PG&E Reaches Deal with California Governor to Emerge from Bankruptcy

Pacific Gas & Electric reached
a deal
 with California Gov. Gavin Newsom that could allow it
to emerge from bankruptcy by a critical June 30 deadline, in
exchange for concessions including a revamped board, foregoing
shareholder dividends for three years, and accountability measures
that could lead to a state takeover if the utility fails to meet
key safety and accountability milestones. 

The agreement, reached late Friday, is a vital step for PG&E
to win approval from state regulators to access a $21
billion
 state wildfire insurance fund, meant to protect it and
other California utilities from future wildfire-driven
bankruptcies. A federal bankruptcy judge must still approve the
plan. 

Newsom had challenged
PG&E’s plans
 to rely heavily on debt financing to emerge
from bankruptcy, even as the utility
has concluded settlements
over the past four months to pay
out $25.5 billion to wildfire victims, insurers and county and
local governments damaged by the fires caused by its
equipment. 

But with the coronavirus pandemic leading Newsom to order an
unprecedented stay-at-home order for California residents and close
non-essential businesses, and the pandemic’s global economic
impacts driving down share prices of companies including PG&E,
Newsom agreed early last week to lift objections to the utility’s $23
billion plan
 to emerge from bankruptcy, which includes $11
billion in debt commitments and $9 billion in new equity, along
with $3 billion to be raised by issuing new shares.

Friday’s agreement includes several of Newsom’s other key
demands, such as requiring PG&E to replace half of its board
of directors with California residents, and select the new members
through an independent executive recruiting firm with Newsom’s
oversight. 

PG&E will also undergo a regional restructuring that will
prioritize safety and accountability to its customers. And in a
move expected to save roughly $4 billion, the utility will forego
paying dividends to shareholders for three years. 

Finally, the deal lays the groundwork for PG&E to be forced
to sell the company to the state if it cannot win approval of its
plan by bankruptcy court and the California Public Utilities
Commission by June 30, or if it fails to put its financing into
place by the end of September. 

Last month, along with a record $2.14 billion fine against
PG&E, the CPUC issued a proposed
decision
 that would impose an oversight process on PG&E,
with steps that could allow the CPUC to punish PG&E for
wildfire mitigation or safety failures by demanding immediate
remedial action, increasing CPUC oversight of PG&E’s
activities or placing it under state receivership. As a final
step, the CPUC could revoke PG&E’s certification to operate as
a utility in the state.

In a statement, Newsom described the deal as “the end of
business as usual for PG&E. Through California’s
unprecedented intervention in the bankruptcy, we secured a totally
transformed board and leadership structure for the company, real
accountability tools to ensure safety and reliability and billions
more in contributions from shareholders to ensure safety upgrades
are achieved.

PG&E filed for bankruptcy in January 2019 under the weight
of tens of billions of dollars in liabilities from the deadly
wildfires sparked by its equipment in 2017 and 2018, including the
Nov. 2018 Camp Fire, the state’s deadliest to date. In a Monday
filing with the U.S. Securities and Exchange Commission, PG&E
revealed it has agreed with the Butte County District Attorney’s
office to
plead guilty to 84 counts
 of involuntary manslaughter for its
role in that fire. 

Source: FS – GreenTech Media
PG&E Reaches Deal with California Governor to Emerge from Bankruptcy