PG&E says it will declare bankruptcy; CEO resigns

Pacific Gas and Electric Company (PG&E), which provides power to roughly 16 million people across California, is in a full-fledged crisis after its CEO resigned, the company announced bankruptcy, and its stock price imploded, all with less than 24 hours.

On Sunday, PG&E CEO Geisha Williams announced she will step down. Williams moved into the CEO role in early 2017, the beginning of what turned out to be a disastrous period for the San Francisco-based utility company.

PG&E’s board of directors said Sunday that it had appointed company Vice President John Simon as temporary CEO while the search for a suitable full-time replacement begins.

On Monday morning, the company delivered another shock, confirming that it plans to prepare for Chapter 11 bankruptcy. According to the announcement:

The Company today provided the 15-day advance notice required by recently enacted California law that it and its wholly owned subsidiary Pacific Gas and Electric Company (the “Utility”) currently intend to file petitions to reorganize under Chapter 11 of the U.S. Bankruptcy Code on or about January 29, 2019.

[...] PG&E expects that the Chapter 11 process will, among other things, support the orderly, fair and expeditious resolution of its potential liabilities resulting from the 2017 and 2018 Northern California wildfires.

Reuters reported last week that PG&E would soon make the bankruptcy bid.

Simon said that PG&E “remains committed to helping [wildfire victims] through the recovery and rebuilding process” and attempted to frame Chapter 11 as a way to help the company meets it obligations.

Cal Fire has identified PG&E equipment as the source of 18 recent California wildfires. Investigations continue into whether the company is responsible for the 2017 Tubbs Fire and 2018 Camp Fire, which between them killed nearly 100 people and destroyed tens of thousands of homes.

The scale of the company’s potential financial liability became more clear Monday, as PG&E’s filings noted that it has approximately $1.5 billion on hand and does not believe that’s enough to cover itself in the near future.

Chapter 11 of the U.S. Bankruptcy Code covers instances of “reorganization,” under which the bankrupt company continues to exist and keeps most of its assets.

While the company is still technically expected to pay its debts, the process hinders creditor’s efforts to collect.

Photo by Paul Morigi/Getty Images for Fortune

In response to today’s news, San Francisco Mayor London Breed said, “I want to assure San Francisco residents that PG&E’s bankruptcy declaration will not impact their power service.”

Governor Gavin Newsom noted, “While PG&E announced its intent to file bankruptcy today, the company should continue to honor promises made to energy suppliers and to our community.

The newly elected governor went on to say the state will continue to press the company to recompense fire victims.

SF-based State Senator Scott Wiener issued a statement saying, “I am deeply disappointed that PG&E is again entering bankruptcy, and that it appears poised to sell its downtown San Francisco headquarters.”

The utility company last filed for Chapter 11 in 2001.

“PG&E’s bankruptcy also will harm victims whose homes burned and whose prospects of recovering damages is now potentially diminished,” Wiener added.

The parade of bad news sent PG&E stocks tumbling Monday morning to more than nine dollars, roughly a fifth of what the company was worth on November 8, the day that the Camp Fire started.

• Chapter 11 announcement [PG&E]
• PG&E May Go Bankrupt [Curbed SF]
• Chapter 11 [Cornell University]
• PG&E Has Started 18 Fires [Curbed SF]
• PG&E Stocks At Lowest [Marketwatch]