PG&E Corporation (NYSE: PCG) and Gavin Newsom, the governor of California, are clashing over incorporating a new clause in the reorganization. The new provision in the reorganization allows state control if PG&E fails in its efforts to maintain safety and meet the performance.
PG&E needs the support of Newsom
PG&E requires the support of Newsom to come out of bankruptcy before the June 30, 2019, deadline imposed by the state. The company has filed for protection under Chapter 11 bankruptcy in early 2019 after it owed damages worth $30 billion because of deadly fires involving its equipment in 2017 and 2018.
Reaches settlements with insurers and victims
PG&E has reached settlements with the victims of wildfires. It has also settled with insurers of victims. However, the fresh condition by the Newsom is a bigger obstacle for the beleaguered company to conclude the restructuring with these two groups.
According to a statement from the office of Newsome, the company should implement safety on priority and ensure accountable practices. The new company should have the flexibility to use the funds to achieve these objectives. According to a communiqué from the company, it will address all the demands in the letter of Newsom.
The company further said it is engaged in a constructive dialogue with the authorities to address those demands. Its main objective is to become stable and financially sound after coming out of chapter 11.
PG&E requires the nod of the utility commission
Newsom will appoint a utility commission and the new entity need to obtain its nod for any reorganization initiative. PG&E has to fully resolve all the issues under the bankruptcy and liabilities of wildfires before the June 30 deadline. The Newsome office has put this condition for the new entity to take part in the new fire insurance funds to prevent any such catastrophic losses.
Newsome orders replacement of entire board
PG&E has received an ultimatum from the office of Newsome to replace the entire board. It should come up with a better financing plan without any burden on the consumers. Elliott Management Corp and Pacific Investment Management Co have already agreed for the state takeover in the new restructuring plan and a clause is in place.
PG&E has submitted a multiparty settlement accord to the state utility commission. As per the terms of the accord, the company will pay a sum of $50 million to improve the electric distribution and transmission system.