PG&E gets bankruptcy court confirmation of plan of reorganization

By Sarah Lizee

Olympia, Wash., June 22 – PG&E Corp. said the U.S. Bankruptcy Court for the Northern District of California confirmed on Saturday its Chapter 11 plan of reorganization, according to a press release.

As previously reported, the California Public Utilities Commission had approved of the plan on May 28.

Upon emergence from Chapter 11, PG&E will be eligible to participate in the state’s new go-forward wildfire fund.

PG&E said it expects to emerge from Chapter 11 in July. Upon emergence, all wildfire settlements provided for in the plan of reorganization will be implemented, including the immediate funding of the fire victim trust through which individual wildfire victim claims and certain other wildfire-related claims will be determined, administered and paid.

The bankruptcy court has already approved the selection of the trustee and claims administrator for the fire victim trust so that the fire victim trust will be in a position to administer claims and make payments to wildfire victims as quickly as possible following the funding of the fire victim trust when the plan becomes effective.

As part of the Chapter 11 cases, PG&E previously reached settlements with all major wildfire victims' groups to be implemented under PG&E's plan, valued at about $25.5 billion, including

• A roughly $13.5 billion settlement resolving claims by individual victims and others relating to the 2015 Butte Fire, 2017 Northern California Wildfires (including the 2017 Tubbs Fire), and the 2018 Camp Fire; this includes stock valued at about $6.75 billion based on an agreed-upon formula;

• A $1 billion settlement to satisfy the wildfire claims of certain cities, counties, and other public entities; and

• An $11 billion settlement with insurance companies and other entities that paid claims by individuals and businesses related to the wildfires.

The company recently announced the selection of a new board of directors that will be in place upon emergence to help guide it post Chapter 11, including 11 new board members.

In addition to announcing the new board, PG&E made a series of commitments, some of which are already underway, regarding its governance, operations, and financial structure, all designed to further prioritize safety and expedite the company's successful emergence from Chapter 11.

The company made these commitments working with the governor’s office and incorporating guidance from CPUC president Batjer, which was included in the full commission’s approval of the plan.

Following the formal confirmation of the company’s plan of reorganization, PG&E completed the initial stage of its bankruptcy exit financing contemplated in its plan of reorganization.

“As a result of its Chapter 11 proceedings, PG&E has been able to retire expensive high-coupon debt and replace it with lower cost debt, yielding significant annual savings for customers,” the company said in a separate press release.

“These savings are estimated to be approximately $250 million annually. PG&E will reflect these savings in future customer bills later this year.”

On June 16, the utility raised $8.93 billion of debt, including about $3.5 billion of long-term debt to finance capital investments. The remaining $2.4 billion of long-term debt and $3 billion of two-year debt will be used to fund a portion of PG&E’s initial contribution to the AB 1054 wildfire fund and to fund claims at emergence from Chapter 11. Interest expense for the latter items will be paid by shareholders.

On June 18, the corporation priced its previously announced debt raise of $4.75 billion, which is expected to close on June 23, subject to customary closing conditions. The cost of the debt will be borne by PG&E shareholders.

PG&E committed to suspend its common dividend until it has recognized $6.2 billion in non-GAAP core earnings, to support a plan for capital investment or to reduce corporation debt in the coming years.

The lower cost of shareholder-funded debt of roughly $70 million compared to the prior expectations will provide additional flexibility for the company after emergence from Chapter 11.

PG&E is an electric and natural gas utility based in San Francisco. The company filed bankruptcy on Jan. 29, 2019 under Chapter 11 case number 19-30088.

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