Exclusive: California utility PG&E explores bankruptcy filing

By Liana B. Baker, Greg Roumeliotis and Mike Spector

(Reuters) – California utility firm PG&E Corp (N:) is exploring filing some or all of its enterprise for bankruptcy safety because it faces billions of {dollars} in liabilities associated to deadly wildfires in 2018 and 2017, individuals accustomed to the matter mentioned on Friday.

The firm is contemplating the transfer as a contingency, partly as a result of it may quickly take a major monetary cost for the fourth quarter of 2018 associated to liabilities from the blazes, the sources mentioned.

A bankruptcy filing just isn’t sure, the sources mentioned. The firm may obtain monetary assist by laws that may let it move on to clients prices related to fireplace liabilities, the sources mentioned. But that’s only a risk, they mentioned, so bankruptcy preparations are being made.

As of Friday, PG&E was shying away from negotiating so-called debtor-in-possession financing that firms sometimes line up earlier than a bankruptcy filing to assist preserve working whereas beneath court docket safety, one supply accustomed to the matter mentioned.

A bankruptcy filing just isn’t PG&E’s desire for addressing liabilities from the catastrophic blazes, a number of the sources mentioned. But the preparations may put stress on California politicians hoping the corporate can keep away from such an end result.

Shares of PG&E, which has a market capitalization of $12.7 billion, dropped 30 % in after hours buying and selling in New York on Friday on the information.

“PG&E’s board and management are working diligently to assess the company’s potential liabilities as a result of the wildfires and the options for addressing those liabilities. We recognize the need to balance the interests of many stakeholders while maintaining safe, reliable and affordable services for our customers, which is always our top priority,” the corporate mentioned in a press release.

PG&E can be exploring promoting its gasoline unit, probably by a court-supervised public sale throughout bankruptcy proceedings, one of many sources mentioned. The sale may additionally happen exterior a bankruptcy course of, the identical supply mentioned. The firm is weighing utilizing proceeds from the unit’s sale to handle dying and damage claims arising from the latest wildfires, this supply mentioned.

NPR first reported on the exploration of the gasoline unit sale earlier on Friday.

PG&E, which filed for bankruptcy as soon as earlier than in 2001, mentioned in November it may face “significant liability” in extra of its insurance coverage protection if its tools was discovered to have precipitated final yr’s fires in northern and southern California.

Those fires, the Camp and Woolsey blazes, killed at the least 86 individuals and destroyed 18,500 properties, incinerating a lot of the Sierra foothills city of Paradise, 175 miles (280 km) north of San Francisco.

PG&E additionally faces dozens of lawsuits from house owners of properties and companies that burned throughout 2017 fires.

The utility has been wrestling with how finest to proceed after two years of damaging fires. California policymakers had accepted a invoice that allow utilities move on to clients some prices associated to wildfires, in accordance with Moody’s. But the invoice didn’t cowl 2018 fires.

Filing for bankruptcy would defend PG&E from the liabilities, giving it time to determine easy methods to deal with the claims.

The firm mentioned on Friday that it was reviewing its “structural options” and assessing its operations, funds, administration, construction and governance. It additionally mentioned it’s looking for new administrators at its holding firm and its utility subsidiary Pacific Gas and Electric Co.

PG&E added that it has shaped a particular board committee that features unbiased consultants to advise on wildfire security finest practices.

Reuters reported final yr that the corporate was working with bankruptcy advisors.

The utility has borrowed greater than $3 billion beneath credit score traces obtainable to it, a transfer firms in monetary misery will typically make to shore up money.

The California Public Utilities Commission final month opened a brand new continuing to contemplate penalties in opposition to the corporate for falsifying pipeline security information.