PG&E shares should not be driven by possible FERC contract ruling, says Mizuho
Speculation about a possible court ruling on whether the Federal Energy Regulatory Commission has the authority to block the rejection of contracts under the filed rate doctrine principal should not be a driver in the value of PG&E shares, Mizuho analyst Paul Fremont tells investors in a research note titled "50 Ways to Leave Your Lover." The analyst believes the rejection of purchase power agreements contracts would not add anything to the long-term equity value of PG&E when it emerges from bankruptcy. However, potential savings, which would likely be significant, could provide leverage in negotiations with California State politicians and regulators prior to exiting bankruptcy, adds Fremont. He attributes the stock's current value to the market anticipating a ruling by the bankruptcy court in the next month on whether FERC has the authority to interfere with PG&E's right to reject contracts under the filed rate doctrine principal. The analyst keeps a Neutral rating on PG&E with a $15 price target.