S&P may cut Berkshire-owned PacifiCorp utility to junk because of wildfires

By Jonathan Stempel

March 2 (Reuters) - S&P Global said on Monday it may downgrade PacifiCorp, a utility owned by Berkshire Hathaway, to junk status as ‌liabilities mount from class action litigation over a series of Oregon wildfires ‌in 2020.

The warning came after an Oregon jury on February 25 awarded $305 million to 16 plaintiffs, or ​about $19 million per plaintiff, who blamed PacifiCorp for failing to turn off power lines during a Labor Day weekend windstorm. Plaintiffs in earlier trials had been awarded about $5 million on average.

S&P said it may cut PacifiCorp's "BBB-minus" credit rating, the lowest investment grade, by at ‌least two notches if future ⁠awards are around $19 million per plaintiff, and by one notch if awards are "significant" but smaller. It said it will closely monitor verdicts ⁠in the coming weeks.

Trials in the so-called James class action are scheduled through early 2028, and PacifiCorp's immediate parent Berkshire Hathaway Energy said the utility faces $48 billion of potential ​payouts on ​top of $1 billion already awarded. PacifiCorp faces ​about $50 billion of wildfire exposure overall.

In ‌response to S&P's action, PacifiCorp said it plans to appeal the $305 million verdict, and is focused on "providing certainty" to employees, customers and communities.

PacifiCorp is awaiting a decision from the Oregon Court of Appeals on whether the class action was properly certified and whether claimants can recover damages for emotional distress.

Berkshire Hathaway Energy said a loss of ‌investment-grade status could leave PacifiCorp unable to raise ​money to support ongoing operations, including paying suppliers ​and providing power to customers.

"PacifiCorp believes ​it will have sufficient liquidity to cover its operations and obligations ‌beyond a year," the parent added.

Berkshire ​Hathaway has high investment-grade ​credit ratings.

In his first annual letter to shareholders, Berkshire Chief Executive Greg Abel said on Saturday that the Omaha, Nebraska-based conglomerate accepts responsibility when it causes ​wildfires, but will fight ‌unjustified claims in court.

"PacifiCorp is not an insurer of last resort and should ​not be treated as a deep pocket," he wrote.

(Reporting by Jonathan Stempel ​in New York; Editing by Cynthia Osterman)