades [1][5][6]. Financial Implications - PacifiCorp has posted $479 million in bonds for 91 wildfire victims and may need to borrow more to cover legal judgments [2][3]. - If payouts continue at the current level, the company could face liabilities of approximately $9 billion for 1,700 victims by 2028 [3]. - The company has over $13 billion in secured bonds, with only about $1.4 billion maturing in the next five years [3]. Credit Rating and Market Reaction - S&P Global Ratings downgraded PacifiCorp to BBB-, just above junk status, with potential for further downgrades [5]. - Analysts from Barclays and JPMorgan Chase have indicated significant risks to PacifiCorp's cash position and potential underperformance of its bonds [5]. Legal Proceedings - The pace of "mini-trials" has been accelerated, with trials scheduled weekly starting February and increasing to twice a week in 2027, expected to conclude by March 2028 [8]. - PacifiCorp has acknowledged that the expedited trial schedule will cause significant financial strain [6]. Liability and Accountability - The company was found liable for not shutting off electricity ahead of a windstorm that caused power lines to fall, contributing to the wildfires [7]. - PacifiCorp has settled some claims but still faces ongoing litigation [7]. Future Outlook - Given the current litigation and damages awarded, PacifiCorp estimates future awards may exceed its capacity to cover with existing bonds and letters of credit [9]. - The company sold $3.8 billion in U.S. investment-grade bonds last year to fund litigation settlements [9]. Industry Context - The situation reflects broader challenges in the utility sector, particularly as climate change increases the frequency and severity of wildfires, impacting operational and financial stability [6].