Xcel Energy (NASDAQ:XEL) is facing a lawsuit from Melanie McQuiddy, who lost her home in the Texas Panhandle to the catastrophic Smokehouse Creek Fire. She believes the fire was started after a neglected utility pole fell on February 26.
McQuiddy accuses Xcel of failing to adequately inspect, maintain, and replace the pole, which led to its collapse and the fire's ignition. The lawsuit targets Xcel, its subsidiary Southwestern Public Service Company, and Osmose Utilities Services.
However, Evercore ISI analysts said in a Tuesday note “that it is unclear whether or not XEL’s equipment caused the fire.”
“There are five active wildfires in the Texas Panhandle region, according to Texas A&M Forest Service,” analysts said in the note.
“The largest of those is the Smokehouse Creek Fire in Hutchinson County, which has burned nearly 1.1 million acres and was 15% contained as of 4.30 pm on March 4th,” they added.
Investigations are currently in progress to determine the origin, cause, and extent of the damage caused by the fire, with no specific deadline for their completion.
Xcel Energy has an insurance coverage amounting to $500 million for its assets in Texas. In this state, the determination of legal liability in such cases hinges on a negligence standard, meaning the outcome of these investigations could significantly impact the legal proceedings.
Evercore maintained an Outperform rating on XEL but cut the target price from $68 to $54.
“We will reassess our estimates, target price and rating once the fire is fully contained and we have a better handle of total damages. We also note that given the active fire, stock could be volatile in the near term as the market view on the potential liability evolves,” analysts said.