The biggest utility bankruptcy in U.S. history is drawing to a close: PG&E Corp. reached a deal with California Gov. Gavin Newsom over the company’s restructuring plan.
As part of the agreement, the embattled utility will overhaul its board and state regulators will gain increased oversight of the company, according to a Bankruptcy Court filing Friday. If PG&E fails to emerge from Chapter 11 bankruptcy protection by June 30, it will appoint a “chief transition officer” and begin a process to sell the company, according to the agreement.
“This is the end of business as usual for PG&E,” Newsom said in a statement. “We secured a totally transformed board and leadership structure for the company, real accountability tools to ensure safety and reliability and billions more in contributions from shareholders to ensure safety upgrades are achieved.”
Newsom’s approval was announced after the end of the regular trading day on Wall Street. PG&E shares rose as much as 4.7% in extended trading.
PG&E has struggled for months to craft a reorganization proposal that would satisfy both creditors and state officials after filing for Chapter 11 last year facing $30 billion in damages from wildfires blamed on its power lines. The consent from Newsom, who objected to earlier versions of PG&E’s turnaround plan, greatly boosts the odds the utility will exit bankruptcy by a state-imposed deadline of June 30.
The deal with Newsom comes as the governor and other officials have turned nearly all their attention to fighting the coronavirus. California has been one of the U.S. centers of the outbreak. On Thursday, Newsom took the dramatic step of ordering residents to isolate themselves at home (with some exceptions) to limit the virus’ spread, the country’s strictest effort so far.
Previously, the utility had pledged reforms including replacing some directors, tying executive pay more closely to safety metrics and dividing up its operations into regional units to better respond to local concerns. PG&E has also said it’s open to a proposal that would let California regulators take greater control of the company if it gets into trouble again.
PG&E already had made peace with bondholders including Elliott Management Corp. and Pacific Investment Management Corp., who had been threatening to take over the utility with a rival restructuring proposal. Previously, the company struck settlements with wildfire victims, their insurers and local government agencies affected by the blazes.
PG&E’s reorganization still needs approval from the judge overseeing its bankruptcy and from a state utility commission, whose members are appointed by the governor.
Newsom said earlier versions of PG&E’s turnaround plan failed to adequately address his concerns over the utility’s governance and financing. For months, Newsom has raised the specter of a state takeover unless PG&E met his demands.
Newsom wanted to see PG&E’s board replaced and called for a provision that would allow for the state to take control of the company’s assets if it failed to meet certain performance goals.
The utility needs to emerge from bankruptcy by June 30 in order to take advantage of a wildfire fund designed to help it pay for future fire-related claims.