Reorganization Plan Debt Offering Saves Customers Approximately $250 Million
SAN FRANCISCO, Calif. ‚ÄĒ Following the formal confirmation of the company's Plan of Reorganization ("Plan of Reorganization") by the United States Bankruptcy Court yesterday, PG&E Corporation (the "Corporation") and Pacific Gas and Electric Company (the "Utility," together "PG&E") announced today that PG&E has completed the initial stage of its bankruptcy exit financing contemplated in its Plan of Reorganization. As a result of its Chapter 11 proceedings, PG&E has been able to retire expensive high-coupon debt and replace it with lower cost debt, yielding significant annual savings for customers. These savings are estimated to be approximately $250 million annually. PG&E will reflect these savings in future customer bills later this year.
"The primary purpose of our Chapter 11 filings was to address the billions of dollars in claims from victims of recent wildfires. We've been able to reach agreements with individual victims, public entities and others. This financing effort takes us one step closer to compensating victims for their losses" said Jason Wells, Chief Financial Officer of PG&E.
"The Chapter 11 proceedings also allowed us to refinance our debt which will result in real savings for customers starting this year, after we emerge from Chapter 11, consistent with our commitment to keep prices as low as possible for customers," Wells continued.
Details of Recent Capital Raise
On Tuesday, June 16, the Utility raised $8.925 billion of debt, including approximately $3.5 billion of long-term debt to finance capital investments. The remaining $2.4 billion of long-term debt and $3 billion of 2-year debt will be used to fund a portion of PG&E's initial contribution to the AB 1054 wildfire fund and to fund claims at emergence from Chapter 11. Interest expense for these latter items will be paid by shareholders.
On Thursday, June 18, the Corporation priced its previously announced debt raise of $4.75 billion, which is expected to close on June 23, subject to customary closing conditions. The cost of this debt will be borne by PG&E shareholders. PG&E Corporation has committed to suspend its common dividend until it has recognized $6.2 billion in non-GAAP core earnings, to support a plan for capital investment or to reduce Corporation debt in the coming years.
Beyond the savings for customers, the lower cost of shareholder-funded debt of roughly $70 million compared to the prior expectations will provide additional flexibility for the company after emergence from Chapter 11.
PG&E's Plan of Reorganization was confirmed by the Bankruptcy Court on Saturday, June 20, 2020.
This news release includes forward-looking statements that are not historical facts, including statements about the beliefs, expectations, estimates, future plans and strategies of PG&E Corporation and Pacific Gas and Electric Company, including but not limited to, statements about Chapter 11 emergence, estimated annual cost savings to customers, commitment regarding customer prices, expected financing, planned use of proceeds and savings from the lower cost of shareholder-funded debt, payment of interest expense, and commitments and expectations, including timing, related to the payment of any dividends, as well as additional governance, operational and financial Plan of Reorganization commitments and implementation of wildfire settlements. These statements are based on current expectations and assumptions, which management believes are reasonable, and on information currently available to management, but are necessarily subject to various risks and uncertainties. In addition to the risk that these assumptions prove to be inaccurate, factors that could cause actual results to differ materially from those contemplated by the forward-looking statements include factors disclosed in PG&E Corporation and Pacific Gas and Electric Company's joint annual report on Form 10-K for the year ended December 31, 2019, their joint quarterly report on Form 10-Q for the quarter ended March 31, 2020, and their subsequent reports filed with the Securities and Exchange Commission (the "SEC"), which are available on PG&E Corporation's website at www.pgecorp.com and on the SEC website at www.sec.gov. Additional factors include, but are not limited to, those associated with the Chapter 11 cases of PG&E Corporation and Pacific Gas and Electric Company that commenced on January 29, 2019. PG&E Corporation and Pacific Gas and Electric Company undertake no obligation to publicly update or revise any forward-looking statements, whether due to new information, future events or otherwise, except to the extent required by law.
About PG&E Corporation
PG&E Corporation (NYSE: PCG) is a holding company headquartered in San Francisco. It is the parent company of Pacific Gas and Electric Company, an energy company that serves 16 million Californians across a 70,000-square-mile service area in Northern and Central California. Each of PG&E Corporation and the Utility is a separate entity, with distinct creditors and claimants, and is subject to separate laws, rules and regulations. For more information, visit pgecorp.com.