By Hudson Sangree
Pacific Gas and Electric said Wednesday it had settled with the bondholders whose competing reorganization plan may have been the biggest threat to the utility having its own Chapter 11 reorganization plan adopted by the U.S. Bankruptcy Court in San Francisco.
The ad hoc committee of senior unsecured noteholders will withdraw its reorganization plan in exchange for PG&E agreeing to refinance billions of dollars in debt on terms generally advantageous to the bondholders, as described in a filing with the U.S. Securities and Exchange Commission on Wednesday. (See Judge Admits Takeover Plan as PG&E Starts Blackouts.)
“Reaching a resolution with the bondholder group is a positive development to move forward with our plan of reorganization,” PG&E CEO Bill Johnson said in a statement.
Johnson noted PG&E’s prior settlements with fire victims, insurance companies and local governments — “and we’ve now reached an agreement with the bondholder group,” he said. “We remain focused on working with key stakeholders, including elected officials and our state regulator, on how PG&E will look, act and be held accountable as we emerge from Chapter 11.” (See Judge OKs PG&E Deals with Fire Victims, Insurers.)
Even as PG&E won a major victory, however, California Gov. Gavin Newsom filed an objection to PG&E’s reorganization plan with the bankruptcy court, saying it does too little to ensure safe, reliable and affordable service for Californians. Newsom has repeatedly criticized PG&E in recent months, demanding fundamental changes that its Chapter 11 plan doesn’t yet include.
The company filed for bankruptcy last January as it faced an estimated $30 billion in liability after two years of catastrophic wildfires ignited by its equipment. The blazes sparked by PG&E’s aging transmission lines included the Camp Fire, the deadliest and most destructive wildfire in state history, which killed 86 people and burned down the town of Paradise in November 2018.
“PG&E’s historical failures — including decades of mismanagement and inadequate investments in fire safety and fire prevention — require that any plan of reorganization must position the reorganized entity for transformation, include stringent governance and management requirements and enforcement mechanisms, and provide for a capital structure that allows the reorganized entity to undertake critical safety investments,” the governor’s attorneys told the court.
The governor cannot stop federal Judge Dennis Montali from confirming PG&E’s plan, but the California Public Utilities Commission, whose members the governor appoints, must approve any reorganization plan as well. Both the court and CPUC must approve a plan by the end of June if the utility wishes to participate in a $21 billion wildfire insurance fund established under Assembly Bill 1054, a bill Newsom signed in July.
In a Dec. 13 letter to PG&E CEO Bill Johnson, Newsom “made clear that the debtors’ plan, and the restructuring transactions contemplated therein, did not, in his judgment, result in a reorganized utility capable of satisfying the requirements of Assembly Bill 1054,” Newsom’s lawyers told Montali in their filing Wednesday.
Among his demands, Newsom said he wanted more Californians on PG&E’s board of directors. The current board includes out-of-staters such as Johnson, the former head of the Tennessee Valley Authority.
Newsom has repeatedly said, including in his court filing Wednesday, that a state takeover of PG&E remained a possibility if the utility fails to comply with his requirements. (See Newsom Budget Reiterates PG&E Takeover Threat.)
The governor’s attorneys asked Montali to hold off on approving aspects of PG&E’s plan to exit bankruptcy until it meets the requirements of AB 1054, as described by the governor.
The judge postponed a hearing on PG&E’s Chapter 11 plan, originally scheduled for Thursday, until Jan. 29.