UPDATE 1-California governor rejects PG&E bankruptcy reorganization plan

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FILE PHOTO: California governor Gavin Newsom speaks at a news conference in San Diego, California, U.S. October 9, 2019. REUTERS/ Mike Blake

(Reuters) – California Governor Gavin Newsom on Friday rejected the bankruptcy reorganization plan submitted by PG&E Corp (PCG.N), the state’s largest investor-owned utility, saying the proposal fails to comply with a recently enacted state wildfire law.

The decision by Newsom, transmitted to PG&E by letter, complicates the company’s push to exit bankruptcy and provide billions of dollars to victims of devastating wildfires in 2017 and 2018 sparked by the utility’s power lines.

The embattled utility now has until Tuesday to further amend its plan to Newsom’s satisfaction, but his criticism of the plan was sweeping.

Newsom said PG&E’s plan lacks “major changes in governance” and tougher safety enforcement mechanisms mandated under the wildfire statute, known as Assembly Bill 1054, which was enacted in July.

The governor also said PG&E’s plan, including a proposed $13.5 billion settlement with victims of wildfires blamed on its power lines, would leave the company with a weakened capital structure and “limited ability to withstand future financial and operational headwinds.”

“In my judgment, the amended plan and the restructuring transactions do not result in a reorganized company positioned to provide safe, reliable and affordable service to its customers, as required by AB 1054,” Newsom wrote.

PG&E, in a statement following release of the governor’s letter, disputed Newsom’s findings that its reorganization plan fails to meet the criteria of the wildfire law.

“We believe it does and is the best course forward for all stakeholders,” the company said. “We’ve welcomed feedback from all stakeholders throughout these proceedings and will continue to work diligently in the coming days to resolve any issues that may arise.”

Still, state approval of reorganization plan is a necessary step before PG&E can submit the proposal for a vote by creditors and final approval from a bankruptcy judge in San Francisco.

Reporting by Tom Hals in Wilmington, Delaware, and Steve Gorman in Culver City, Calif.; Editing by David Gregorio, Bill Tarrant, Sandra Maler and Michael Perry

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