January 29, 2019 / 8:22 AM / 8 months ago

Bankrupted by deadly wildfires, PG&E vows to keep the lights on

(This Jan 29 story has been corrected in paragraph 10 to remove reference to top creditors, which erroneously included banks that act as trustees on bond indentures with no direct credit exposure)

By Subrat Patnaik

(Reuters) - Utility owner PG&E Corp filed for bankruptcy protection on Tuesday in anticipation of liabilities from California wildfires, including a catastrophic 2018 blaze that killed 86 people.

PG&E, which provides electricity and natural gas to 16 million customers in northern and central California and employs 24,000 people, vowed to keep the lights on as it grapples with fire-related costs it estimates at more than $30 billion.

“The power and gas will stay on ... We are not ‘going out of business,’ and there will be no disruption in the services you expect from us,” interim Chief Executive John Simon said in a letter to customers.

The San Francisco-based owner of the biggest U.S. power utility warned in November it could face significant liability in excess of its insurance coverage if its equipment was found to have caused the Camp Fire that destroyed Paradise, California, last year.

The blaze broke out on Nov. 8, killing at least 86 people in the deadliest and most destructive wildfire in California history.

State investigators had earlier cleared PG&E of liability in a 2017 wildfire in California’s wine country, but the company still faces dozens of lawsuits from owners of homes and businesses that burned during that and other 2017 fires.

FILE PHOTO: PG&E crew work on power lines to repair damage caused by the Camp Fire in Paradise, California, U.S. November 21, 2018. REUTERS/Elijah Nouvelage/File Photo

Reinsurance company Munich Re called November’s Camp Fire the world’s most expensive natural disaster of 2018 and pegged overall losses at $16.5 billion. Filing for bankruptcy would shield PG&E from claims, giving it time to figure out next steps.

PG&E is seeking court approval for $5.5 billion in debtor-in-possession financing from J.P. Morgan, Bank of America, Barclays, Citi, and other banks, it said. The sum is roughly equal to PG&E’s annual spending.

PG&E listed assets of $71.39 billion and liabilities of $51.69 billion as of Sept. 30 in the voluntary Chapter 11 document filed in the U.S. Bankruptcy Court for the Northern District of California.

It carries a debt load of more than $18 billion. Company advisers expect that it may take up to two years to emerge from bankruptcy.

PG&E shares, which lost three-quarters of its value from its 52-week high before the Camp Fire, were up 6 percent at $12.74 in morning trading.

PG&E subsidiary Pacific Gas and Electric Company filed for bankruptcy in 2001.

HEDGE FUND CHALLENGE

BlueMountain Capital Management LLC said it would propose a slate of board directors by Feb. 21, and urged stakeholders to support change at the company. The hedge fund could potentially be in line to sit on an equity committee that a bankruptcy judge appoints.

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PG&E must also contend with worried suppliers.

Federal energy regulators said on Friday they had joint jurisdiction with a bankruptcy court over requests to cancel or renegotiate power contracts by PG&E. The was a win for power producers that supply PG&E with solar and wind power, including NextEra Energy Inc.

Last year, lawmakers gave PG&E permission to raise rates to cover wildfire losses from 2017. But elected officials have shown little appetite for new rate hikes or other maneuvers to prevent a bankruptcy filing.

Reporting by Subrat Patnaik in Bengaluru and Jim Christie in San Francisco; Writing by Nick Zieminski; Editing by Saumyadeb Chakrabarty and Meredith Mazzilli

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