Federal bankruptcy judge OKs PG&E's $23 billion debt, equity financing plan

Houston — A federal bankruptcy judge in California approved $23 billion debt and equity financing plan PG&E wants to employ to help it exit Chapter 11 protection by June 30, as the state's governor has cooled his opposition to the utility's plans.

Judge Dennis Montali of the US Bankruptcy Court for the Northern District of California on Monday approved the plan on the same day that PG&E's stock took a 12% fall amidst a 3,000 point decline of the Dow Jones Industrial Average.

A PG&E lawyer told Montali that financial markets roiled by the coronavirus pandemic made reaching an agreement on a financial package "critically important."

The judge approved a financing motion for $11 billion in debt commitments, $9 billion in new equity, and an additional $3 billion for the company to buy new shares under the plan.

In a statement released late Monday, PG&E said: "Over the last several months, PG&E has made substantial progress toward emerging from Chapter 11 as a financially stable company positioned to continue prioritizing safe operations and customer focus while meeting California's energy needs and clean energy goals in a changed climate."

It called the court's approval of its Chapter 11 emergence financing commitments "another major milestone."

In its statement, PG&E said: "The Governor's Office did not oppose approval" of the financing commitments and, added: "Discussions continue with his office and we continue to make good progress."

GOVERNOR STEPS BACK

The governor of California, Gavin Newsom, had expressed strong opposition to PG&E's previous plans to exit bankruptcy, but has been softening his tone.

In mid-December, Newsom rejected a PG&E reorganization plan, saying it failed to meet the requirements of the AB 1054 Wildfire Liability Bill that Newsom signed into law in July 2019.

The bill makes available $21 billion to the state's utilities to pay victims of future wildfires.

Newsom has leverage over PG&E because the company needs state approval of its bankruptcy plan to qualify for coverage from the wildfire insurance fund.

However, with the onset of the pandemic and the turmoil in financial markets, Newsom has other concerns.

In a March 6 filing with the bankruptcy court, lawyers for the governor said: "Under normal circumstances, it may be prudent for the debtors to delay solicitation until the plan can be further refined to meet AB 1054. The Governor's Office, however, is cognizant that the June 30, 2020 deadline codified in AB 1054 creates unusual tension in these Chapter 11 cases that results in any delay endangering the debtors' ability to ultimately obtain the benefit of the provisions of AB 1054."

The filing said Newsom "does not object to the disclosure statement or the solicitation of votes to accept or reject the plan; however, the governor reserves all rights with respect to confirmation of the plan and other plan related issues."

PG&E's 19.2% CAL-ISO MARKET SHARE

Like other wholesale power sellers, PG&E reports its sales in an Electric Quarterly Report filing with the US Federal Energy Regulatory Commission.

S&P Global Platts compiles data from FERC's EQRs for its Power Sales Analysis. Over the past several quarters, PG&E has experienced a roughly one quarter delay in filing its EQR. It's most recent data filed is for the third quarter of 2019.

In Q3 2019, some 120.4 million MWh of wholesale power was sold in the California Independent System Operator market. That was an increase of 9% compared with Q3 2018.

According to PG&E's EQR filing, it sold 23.04 million MWh in Q3 2019, a year-over-year increase of 1.9%.

Reflecting how important the San Francisco-based utility's transmission and distribution system is to the northern and central California power market, PG&E's reported Q3 2019 wholesale power sales represented 19.2% of the Cal-ISO market in that quarter.