PG&E Wins $23B Approval For Turnaround Bid After California Governor Drops Opposition

PG&E Corporation PCG announced Monday it had been allowed to use $23 billion in financing by a bankruptcy court to support its turnaround plans.

What Happened

The company filed for Chapter 11 bankruptcy in January 2019 and was facing opposition to its restructuring plan by California’s Governor Gavin Newsom. The governor did not oppose the financing request, after which the court gave its go-ahead to the power company’s restructuring bid.

The electric utility will be allowed a financing motion for $11 billion in debt commitments and $9 billion in fresh equity for its turnaround. Additionally, PG&E can also raise $3 billion by issuing new shares, reports Reuters.

PG&E lost the right to control its reorganization plan in October last year and had allowed investors Pacific Investment Management Co., and Elliott Management Corp. to pitch plans on how to deal with the $30 billion in liabilities PG&E had incurred due to wildfires.

Why It Matters

In February, PG&E announced plans to raise $25.68 billion by selling securities, according to Reuters. This would help the utility company emerge from bankruptcy and deal with the fallout from a damaged reputation, its equipment having been blamed for causing California’s wildfires. 

The company needs to emerge from bankruptcy by June 30 if it is to participate in a state-backed fund that helps utilities hit by wildfires.

PG&E submitted its 2020 Wildfire Mitigation Plan to the California Public Utilities Commission last month. The plan aims to expand new grid technology, to fool-proof its electric system, and to accelerate inspections, amongst other measures. 

Price Action

PG&E shares traded 0.91% higher at $9.86 in the after-hours session on Monday. The shares had closed the regular session 12.34% lower at $8.95.