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article imagePG&E will file for bankruptcy protection at end of January

By Karen Graham     Jan 14, 2019 in Business
California’s largest power company intends to file for bankruptcy as it faces tens of billions of dollars in potential liability following massive wildfires that devastated parts of the state over the last two years.
PG&E Corp. stocks fell in the basement in early trading on Monday, dropping nearly 50 percent. This was just one day after Chief Executive Geisha Williams stepped down. The stock has lost more than 80 percent of its value over the last three months, according to CNBC News.
PG&E's market value has declined from a peak of $37 billion in 2017 to about $4.7 billion today. The company is the largest investor-owned utility in California and has 16 million customers covering a 70,000 square mile service area in Northern and Central California.
As noted previously in Digital Journal, on Friday, December 4, PG&E shares fell 20 percent when it was rumored that the utility was thinking about filing for bankruptcy protection, a move that raised speculation the company was bluffing to get aid from the state.
However, State Senator Jerry Hill, an outspoken PG&E critic, said the company has used bankruptcy before as leverage when seeking state assistance in paying its wildfire liabilities. “Last year, they were able to fool the legislature with the narrative of bankruptcy or bailout, and the legislature gave them a bailout,” said Hill.
Bankruptcy protection filing
According to the company's filing with the Securities and Exchange Commission, they have only "about $1.5 billion in cash and cash equivalents on hand." It said it believes bankruptcy is in the best interests of not just wildfire claimants but also other creditors, its shareholders, and customers, reports CNN.
The company is also in negotiations with a "number of major banks," hoping to secure more than $5 billion to fund its ongoing operations as it seeks bankruptcy protection.
Based on California law, the company will have to wait for 15 days to file for bankruptcy on January 29. "The people affected by the devastating Northern California wildfires are our customers, our neighbors, and our friends, and we understand the profound impact the fires have had on our communities and the need for PG&E to continue enhancing our wildfire mitigation efforts," said John Simon, who was named interim CEO on Sunday, in a statement.
"We remain committed to helping them through the recovery and rebuilding process. We believe a court-supervised [bankruptcy] process... will best enable PG&E to resolve its potential liabilities in an orderly, fair and expeditious fashion."
Creating uncertainty in the energy industry
PG&E's bankruptcy filing is going to be not only complex but political, as well, reports the Washington Post.
The filing will undoubtedly pit fire victims, customers, bankers and renewable energy providers against each other. And due to California's push to have an electrical grid free of carbon dioxide emissions, the state has pushed energy companies to buy into renewable energy developers, and now they face uncertainty.
“Many of the power contracts are above market price,” Gabe Grosberg, a utility analyst at S&P Global, said Monday. A renegotiation of those contracts “is something the bankruptcy judge will take a look at,” he said.
PG&E said it does not expect any impact to electric or natural gas service for its customers during the Chapter 11 process.
As of 2:00 p.m. on January 14, 2019, PG&E shares were trading at $9.15, down 47.97 percent.
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