All Eyes on California as PG&E Cuts Deal on Board Overhaul
Apr 07, 2019
<h4>PG&amp;E and group of investors agree on CEO, 10 new directors. New board ‘raises concerns,’ says Governor Gavin Newsom<br/></h4>
<p style="vertical-align: baseline;"><span id="selectionBoundary_1554652887967_45723330252238514" class="rangySelectionBoundary">&#65279;</span>BLOOMBERG -- After a weeks-long battle, bankrupt power giant <a href="https://www.bloomberg.com/quote/PCG:US" title="Company Overview" style="vertical-align: baseline;">PG&amp;E Corp.</a> has struck a deal with a group of investors to hire a chief executive officer and form a new board that will lead the company through the biggest utility bankruptcy in U.S. history.</p><p style="vertical-align: baseline;"><br/></p><div class="hardwall" style="vertical-align: baseline;"></div><div class="softwall" style="vertical-align: baseline;"></div><p style="vertical-align: baseline;">Now it just has to sell the slate to California’s leaders. And that’s already proving an uphill battle: An hour after PG&amp;E named outgoing <a href="https://www.bloomberg.com/quote/TVA:US" title="Company Overview" style="vertical-align: baseline;">Tennessee Valley Authority</a> chief Bill Johnson as its CEO and appointed 10 new directors, California Governor Gavin Newsom issued a statement saying the board “raises concerns” and lacks experience. State legislators began sounding off, with one saying: “I’m not impressed.”<span id="selectionBoundary_1554652887967_34052018167883724" class="rangySelectionBoundary">&#65279;</span></p><p style="font-size: 18px;vertical-align: baseline;"><br/></p><p style="font-size: 18px;vertical-align: baseline;"><img src="https://assets.bwbx.io/images/users/iIyChnKQ1lHc/iSYczccbgDXo/v0/620x-1.jpg"/>​</p><div style="vertical-align: baseline;text-align: left;"><p style="vertical-align: baseline;"><span id="selectionBoundary_1554652915582_6023076194895853">&#65279;</span>Bill Johnson waits to testify at hearing of N.C. Utilities Commission in Raleigh, North Carolina, on July 19, 2012. Photographer: Davis Turner/Bloomberg</p><p style="vertical-align: baseline;"><br/></p><p style="vertical-align: baseline;"></p><p>Winning over California will be crucial for Johnson as he steers PG&amp;E through what’s expected to be a contentious bankruptcy with politicians, regulators, activist investors, creditors and wildfire victims wrestling over how to restructure a utility serving 16 million people in one of the world’s largest economies. He replaces Geisha Williams, who resigned in January before the company filed for bankruptcy facing $30 billion in liabilities from wildfires its equipment has been suspected of igniting.<span id="selectionBoundary_1554652915581_7030305133370582">&#65279;</span><br/></p><p><br/></p><p style="vertical-align: baseline;"><span id="selectionBoundary_1554652877459_49787356410059624">&#65279;</span><span id="selectionBoundary_1554652882278_9141312274007127">&#65279;</span>Perhaps anticipating the challenge ahead, Johnson said in a statement <a href="https://www.bloomberg.com/news/terminal/PPES6CMEWG74" title="PG&amp;E Announces New Chief Executive Officer and Appointment of a Refreshed Board of Directors; New Leadership Focused on" target="_blank" style="vertical-align: baseline;">Wednesday</a> that he’s “dedicated to meeting the high expectations that our customers, regulators and legislators have for PG&amp;E.”</p><p style="vertical-align: baseline;"><br/></p><div style="vertical-align: baseline;"></div><div style="vertical-align: baseline;"></div><p style="vertical-align: baseline;">Shares climbed as much as 6.3 percent Thursday to $19.64 in New York.</p><p style="vertical-align: baseline;"><br/></p><p style="vertical-align: baseline;">The 10 new directors joining PG&amp;’s 13-member board include former energy executives, restructuring experts, a former federal energy regulator and at least four California residents. They were all part of a deal the company struck with investors <a href="https://www.bloomberg.com/quote/0705815D:US" title="Company Overview" style="vertical-align: baseline;">Knighthead Capital Management</a>, <a href="https://www.bloomberg.com/quote/0217593D:US" title="Company Overview" style="vertical-align: baseline;">Redwood Capital Management</a> and <a href="https://www.bloomberg.com/quote/0752024D:US" title="Company Overview" style="vertical-align: baseline;">Abrams Capital Management</a> -- which collectively own about 10 percent of the company’s shares. The group squared off against activist investor <a href="https://www.bloomberg.com/quote/3620319Z:US" title="Company Overview" style="vertical-align: baseline;">BlueMountain Capital Management</a>, which had put forth its own slate.<br/></p><p style="vertical-align: baseline;"><br/></p><p style="vertical-align: baseline;">Among the appointees are:<span id="selectionBoundary_1554652882277_9698136589061752">&#65279;</span><span id="selectionBoundary_1554652877459_8290114280638614">&#65279;</span></p><ul><li>  Jeffrey Bleich, a partner at the law firm Dentons and a California resident.</li></ul><ul><li>  Nora Mead Brownell, a former member of the <a href="https://www.bloomberg.com/quote/9904743Z:US" title="Company Overview" style="vertical-align: baseline;">Federal Energy Regulatory Commission</a>.</li></ul><ul><li>  Fred Fowler, former chief executive officer of the natural gas pipeline company Spectra Energy Corp.</li></ul><ul><li>  Meridee Moore, founder and CEO of San Francisco-based alternative asset manager <a href="https://www.bloomberg.com/quote/876269Z:US" title="Company Overview" style="vertical-align: baseline;">Watershed Asset Management</a>.</li></ul><ul><li>  Richard Kelly, former CEO of power utility <a href="https://www.bloomberg.com/quote/XEL:US" title="Company Overview" style="vertical-align: baseline;">Xcel Energy Inc.</a></li></ul><p><br/></p><p><span id="selectionBoundary_1554652839871_8129380494721152">&#65279;</span>All of them will stand for election at an annual meeting on May 21 while Johnson will be up for election as a 14th director.</p><p><br/></p><p>While PG&amp;E made some changes to the slate after Newsom voiced reservations last week, the governor said in a statement that the board “still raises concerns.” He pointed to a “large representation of Wall Street interests and most board nominees’ lack of relevant California experience” and said the state would hold PG&amp;E to the “highest standards.”</p><p></p><h4>What Bloomberg Intelligence Says</h4><p></p><p></p><p><span style="font-size: 1rem;"></span></p><blockquote><div>“New CEO Bill Johnson and the new board, though light on equity holders, could be an advantage in the key goal of surviving bankruptcy.” --Kit Konolige, senior industry analyst</div></blockquote><p></p><p></p><h4>Bottom Line</h4><p>California Assemblyman Chris Holden said he wasn’t impressed and didn’t “see much in this collection that indicates that they are going to watch out for anything but their bottom line.”</p><p><br/></p><p>State Senator Bill Dodd, who along with Holden had helped draft wildfire legislation that was positive for PG&amp;E, said by phone that he had shared the governor’s concerns ahead of PG&amp;E’s announcement. And despite the reservations, he said, he’d been told only three changes were made to the board picks before the company announced the appointments Wednesday.</p><p><br/></p><p>“When you look at a slate of 13 candidates,” Dodd said, “from my vantage point, with the heavy lifting that PG&amp;E has to do going forward, that raises some real concerns.”</p><p><br/></p><p>BlueMountain had meanwhile nominated 13 directors including former California treasurer Phil Angelides, <a href="https://www.bloomberg.com/quote/0229241Z:US" title="Company Overview" style="vertical-align: baseline;">National Transportation Safety Board</a> ex-chairman Christopher Hart and Jeff Ubben, chief executive officer of activist investor <a href="https://www.bloomberg.com/quote/0992726D:US" title="Company Overview" style="vertical-align: baseline;">ValueAct Capital Management</a>.</p><h4>Safety Culture</h4><p><span style="font-size: 1rem;">It’s unclear whether BlueMountain will continue to push for its picks to be elected. It said in a statement Wednesday that PG&amp;E needs a board with “strong financial and turnaround expertise,” as well as experience in “risk management, utility operations and clean energy.” The firm said it will “carefully evaluate the nominees put forward.”</span><br/></p><p></p><p><br/></p><p></p><p>California’s chief utility regulator, Michael Picker, meanwhile said by phone that he’ll want to bring some of the new appointees before the state Public Utilities Commission to talk about PG&amp;E’s safety culture and how the board will shape it.</p><p><br/></p><p>Johnson’s appointment may face its own push-back.</p><p><br/></p><p>Clean energy advocacy group Vote Solar said in a statement that his track record falls short of what “PG&amp;E’s customers deserve.” The group pointed to the lack of solar and wind power on TVA’s coal-dependent system. Coal made up more than a quarter of TVA’s portfolio last year, with solar and wind accounting for 3 percent, according to the company’s website.</p><p><br/></p><p>PG&amp;E noted in its statement that, under Johnson’s leadership, TVA retired more than half of coal generation, cutting the utility’s carbon emissions by about 50 percent over the last decade.</p><p><br/></p><p>Johnson, who <a href="https://www.bloomberg.com/news/terminal/PI7G816VDKHU" title="Federal Utility CEO, Highest-Paid Government Worker, to Retire" target="_blank" style="vertical-align: baseline;">announced</a> his retirement from the TVA in November, may be best known as the man who served as CEO of Duke Energy Corp. for <a href="https://www.bloomberg.com/news/articles/2012-07-23/duke-merger-future-clouded-by-rift-with-state-regulators" title="Duke Regulator Rift Over CEO Switch Clouds Future for Merger" target="_blank" style="vertical-align: baseline;">less than a day</a>. He had been appointed as part of the company’s $17.8 billion takeover of <a href="https://www.bloomberg.com/quote/PREX:US" title="Company Overview" style="vertical-align: baseline;">Progress Energy</a> in 2012 but was replaced eight hours later with James Rogers, the former Duke CEO who was supposed to become executive chairman. Johnson received an exit package estimated to be worth more than $40 million.</p><p><br/></p><p>He was appointed that same year to his post at TVA, a corporate agency of the U.S. government that supplies electricity to power companies serving 10 million people in the Southeast.<span id="selectionBoundary_1554652839870_0895767496909301">&#65279;</span></p><p><br/></p><h5>Thank you to our friends at <i>BLOOMBERG</i><i> </i>for providing the original articles below</h5><p style="font-size: 14px;"></p></div>

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