PG&E files for bankruptcy protection after catastrophic California wildfire
Hedge fund shareholder BlueMountain to propose a new slate of directors
Bengaluru — Utility owner PG&E filed for bankruptcy protection on Tuesday in anticipation of liabilities from California wildfires, including a catastrophic 2018 blaze that killed 86 people.
PG&E, which provides electricity and natural gas to 16-million customers in northern and central California and employs 24,000 people, vowed to keep the lights on as it grapples with fire-related costs it estimates at more than $30bn.
“The power and gas will stay on.... We are not ‘going out of business’ and there will be no disruption in the services you expect from us,” interim CEO John Simon said in a letter to customers.
The San Francisco-based owner of the biggest US power utility warned in November it could face significant liability in excess of its insurance coverage if its equipment was found to have caused the Camp Fire that destroyed Paradise, California, last year.
The blaze broke out on November 8, killing at least 86 people in the deadliest and most destructive wildfire in California history.
State investigators had earlier cleared PG&E of liability in a 2017 wildfire in California’s wine country, but the company still faces dozens of lawsuits from owners of homes and businesses that burned during that and other 2017 fires.
Reinsurance company Munich Re called November’s Camp Fire the world’s most expensive natural disaster of 2018 and pegged overall losses at $16.5bn. Filing for bankruptcy would shield PG&E from claims, giving it time to figure out next steps.
PG&E is seeking court approval for $5.5bn in debtor-in-possession financing from JPMorgan, Bank of America, Barclays, Citi, and other banks, it said. The sum is roughly equal to PG&E’s annual spending.
PG&E listed assets of $71.39bn and liabilities of $51.69bn as of September 30 in the voluntary Chapter 11 document filed in the US Bankruptcy Court for the Northern District of California.
Bank of New York Mellon Corp and Citigroup were among PG&E’s top creditors with unsecured claims.
It carries a debt load of more than $18bn. Company advisers expect that it may take up to two years to emerge from bankruptcy.
PG&E shares, which lost three-quarters of its value from its 52-week high before the Camp Fire, were up 6% at $12.74 in morning trading.
PG&E subsidiary Pacific Gas and Electric Company filed for bankruptcy in 2001.
Hedge fund challenge
BlueMountain Capital Management said it would propose a slate of board directors by February 21, and urged stakeholders to support change at the company. The hedge fund could potentially be in line to sit on an equity committee that a bankruptcy judge appoints.
PG&E must also contend with worried suppliers.
Federal energy regulators said on Friday they had joint jurisdiction with a bankruptcy court over requests to cancel or renegotiate power contracts by PG&E. The was a win for power producers that supply PG&E with solar and wind power, including NextEra Energy.
Last year, legislators gave PG&E permission to raise rates to cover wildfire losses from 2017. But elected officials have shown little appetite for new rate hikes or other maneuvers to prevent a bankruptcy filing.