PG&E Says it Will File Chapter 11 Bankruptcy

Geisha Williams speaks during the 2018 CERAWeek by IHS Markit conference in Houston Texas on Thursday
Geisha Williams speaks during the 2018 CERAWeek by IHS Markit conference in Houston Texas on Thursday

17 January, 2019

PG&E said it "does not expect" bankruptcy to impact service to customers, or pay and benefits to employees.

PG&E officials say liabilities from the fires could potentially reach $30 billion.

If PG&E is found legally responsible for some or all of the costs connected to the 2017 and 2018 Northern California wildfires, its liability could exceed $30 billion, according to the company's filing with the Securities and Exchange Commission on Monday. While PG&E's equipment has been named the cause of multiple recent fires, experts blame climate change for extending California's wildfire season and making blazes more deadly and destructive.

The California utility owner is in touch with large banks about so-called debtor-in-possession financing that could total between $3 billion and $5 billion, though the exact figure remains in flux and could end up being higher, said the sources, who are familiar with the matter.

Williams, who became CEO in March 2017, was in elite company as one of the only women to run a power company and one of only about two dozen women running an S&P 500 company.

The company's board ousted CEO Geisha Williams and chose to undergo a restructuring at a meeting this weekend in San Francisco, according to a source familiar with the matter. Simon is serving as interim chief executive officer for the company.

Moody's investor rating service warned November 15 that the potential liability of 21 major wildfires in 2017 was roughly $10 billion and that the destructive 2018 Camp Fire, which devastated the town of Paradise and killed 86 people, would add further costs.

Cavanagh said that another casualty of bankruptcy could be billions of dollars of funding for clean energy initiatives created to fight the effects of climate change.

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PG&E also filed for Chapter 11 in 2001 amid rising electricity prices during California's energy crisis.

Richard C. Kelly, PG&E Corp.'s chairman of the board, said, "Following a comprehensive review with the assistance of our outside advisors, the PG&E Board and management team have determined that initiating a Chapter 11 reorganization for both the Utility and PG&E Corporation represents the only viable option to address the Company's responsibilities to its stakeholders".

"The people affected by the devastating Northern California wildfires are our customers, our neighbours and our friends, and we understand the profound impact the fires have had on our communities and the need for PG&E to continue enhancing our wildfire mitigation efforts", Simon said on Monday. It said it believes bankruptcy is in the best interests of not just wildfire claimants but also other creditors, its shareholders and customers.

"The Chapter 11 process allows us to work with these many constituents in one court-supervised forum to comprehensively address our potential liabilities and to implement appropriate changes".

PG&E spent millions in an 11th-hour lobbying effort at the end of the California legislative session in August in a failed attempt to change the law to reduce its financial liability in wildfires. It also indicated that it will continue to provide natural and electric to its customers during the restructuring phase. The president of the California Public Utilities Commission had in November widened his investigation of PG&E to include its "safety culture" more generally. The financing will provide PG&E sufficient liquidity to maintain its ongoing operations, the company stated.

Mr. Newsom said in a statement Monday that he planned to work "on a solution that ensures consumers have access to safe, affordable and reliable service, fire victims are treated fairly and California can continue to make progress toward our climate goals".

The bankruptcy announcement is a bit surprising given that PG&E had a market cap of almost $10 billion at the end of last week.

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