(Bloomberg) -- PG&E Corp. said it will file for bankruptcy in California after the cost of wildfires left it with liabilities too big to manage, gutting its share price and prompting the departure of its chief executive officer.
The San Francisco-based company said it will file under Chapter 11 of the U.S. bankruptcy code by Jan. 29 after giving the required 15-day notice to its employees, according to filing at the Securities and Exchange Commission on Monday. On Sunday, the company started searching for a new leader after Geisha Williams, 57, quit as CEO. General counsel John Simon will take the helm in the meantime. The departure of Williams, who took over as CEO in March 2017, follows a catastrophic three months for PG&E.
The company has seen two-thirds of its market value wiped out since November’s Camp Fire -- the deadliest wildfire in California’s history. Its debt has been downgraded to junk and state regulators have called for a management shakeup. Investigators have been probing whether the power giant’s equipment ignited the fire, along with its potential liability for blazes that devastated Northern California’s wine country in 2017 -- costs that may tally as much as $30 billion.
“It has truly been an honor to lead PG&E and to serve more than 16 million people in Northern and Central California,” Williams said in her own emailed statement on Sunday. “I value the opportunity I’ve had to lead PG&E and wish all of my colleagues well.”
Shares of PG&E fell as much as 52 percent in pre-market trading on the New York Stock Exchange. It was recently quoted at $8.50, down from $17.59 yesterday and a record high of $49.42 on Nov. 7.
The company’s deepening financial crisis has forced California regulators and policy makers to consider a bailout package and PG&E. The utility said bankruptcy was the best way forward for employees and those who are claiming losses from wildfires that may have been caused by its power lines.
“Commencing reorganization cases under Chapter 11 of the U.S. Bankruptcy Code is appropriate, necessary and in the best interests of all stakeholders, including wildfire claimants, PG&E’s other creditors and shareholders, and is ultimately the only viable option to restore PG&E’s financial stability,” the company said in an 8-K filing on Monday.
A notice may signal that the company has accelerated plans to make a Chapter 11 filing as way of dealing with crippling liabilities from the wildfires of 2017 and 2018 that killed more than 100 people and destroyed hundreds of thousands of acres. It also puts pressure on California’s new governor, Gavin Newsom, and legislators to come up with a plan that could keep the utility solvent.
Newsom said during a press conference Thursday that his office would be making an announcement related to PG&E within the next few days and that the issue was at the top of his agenda. He said in a later interview that the announcement would involve appointments to the California Public Utilities Commission, the state’s grid operator and to a commission established by legislature to explore wildfire issues.
Nathan Click, a spokesman for Newsom’s office, said Saturday that he’s “monitoring the situation very closely.”
PG&E’s financial woes have already spread to the companies that supply its natural gas and generate electricity for its customers. At least two small gas suppliers have restricted sales to PG&E out of concern that the company won’t be able to pay, people with direct knowledge of the situation said last week. Some banks are taking a long look at a potential $2 billion debt financing for the Geysers, the world’s largest geothermal complex, because it supplies the utility, people familiar with the matter also said last week.
The departure of Williams -- one of the world’s most powerful women in business -- thins the ranks of the roughly two dozen women running S&P 500 companies. She was one of a group of women occupying the C-suite at power companies -- including Duke Energy Corp.’s Lynn Good, El Paso Electric Co.’s Mary Kipp, PNM Resources Inc.’s Pat Vincent-Collawn and Sunrun Inc.’s Lynn Jurich.
The daughter of Cuban political refugees, Williams became the nation’s first Latina CEO of a Fortune 500 company when she took over PG&E. Her departure follows the exit of three PG&E executives earlier this month -- Patrick Hogan, senior vice president of electric operations at PG&E’s utility unit; Kevin Dasso, vice president of electric asset management; and Gregg Lemler, vice president of electric transmission.
Under Williams, PG&E spent millions of dollars trying to convince state lawmakers to change a legal doctrine known as inverse condemnation, under which utilities are liable for damages if their equipment is found to have sparked a wildfire, even if they weren’t negligent. Williams called the doctrine bad public policy that made utilities the default insurer in the state. She said the wildfires were a symptom of climate change with hotter and drier conditions sparking more frequent and intense blazes.
Wine Country Bill
While state lawmakers rejected PG&E’s request to change wildfire liability law, they did pass legislation in August that will help PG&E pay for lawsuits arising from the wine country fires. Three months later, however, the utility’s equipment again was being looked at as a possible source of the Camp Fire, which killed 86 people and destroyed the town of Paradise.
Support for PG&E’s management eroded even further in December when state regulators accused the utility of falsifying records related to locating and marking underground gas lines from 2012 through 2017 -- years in which the company was trying to convince the public that it had cleaned up its act after a 2010 pipeline blast that killed eight in San Bruno, California.
--With assistance from David R. Baker and Peter Blumberg.
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