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PG&E prepares bankruptcy filing after California wildfires

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(Reuters) – PG&E Corp (PCG.N), owner of the biggest U.S. power utility by customers, said on Monday it is preparing to file for Chapter 11 bankruptcy protection as soon as this month amid pressure from potentially crushing liabilities linked to California’s catastrophic wildfires in 2017 and 2018.

PG&E, which provides electricity and natural gas to 16 million customers in northern and central California, faces widespread litigation, government investigations and liabilities that could potentially exceed $30 billion due to the fires, the company said.

The most recent fire last November killed at least 86 people in the deadliest and most destructive blaze in California history.

Its shares plunged 52 percent on Monday to $8.38, giving it a market capitalization of less than $4.5 billion. The stock is down more than 80 percent from late 2017, before wildfires devastated PG&E’s service areas. Bond prices also fell sharply on Monday.

PG&E’s chief executive officer was replaced on Sunday by General Counsel John Simon on an interim basis.

San Francisco-based PG&E is working on lining up roughly $5.5 billion in so-called debtor-in-possession financing to help operations during bankruptcy proceedings.

The utility said the bankruptcy process would not affect electric or natural gas services for customers. Company advisers expect that it may take up to two years to emerge from bankruptcy.

In theory, California politicians could avert PG&E’s bankruptcy with legislative action. Last year, the state approved a law helping utilities recoup costs from fires in 2017, but not blazes in 2018.

Lawmakers and regulators may both be constrained in how much more they can help PG&E, at least by allowing it to further raise electricity rates.

California’s average rate is 16 cents per kilowatt hour, while those in neighboring Oregon and in Washington state are about half as much, according to data from the U.S. Energy Information Administration provided by energy consulting firm McCullough Research. The U.S. average is 10 cents per kilowatt hour.

‘SIGNIFICANT LIABILITY’

PG&E said in a securities filing it could potentially raise more money and avoid seeking bankruptcy protection, but argued such a move would be complex, uncertain and expensive.

Moody’s and Standard & Poor’s recently cut PG&E’s credit rating into junk territory, citing concerns about wildfire liabilities.

On Monday, Moody’s and S&P cut PG&E’s ratings again and Fitch downgraded the California power company and its Pacific Power & Gas Co unit to junk.

FILE PHOTO: PG&E works on power lines to repair damage caused by the Camp Fire in Paradise, California, U.S. November 21, 2018. REUTERS/Elijah Nouvelage/File Photo

A bankruptcy filing could help the company deal with such fundamental problems as the prospect of continually being exposed to financial fallout from future wildfires, the company said. Many PG&E customers live near dry forests where rain has become increasingly rare – conditions for potential future blazes.

PG&E’s regulator, the California Public Utilities Commission, began in late December to investigate whether the company should make significant structural changes, including becoming owned by the state or splitting up its businesses.

The company said it was looking for new members for its board of directors with safety experience.

PG&E said it could face “significant liability” in excess of its insurance coverage if its equipment was found to have caused the Camp Fire that swept through the California mountain community of Paradise last November.

PG&E’s liabilities from that fire could be catastrophic if authorities determine its equipment caused the blazes. Under California law, utilities are exposed to liability from wildfires regardless of their negligence. The company decided to prepare to file for bankruptcy in part to address that issue, known as “inverse condemnation.”

In a regulatory filing, it questioned whether it could continue to operate in the years ahead as a so-called investor-owned utility by being exposed to that risk. Investors might avoid the company if questions around that risk remain unanswered.

A federal judge last week proposed restricting PG&E from using power lines deemed unsafe during high winds in this year’s fire season.

Energy companies that supply PG&E could be hit by its bankruptcy. One of the most exposed is Kinder Morgan Inc (KMI.N), the second-largest North American pipeline operator, analysts said.

Slideshow (2 Images)

PG&E plans to seek court protection from creditors around Jan. 29, the company said. It alerted employees on Monday in order to comply with California law.

The company’s board ousted CEO Geisha Williams and decided to undergo a restructuring at a meeting over the weekend in San Francisco, according to a source familiar with the matter. Williams had served as CEO since March 2017, before the fatal blazes.

PG&E, which drew down remaining amounts on credit lines totaling $3.3 billion in November, had about $1.5 billion of liquidity as of Friday.

Reporting by Liana B. Baker, Mike Spector and Jessica DiNapoli in New York; Additional reporting by Scott Disavino in New York; Gary McWilliams in Houston and Laharee Chatterjee and Kanishka Singh in Bengaluru; Editing by Lisa Shumaker and Peter Cooney

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Canadian Tire and NuPort Robotics to commercialize Canada’s first automated heavy duty trucks

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Canadian Tire Corporation and Toronto based start-up NuPort Robotics, Canada’s first autonomous trucking company, are partnering with the Ontario government to invest $3 million to undertake an automated heavy duty trucking project to test a “first-of-its-kind-in-the-world” technology. 

The breakthrough technology provides a transportation solution for the middle mile, the short-haul shuttle runs that semi-tractor trailers make between distribution centres, warehouses and terminals each day.

It is designed to enable next-generation automated trucks that are more fuel efficient, safer to operate, and provide an enhanced driver experience.

Backed by $1 million in support from the Ontario government through Ontario’s Autonomous Vehicle Innovation Network and matched by $1 million investments from Canadian Tire and NuPort Robotics, respectively, the two-year project is applying proprietary, artificial intelligence technology from NuPort Robotics to retrofit two conventional semi-tractor trailers – which will always be attended by a driver – with high-tech sensors and controls, a touchscreen navigation system, and other advanced features such as obstacle and collision avoidance.

Caroline Mulroney, Minister of Transportation, says: “Ontario is proud to be a global leader in automated and connected vehicle technology and this innovative project is an exciting milestone toward automated vehicle tech in the trucking industry.

“Ontarians rely on goods being delivered by trucks across the province every day and projects like this are demonstrating the ways that automated truck technology could help businesses meet delivery demands more efficiently while supporting a strong supply chain in Ontario.”

Vic Fedeli, Ontario Minister of Economic Development, Job Creation and Trade, says: “This project applies unique and made-in-Ontario Artificial Intelligence technology that offers increased safety and efficiency, with a reduced carbon footprint, to the goods supply chains on which we all rely.

“This is the latest example of how Ontario’s Autonomous Vehicle Innovation Network acts as a catalyst, fostering partnerships between ambitious technology start-ups and industry to develop and commercialize next generation transportation technologies that strengthen our economy and benefit society.”

Raghavender Sahdev, CEO of NuPort Robotics, says: “The trucks are currently transporting goods between a Canadian Tire distribution centre in the Greater Toronto Area and nearby rail terminals within a 12.5 mile radius, and early results are promising.

“The aim of the project is to develop a system that incorporates an autopilot feature for conventional trucks with a driver, leading to the most efficient way to drive and increase safety.

“The sensors work as a ‘safety cocoon’ to cover blind spots and prevent accidents and the end result is peak fuel efficiency, meaning lower carbon emissions, and peak driving performance for an overall more optimal transportation experience.”

NuPort Robotic’s approach to autonomous trucking is unique in the industry because it focuses only on solving the middle mile challenge, using a known set of predetermined trucking routes that are repetitive and high frequency as opposed to general highway driving.

Ultimately, when implemented on fixed routes in the future, Canadian Tire will benefit from faster commercial deployments and improvements in supply chain sustainability.

Gary Fast, vice-president of transportation, Canadian Tire, says: “Canadian Tire embraces innovation and is always testing new technologies to improve our operational efficiency and safety.

“As proud Canadian companies, the safety of all stakeholders, including drivers, employees, customers, and public will be the top priority as we work together towards deployment of this technology.”

Cari Covent, vice president of intelligent automation, Canadian Tire, says: “Over the last three years, Canadian Tire has made a significant effort to solve complex business problems by using the Canadian start-up Artificial Intelligence ecosystem, and NuPort Robotics exemplifies what we look for in a start-up with a focus on innovation, automation and artificial intelligence.”

Sahdev says: “As NuPort Robotics continues to develop new technologies to overcome middle mile supply chain problems and advance autonomous trucking, I am extremely grateful for the support of the Ontario Government through AVIN and the Ontario Centre of Innovation.

“With their continued support, we are striving to position Canada as the leader in autonomous transportation.”

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Constellation Software is money in the bank, this fund manager says

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If you’re looking for a long-term hold in Canadian tech then Constellation Software (Constellation Software Stock Quote, Chart, News, Analysts, Financials TSX:CSU) should definitely be on your radar. So says Jason Del Vicario of Hillside Wealth Management who likes not only Constellation but its recent spin-off Topicus (Topicus Stock Quote, Chart, News, Analysts, Financials TSXV:TOI) which Del Vicario says could do even better than CSU over the next ten years.

Software consolidator Constellation has been running on the same game plan for years, buying small vertical market software companies providing so-called mission critical software solutions globally. Over the years CSU has completed over 500 such acquisitions, buying the top names in their respective niche verticals and then using its clout and breadth to grow the business and expand into new markets. The resulting cash flow is then plowed back into more acquisitions and the cycle repeats.

The strategy has worked wonders for Constellation, which has grown its revenue from $631 million in 2010 to almost $4 billion for 2020 while taking earnings from $4.12 per share in 2010 to $20.59 per share this past year.

Shareholders were given a special treat last month when Constellation spun out recently acquired Topicus, giving CSU owners about 1.9 Topicus shares for every Constellation share as a dividend-in-kind. Constellation bought Netherlands-based software company Total Specific Solutions BV (or TSS) in 2013 and that subsidiary recently acquired Topicus BV, a Dutch information service company focusing on sectors such as healthcare, education and finance.

Topicus was singled out by Constellation founder Mark Leonard for its ability to grow without using outside shareholder funding. Leonard said the spin-out was part of the intention since a purchase agreement was struck last year.

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Nuvei wins price target raise from National Bank

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Strong quarterly results and an even brighter outlook for 2021 are reasons to celebrate for Canadian payments company Nuvei (Nuvei Stock Quote, Chart, News, Analysts, Financials TSX:NVEI), according to National Bank Financial analyst Richard Tse. In an update to clients on Wednesday, Tse left his rating unchanged at “Outperform” while raising his price target from C$85.00 to C$100.00.

Montreal-headquartered Nuvei is a provider of payment technology solutions to merchants and partners around the world, with a platform geared for high-growth mobile commerce and e-commerce markets. Nuvei’s solutions include a fully integrated payments engine with global processing capabilities, a turnkey checkout solution and a suite of data-driven business intelligence and risk management tools and services.

The company released its fourth quarter and full year 2020 financials on Wednesday, showing Q4 revenue of $115.9 million, up 46 per cent year-over-year, and adjusted EBITDA of $51.3 million, up 61 per cent year-over-year. Total dollar value of transactions processed by merchants (‘total volume’) with Nuvei rose by 53 per cent to $13.9 billion. (All figures in US dollars except where noted otherwise.)

The 2020 year featured revenue up 53 per cent to $375.0 million and adjusted EBITDA up 87 per cent to $163.0 million, with total volume rising a full 76 per cent year-over-year to $43.2 billion.

“Our performance continues to be driven by strong momentum in the high-growth verticals we serve, as well as by our customizable, scalable and feature-rich technology platform which provides one of the industry’s most complete payment technology solutions going well beyond merchant acquiring,” said Philip Fayer, chairman and CEO, in a press release.

The company said the fourth quarter represented the strongest growth yet experienced by Nuvei, driven by wallet share expansion from current merchants along with accelerated uptake of new merchants. New e-commerce business almost tripled compared to a year earlier, Nuvei said, while the company expanded its connectivity coverage over the quarter, introduced new product innovations on its platform and continued to execute on M&A.

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