Amid an investigation into whether its equipment started California’s deadliest wildfire, Pacific Gas and Electric has filed for bankruptcy.
On Tuesday, the utility company, which supplies natural gas and power to 16 million customers,
filed for Chapter 11 to protect itself from liability claims after the two worst wildfires in California’s history. The claims from the 2017 and 2018 wildfires are estimated to reach as high as $30 billion.
The company says filing bankruptcy is necessary, despite its being offered alternatives.
PG&E, which faces damage claims estimated at tens of billions of dollars for wildfires started by its equipment, said this month that bankruptcy was its “only viable option.”
Investors and state officials tried to persuade the company’s board to change its plans over the last several days by offering alternative proposals and ideas. Some of those people seized on a finding last week by state investigators that PG&E did not cause the Tubbs Fire , which tore through Sonoma County in 2017 and was the second-worst fire in California history. They were hoping that the finding had reduced PG&E’s liabilities enough to make the bankruptcy unnecessary.
Investigations are ongoing for the 2018 wildfire that destroyed roughly 14,000 homes and killed at least 86 people.
The company has cited at least $7 billion in claims from the Camp Fire. It is believed that the Camp Fire was started when a PG&E power line came in contact with nearby trees.
PG&E reported “an outage” on a transmission line in the area where the blaze began, about 15 minutes before it started. Within the massive burn area, PG&E found power equipment and a fallen power pole riddled with bullet holes, according to a letter it sent to regulators. The company also reported that it found a downed line with tree branches on it.
On Monday, investors sent PG&E a proposal for $4 billion, hoping to stave off the Chapter 11 filing.
A consortium including Paul Singer ‘s Elliott Management Corp. sent a proposal to PG&E Monday that would be backed by $4 billion in bonds and could give the company enough cash to stay out of bankruptcy while working through an estimated $30 billion in wildfire liabilities, a person with knowledge of the situation said. At least one other group that includesKen Griffin ‘s Citadel LLC and Leon Black ‘s Apollo Global Management LLC is pitching a rival plan, separate people said.
However, the company moved forward with its bankruptcy plan, also appointing a chief restructuring officer to help navigate the filing and next steps.
The San Francisco-based utility owner, which carries debt exceeding $18 billion, is in the final stages of discussions to appoint longtime turnaround specialist James Mesterharm as its chief restructuring officer to help the company navigate bankruptcy proceedings, the sources said.
In a press release issued early Tuesday morning , PG&E said it “remains committed” to its rebuilding efforts after 2018’s Northern California wildfire, along with “delivering safe and reliable” services and “continuing to make critical investments in system safety and maintenance.”
The company’s interim chief, John R. Simon, liberally sprinkled his statements with terms such as “safety,” “reliability” and “dedication”:
“Our most important responsibility is and must be safety, and that remains our focus. Throughout this process, we are fully committed to enhancing our wildfire safety efforts, as well as helping restoration and rebuilding efforts across the communities impacted by the devastating Northern California wildfires. We also intend to work together with our customers, employees and other stakeholders to create a more sustainable foundation for the delivery of safe, reliable and affordable service in the years ahead. To be clear, we have heard the calls for change and we are determined to take action throughout this process to build the energy system our customers want and deserve,” said John R. Simon, PG&E Corporation Interim CEO.
… “Through this process, we will prioritize what matters most to our customers and the communities we serve – safety and reliability. We believe that this process will make sure that we have sufficient liquidity to serve our customers and support our operations and obligations,” Mr. Simon said.
“I know that our 24,000 dedicated employees remain steadfastly focused on delivering safe and reliable natural gas and electric service for the 16 million people across our service area,” said Mr. Simon. “Each day I see the hard work and resilience of our team, and I thank them for their continued dedication to working safely and delivering for our customers.”
The move to file bankruptcy has already received backlash, but PG&E urged its stakeholders to support its decision.
The company said it intends to pay suppliers in full under normal terms for goods and services provided on or after the date of the Chapter 11 filing.
Top of Form
Bottom of Form
Separately, PG&E shareholder BlueMountain Capital Management said it was “deeply disappointed” that the company’s board ignored calls from multiple parties to abandon its “reckless and irresponsible plan to file for bankruptcy.”
The investment firm said it would propose a slate of board directors no later than Feb. 21, and urged all PG&E stakeholders to support change at the company.
The filing is PG&E’s second bankruptcy claim in the last two decades.
The New York Times reported:
This is the utility’s second bankruptcy in less than 20 years. It sought bankruptcy protection in 2001 after a botched state deregulation of the electricity industry.
(Image via )