The United States Bankruptcy Court for the Northern District of California confirmed PG&E’s plan of reorganization. Following the confirmation of the plan, PG&E Corporation and Pacific Gas and Electric Company completed the initial stage of the bankruptcy exit financing contemplated in the plan. As a result of its Chapter 11 proceedings, PG&E retired expensive high-coupon debt and replaced it with lower cost debt, yielding annual savings for customers. These savings are estimated to be approximately $250 million annually. PG&E will reflect these savings in future customer bills later this year.
“The primary purpose of our Chapter 11 filings was to address the billions of dollars in claims from victims of recent wildfires. We’ve been able to reach agreements with individual victims, public entities and others. This financing effort takes us one step closer to compensating victims for their losses,” Jason Wells, CFO of PG&E, said. “The Chapter 11 proceedings also allowed us to refinance our debt, which will result in real savings for customers starting this year, after we emerge from Chapter 11, consistent with our commitment to keep prices as low as possible for customers.”
On June 16, Pacific Gas and Electric Company raised $8.925 billion of debt, including approximately $3.5 billion of long-term debt to finance capital investments. The remaining $2.4 billion of long-term debt and $3 billion of two-year debt will be used to fund a portion of PG&E’s initial contribution to the AB 1054 wildfire fund and to fund claims at emergence from Chapter 11. Interest expense for these latter items will be paid by shareholders.
On June 18, PG&E Corporation priced its previously announced debt raise of $4.75 billion, which is expected to close on June 23, subject to customary closing conditions. The cost of this debt will be borne by PG&E shareholders. PG&E Corporation committed to suspend its common dividend until it has recognized $6.2 billion in non-GAAP core earnings to support a plan for capital investment or to reduce corporation debt in the coming years.
