PG&E Corp. surged on the strength of a Friday announcement it had secured a $13.5 billion settlement with victims of wildfires ignited by its power lines, a step toward resolving the biggest utility bankruptcy in U.S. history.
The agreement will cover claims stemming from some of the worst fires to hit Northern California, including the 2017 wine country fires and the 2018 Camp Fire, the company said in an email. The 2015 Ghost Ship fire and the 2017 Tubbs fire are also covered, though the utility doesn’t admit fault for either blaze, PG&E said. The shares rose 13% Monday to $10.94 at 9:30 a.m. in New York.
The payout will be financed through cash, stock in a reorganized PG&E and monetization of net operating losses, according to attorneys for the victims. The deal must be approved by California Governor Gavin Newsom and the bankruptcy court. The pact is a win for PG&E, which has spent months trying to negotiate a plan to emerge from bankruptcy by mid-2020.
The company also amended its restructuring support agreement to include an added pretax charge for victim claims of $4.9 billion for the quarter ended Dec. 31, according to a filing. And it extended the deadline for obtaining bankruptcy court approval for the agreement with insurers to Dec. 11 from Dec. 6.
“From the beginning of the Chapter 11 process, getting wildfire victims fairly compensated, especially the individuals, has been our primary goal,” PG&E Chief Executive Officer Bill Johnson said in the statement. “We want to help our customers, our neighbors and our friends in those impacted areas recover and rebuild after these tragic wildfires.”
U.S. Bankruptcy Judge Dennis Montali had ordered parties into mediation after settlement talks between victims and the company stalled.
The utility has already agreed to pay $11 billion to insurers and investors, although that pact has been contested by the governor’s office, saying it locks claim holders into a restructuring plan that may not win approval. The company also has a deal to pay $1 billion to local government agencies.
PG&E said Friday that it will update and file its reorganization plan that resolves all major wildfire claims. The company said it is on track to gain the needed regulatory and court approvals to exit from bankruptcy by a state-imposed deadline of June 30, 2020.
The utility said it had also received more than $12 billion in equity backstop commitments to support the settlement and its plan of reorganization.
PG&E filed for Chapter 11 in January after its equipment was blamed for starting catastrophic wildfires in 2017 and 2018, burying it in an estimated $30 billion worth of liabilities.
Compensating victims of wildfires has been the largest sticking point in PG&E’s restructuring. The company initially offered victims $8.4 billion, a fraction of what they said they were owed. A group of creditors — led by Pacific Investment Management Co. and Elliott Management Corp. — had offered to pay victims $13.5 billion as part of their rival reorganization proposal that won the support of the victims group.
Newsom has threatened a state takeover if the utility failed to reach a deal with creditors and wildfire victims soon.
The settlement with fire victims comes after PG&E drew outrage from state lawmakers and residents for carrying out deliberate mass blackouts to keep its power lines from igniting more wildfires during wind storms. In October, it plunged millions of Californians into darkness four times. The backlash increased pressure on Newsom to restructure PG&E.
If approved, the settlement means PG&E will avert a trial scheduled to begin next month in San Francisco federal court to determine its liability from fire-related losses and estimate damages.
“What makes the settlement significant is it creates a pathway to confirm a plan where you don’t have to go through extensive litigation,” said Eric Goodman, an attorney with the official committee representing wildfire victims.
The cases of a group of victims of the Tubbs fire who were elderly or sick will remain scheduled for trial in January, attorney Mike Danko said. Such cases can’t be delayed more than 15 days, he said, adding that they could still be settled ahead of trial as part of the $13.5 billion deal. Danko represents fire victims but not those scheduled for trial next month.
The settlement offers PG&E no relief from the scrutiny of a different federal judge overseeing its criminal probation stemming from the 2010 gas pipeline explosions in San Bruno, California. The Kincade fire in October has only intensified U.S. District Judge William Alsup’s aggressive inquiries about whether the utility has violated its probation by committing any federal, state or local crimes. PG&E remains under criminal investigation by the Butte County District Attorney for last year’s Camp fire.
–With assistance from Brian Eckhouse.
- Wildfires Likely to Boost California Surplus Lines Homeowners Share; FAIR Plan Expansion Questioned
- California’s Fair Plan Balks at State’s ‘Misguided’ Order to Expand Coverage
- California Commissioner Orders FAIR Plan to Increase Homeowners Coverage Options
Was this article valuable?
Here are more articles you may enjoy.