Released March 23, 2020 | SUGAR LAND
en
Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The nation's largest utility came closer to getting out of bankruptcy March 16 after California Governor Gavin Newsom dropped his objections to a $23 billion financing package assembled by Pacific Gas & Electric Company (San Francisco, California), a unit of PG&E Corporation (NYSE:PCG) (San Francisco, California).
The utility and its corporate parent filed for Chapter 11 bankruptcy reorganization January 2019, after incurring tens of billions of dollars of liabilities stemming from wildfires in 2017 and 2018. For more on the bankruptcy filing, see January 15, 2019, article - PG&E to File for Bankruptcy Protection, Engulfed by Wildfire Liabilities.
The March 16 bankruptcy court ruling was unusual in that it was conducted by conference call, owing to the COVID-19 pandemic and San Francisco's decision to ban large groups.
The utility and its corporate parent aren't out of the woods yet, as they still face efforts by some elected officials to turn the utility into a publicly owned enterprise. PG&E has rejected efforts to turn it, or part of it, into a municipal utility or electric cooperative. The state must still approve PG&E's plan to exit bankruptcy.
Still, the March 16 court decision was an important milestone. PG&E must exit bankruptcy proceedings by June 30 in order to be eligible to receive funds from the state's wildfire compensation fund.
In an emailed statement, PG&E spokesman Ari Vanrenen said the court's decision was "another significant step toward successfully concluding the Chapter 11 process. Throughout this process, our focus has remained on getting victims paid, continuing to deliver safe and reliable electric and gas service, and implementing needed changes across our business to improve our operations for the long term."
The utility added it has resolved all wildfire victim claims and has reached agreements to restructure its finances.
Industrial Info is tracking about 66 PG&E capital and maintenance projects valued at about $4.8 billion. The largest project is the decommissioning and dismantlement of the Diablo Canyon Nuclear Power Station, a $3.7 billion project that isn't slated to kick off until 2025. Most of its other projects are for transmission and distribution (T&D), though there is one large battery energy storage system (BESS) project under development.
PG&E also has been increasing its spending on tree-trimming in an effort to reduce the potential for wildfires. For more on that, see June 4, 2019, article - PG&E Wildfire Mitigation Costs Drive Up Capital Spending Plans.
The financing plan approved March 16 by the federal bankruptcy court in San Francisco included issuing between $9 billion and $12 billion of new stock, as well as new loans totaling $5.25 billion to the utility and $5 billion to the parent.
Given the volatility in financial markets, the utility and its corporate parent have arranged "backstop" commitments "to ensure sufficient funds at an acceptable price will be available ... even if market conditions deteriorate," according to the second amended motion filed March 16 by the utility and its corporate parent.
Governor Newsom initially opposed PG&E's reorganization plan because paying wildfire claims and upgrading equipment was reportedly estimated to cost a total of $40 billion. After the failure of PG&E's equipment triggered numerous wildfires in California in 2017 and 2018, it was hit with an avalanche of claims that pushed both the utility and its parent into bankruptcy.
PG&E is expected to use the new financing to pay more than $25 billion in claims stemming from wildfires in those two years. Settlements reportedly have been reached with wildfire victims, insurers and government agencies.
According to news reports of the March 16 hearing, U.S. Bankruptcy Judge Dennis Montali said, "The complexity of the transaction is beyond my understanding," but that the utility's advisors, Gov. Newsom and other parties "have put their heads together in one of the most complicated things that, I guess, has ever occurred in U.S. refinancing, and probably more complicated by the world situation."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
The utility and its corporate parent filed for Chapter 11 bankruptcy reorganization January 2019, after incurring tens of billions of dollars of liabilities stemming from wildfires in 2017 and 2018. For more on the bankruptcy filing, see January 15, 2019, article - PG&E to File for Bankruptcy Protection, Engulfed by Wildfire Liabilities.
The March 16 bankruptcy court ruling was unusual in that it was conducted by conference call, owing to the COVID-19 pandemic and San Francisco's decision to ban large groups.
The utility and its corporate parent aren't out of the woods yet, as they still face efforts by some elected officials to turn the utility into a publicly owned enterprise. PG&E has rejected efforts to turn it, or part of it, into a municipal utility or electric cooperative. The state must still approve PG&E's plan to exit bankruptcy.
Still, the March 16 court decision was an important milestone. PG&E must exit bankruptcy proceedings by June 30 in order to be eligible to receive funds from the state's wildfire compensation fund.
In an emailed statement, PG&E spokesman Ari Vanrenen said the court's decision was "another significant step toward successfully concluding the Chapter 11 process. Throughout this process, our focus has remained on getting victims paid, continuing to deliver safe and reliable electric and gas service, and implementing needed changes across our business to improve our operations for the long term."
The utility added it has resolved all wildfire victim claims and has reached agreements to restructure its finances.
Industrial Info is tracking about 66 PG&E capital and maintenance projects valued at about $4.8 billion. The largest project is the decommissioning and dismantlement of the Diablo Canyon Nuclear Power Station, a $3.7 billion project that isn't slated to kick off until 2025. Most of its other projects are for transmission and distribution (T&D), though there is one large battery energy storage system (BESS) project under development.
PG&E also has been increasing its spending on tree-trimming in an effort to reduce the potential for wildfires. For more on that, see June 4, 2019, article - PG&E Wildfire Mitigation Costs Drive Up Capital Spending Plans.
The financing plan approved March 16 by the federal bankruptcy court in San Francisco included issuing between $9 billion and $12 billion of new stock, as well as new loans totaling $5.25 billion to the utility and $5 billion to the parent.
Given the volatility in financial markets, the utility and its corporate parent have arranged "backstop" commitments "to ensure sufficient funds at an acceptable price will be available ... even if market conditions deteriorate," according to the second amended motion filed March 16 by the utility and its corporate parent.
Governor Newsom initially opposed PG&E's reorganization plan because paying wildfire claims and upgrading equipment was reportedly estimated to cost a total of $40 billion. After the failure of PG&E's equipment triggered numerous wildfires in California in 2017 and 2018, it was hit with an avalanche of claims that pushed both the utility and its parent into bankruptcy.
PG&E is expected to use the new financing to pay more than $25 billion in claims stemming from wildfires in those two years. Settlements reportedly have been reached with wildfire victims, insurers and government agencies.
According to news reports of the March 16 hearing, U.S. Bankruptcy Judge Dennis Montali said, "The complexity of the transaction is beyond my understanding," but that the utility's advisors, Gov. Newsom and other parties "have put their heads together in one of the most complicated things that, I guess, has ever occurred in U.S. refinancing, and probably more complicated by the world situation."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
