(Bloomberg) — Bonds tied to Edison International, the parent of the largest utility in Southern California, weakened on Wednesday after windstorms fanned wildfires into even bigger conflagrations in the Los Angeles area.
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Investment-grade bonds sold by Edison International and its Southern California Edison unit saw their risk premiums — or the extra yield they pay relative to Treasuries — rise on Wednesday. This signals that investors see a slightly higher chance of the company struggling to meet its obligations.
Spreads on Edison International’s 5.75% bonds due 2027 widened by 0.20 percentage point, or 20 basis points to 95 basis points as of 9:50 a.m. in New York. Southern California Edison, a utility unit, saw its newly minted 5.9% bonds maturing in 2055 widen three basis points to 113 basis points as of 12:15 p.m. in New York.
Its 5.45% bonds due in 2035 also widened two basis points to 91 basis points as of 12:14 p.m. in New York.
Edison International’s Southern California Edison unit doesn’t directly serve Los Angeles, but does cater to nearby areas plus large swathes of other parts of the state.
Wildfires have created new risks for utilities, often considered among the safest bets on Wall Street. The disasters can slash profits, bringing more acute pain to shareholders than bondholders. But they can also force energy companies to borrow more in order to upgrade aging infrastructure and pay off settlement claims.
Southern California Edison shut off electricity to about 136,000 homes and businesses in an effort to prevent wildfires. The company said it may need to cut power to hundreds of thousands of additional customers if Santa Ana winds become exceptionally strong.
Across the area, thousands of people have been ordered to evacuate from their homes, with hurricane-force winds pushing flames through the region.
Forecasters expect gusts to keep spreading flames through the Los Angeles region for at least another two days.
–With assistance from Brian K. Sullivan, Lauren Rosenthal, Olivia Raimonde and Mark Chediak.
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