PG&E Reaches Agreement With Governor, Clearing Bankruptcy Hurdle

But in other areas, Mr. Newsom gained more modest concessions. Under the agreement, PGE Corporation, the holding company that owns the utility, will still issue new debt, something that could put it at financial risk. The interest on that debt would have to be paid with profits from the Pacific Gas Electric Company, the entity that provides customers with gas and power. PGE and its shareholders had originally wanted the holding company to issue $7 billion in debt, but the agreement with the governor calls for $4.75 billion.

PGE is also going ahead with a financing arrangement that involves using a tax windfall from its wildfire-related losses to back its new debt.

In a letter in December, Mr. Newsom criticized PGE’s intention to issue debt at the holding company and use its tax breaks, saying such steps would leave the company “with limited tools to finance itself when it needs to access capital to make billions of dollars of safety investments.”

PGE is still set to emerge from bankruptcy with far more debt than it had before it sought bankruptcy protection.

“Our plan will position the company to make necessary safety and wildfire mitigation investments in the coming years, partner with the state in achieving its bold climate goals, and, importantly, provide protection to California if the Chapter 11 process is not concluded in a timely manner,” Bill Johnson, chief executive of PGE Corporation, said in a statement.

Article source: https://www.nytimes.com/2020/03/20/business/energy-environment/pge-deal-gavin-newsom-california.html