Pacific Gas & Electric's reorganization suffered a setback at the hands of a U.S. bankruptcy judge.
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U.S. Bankruptcy Judge Dennis Montali ruled on Wednesday evening the California utility company doesn’t have the ability to solely control its reorganization, sending shares plunging to their lowest level since January.
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Montali said that a plan developed by bondholders, led by the hedge fund Elliott Management and supported by California citizens with claims against the utility for damage caused by the wildfire, should be considered.
"We are disappointed that the Bankruptcy Court has opened the door to consideration of a plan designed to unjustly enrich Elliott and the other ad hoc bondholders and seize control of PG&E at a substantial discount," PG&E said in a statement. "We are confident that our fully funded Plan of Reorganization, which will satisfy all wildfire claims in full while treating all stakeholders fairly and protecting customers, is the better solution for all constituencies and will be confirmed."
PG&E in January filed for Chapter 11 bankruptcy protection due to liabilities stemming from wildfires in Northern California in 2017 and 2018.
Montali’s ruling comes as PG&E began shutting off power to 800,000 customers in northern and central California in an effort to avert more wildfires. About 2 million Californians in total will be impacted by the blackouts.
PG&E shares have lost more than 75 percent of their value since Nov. 8, when the Camp Fire, the deadliest and most destructive wildfire in California history broke out. The California Department of Forestry and Fire Protection found that PG&E was responsible for that wildfire, and others. Last month, the utility reached an $11 billion settlement for claims tied to the 2017 and 2018 wildfires.
PG&E has not yet announced a date for its third-quarter earnings release.