Bankrupt utility giant PG&E Corp. is offering $13.5 billion in compensation to the victims of wildfires sparked by its power lines as part of a restructuring plan, according to people with knowledge of the situation.
In doing so, the San Francisco-based power company is trying to provide the same amount that a group of its creditors — led by Pacific Investment Management Co. and Elliott Management Corp. — has agreed to pay victims in a rival reorganization proposal, said the people, who asked not to be identified because the negotiations are private. The two sides are at odds, however, over how to structure the payout and how much should come in the form of cash and stock, they said.
PG&E has spent months trying to come up with a restructuring plan that would get it out of the biggest utility bankruptcy in U.S. history by the middle of next year. The utility filed for bankruptcy protection in January after its equipment was found to have started a series of catastrophic wildfires in 2017 and 2018, burying it in an estimated $30 billion worth of liabilities.
An $11-billion deal that PG&E had already struck with wildfire insurers has come under attack as negotiations between the company and actual fire victims drag on. A group of victims has filed a lawsuit against the utility, saying they should get paid before insurers do.
California Gov. Gavin Newsom has threatened a government takeover if the company can’t come up with a viable reorganization plan soon. The judge overseeing the case has ordered PG&E and victims to meet and to try to hammer out an agreement. The parties were in mediation on Monday, people familiar with the talks said.
PG&E said in a statement that it “remains committed to working with the individual claimants to fairly and reasonably resolve their claims and will continue to work to do so.” The company noted that an initial restructuring plan it had filed in bankruptcy case would have the utility “satisfying all wildfire claims in full.”
A committee representing wildfire victims in PG&E’s bankruptcy case declined to comment.
A group of creditors led by Elliott and Pimco have for months been pitching a rival restructuring plan for PG&E that would all but wipe out the shares of current stakeholders and hand them control of the company. Under that proposal, PG&E would use some cash and $12.75 billion in new stock to establish a wildfire victim trust that would administer payments.
Over the weekend, Newsom urged the judge overseeing PG&E’s bankruptcy to delay a ruling on the insurance deal, describing it as nothing more than “legal maneuvering by parties apparently more focused on securing procedural advantages for their own pecuniary interests than on reaching a fair and expeditious resolution of this bankruptcy.”
Mark Chediak and Scott Deveau write for Bloomberg.