PG&E Stock Dec 19

PG&E's stock value over the course of 2019. The utility will provide fire victims with a mixture of company stock and cash.

Pacific Gas & Electric's $13.5-billion settlement with wildfire victims will require some victims to "accept stock in the company that ruined their lives," lawyers representing 284 Camp Fire victims told U.S. Bankruptcy Judge Dennis Montali on Dec. 17.

"The best thing we can do for [victims] is stock in the company that ruined their lives?" a Camp Fire victim lawyer said in court. "What if something catastrophic happens [to PG&E] . . . what do we think the stock will be worth then?"

PG&E's approved settlement provides wildfire victims $5.4 billion in cash and $6.75 billion in its own stock. The total stock provided must not represent less than a 20.9-percent share of the reorganized PG&E, according to the utility.

However, holders of insurance claims—about 39 percent of which are held by Boston-based hedge fund Baupost Group—will receive all cash for their claims, or about $11 billion. Baupost Group purchased $6 billion of subrogation insurance claims, the majority for a reported 30 to 35 cents on the dollar, according to the tort claimants committee, which represents about 70 percent of wildfire victims (see CEM No. 1568).

Insurance claim holders are "better equipped to take stock" than victims because the insurance claim holders are "experienced in managing large portfolios of various securities, including stock," the Law Office of Kenneth Roye, which represents the 284 individual Camp Fire victims and four affected businesses, said in a letter to the court.

But Montali said PG&E's stock could just as well "go up" over time and benefit victims who hold its shares. The utility's stock was worth about $25 per share this year at its high, and about $3 per share at its low. It was worth about $11 per share as of Dec. 20.

How much stock a victim receives will depend on how quickly cash runs out in PG&E's wildfire victims trust fund. The fund will provide payment of cash or stock to victims for claims arising from the 2017 and 2018 Northern California wildfires and the 2015 Butte Fire, and will not pay out the subrogation insurance claims and public entities' wildfire claims, which will be dealt with separately.

A set of trust-fund procedures will determine in which manner as well as the amount victims will be paid for their losses. The procedures are being developed now and will be provided at a later time during the utility's ongoing bankruptcy process, according to PG&E and the TCC.

TCC lawyer Cecily Dumas said the settlement mediation parties are now working on a "resolution trust agreement" that includes mechanisms for how the trust is administered, along with an "objective, easy-to-understand matrix" that "allows victims to see" what their standard settlements could be.

But TCC lawyers two weeks ago were concerned that PG&E's settlement proposals would pay insurance companies and subrogation claim holders irrespective of whether there would be enough cash left over in PG&E's trust fund to pay wildfire victims (see CEM No. 1568).

The resolution trust matrix and procedures will be brought before Montali for review and approval, Dumas said.

Staff Writer

David Krause is an energy reporter covering the California Energy Commission and Air Resources Board. He writes about transportation, climate change, utilities, and wildfires. He has an MFA in Writing, an MA in English, and a BS in Civil Engineering.