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Citing uncertainties, PG&E files Chapter 11 reorganization plan

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Citing uncertainties, PG&E files Chapter 11 reorganization plan

More than seven months after California's largest utility, Pacific Gas and Electric Co., entered Chapter 11 bankruptcy protection together with its parent company, PG&E Corp., the companies on Sept. 9 filed their joint plan of reorganization with a federal court in San Francisco.

A summary of the proposal details the debtors' intent to raise an initial up to $14 billion in equity, and, if necessary, more than $30 billion in debt and equity, to emerge from bankruptcy by June 30, 2020, in line with conditions set by a recently approved state law. Submitted with the filings were "backstop" financing commitment letters from investment funds Abrams Capital Partners I LP, Abrams Capital Partners II LP, Knighthead Capital Management LLC, Riva Capital Partners V LP and Whitecrest Partners LP to purchase common stock.

The reorganization plan proposes to cap the debtors' wildfire liabilities linked to Pacific Gas and Electric, or PG&E, electric infrastructure at almost $18 billion, including $8.4 billion for the uninsured losses of individuals and public entities, $8.5 billion to reimburse insurance companies for insured losses and a previous $1 billion settlement with local governments.

"Under the plan we filed today, we will meet our commitment to fairly compensate wildfire victims and we will emerge from Chapter 11 financially sound and able to continue meeting California's clean energy goals," PG&E Corp. President and CEO Bill Johnson said in a news release. "Throughout this process, we remain focused on the guiding principles of safely and reliably delivering energy to our customers, further reducing the risk of wildfires, and continuing to support the state's clean energy goals."

'Subject to amendment'

While reaching a critical milestone in its restructuring process, the plan remains largely in flux, pending the outcome of an ongoing court process for estimating PG&E's total wildfire liabilities. Attorneys for wildfire victims and the debtors are potentially more than $40 billion apart in their estimates.

"In view of the current uncertainty of the debtors' aggregate liability with respect to [wildfire claims] held by individuals and public entities that have not settled with the debtors and the upcoming hearings with respect to the estimation of such claims, the plan and the funding associated therewith necessarily will be subject to amendment to address the outcome of such proceedings or any consensual resolution of such liabilities," attorneys for PG&E and its parent company said.

The plan filing comes just days after California state lawmakers shelved a proposal, until at least January 2020, that would have enabled the company to raise an estimated $20 billion to $40 billion in debt through tax-exempt bonds to compensate wildfire victims.

Echoing previous statements, including in PG&E's preview of the plan outlined in a prior filing with the U.S. Bankruptcy Court for the Northern District of California, the proposed restructuring plan would assume "all power purchase agreements, renewable energy power purchase agreements, and community choice aggregation servicing agreements."

The plan of reorganization requires approvals from U.S. Bankruptcy Judge Dennis Montali and state energy regulators.