PG&E gets approval for $1.5 billion loan in bankruptcy

PG&E Corp. won a judge’s approval Thursday for a $1.5 billion bank loan to fund the utility’s operations for the first four weeks of bankruptcy proceedings, despite questions from a federal trustee on whether the company needs the money.

The first full day of hearings on the financial plight of California’s largest utility was devoted to Pacific Gas and Electric Co.’s short-term plans to keep afloat and pay its bills. The parent company’s bankruptcy filing Tuesday listed $71.2 billion in assets and $51.4 billion in debt, a figure that does not include tens of billions of dollars in potential liability for the Northern California wildfires of the past two years.

The $1.5 billion bank loan would carry PG&E through Feb. 27, when it plans to seek approval for an additional $4 billion for the remainder of the bankruptcy proceedings. At Thursday’s hearing in San Francisco, however, Lynette Kelly, a lawyer for the Justice Department’s U.S. bankruptcy trustee, questioned the need for any loan and said PG&E has projected a cash balance of $1.6 billion as of Feb. 6.

U.S. Bankruptcy Judge Dennis Montali read the figures differently and said the company had listed its net worth at $670 million. Paul Zumbro, a lawyer for PG&E, told Montali that after deducting funds that belonged to the utility’s parent company and customer deposits, the cash on hand was about $230 million.

“We actually do need the money,” Zumbro said. “There’s not a sufficient cushion to cover all the exigencies.”

Montali approved the funding. He also approved a request by PG&E and one of its prospective lenders, JPMorgan Chase, to seal the lending documents from public view, other than the $95.3 million cost of the overall $5.5 billion loan. Kelly said the public should have more access to the information, but Zumbro said some aspects of the fees were “commercially sensitive” for both PG&E and its banks.

The hearing came a day after U.S. District Judge William Alsup, in the same courthouse, blamed PG&E for “death and destruction” from the wildfires and suggested he might require the company to remove trees near power lines and shut off electricity during times of high fire danger. Alsup is supervising the company’s probation from its felony convictions on charges related to the 2010 San Bruno gas pipeline explosion, which killed eight people.

Consumer groups have accused PG&E of trying to evade responsibility to the fire victims by declaring bankruptcy. Mark Toney, executive director of The Utility Reform Network, urged Alsup to place the company under federal receivership in a column in Wednesday’s Chronicle.

But Stephen Karotkin, another lawyer for the company, told Montali that bankruptcy was “the only viable alternative to restore PG&E’s financial stability and to fairly address the wildfire claims.”

It is “not a strategic ploy to evade PG&E’s responsibility,” Karotkin said in his opening statement at Thursday’s hearing. If the system works as intended, he said, it will resolve fire victims’ claims more quickly than the state courts where their lawsuits are pending, while “assuring service for 16 million” customers.

The payments PG&E wants to make during the bankruptcy proceedings include its annual performance bonuses for 2018, totaling $130 million for as many as 14,000 employees, according to the company’s court filings. The payments, to begin in March, will be considered by Montali at the Feb. 27 hearing, but they drew a protest Thursday from a lawyer for wildfire victims.

Dario de Ghetaldi represents families impacted by the 2015 Butte Fire, which burned more than 70,000 acres and killed two people. The fire started when a tree struck a PG&E power line and has prompted numerous suits against the utility.

“We want to make specific objections to (bonuses for) those employees who we believe were at fault,” de Ghetaldi said. He asked Montali to halt any bonuses to employees in the company’s vegetation management and risk-assessment divisions until he and other lawyers could identify those who may have been responsible for the fire.

Karotkin replied that the bonuses were for employees’ work in 2018, not earlier years. He also noted that they did not cover 38 high-ranking PG&E officers and directors. The company says the payments would range from $5,000 to $90,000 and average $13,000.

Montali said he is “sympathetic” to the lawyer’s concerns, but he declined to issue any such orders before approving wage and benefit payments to PG&E employees, without considering the performance bonuses. He also allowed PG&E to pay $30 million to vendors and suppliers that the company considers essential for its operations, despite objections from several lawyers that PG&E had not identified those suppliers or said why they were considered essential.