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PG&E Reaches $13.5 Billion Settlement With Wildfire Victims (1)

Dec. 7, 2019, 4:07 AM

PG&E Corp. has reached a $13.5 billion settlement with victims of wildfires ignited by its power lines, a major step toward resolving the biggest utility bankruptcy in U.S. history.

The settlement 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 a emailed statement. The 2015 Ghost Ship fire and the 2017 Tubbs fire are also covered, although the utility doesn’t admit fault for either blaze, PG&E said.

The agreement is subject to a number of conditions and the approval of the bankruptcy court, the utility said.

The deal is a victory for PG&E, which has spent months trying to negotiate a viable restructuring plan to emerge from bankruptcy by the middle of next year. U.S. Bankruptcy Judge Dennis Montali had ordered parties into mediation after settlement talks between victims and the company stalled.

“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.”

The utility has already agreed to pay $11 billion to insurers and investors, although that pact has been contested by California Governor Gavin Newsom, 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.

To contact the reporters on this story:
Mark Chediak in San Francisco at mchediak@bloomberg.net;
Scott Deveau in New York at sdeveau2@bloomberg.net

To contact the editors responsible for this story:
Lynn Doan at ldoan6@bloomberg.net

Joe Ryan, Pratish Narayanan

© 2019 Bloomberg L.P. All rights reserved. Used with permission.

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