Pacific Gas and Electric, facing billions of dollars in claims over the deadly 2018 Camp Fire, is headed to bankruptcy court.

PG&E, the state’s largest utility, said Monday it will file for bankruptcy on January 29, after a 14-day waiting period required by California law. It needs to use the bankruptcy process, which will allow it to shed some of its debt, to pay for damages and stay in business to provide gas and electric service to its customers.

Shares of PG&E (PCG) plunged 55% in premarket trading following the filing. The company, in a public filing, cited at least $7 billion in claims from the Camp Fire. The wildfire caused 86 deaths and destroyed 14,000 homes, along with more than 500 businesses and 4,300 other buildings.

It is believed the fire was started when a PG&E power line came in contact with nearby trees. PG&E reported “an outage” on a transmission line in the area where the blaze began, about 15 minutes before it started. Within the massive burn area, PG&E found power equipment and a fallen power pole riddled with bullet holes, according to a letter it sent to regulators. The company also reported that it found a downed line with tree branches on it.

In addition, a series of wildfires in 2017, many of which were also blamed on PG&E, caused $10 billion in damages and 44 deaths. In 11 of those fires, state investigators found the company violated codes regarding brush clearance near its power lines or had made related violations.

PG&E said Monday that it has only about $1.5 billion in cash and cash equivalents on hand. It said it believes bankruptcy is “appropriate, necessary and in the best interests of all stakeholders, including wildfire claimants,” as well as other creditors, its shareholders and customers. Shareholders are generally wiped out in the bankruptcy process. Shares of PG&E were already down 63% since the start of the Camp Fire.

On Sunday night the company reported that CEO Geisha Williams, who had been in the job less than 11 months, has stepped down. The company said it would look to hire a new chief executive with “extensive operational and safety expertise.”

Gov. Gavin Newsom issued the following statement: “While PG&E announced its intent to file bankruptcy today, the company should continue to honor promises made to energy suppliers and to our community. Throughout the months ahead, I will be working with the Legislature and all stakeholders on a solution that ensures consumers have access to safe, affordable and reliable service, fire victims are treated fairly, and California can continue to make progress toward our climate goals.”

STATEMENT FROM PG&E:

PG&E Remains Committed to Providing Safe Natural Gas and Electric Service to Customers as it Prepares to Initiate Voluntary Reorganization Cases Under Chapter 11

Natural Gas and Electric Service Expected to Continue Without Disruption; Company Focused on Safety and Continuing Community Restoration and Rebuilding Efforts
Intends to Use Court-Supervised Process to Achieve Orderly, Fair and Expeditious Resolution of Potential Liabilities Resulting from 2017 and 2018 Northern California Wildfires
Expects Process Will Assure Access to Capital and Resources Necessary to Support Ongoing Operations and Enable PG&E to Continue Investing in its Systems, Infrastructure and Wildfire Mitigation Initiatives

PG&E Corporation (NYSE: PCG) (“PG&E” or “the Company”) said today (Jan. 14) it remains committed to providing safe natural gas and electric service to customers as it prepares to initiate voluntary reorganization proceedings under Chapter 11. The Company today provided the 15-day advance notice required by recently enacted California law that it and its wholly owned subsidiary Pacific Gas and Electric Company (the “Utility”) currently intend to file petitions to reorganize under Chapter 11 of the U.S. Bankruptcy Code on or about January 29, 2019.

During this process, the Company is also committed to continuing to make investments in system safety as it works with regulators, policymakers and other key stakeholders to consider a range of alternatives to provide for the safe delivery of natural gas and electric service for the long-term in an environment that continues to be challenged by climate change. PG&E expects that the Chapter 11 process will, among other things, support the orderly, fair and expeditious resolution of its potential liabilities resulting from the 2017 and 2018 Northern California wildfires, and will assure the Company has access to the capital and resources it needs to continue to provide safe service to customers.

The Company does not expect any impact to electric or natural gas service for its customers as a result of the Chapter 11 process. PG&E remains committed to assisting the communities affected by wildfires in Northern California, and its restoration and rebuilding efforts will continue. The Company also expects that its employees will continue to receive their pay and healthcare benefits as usual.

John R. Simon, PG&E Corporation Interim CEO, said, “The people affected by the devastating Northern California wildfires are our customers, our neighbors and our friends, and we understand the profound impact the fires have had on our communities and the need for PG&E to continue enhancing our wildfire mitigation efforts. We remain committed to helping them through the recovery and rebuilding process. We believe a court-supervised process under Chapter 11 will best enable PG&E to resolve its potential liabilities in an orderly, fair and expeditious fashion. We expect this process also will enable PG&E to access the capital and resources we need to continue providing our customers with safe service and investing in our systems and infrastructure. Everyone at PG&E knows that our single most important responsibility is safety, and we recognize that we must work even harder every day to demonstrate that the safety of our customers, our communities, our employees and our contractors comes first.”

Richard C. Kelly, Chair of the Board of Directors of PG&E Corporation, said, “Following a comprehensive review with the assistance of our outside advisors, the PG&E Board and management team have determined that initiating a Chapter 11 reorganization for both the Utility and PG&E Corporation represents the only viable option to address the Company’s responsibilities to its stakeholders. Our goal will be to work collaboratively to fairly balance the interests of our many constituents—including wildfire victims, customers, employees, creditors, shareholders, the financial community and business partners—while creating a sustainable foundation for the delivery of safe service to our customers in the years ahead. The Chapter 11 process allows us to work with these many constituents in one court-supervised forum to comprehensively address our potential liabilities and to implement appropriate changes.”

The Company expects that the Chapter 11 process will, among other things:

Enable continued safe delivery of natural gas and electric service to PG&E’s millions of customers;
Support the orderly, fair and expeditious resolution of PG&E’s potential liabilities resulting from the 2017 and 2018 Northern California wildfires;
Enable PG&E to continue its extensive restoration and rebuilding efforts to assist communities affected by the 2017 and 2018 wildfires in Northern California;
Allow the Company to work with regulators and policymakers to determine the most effective way for customers to receive safe natural gas and electric service for the long-term in an environment that continues to be challenged by climate change; and
Assure the Company has access to the capital and resources necessary to support ongoing operations and enable PG&E to continue investing in its systems, infrastructure and critical safety efforts, including investing in its Community Wildfire Safety Program, an additional precautionary safety measure implemented following the 2017 Northern California wildfires to further reduce wildfire risk.

PG&E has engaged in discussions with potential lenders with respect to Debtor-in-Possession (“DIP”) financing. PG&E expects to have approximately $5.5 billion of committed DIP financing at the time it files for relief under Chapter 11 on or about January 29, 2019, and has received highly confident letters from a number of major banks. The DIP financing will provide PG&E with sufficient liquidity to fund the Company’s ongoing operations, including its ability to provide safe service to customers.

Weil, Gotshal & Manges LLP and Cravath, Swaine & Moore LLP are serving as the Company’s legal counsel, Lazard is serving as its investment banker, and AlixPartners LLP is serving as the restructuring advisor to PG&E.

Additional Resources

Additional information is available in a Form 8-K that the Company today filed with the U.S. Securities and Exchange Commission. Further resources for customers and other stakeholders are available on the Company’s website at pge.com/reorganization.

About PG&E Corporation

PG&E Corporation (NYSE: PCG) is a Fortune 200 energy-based 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. For more information, visit http://www.pgecorp.com. In this press release, they are together referred to as “PG&E.”