PG&E Reaches Deal With California Governor on Bankruptcy Exit -- Update
21 March 2020 - 10:12AM
Dow Jones News
By Katherine Blunt
California Gov. Gavin Newsom on Friday dropped his opposition to
PG&E Corp.'s plan to emerge from bankruptcy protection after
striking a deal requiring certain concessions from the company.
As part of the deal, PG&E has agreed to put itself up for
sale if it can't exit bankruptcy by June 30, a state-imposed
deadline for its emergence if it wants to qualify for a state
wildfire fund.
PG&E also agreed to use shareholder funding to reduce its
debt load and submit to more stringent regulatory oversight that
could lead to a state takeover of the company if it fails to make
safety improvements.
"Because of these new tools, the state will have the legal
authority to continue demanding total transformation even after the
company emerges from bankruptcy," Mr. Newsom said in a statement.
"We aren't taking our foot off the gas."
The move clears one of the last major remaining hurdles for
PG&E to exit Chapter 11. The company sought bankruptcy
protection last year due to billions in potential liabilities from
wildfires sparked by its equipment. The company disclosed the
details of the agreement in a bankruptcy court filing.
The plan is now subject to approval by the California Public
Utilities Commission, as well as a vote by the company's creditors,
which include wildfire victims as well as shareholders and
bondholders.
"We now look to the California Public Utilities Commission to
approve the Plan through its established regulatory process, so
that we can exit Chapter 11, pay wildfire victims fairly and as
soon as possible, and participate in the State's Wildfire Fund,"
PG&E Chief Executive Bill Johnson said in a statement.
Mr. Newsom, a Democrat, had for months opposed PG&E's
reorganization plan, which proposes raising billions of dollars in
debt and equity to pay damages tied to a series of deadly wildfires
throughout its service territory. He raised concerns that the plan
would leave the company too leveraged to make safety investments in
the electric grid and failed to ensure operational change within
its leadership.
As part of the deal, PG&E has agreed to submit to an
"operational observer" selected by the state to monitor its safety
compliance. The company earlier this year agreed to replace many of
its current directors and expand safety positions and performance
metrics after it emerged from bankruptcy protection.
The company will now be subject to stricter regulatory oversight
from the California Public Utilities Commission to ensure its
compliance with state regulations. Marybel Batjer, the agency's
president, last month proposed a series of escalating sanctions for
continual violations, culminating with a process to revoke the
utility's license to operate if necessary.
The company is seeking regulatory approval to issue $7.5 billion
in low-interest bonds to replace pricier short-term loans included
in its reorganization plan. As part of the deal with the governor,
shareholders would have to foot the repayment of those bonds.
PG&E also agreed not to reinstate dividend payments to
shareholders for about three years. Those payments have been
suspended since the end of 2017, after a series of deadly wildfires
in California's wine country.
A U.S. district judge overseeing PG&E's federal probation
tied to a 2010 natural-gas pipeline explosion has also restricted
the company from reinstating dividend payments until it
dramatically reduces the risk of its equipment sparking more
wildfires.
State fire investigators have tied PG&E's equipment to 18
wildfires in 2017 and 2018 that collectively killed more than 100
people and destroyed roughly 15,700 homes. The company has agreed
to settle claims from insurers, individual fire victims, cities and
public agencies for more than $25 billion.
Write to Katherine Blunt at Katherine.Blunt@wsj.com
(END) Dow Jones Newswires
March 20, 2020 18:57 ET (22:57 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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