PG&E Says Bankruptcy Could Take 3 Years as Shareholders Fight Filing

A week after announcing that the company will file for bankruptcy protection at month's end, Pacific Gas and Electric officials said they have secured financing to continue safe operations while the Chapter 11 case proceeds.

In a filing with the Securities and Exchange Commission, PG&E wrote that it entered into an agreement with four major banks to provide $5.5 billion in "debtor-in-possession," or DIP loans.

"PG&E expects that the DIP Facilities will provide it with sufficient liquidity to fund its ongoing operations, including its ability to provide safe service to customers during the Chapter 11 cases," the filing states, adding that the company expects the Chapter 11 proceedings to take two years, but that the loans could be extended to a third year.

It's the latest twist in a bankruptcy case that could have huge implications for California ratepayers, fire victims and the state's fight against climate change. PG&E announced on Jan. 14 that it plans to file for Chapter 11 protections around Jan. 29, citing the more than $30 billion in potential liabilities from a series of devastating wildfires that the company is suspected of starting.

The filing will also have huge repercussions for PG&E's shareholders — including New York-based BlueMountain Capital Management.

While most investors have bailed on PG&E since November's deadly Camp Fire in Butte County, the hedge fund has more than doubled its stake, and says it currently holds about 2 percent of outstanding shares.

And one of the firm's leaders told KQED that entering Chapter 11 doesn't make sense for PG&E — at least not yet.

"There hasn't been a single judgment issued against the company from the 2017 or 2018 wildfire claims. Many of them are in pretrial orders, which could take a few years," said Omar Vaishnavi, a partner at BlueMountain Capital Management, in an exclusive interview with KQED's The California Report.

"Even when a decision happens against the company in the future, the company could appeal that decision, which means that these cases could go on for four or five, even up to 10 years in some cases."

In addition to questioning the rush to enter into bankruptcy protection, Vaishnavi takes issue with the utility's estimate that the liability it faces from those fires could exceed $30 billion.

"There's multiple avenues to reduce those liabilities from that $30 billion figure to something much lower than that," Vaishnavi said.

The options include settling claims to lower the amount it ultimately pays out, as Sempra Energy's San Diego Gas & Electric did following a devastating fire in 2007.

But PG&E's liabilities could still end up being higher than the company is currently worth. While its investigation into the Camp Fire's cause is ongoing, Cal Fire has already ruled that PG&E equipment was involved in at least 18 of the more than 170 fires that swept Northern California in October 2017.

Nonetheless, Vaishnavi argues, PG&E is far more valuable than it's worth on paper.

"PG&E is one of the largest and most attractive utilities in the country," he said. "It starts with where it's located. It's in California, and one of the most important initiatives California has outlined is growth in clean energy. PG&E is very important to ensure that growth plan."