American utility PG&E set to file for chapter 11 bankruptcy

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From pv magazine USA.

The Pacific Gas & Electric Company (PG&E) has not had a good month. CEO Geisha Williams stepped down on Sunday, and yesterday the company announced it will voluntarily file for Chapter 11 bankruptcy on January 29. Rumors of such a move have been swirling for months, as the utility is potentially on the hook for billions of dollars in liabilities after recent wildfires in the state. The business has said it intends to use the proceeds from the resulting reorganization to pay off wildfire-related liabilities.

PG&E said it expected to have $5.5 billion in debtor-in-possession financing secured by the time it files, and expects to continue operations as usual during the reorganization.

The dramatic development is only the latest headache for the historic utility. On the Friday before Christmas the California Public Utilities Commission (CPUC) announced an investigation into the company’s safety culture, a move the San Jose Mercury News said could involve replacing the board and breaking up the power giant, or turning it into a public agency.

Topaz downgraded

And the problems dogging the utility are already affecting solar projects. Last week S&P Global Ratings cut the credit rating of the 550 MW Topaz Solar Farm to junk status. PG&E is the sole off-taker for the project, which the agency has reduced from B to BBB- status. S&P has also said it may make further cuts to the rating, and noted PG&E may face as much as $30 billion in liabilities.

S&P was quoted by Bloomberg as stating: “Any potential threats to the company can have [a] wide-reaching ripple effect,” which could be of great concern to other PV projects. According to Bloomberg, Fitch had already cut ratings for the project, based on PG&E’s liabilities.

It is ironic to think one of the arguments in favor of large investor-owned utilities is that they provide an entity large and stable enough to be a credit-worthy offtaker for long-term contracts. While the Topaz project’s sheer size makes it one of the largest projects affected, there are significant concerns elsewhere, given PG&E holds contracts with other solar plants that add up to gigawatts of capacity.

pv magazine USA has not been able to get leading figures in California’s solar industry to comment on what a potential breakup for PG&E would mean for the state’s solar market. The utility was already facing the existential threat of an increasing number of community choice aggregators which are taking over procurement in large parts of its service area, and threatening to make it irrelevant.