(Bloomberg) -- PG&E Corp. agreed to pay $11 billion to settle insurance claims for 2017 and 2018 wildfires blamed on its equipment, a crucial step forward in the effort to resolve liabilities that pushed the utility into bankruptcy.
The agreement, which requires approval from the bankruptcy court, is with groups representing about 85% of insurance claims faced by the embattled company, according to a statement Friday. The shares climbed as much as 10%.
The settlement marks a key development for PG&E. Wildfires blamed on the company’s equipment destroyed tens of thousands of structures across Northern California in 2017 and 2018, killed more than 100 people and buried the utility in so many legal claims it was forced to file for Chapter 11 in January.
“Today’s settlement is another step in doing what’s right for the communities, businesses and individuals affected by the devastating wildfires,” PG&E Chief Executive Officer Bill Johnson said in a statement.
The $11 billion the company is agreeing to pay the insurance companies includes liabilities from the deadly 2017 Tubbs Fire that raged in California Wine Country, a utility spokeswoman said. The total settlement exceeds the $8.5 billion PG&E proposed in the reorganization plan it filed this week. The company now plans to file a revised plan with the bankruptcy court.
It is PG&E’s second major settlement of wildfire claims. In June, the company reached a $1 billion deal to settle with 18 towns and other local governments to settle claims from blazes in 2015, 2017 and 2018. Additional fire claims are pending in federal and state court.
What Bloomberg Intelligence Says
“PG&E’s settlement of $11 billion in insurance subrogation claims is a big step toward resolving the bankruptcy without massive dilution.”-- Kit Konolige, utilities analyst Click here for the research
The Chapter 11 plan PG&E submitted Monday kicked off the most contentious phase yet for a bankruptcy that’s attracted some of the biggest names in the financial world, including Pacific Investment Management Co. and Elliott Management Corp.
“While this proposed settlement does not fully satisfy the approximately $20 billion in group members’ unsecured claims, we hope that this compromise will pave the way for a plan of reorganization that allows PG&E to fairly compensate all victims and emerge from Chapter 11 by the June 2020 legislative deadline,” the ad hoc subrogation group, a consortium of insurance companies and holders of insurance claims, said in a statement.
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