As Bay Area counties prepped for a second wave of massive blackouts by California power company PG&E, a bankruptcy judge issued a ruling that could have a dramatic impact on the faltering utility's financial future.
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U.S. Bankruptcy Judge Dennis Montali said in his order filed in U.S. Bankruptcy Court in San Francisco that noteholders of PG&E will be allowed to file their reorganization plan which came about following a series of wildfires in 2018 — even as the utility puts forward its own plan. The court hopes this move will hasten a resolution to the case.
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PG&E’s had offered a reorganization plan with a $20.4 billion fund, according to the New York Times, that would allocate $12 billion for insurance claim holders and public entities that have settled with the utility. An additional $8.4 billion would be directed to the victims of the devastating 2018 wildfires, which caused 86 deaths and destroyed 14,000 homes, along with more than 500 businesses and 4,300 other buildings. PG&E’s plan would be financed by a combination of bank loans and the proceeds from issuing new shares.
The PG&E offer, according to the Times, "has been rejected by lawyers representing a committee of fire victims, who say the amount is insufficient to cover tens of thousands of claims from victims of fires sparked by PG&E equipment." This committee is supporting a plan being spearheaded by a group of creditors which include PG&E bondholders, such as hedge fund Elliott Management and mutual fund firm Pacific Investment Management Company.
Meanwhile, late Wednesday, Californians were bracing for power shutdowns — all in the name of prevention — by PG&E. Shutting off the power is PG&E’s attempt to avert more disaster. Weather reports call for dry winds through the end of the week through Central and Northern California where there has been little rainfall in recent months. If PG&E were to have power at normal levels there is a fear that dry winds, dry leaves and dry ground could catch a spark from power lines or equipment and it could lead to another wildfire.
PG&E stock was down 26% in extended trading late Wednesday.