PG&E reaches settlement worth $13.5 billion with wildfire claimants

By Caroline Salls

Pittsburgh, Dec. 9 – PG&E Corp. and Pacific Gas and Electric Co. announced Monday that they have agreed to a settlement with the official committee of tort claimants and with firms representing individual claimants who sustained losses from the 2015 Butte Fire, 2017 Northern California Wildfires and 2018 Camp Fire.

According to a company news release, the settlement is valued at $13.5 billion and will resolve all claims arising from those fires, including the 2017 Tubbs Fire as well as all claims arising from the 2016 Ghost Ship Fire in Oakland, Calif.

The settlement is subject to a number of conditions and will be implemented under PG&E’s Chapter 11 plan of reorganization, which is subject to confirmation by the U.S. Bankruptcy Court for the Northern District of Texas.

The company said court approval of the settlement would put PG&E on a sustainable path forward to emerge from Chapter 11 by the June 30, 2020, deadline to participate in the State of California’s go-forward wildfire fund.

“From the beginning of the Chapter 11 process, getting wildfire victims fairly compensated, especially the individuals, has been our primary goal,” chief executive officer and president Bill Johnson said in the release.

“With this important milestone now accomplished, we are focused on emerging from Chapter 11 as the utility of the future that our customers and communities expect and deserve.

“There have been many calls for PG&E to change in recent years. PG&E’s leadership team has heard those calls for change, and we realize we need to do even more to be a different company now and in the future. We will continue to make the needed changes to re-earn the trust and respect of our customers, our stakeholders and the public.”

According to an 8-K filed with the Securities and Exchange Commission, the fire victim consideration is to be funded into a trust to be established under the amended plan. The trust will consist of $5.4 billion in cash contributed on the plan effective date, $1.35 billion in cash payable through $650 million paid on Jan. 15, 2021 and $700 million paid on Jan. 15, 2022, subject to the terms of a tax benefit payment agreement to be entered into between the trust and the reorganized utility, and $6.75 billion in common stock of the reorganized PG&E valued at 14.9 times normalized estimated net income, except that the trust’s share ownership of the reorganized PG&E will not be less than 20.9%.

Under specified circumstances, including some change-of-control transactions and in connection with the monetization of tax benefits related to the payment of wildfire-related claims, the reorganized utility’s payments will be accelerated and payable on an earlier date.

PG&E said this new agreement is the third major settlement achieved in its Chapter 11 case. The company previously reached settlements with two other major groups of wildfire claim holders, including a $1 billion settlement with cities, counties and other public entities and an $11 billion agreement with insurance companies and other entities that have already paid insurance coverage for claims relating to the 2017 and 2018 wildfires.

With all major wildfire claims now on a path to be resolved and the total amount of wildfire liabilities determined, PG&E said it will now amend and finalize its plan, which will satisfy all wildfire claims in accordance with Assembly Bill 1054.

The company said it remains on track to obtain regulatory approval and confirmation of its plan in advance of the June 30, 2020 statutory deadline set by AB 1054.

In addition, PG&E said it has received more than $12 billion of equity backstop commitments to support the settlement and its plan.

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

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