Insurance claims from California's deadly November 2018 wildfires have topped $11.4 billion, making the series of fires one of the most expensive in state history, the Associated Press reported. More than $8 billion of those losses are from the fire that leveled the town of Paradise, killing 86 people and destroying roughly 15,000 homes, state Insurance Commissioner Ricardo Lara said. Roughly $3 billion worth of damage is related to two Southern California wildfires that ignited during the same week. "We have a long way to go before we can feel whole again," Lara said after announcing the numbers. The $11.4 billion total is slightly below the losses claimed from 2017 wildfires that ripped through Northern California wine country in October and Southern California in December. While far more houses were destroyed in last year's wildfires, home values are much lower in rural California communities, officials said last year. The losses could keep rising. In all, wildfire insurance claims in California last year neared $12.4 billion, Lara said.
Federal energy regulators said on Friday they had joint jurisdiction with a bankruptcy court over any requests to cancel or renegotiate power contracts by California utility PG&E Corp, which is preparing to file for bankruptcy, Reuters reported. The order by the Federal Energy Regulatory Commission was a win for power producers that supply PG&E with vast amounts with solar and wind power. NextEra Energy Inc, which has several contracts with PG&E, last week asked FERC to declare that PG&E may not modify its wholesale power contracts without the commission’s approval if it files for bankruptcy. Several other power producers filed comments in support of NextEra’s request, including Exelon Corp., NRG Energy Inc., Consolidated Edison Inc., First Solar Inc. and Southern Co. Read more.
In related news, PG&E Corp. is skipping payments it agreed to make to people whose property was destroyed in a 2015 blaze in the Sierra Nevada foothills caused by a tree falling on a power line that officials have blamed on the utility, Bloomberg News reported. So far, California’s largest investor-owned utility has failed to make payments of about $1.5 million to four families whose properties were destroyed by the Butte fire, and appears prepared to turn its back on at least another seven settlement agreements worth about $2.5 million, according to plaintiffs’ lawyer Amanda Riddle. The utility explained to a judge in a Jan. 23 letter that money is too tight now to commit to honoring the settlements — two days before PG&E said its board approved a $75,000 raise for its senior vice president of gas operations. Read more.
PG&E Corp. shareholder BlueMountain Capital Management LLC said yesterday that it is preparing a challenge to the embattled utility owner’s board, arguing its plan to file for bankruptcy in the wake of catastrophic wildfires in California is harming investors, Reuters reported. The hedge fund, which owns about 2 percent of PG&E, said it is trying to rally support from other shareholders to replace all 10 of the company’s board members at this year’s annual meeting expected in May. BlueMountain’s chances of success are remote, given that PG&E has said its bankruptcy filing may come as early Jan. 29. However, the maneuvering could end up giving BlueMountain a bigger role in any bankruptcy negotiations. “As we noted in our letter today, shareholders retain their corporate governance rights in bankruptcy,” a BlueMountain spokesman said. The hedge fund and other shareholders could potentially be in line to sit on a so-called equity committee that a bankruptcy judge would be empowered to appoint as part of PG&E’s court proceedings.
California power company PG&E Corp., which expects to soon file for bankruptcy, said yesterday that it would cost between $75 billion and $150 billion to fully comply with a judge’s order to inspect its power grid and remove or trim trees that could fall into power lines and trigger wildfires, Reuters reported. PG&E in a filing at U.S. District Court in San Francisco said it could not on its own afford the work proposed in a Jan. 9 order by U.S. District Judge William Alsup, who is overseeing conditions of the company’s probation following a 2010 gas pipeline explosion. To pay for the proposed work, PG&E said it would have to pass the bill to ratepayers who get their power from the utility company’s nearly 100,000 miles of overhead lines in northern California. Read more.
In related news, PG&E Corp. shareholder Blue Mountain Capital Management LLC is preparing to launch a proxy fight to oust the embattled California utility owner’s board, arguing that the company is harming investors with its plan to seek bankruptcy protection in the wake of catastrophic wildfires, Reuters reported. The hedge fund, which owns about 11 million PG&E shares, is trying to rally support from other shareholders to replace all 10 board members at this year’s annual meeting expected in May, according to a letter reviewed by Reuters. "We expect to announce the new slate no later than February 21, 2019," the New York-based firm said in a letter today. Read more.
PG&E Corp. disclosed yesterday that it has entered into a commitment letter for $5.5 billion in debtor-in-possession (DIP) financing from J.P. Morgan Chase & Co., Bank of America Corp., Citigroup Inc. and Barclays PLC ahead of the utility company's planned bankruptcy filing, MarketWatch.com reported. PG&E expects that the DIP financing will provide it with "sufficient liquidity to fund its ongoing operations. The company expects the chapter 11 cases to take about two years. The DIP financing is in the form of a $3.5 billion revolving credit facility, a $1.5 billion term loan and a $500 million delayed draw term loan facility. PG&E's bankruptcy filing comes as it faces more than $30 billion in potential liability related to its role in the recent California wildfires. Read more.
In related news, PG&E Corp. said today that it expected capital expenses of about $6.6 billion in 2019 and $6.9 billion in 2020, Reuters reported. In a filing with the U.S. Securities and Exchange Commission, the company said that it expects to spend between $5.7 billion and $7 billion annually from 2020 to 2023. PG&E expects capex to be about $6.5 billion for fiscal 2018. Read more.
Also, consumer activist Erin Brockovich, who famously took on Pacific Gas & Electric Co. in the 1990s, urged California lawmakers yesterday not to let the utility go bankrupt because it could mean less money for wildfire victims, the Associated Press reported. PG&E announced last week it plans to file for chapter 11 bankruptcy because it can't afford to pay at least $30 billion in expected damages due to deadly 2017 and 2018 Northern California wildfires. California law makes utilities entirely liable for damage caused by wildfires sparked by their equipment, even if the utility isn't found to be negligent. The cause of a 2017 fire that swept through Santa Rosa and the 2018 fire that destroyed Paradise are still under investigation. PG&E is under scrutiny in both cases, and lawsuits have been filed by people who lost their homes and are underinsured or lack insurance. Brockovich is part of the legal team representing victims of the 2017 fires. Under a PG&E bankruptcy, wildfire victims likely won't get all of the money they have sued for, experts have said. Brockovich and Noreen Evans, a former state lawmaker representing wildfire victims, suggested the legislature should allow PG&E to take out state-backed bonds to cover the costs of the 2018 fire and potentially pass some costs to ratepayers to avoid bankruptcy. Read more.
Argentina’s YPF S.A. yesterday told a bankruptcy judge that it shouldn’t be forced to pay to clean up the Passaic River, a New Jersey waterway contaminated by decades of industrial use, WSJ Pro Bankruptcy reported. With billions of dollars in potential environmental cleanup costs on the line, YPF’s lawyers denied manipulating a now-defunct U.S. unit to escape liability for one of the largest Superfund sites in the nation. A 17-mile stretch of the Passaic river, upstream and down from Newark, NJ, is so contaminated that crabs and fish aren’t safe to eat. Who will pay to fix the Passaic is the central question of a lawsuit growing out of the bankruptcy of YPF’s Maxus Energy Corp. The case is considered a test of the force that U.S. environmental laws have once bankruptcy laws are in play. YPF, which is solvent and majority-owned by Argentina, owned Maxus, an oil-and-gas company that decades ago manufactured Agent Orange, the herbicide that became notorious for its use in the Vietnam War.
Edison International said much of the damage from the mudslides that swept through the coastal town of Montecito last year was the result of poorly designed and maintained debris basins for which local governments are responsible, Bloomberg News reported. The parent company and its Southern California Edison Co. utility filed a cross-complaint Friday against the City and the County of Santa Barbara, among other public entities, saying that a substantial part of liability for the damages should be shifted to government entities responsible for the inadequate infrastructure. Edison is blamed for the mudslides because the company’s equipment may have ignited the wildfires that led to them. “With this cross-complaint we seek to ensure that there is a comprehensive review of the role many parties may have played in the large and tragic losses suffered by the community during the Montecito mudslides,” Edison said in a statement.
BlueMountain Capital Management LLC, a hedge fund with a significant stake in PG&E Corp., has challenged the utility’s board over a plan to resort to bankruptcy to tackle wildfire damages that PG&E estimates could run as high as $30 billion, WSJ Pro Bankruptcy reported. The California utility announced on Monday that it would file for bankruptcy, jolting BlueMountain and other investors that bought up the stock in 2018 before the state’s deadly Camp Fire, which killed 86 people. The utility’s equipment is suspected of having triggered some wildfires. The announcement slammed the already depressed price of PG&E’s shares and bonds. The shares, which were selling for $48.80 just before the Camp Fire broke out in November, fell 9.5 percent to $6.36 yesterday, marking a three-month drop of 87 percent. BlueMountain, which reported owning 4.3 million shares as of Sept. 30, now owns about 11 million shares, according to a person familiar with the firm’s holdings. The hedge fund contends the utility’s board is moving too quickly toward a chapter 11 bankruptcy, destroying value unnecessarily.
PG&E Corp. bonds and shares plummeted after the California power company failed to make a $21.6 million interest payment due yesterday on its 2040 senior notes, as it planned to seek chapter 11 protection, Reuters reported. Nearly all of the company’s $18 billion in debt was trading down, while the share price has fallen 21.7 percent. In a form filed with the U.S. Securities and Exchange Commission on Monday, PG&E announced its intention to not make the payment. In response to a request for comment, the company cited the SEC filing, which also noted that “Under the indenture governing the 2040 Notes, PG&E has a 30-day grace period to make the interest payment before triggering an event of default.” PG&E, which owns the biggest U.S. power utility by customers, said on Monday it was preparing to file for chapter 11 as soon as this month as it faces a potential $30 billion in liabilities linked to California’s catastrophic wildfires in 2017 and 2018. Its shares and bonds have been falling since.
PG&E Corp. was prompted to disclose its intent to file for chapter 11 by a new California law that includes a novel provision requiring utilities give employees a 15-day heads-up before seeking protection and freezes for at least six months the utility’s ability to potentially layoff workers after filing for bankruptcy, WSJ Pro Bankruptcy reported. The law, which took effect Jan. 1, is intended to provide employees, creditors and state regulators “the maximum amount of transparency” about a coming bankruptcy, said Paul Payne, spokesman for California Sen. Bill Dodd (D-Napa). The provisions were included in a sweeping bill Sen. Dodd introduced last year aimed at protecting employees and improving how utilities and the state government respond to wildfires, which have devastated California. The law “ensures that employers and state regulators aren’t caught off guard by a bankruptcy,” Payne said. The state law also prohibits utilities such as PG&E from laying off its rank-and-file employees or reducing their wages or benefits for 180 days after filing for bankruptcy. Any request to reduce the company’s workforce would need to be reviewed by the California agency regulating privately owned utilities, according to a Senate analysis of the law from August.
