Item 1.01 Entry into a Material Definitive Agreement
As previously disclosed, in September 2015, a wildfire (the “2015 Butte fire”) ignited and spread in Amador and Calaveras Counties in Northern California. Beginning on October 8, 2017, multiple
wildfires spread through Northern California, including Napa, Sonoma, Butte, Humboldt, Mendocino, Lake, Nevada, and Yuba Counties, as well as in the area surrounding Yuba City (the “2017 Northern California wildfires”). On November 8, 2018, a
wildfire began near the city of Paradise, Butte County, California (the “2018 Camp fire”). The 2015 Butte fire, the 2017 Northern California wildfires and the 2018 Camp fire are collectively referred to herein as the “Wildfires.”
Also as previously disclosed, on January 29, 2019, PG&E Corporation and its subsidiary, Pacific Gas and Electric Company (the
“Utility,” and together with PG&E Corporation, the “Debtors”), filed voluntary petitions for relief under chapter 11 of title 11 (“Chapter 11”) of the United States Code in the U.S. Bankruptcy Court for the Northern District of California
(the “Bankruptcy Court”). The Debtors’ Chapter 11 cases are being jointly administered under the caption
In re: PG&E Corporation and Pacific Gas and Electric
Company
, Case No. 19-30088 (DM) (the “Chapter 11 Cases”).
On June 18, 2019, the Debtors entered into PSAs (as defined below) with certain local public entities providing for an aggregate of $1.0
billion to be paid by the Debtors to such public entities pursuant to the Debtors’ Chapter 11 plan of reorganization (the “Debtor Plan”)
in order to settle such
public entities’ claims against the Debtors relating to the Wildfires (collectively, “Wildfire Claims”), upon the terms and conditions set forth therein. The Debtor Plan currently is under development and has not yet been filed with the
Bankruptcy Court. The Debtors have entered into a Plan Support Agreement as to Plan Treatment of Public Entities’ Wildfire Claims (each, a “PSA”) with each of the following public entities or group of public entities, as applicable: (i) the
City of Clearlake, the City of Napa, the City of Santa Rosa, the County of Lake, the Lake County Sanitation District, the County of Mendocino, Napa County, the County of Nevada, the County of Sonoma, the Sonoma County Agricultural Preservation
and Open Space District, the Sonoma County Community Development Commission, the Sonoma County Water Agency, the Sonoma Valley County Sanitation District and the County of Yuba (collectively, the “2017 Northern California Wildfire Public
Entities”); (ii) the Town of Paradise; (iii) the County of Butte; (iv) the Paradise Recreation & Park District; (v) the County of Yuba; and (vi) the Calaveras County Water District. For purposes of each PSA, the government entities that are
party to such PSA are referred to herein as “Supporting Public Entities.”
Each PSA provides that the Debtor Plan will include, among other things, the following elements: (a) following the effective date of the
Debtor Plan, the Debtors will remit a Settlement Amount (as defined below) in the amount set forth below to the applicable Supporting Public Entities in full and final satisfaction and discharge of their Wildfire Claims, and (b) subject to the
Supporting Public Entities voting affirmatively to accept the Debtor Plan, following the effective date of the Debtor Plan, the Debtors will create and promptly fund $10.0 million to a segregated fund to be used by the Supporting Public Entities
collectively in connection with the defense or resolution of claims against the Supporting Public Entities by third parties relating to the Wildfires (“Third Party Claims”). The “Settlement Amount” set forth in each PSA is as follows: (i) for
the 2017 Northern California Wildfire Public Entities, $415.0 million (which amount will be allocated among such entities), (ii) for the Town of Paradise, $270.0 million, (iii) for the County of Butte, $252.0 million, (iv) for the Paradise
Recreation & Park District, $47.5 million, (v) for the County of Yuba, $12.5 million, and (vi) for the Calaveras County Water District, $3.0 million.
Each PSA provides that, subject to certain terms and conditions, the Supporting Public Entities will support the Debtor Plan with respect
to its treatment of their respective Wildfire Claims, including by voting to accept the Debtor Plan in the Chapter 11 Cases.
Each PSA may be terminated by the applicable Supporting Public Entities under certain circumstances, including (i) if the Federal Office
of Emergency Management or the California Office of Emergency Services fails to agree that no reimbursement is required from the Supporting Public Entities on account of assistance rendered by either agency in connection with the Wildfires, and
(ii) by any individual Supporting Public Entity, if a material amount of Third Party Claims is filed against such Supporting Public Entity and such Third Party Claims are not released pursuant to the Debtor Plan. Each PSA may be terminated by
the Debtors under certain circumstances, including if (i) the Debtors do not obtain the consent, or the waiver of the lack of consent as a defense, of the Debtors’ insurance carriers for the policy years 2017 and 2018, (ii) the Board of Directors
of either Debtor determines in good faith that continued performance under the PSA would be inconsistent with the exercise of its fiduciary duties, and (iii) any Supporting Public Entity terminates a PSA, in which case the Debtors may terminate
any other PSA.