PG&E clears another bankruptcy hurdle with debt refinancing
SAN FRANCISCO - A federal judge on Tuesday approved a settlement that moves Pacific Gas & Electric closer to getting out of bankruptcy, but the troubled utility still must navigate nettlesome obstacles being put up by the state of California.
U.S. Bankruptcy Judge Dennis Montali signed off on a deal to refinance billions of dollars in debt to pay off PG&E bondholders.
The bondholders had threatened to cause problems for the nation's largest utility. As part of the truce, the bondholders agreed to abandon an alternative plan for getting PG&E out of bankruptcy and support the company's blueprint instead.
In the past few months, PG&E has also negotiated settlements totaling $25.5 billion to appease homeowners, businesses, insurers and government agencies who had claimed more than $50 billion in losses from a series of catastrophic wildfires blamed on the utility's dilapidated electrical grid and managerial negligence.
PG&E now appears to be well positioned to emerge from bankruptcy by June 30, but still faces one formidable stumbling block: staunch opposition from California Gov. Newsom and other elected officials. They have threatened a government-backed takeover of the company unless far more dramatic changes are made.
PG&E, which provides power to about 16 million people, last week expressed confidence that it will be able to satisfy Newsom by the June 30 deadline to emerge from bankruptcy.
The Democratic governor is demanding that PG&E replace its entire 14-member board of directors, including CEO Bill Johnson, and revise other elements of its plan to reduce its debt load so it has enough financial flexibility to pay for $40 billion to $50 billion in improvements to its outdated electrical system to reduce the chances of igniting more wildfires.
The San Francisco company pledged to bring in new directors, without specifying how many, but hasn't said if it will tweak its financial plan.
Newsom, state lawmakers and PG&E's chief regulatory agency in California hold unusual leverage over the company because of a wildfire insurance fund that the state created. Obtaining funding from the state program is a key component in PG&E's reorganization, but the company requires state approval by the June deadline to qualify.
Just days after PG&E announced its attempt to placate Newsom, a California lawmaker announced a formal proposal to authorize borrowing billions of dollars so California taxpayers could buy the utility, currently valued around $9 billion.