Dive Brief:
- Pacific Gas & Electric on Monday filed a sketch of its reorganization plan with the U.S. Bankruptcy Court for the Northern District of California, proposing $17.9 billion to pay wildfire claims, but leaving aside details on funding.
- PG&E will need to file a more detailed, final plan by Sept. 29, when its exclusivity period ends. After that, the utility's creditors can propose their own strategies.
- PG&E's plan is a win for renewables developers like NextEra Energy, which feared PG&E would seek to amend or reject PPAs in bankruptcy court. The utility's plan calls for honoring all power purchase agreements (PPAs) and community choice aggregation servicing agreements.
Dive Insight:
PG&E's highly-anticipated filing answered how it intends to handle above-market renewables contracts as it works to exit Chapter 11 bankruptcy. But how the overall reorganization plan will be funded remains murky.
The proposal includes $8.4 billion in compensation for wildfire victims, $8.5 billion for insurance companies, which have paid claims, and $1 billon for public entities.
It also includes "payment in full, with interest, of all prepetition funded debt obligations, all prepetition trade claims and employee-related claims," the utility said in a statement. And it includes the assumption of all power purchase agreements and community choice aggregation servicing agreements, and all pension obligations, other employee obligations, and collective bargaining agreements with labor.
PG&E officials say the plan will allow it to exit bankruptcy ahead of a June 30, 2020 deadline to access California's new wildfire fund to help utilities address costs.
In a statement, PG&E said its Chapter 11 emergence financing "is expected to include a substantial equity financing component, which could include a rights offering to existing shareholders or one or more offerings in the capital markets."
The utility said it plans to work with financial institutions "over the next several weeks" to obtain up to $14 billion of total equity financing commitments. And all proceeds of the equity commitments would be used to pay wildfire victims and help fund the utility's contributions to the state wildfire fund.
PG&E filed its plan just days after a bill to allow it to access $20 billon in tax exempt bonds was pulled from California's legislature for this session. Republican Assemblyman Chad Mayes indicated the measure could be considered in 2020 — but that could be too late to meet the June deadline to access the state's new wildfire fund.
PG&E's Official Creditors Committee, in a statement, said it was reviewing the proposal and would seek the best possible outcomes for union members, retirees, small and medium businesses, and lenders that supply "critical services and materials to the utility."
"We remain committed to achieving a swift resolution that brings certainty and clarity to PG&E’s bankruptcy case and look forward to deliberating on the plan details," OCC said in an email to Utility Dive.
The Wall Street Journal reported that counsel for some wildfire victims were unhappy with the proposal. One lawyer reportedly called it "an extremely disappointing development."
Actual liabilities are being estimated by the U.S. District Court for the Northern District of California, and those figures will be included in future discussions of PG&E's reorganization.
The utility's reorganization proposal is an opening position in what will be an intricate negotiation. In June, major investors floated a reorganization plan that offered up to $30 billion in capital, including $16 billion to $18 billion earmarked for 2017 and 2018 wildfire claims.
Somewhat complicating matters, San Francisco last week offered PG&E $2.5 billion for the portions of its grid that serve the city. That would be a step toward the city separating from the bankrupt utility and setting up a municipal provider, but PG&E indicated the company is not interested in a sale.
