The city of San Francisco has offered to buy PG&E Corp.’s electrical operations in the city for $2.5 billion in a move that could throw a dramatic wrinkle into the utility’s bankruptcy case.
Mayor London Breed, in a statement released by the city Sunday, called the offer “competitive, fair and equitable” and said it will “offer financial stability for PG&E.”
The bid comes on the eve of a pivotal moment in PG&E’s bankruptcy: The company is scheduled to file a Chapter 11 reorganization plan Monday, including an outline for repaying billions in liabilities from the 2017 and 2018 wildfires. The utility suffered a significant setback Friday when it was forced to acknowledge that a tax-free state bond plan, designed to raise money for paying wildfire victims, was dead in the Legislature at least until January.
The company immediately brushed off the city’s offer, telling the San Francisco Chronicle that selling assets to San Francisco wasn’t in “the best interests of our customers and stakeholders.” But it added that it’s willing to discuss the issue with the city.
In a letter to PG&E, dated Friday, Breed and City Attorney Dennis Herrera said the deal would provide the ailing utility with a “significant cash infusion.”
San Francisco has been studying a possible takeover of PG&E’s assets in the city ever since the utility filed for Chapter 11 bankruptcy in January under the weight of billions of dollars in wildfire liabilities.
A group of hedge funds that control about half of PG&E’s stock have pledged up to $15 billion to help pay wildfire claims and finance the company’s exit from bankruptcy. At the same time, the company was hoping to secure backing from the Legislature for a plan to issue up to $20 billion for wildfire claims through a low-interest, tax-free bond offering. The company said shareholders would repay the debt out of future profits.
The plan died, at least for this year, in part because a rival group of hedge funds, led by PG&E’s bondholders, mounted a fierce lobbying campaign in the Capitol. The bondholders have their own repayment plan for wildfire liabilities and want to take over the company for themselves.