Pacific Gas and Electric (PG&E) has hired Will, Gotshal & Manges LLP to export debt restructuring options. One of the options available to PG&E is to break up the company and have one of the divisions declare bankruptcy, thus protecting the remainder of California’s largest utility.
In an exclusive with Reuters, insiders said that the utility was grappling with the liability stemming from the 2017 fires in California. Current liability could exceed $8 billion.
According to the report, PG&E has already reported a “$2.5 billion pre-tax charge in its second-quarter earnings, after California officials blamed its power lines for sparking the deadliest firestorm in the state’s history last autumn.”
While nothing has been decided as yet, PG&E responded to the rumours saying: “As a matter of general practice, we do not comment on market rumours.
“To be clear, without reform, the current situation is not financially sustainable over the long term and our focus continues to be on communicating the urgent need to find policy solutions that protect victims, protect customers and protect the state’s climate and clean energy goals by keeping the state’s utilities financially viable,” the company added.
The company has received 200 legal complaints from more than 2,700 complainants. Due to regulatory restriction, PG&E cannot make up losses through rate hikes to consumers.
This is not the first time PG&E has had to face challenges such as this. In 2001, it declared its Pacific Gas and Electric utility unit bankrupt.
According to Reuters, “Hiving off part of a business to insulate the rest from liabilities is a popular strategy for companies seeking to reorganise and deal with financial struggles.”