PG&E announces agreement in principle on insurance subrogation claims

By Caroline Salls

Pittsburgh, Sept. 13 – PG&E Corp. and Pacific Gas and Electric Co. have agreed in principle with entities representing roughly 85% of insurance subrogation claims to an $11 billion settlement to resolve all subrogation claims arising from the 2017 Northern California wildfires and 2018 Camp Fire, according to a news release.

PG&E said these claims are based on payments made by insurance companies to individuals and businesses with insurance coverage for wildfire damages.

The settlement is subject to definitive documentation and approval of the U.S. Bankruptcy Court for the Northern District of California. The settlement is to be implemented under PG&E’s Chapter 11 plan of reorganization.

“As we work to resolve the remaining claims of those who’ve suffered, we are also focused on safely and reliably delivering energy to our customers, improving our systems and infrastructure and continuing to support California’s clean energy goals,” PG&E chief executive officer and president Bill Johnson said in the release.

This is PG&E’s second major settlement of wildfire claims. On June 19, the company and 18 local public entities announced that they had reached agreements to settle their claims relating to the 2015, 2017 and 2018 wildfires for a total of $1 billion to be implemented as part of the plan.

The company said proceedings regarding the third and final major group of wildfire claims are currently pending in both federal district court and state court.

PG&E said it remains committed to working with individual plaintiffs to fairly and reasonably resolve their claims.

In connection with the insurance subrogation claim settlement, PG&E amended its previously announced equity financing commitment agreements to accommodate the total amount of subrogation claims covered by the settlement and reaffirmed the total $14 billion equity financing commitment target for the plan.

According to the release, the company has received renewed commitments of $1.5 billion under the revised equity financing commitments and intends to seek remaining equity financing commitments over the next several weeks.

PG&E said in an 8-K filed with the Securities and Exchange Commission that the cap on the PG&E debtors’ total pre-bankruptcy wildfire claims liability was increased to $18.9 billion from $17.9 billion. That cap may be adjusted upward for wildfire-related claims consisting of professional fees that the bankruptcy court or the U.S. District Court for the Northern District of California determines to be reasonable.

The backstop parties will be deemed to have consented to one or more future amendments to the version of the Chapter 11 plan filed on Sept. 9 in order to incorporate the terms of the definitive documentation for the agreement in principle.

If the bankruptcy court does not approve PG&E’s restructuring support agreement on or before Oct. 16, then the wildfire claims cap will be reduced to $17.9 billion, and the plan must be amended to remove any permitted changes.

The company said it expects the equity financing commitment to be part of a more comprehensive financing package to emerge from Chapter 11, and it expects to amend the plan to incorporate the terms of the settlement of the subrogation claims after completion of the definitive documentation.

The electric and natural-gas utility is based in San Francisco. The company filed bankruptcy on Jan. 29, 2019 under Chapter 11 case number 19-30088.

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