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Pacific Gas Electric Co (75488) SEC Filing 10-Q Quarterly report for the period ending Tuesday, March 31, 2020

Pacific Gas Electric Co

CIK: 75488

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Investor Relations Contact: 415.972.7080 | Media Inquiries Contact: 415.973.5930 | www.pgecorp.com
May 1, 2020

PG&E Corporation Reports First-Quarter 2020 Financial Results

Recorded GAAP earnings were $0.57 per share for the first quarter of 2020, compared to earnings of $0.25 per share for the same period in 2019.
Non-GAAP core earnings were $0.89 per share for the first quarter of 2020, compared to $1.04 per share for the same period in 2019.

SAN FRANCISCO — PG&E Corporation (NYSE: PCG) recorded first-quarter 2020 income available for common shareholders of $371 million, or $0.57 per share, as reported in accordance with generally accepted accounting principles (GAAP). This compares with income available for common shareholders of $136 million, or $0.25 per share, for the first quarter of 2019.

GAAP results include non-core items that management does not consider representative of ongoing earnings, which totaled $205 million after-tax, or $0.32 per share, for the quarter. This was primarily driven by costs related to PG&E Corporation’s and Pacific Gas and Electric Company’s (Utility) reorganization cases under Chapter 11 of the U.S. Bankruptcy Code (Chapter 11).

PG&E continues to make substantial progress in those cases and remains on track for Bankruptcy Court confirmation of its Plan of Reorganization (“Plan”) by June 30, 2020, allowing the company to participate in California's new go-forward wildfire fund.

PG&E has previously reached settlements with all major groups of wildfire victims to be implemented pursuant to its Plan, valued at approximately $25.5 billion at plan value. Voting by eligible parties is now underway, and ballot counting is expected to be complete by the third week of May.

“We have developed a Plan of Reorganization that has the support of a broad coalition of stakeholders, including the Governor’s Office. Our Plan compensates wildfire victims fairly, resolves our liabilities, assumes the collective bargaining agreements with our labor unions and is energy-bill-neutral for our customers. It will protect our clean energy commitments and set us up to emerge from Chapter 11 as a stronger and more sustainable utility,” said Bill Johnson, CEO and President of PG&E Corporation.

Johnson previously announced his decision to retire from the company effective June 30, 2020. PG&E Corporation has named William “Bill” Smith as Interim CEO. Smith, who joined the Boards of Directors of PG&E Corporation and the Utility (the “Boards”) in 2019, will serve in this role from the time of Johnson’s departure through the appointment of a new CEO.

“I am quite proud of what PG&E and our 23,000 employees have achieved in the past year,” Johnson said. “We are close to emerging from bankruptcy. We’ve stabilized our operations, made significant structural and governance improvements across the business, and continued


The following information was filed by Pacific Gas Electric Co on Friday, May 1, 2020 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
FORM10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period endedMarch 31, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to __________
Commission
File
Number
Exact Name of
Registrant
as Specified
in its Charter
State or Other
Jurisdiction of
Incorporation
IRS Employer
Identification
Number
1-12609PG&E CorporationCalifornia94-3234914
1-2348Pacific Gas and Electric CompanyCalifornia94-0742640
PG&E CorporationPacific Gas and Electric Company
77 Beale Street77 Beale Street
P.O. Box 770000P.O. Box 770000
San Francisco,California94177San Francisco, California 94177
Address of principal executive offices, including zip code
PG&E CorporationPacific Gas and Electric Company
415973-1000415973-7000
Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, no par valuePCGThe New York Stock Exchange
First preferred stock, cumulative, par value $25 per share, 5% series A redeemablePCG-PENYSE American LLC
First preferred stock, cumulative, par value $25 per share, 5% redeemablePCG-PDNYSE American LLC
First preferred stock, cumulative, par value $25 per share, 4.80% redeemablePCG-PGNYSE American LLC
First preferred stock, cumulative, par value $25 per share, 4.50% redeemablePCG-PHNYSE American LLC
First preferred stock, cumulative, par value $25 per share, 4.36% series A redeemablePCG-PINYSE American LLC
First preferred stock, cumulative, par value $25 per share, 6% nonredeemablePCG-PANYSE American LLC
First preferred stock, cumulative, par value $25 per share, 5.50% nonredeemablePCG-PBNYSE American LLC
First preferred stock, cumulative, par value $25 per share, 5% nonredeemablePCG-PCNYSE American LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 
PG&E Corporation:YesNo
Pacific Gas and Electric Company:YesNo
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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
PG&E Corporation:YesNo
Pacific Gas and Electric Company:YesNo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
PG&E Corporation:Large accelerated filer
Accelerated filer
 
Non-accelerated filer  
 Smaller reporting companyEmerging growth company
Pacific Gas and Electric Company:Large accelerated filer
Accelerated filer
 
Non-accelerated filer
 Smaller reporting companyEmerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
PG&E Corporation:
Pacific Gas and Electric Company:
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
PG&E Corporation:Yes
No
Pacific Gas and Electric Company:Yes
No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common stock outstanding as of April 27, 2020: 
PG&E Corporation:529,785,896  
Pacific Gas and Electric Company:
264,374,809  

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PG&E CORPORATION AND
PACIFIC GAS AND ELECTRIC COMPANY, DEBTORS-IN-POSSESSION
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2020
TABLE OF CONTENTS


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GLOSSARY

The following terms and abbreviations appearing in the text of this report have the meanings indicated below.
2019 Form 10-KPG&E Corporation and Pacific Gas and Electric Company’s combined Annual Report on Form 10-K for the year ended December 31, 2019
2019 Wildfire Mitigation Planthe wildfire mitigation plan for 2019 submitted by the Utility to the CPUC pursuant to SB 901, previously also referred to as the “2019 Wildfire Safety Plan”
ABAssembly Bill
ALJadministrative law judge
AROasset retirement obligation
ASUaccounting standard update issued by the FASB (see below)
Backstop Partya third-party investor party to a Backstop Commitment Letter
Bankruptcy Codethe United States Bankruptcy Code
Bankruptcy Courtthe U.S. Bankruptcy Court for the Northern District of California
CAISOCalifornia Independent System Operator
Cal FireCalifornia Department of Forestry and Fire Protection
CARBCalifornia Air Resources Board
CARECalifornia Alternate Rates for Energy
CCACommunity Choice Aggregator
CEMACatastrophic Event Memorandum Account
Chapter 11chapter 11 of title 11 of the U.S. Code
Chapter 11 Casesthe voluntary cases commenced by each of PG&E Corporation and the Utility under Chapter 11 on January 29, 2019
CHTCustomer Harm Threshold
CPUCCalifornia Public Utilities Commission
CRRscongestion revenue rights
CUECoalition of California Utility Employees
CVAClimate Vulnerability Assessment
DADirect Access
Diablo CanyonDiablo Canyon nuclear power plant
DIP Credit AgreementSenior Secured Superpriority Debtor in Possession Credit, Guaranty and Security Agreement, dated as of February 1, 2019, among the Utility, as borrower, PG&E Corporation, as guarantor, JPMorgan Chase Bank, N.A., as administrative agent, and Citibank, N.A., as collateral agent
DTSCDepartment of Toxic Substances Control
EPSearnings per common share
FASBFinancial Accounting Standards Board
FEMAFederal Emergency Management Agency
FERCFederal Energy Regulatory Commission
FHPMAFire Hazard Prevention Memorandum Account
FRMMAFire Risk Mitigation Memorandum Account
Fire Victim Trusttrust to be established pursuant to the Plan for the benefit of holders of the Fire Victim Claims into which the Aggregate Fire Victim Consideration (as defined in the Plan) is to be funded
GAAPU.S. Generally Accepted Accounting Principles
GRCgeneral rate case
GT&Sgas transmission and storage
HSMHazardous Substance Memorandum Account
IOU(s)investor-owned utility(ies)
LIBORLondon Interbank Offered Rate
LSTCliabilities subject to compromise
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MD&AManagement’s Discussion and Analysis of Financial Condition and Results of Operations set forth in Item 2 of this Form 10-Q
MGP(s)manufactured gas plants
the Monitorthird-party monitor retained as part of its compliance with the sentencing terms of the Utility’s January 27, 2017 federal criminal conviction
NAVnet asset value
NDCTPNuclear Decommissioning Cost Triennial Proceedings
NEILNuclear Electric Insurance Limited
NRCNuclear Regulatory Commission
OESState of California Office of Emergency Services
OIIorder instituting investigation
OIRorder instituting rulemaking
PCIAPower Charge Indifference Adjustment
PODPresiding Officer’s Decision
PDproposed decision
Petition DateJanuary 29, 2019
PFMpetition for modification
PSAplan support agreement
PSPSPublic Safety Power Shutoff
ROEreturn on equity
RSArestructuring support agreement (as amended)
SBSenate Bill
SECU.S. Securities and Exchange Commission
SEDSafety and Enforcement Division of the CPUC
Tax ActTax Cuts and Jobs Act of 2017
TCCOfficial Committee of Tort Claimants
TOtransmission owner
TURNThe Utility Reform Network
UtilityPacific Gas and Electric Company
VIE(s)variable interest entity(ies)
WEMAWildfire Expense Memorandum Account
Wildfire Assistance Fundprogram designed to assist those displaced by the 2018 Camp fire and 2017 Northern California wildfires with the costs of temporary housing and other urgent needs
Wildfire Fundstatewide fund established by AB 1054 that will be available for eligible electric utility companies to pay eligible claims for liabilities arising from wildfires occurring after July 12, 2019 that are caused by the applicable electric utility company’s equipment
Wildfires OIIOrder Instituting Investigation into the 2017 Northern California Wildfires and the 2018 Camp Fire
WMPWildfire Mitigation Plan
WMPMAWildfire Mitigation Plan Memorandum Account

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FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements that are necessarily subject to various risks and uncertainties.  These statements reflect management’s judgment and opinions that are based on current estimates, expectations, and projections about future events and assumptions regarding these events and management’s knowledge of facts as of the date of this report.  These forward-looking statements relate to, among other matters, estimated losses, including penalties and fines, associated with various investigations and proceedings; forecasts of capital expenditures; estimates and assumptions used in critical accounting policies, including those relating to liabilities subject to compromise, insurance receivable, regulatory assets and liabilities, environmental remediation, litigation, third-party claims, and other liabilities; and the level of future equity or debt issuances.  These statements are also identified by words such as “assume,” “expect,” “intend,” “forecast,” “plan,” “project,” “believe,” “estimate,” “predict,” “anticipate,” “may,” “should,” “would,” “could,” “potential” and similar expressions.  PG&E Corporation and the Utility are not able to predict all the factors that may affect future results.  Some of the factors that could cause future results to differ materially from those expressed or implied by the forward-looking statements, or from historical results, include, but are not limited to:

the risks and uncertainties associated with the Chapter 11 Cases, including, but not limited to, the ability to develop, consummate, and implement a plan of reorganization with respect to PG&E Corporation and the Utility that satisfies all applicable legal requirements; the ability to obtain applicable Bankruptcy Court, creditor or state or federal regulatory approvals; the effect of any alternative proposals, views or objections related to the plan of reorganization; potential complexities that may arise in connection with concurrent proceedings involving the Bankruptcy Court, the CPUC, and the FERC; increased costs related to the Chapter 11 Cases; the ability to obtain sufficient financing sources for ongoing and future operations and investment; the ability to satisfy the conditions precedent to financing under the Backstop Commitment Letters and the Debt Commitment Letters and the risk that such agreements may be terminated; the risk that the Noteholder RSA, the Subrogation RSA, the TCC RSA or the PSAs could be terminated; disruptions to PG&E Corporation’s and the Utility’s business and operations and the potential impact on regulatory compliance;

whether PG&E Corporation and the Utility will be able to emerge from Chapter 11 by June 30, 2020 with a plan of reorganization that is deemed to meet the requirements of AB 1054, and whether PG&E Corporation and the Utility will need to undertake significant changes in ownership, management and governance in connection therewith;

if the Plan is determined not to meet the requirements of AB 1054 or the Utility does not otherwise participate in the Wildfire Fund under AB 1054, it could result in a significant delay in emergence from bankruptcy, as PG&E Corporation and the Utility may be required to make material modifications or amendments to their Plan, to develop and consummate a new consensual plan of reorganization or engage in a contested proceeding;

restrictions on PG&E Corporation’s and the Utility’s ability to pursue strategic and operational initiatives for the duration of the Chapter 11 Cases;

PG&E Corporation’s and the Utility’s historical financial information not being indicative of future financial performance as a result of the Chapter 11 Cases and the potential financial and other restructuring currently contemplated by the Plan;

the possibility that PG&E Corporation and the Utility will not be able to meet the conditions precedent to funding under the Backstop Commitment Letters and the Debt Commitment Letters, or that events or circumstances will occur that give rise to termination rights of the Backstop Parties or Commitment Parties under the Backstop Commitment Letters or Debt Commitment Letters, respectively, which could make raising funds to pay claims and exit Chapter 11 difficult or uneconomic;

the ability of PG&E Corporation and the Utility to access capital markets and other sources of debt and equity financing in a timely manner and on acceptable terms in order to exit Chapter 11 and to raise financing for operations and investment after emergence;

the impact of AB 1054 on potential losses in connection with future wildfires, including the CPUC’s implementation of the procedures for recovering such losses;

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the impact of the 2018 Camp fire, 2017 Northern California wildfires and the 2015 Butte fire, including whether the Utility will be able to timely recover any costs incurred therewith in excess of insurance not disallowed from recovery in the Wildfire OII; the timing and outcome of the remaining wildfire investigations and the extent to which the Utility will have liability associated with these fires; the timing and amount of insurance recoveries; and potential liabilities in connection with fines or penalties that could be imposed on the Utility if the CPUC or any other law enforcement agency were to bring an enforcement action, including, if the Plea Agreement is terminated, a criminal proceeding, and determined that the Utility failed to comply with applicable laws and regulations (which actions could also adversely impact a timely emergence from Chapter 11);

the ability of PG&E Corporation and the Utility to finance costs, expenses and other possible losses with respect to claims related to the 2018 Camp fire and the 2017 Northern California wildfires, through securitization mechanisms or otherwise, which potential financings are not addressed by the Wildfire Fund as it only applies to wildfires occurring after July 12, 2019;

the timing and outcome of any proceeding to recover 2015 Butte fire-related costs in excess of insurance through rates;

the risks and uncertainties associated with the 2019 Kincade fire;

the timing and outcome of future regulatory and legislative developments in connection with SB 901, including future wildfire reforms, inverse condemnation reform, and other wildfire mitigation measures or other reforms targeted at the Utility or its industry;

the severity, extent and duration of the global COVID-19 pandemic and its impact on PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity and cash flows, as well as on energy demand in the Utility’s service territory, the ability of the Utility to collect on customer invoices, the ability of the Utility to offset these effects with spending reductions and the ability of the Utility to recover any losses incurred in connection with the COVID-19 pandemic through cost recovery, and the impact of workforce disruptions, if any;

the outcome of the Utility’s Community Wildfire Safety Program that the Utility has developed in coordination with first responders, civic and community leaders, and customers, to help reduce wildfire threats and improve safety as a result of climate-driven wildfires and extreme weather, including the Utility’s ability to comply with the targets and metrics set forth in the 2020-2022 Wildfire Mitigation Plan; and the cost of the program and the timing and outcome of any proceeding to recover such cost through rates;

whether the Utility will be able to obtain full recovery of its significantly increased insurance premiums, and the timing of any such recovery;

whether the Utility can obtain wildfire insurance at a reasonable cost in the future, or at all, and whether insurance coverage is adequate for future losses or claims;

increased employee attrition as a result of the filing of the Chapter 11 Cases and the challenging political and operating environment facing the company;

the impact of the Utility’s implementation of its PSPS program, including the timing and outcome of the PSPS OII and order to show cause, and whether any fines or penalties or civil liability for damages will be imposed on the Utility as a result; the costs in connection with PSPS events, and the effects on PG&E Corporation’s and the Utility’s reputations caused by implementation of the PSPS program;

the timing and outcomes of the 2020 GRC, FERC TO18, TO19, and TO20 rate cases, 2018 and 2019 CEMA applications, WEMA application, future applications for FHPMA, FRMMA, and WMPMA, future cost of capital proceedings, and other ratemaking and regulatory proceedings;

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the outcome of the probation and the monitorship imposed by the federal court after the Utility’s conviction in the federal criminal trial in 2017, the timing and outcomes of the debarment proceeding, potential reliability penalties or sanctions from the North American Electric Reliability Corporation, the SED’s unresolved enforcement matters relating to the Utility’s compliance with natural gas-related laws and regulations, and other investigations that have been or may be commenced relating to the Utility’s compliance with natural gas- and electric- related laws and regulations, and the ultimate amount of fines, penalties, and remedial costs that the Utility may incur in connection with the outcomes including the costs of complying with any additional conditions of probation imposed in connection with the Utility’s federal criminal proceeding, such as expenses associated with any material expansion of the Utility’s vegetation management program, including as a result of the probation proceedings before the U.S. District Court, as well as the impact of additional conditions of probation on PG&E Corporation’s and the Utility’s ability to make distributions to shareholders;

the effects on PG&E Corporation’s and the Utility’s reputations caused by matters such as the CPUC’s investigations and enforcement proceedings;

the outcome of the Safety Culture OII proceeding, and future legislative or regulatory actions that may be taken, such as requiring the Utility to separate its electric and natural gas businesses, or restructure into separate entities, or undertake some other corporate restructuring, or transfer ownership of the Utility’s assets to municipalities or other public entities, or implement corporate governance changes;

whether the Utility can control its operating costs within the authorized levels of spending, and timely recover its costs through rates; whether the Utility can continue implementing a streamlined organizational structure and achieve project savings, the extent to which the Utility incurs unrecoverable costs that are higher than the forecasts of such costs; and changes in cost forecasts or the scope and timing of planned work resulting from changes in customer demand for electricity and natural gas or other reasons;

whether the Utility and its third-party vendors and contractors are able to protect the Utility’s operational networks and information technology systems from cyber- and physical attacks, or other internal or external hazards;

the timing and outcome in the Court of Appeals of the appeal of FERC’s order denying rehearing on September 19, 2019 of the complaint filed by the CPUC and certain other parties that the Utility provide an open and transparent planning process for its capital transmission projects that do not go through the CAISO’s Transmission Planning Process to allow for greater participation and input from interested parties; and the timing and outcome of FERC’s Order on Remand on July 18, 2019 granting the Utility a 50 basis point ROE incentive adder for continued participation in the CAISO;

the outcome of current and future self-reports, investigations, or other enforcement proceedings that could be commenced or notices of violation that could be issued relating to the Utility’s compliance with laws, rules, regulations, or orders applicable to its operations, including the construction, expansion, or replacement of its electric and gas facilities, electric grid reliability, inspection and maintenance practices, customer billing and privacy, physical and cybersecurity, environmental laws and regulations; and the outcome of existing and future SED notices of violations;

the impact of environmental remediation laws, regulations, and orders; the ultimate amount of costs incurred to discharge the Utility’s known and unknown remediation obligations; and the extent to which the Utility is able to recover environmental costs in rates or from other sources;

the impact of SB 100, signed into law on September 10, 2018, which increased the percentage from 50% to 60% of California’s electricity portfolio that must come from renewables by 2030; and establishes state policy that 100% of all retail electricity sales must come from renewable portfolio standard-eligible or carbon-free resources by 2045;

how the CPUC and the CARB implement state environmental laws relating to greenhouse gas, renewable energy targets, energy efficiency standards, distributed energy resources, electric vehicles, and similar matters, including whether the Utility is able to continue recovering associated compliance costs, such as the cost of emission allowances and offsets under cap-and-trade regulations; and whether the Utility is able to timely recover its associated investment costs;

the impact of the California governor’s executive order issued on January 26, 2018, to implement a new target of five million zero-emission vehicles on the road in California by 2030;
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the ultimate amount of unrecoverable environmental costs the Utility incurs associated with the Utility’s natural gas compressor station site located near Hinkley, California and the Utility’s fossil fuel-fired generation sites;

the impact of new legislation or NRC regulations, recommendations, policies, decisions, or orders relating to the nuclear industry, including operations, seismic design, security, safety, relicensing, the storage of spent nuclear fuel, decommissioning, cooling water intake, or other issues; the impact of potential actions, such as legislation, taken by state agencies that may affect the Utility’s ability to continue operating Diablo Canyon until its planned retirement;

the impact of wildfires, droughts, floods, or other weather-related conditions or events, climate change, natural disasters, acts of terrorism, war, vandalism (including cyber-attacks), downed power lines, and other events, that can cause unplanned outages, reduce generating output, disrupt the Utility’s service to customers, or damage or disrupt the facilities, operations, or information technology and systems owned by the Utility, its customers, or third parties on which the Utility relies, and the reparation and other costs that the Utility may incur in connection with such conditions or events; the impact of the adequacy of the Utility’s emergency preparedness; whether the Utility incurs liability to third parties for property damage or personal injury caused by such events; whether the Utility is subject to civil, criminal, or regulatory penalties in connection with such events; and whether the Utility’s insurance coverage is available for these types of claims and sufficient to cover the Utility’s liability;

whether the Utility’s climate change adaptation strategies are successful;

the breakdown or failure of equipment that can cause damages, including fires, and unplanned outages; and whether the Utility will be subject to investigations, penalties, and other costs in connection with such events;

the impact that reductions in Utility customer demand for electricity and natural gas, driven by customer departures to CCAs and DA providers, have on the Utility’s ability to make and recover its investments through rates and earn its authorized return on equity, and whether the Utility is successful in addressing the impact of growing distributed and renewable generation resources, and changing customer demand for its natural gas and electric services;

the supply and price of electricity, natural gas, and nuclear fuel; the extent to which the Utility can manage and respond to the volatility of energy commodity prices; the ability of the Utility and its counterparties to post or return collateral in connection with price risk management activities; and whether the Utility is able to recover timely its electric generation and energy commodity costs through rates, including its renewable energy procurement costs;

the amount and timing of charges reflecting probable liabilities for third-party claims; the extent to which costs incurred in connection with third-party claims or litigation can be recovered through insurance, rates, or from other third parties; and whether the Utility can continue to obtain adequate insurance coverage for future losses or claims, especially following a major event that causes widespread third-party losses;

the impact of the regulation of utilities and their holding companies, including how the CPUC interprets and enforces the financial and other conditions imposed on PG&E Corporation when it became the Utility’s holding company, and whether the uncertainty in connection with the 2018 Camp fire and the 2017 Northern California wildfires, the ultimate outcomes of the CPUC’s pending investigations, and other enforcement matters will impact the Utility’s ability to make distributions to PG&E Corporation;

the outcome of federal or state tax audits and the impact of any changes in federal or state tax laws, policies, regulations, or their interpretation;

changes in the regulatory and economic environment, including potential changes affecting renewable energy sources and associated tax credits, as a result of the current federal administration; and

the impact of changes in GAAP, standards, rules, or policies, including those related to regulatory accounting, and the impact of changes in their interpretation or application.

For more information about the significant risks that could affect the outcome of the forward-looking statements and PG&E Corporation’s and the Utility’s future financial condition, results of operations, liquidity, and cash flows, see Item 1A. Risk Factors below and a detailed discussion of these matters contained in Item 2. MD&A. PG&E Corporation and the Utility do not undertake any obligation to update forward-looking statements, whether in response to new information, future events, or otherwise.
9



PG&E Corporation and the Utility routinely provide links to the Utility’s principal regulatory proceedings before the CPUC and the FERC at http://investor.pgecorp.com, under the “Regulatory Filings” tab, so that such filings are available to investors upon filing with the relevant agency. PG&E Corporation and the Utility also routinely post or provide direct links to presentations, documents, and other information that may be of interest to investors at http://investor.pgecorp.com, under the “PG&E Progress,” “Chapter 11,” “Wildfire Updates” and “News & Events: Events & Presentations” tabs, respectively, in order to publicly disseminate such information. It is possible that any of these filings or information included therein could be deemed to be material information. The information contained on such website is not part of this or any other report that PG&E Corporation or the Utility files with, or furnishes to, the SEC. PG&E Corporation and the Utility are providing the address to this website solely for the information of investors and do not intend the address to be an active link.

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PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

PG&E CORPORATION
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME


 (Unaudited)
Three Months Ended March 31,
(in millions, except per share amounts)20202019
Operating Revenues  
Electric$3,040  $2,792  
Natural gas1,266  1,219  
Total operating revenues4,306  4,011  
Operating Expenses
Cost of electricity545  599  
Cost of natural gas284  339  
Operating and maintenance1,967  2,087  
Depreciation, amortization, and decommissioning855  797  
Total operating expenses3,651  3,822  
Operating Income655  189  
Interest income16  22  
Interest expense(254) (103) 
Other income, net97  71  
Reorganization items, net(176) (127) 
Income Before Income Taxes338  52  
Income tax benefit(36) (84) 
Net Income 374  136  
Preferred stock dividend requirement of subsidiary —  
Income Available for Common Shareholders$371  $136  
Weighted Average Common Shares Outstanding, Basic529  526  
Weighted Average Common Shares Outstanding, Diluted648  527  
Net Income Per Common Share, Basic$0.70  $0.25  
Net Income Per Common Share, Diluted$0.57  $0.25  
See accompanying Notes to the Condensed Consolidated Financial Statements.


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PG&E CORPORATION
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 (Unaudited)
Three Months Ended March 31,
(in millions)20202019
Net Income$374  $136  
Other Comprehensive Income
Pension and other post-retirement benefit plans obligations (net of taxes of $0 and $0, respectively)
—  —  
Total other comprehensive income —  —  
Comprehensive Income374  136  
Preferred stock dividend requirement of subsidiary —  
Comprehensive Income Available for Common Shareholders
$371  $136  
See accompanying Notes to the Condensed Consolidated Financial Statements.

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PG&E CORPORATION
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED BALANCE SHEETS
 (Unaudited)
 Balance At
(in millions)March 31, 2020December 31, 2019
ASSETS  
Current Assets    
Cash and cash equivalents$1,960  $1,570  
Accounts receivable:
Customers (net of allowance for doubtful accounts of $46 and $43
at respective dates)
1,319  1,287  
Accrued unbilled revenue946  969  
Regulatory balancing accounts2,102  2,114  
Other2,613  2,617  
Regulatory assets373  315  
Inventories:
Gas stored underground and fuel oil77  97  
Materials and supplies567  550  
Other601  646  
Total current assets10,558  10,165  
Property, Plant, and Equipment
Electric63,750  62,707  
Gas23,045  22,688  
Construction work in progress2,670  2,675  
Other20  20  
Total property, plant, and equipment89,485  88,090  
Accumulated depreciation(26,987) (26,455) 
Net property, plant, and equipment62,498  61,635  
Other Noncurrent Assets
Regulatory assets6,604  6,066  
Nuclear decommissioning trusts2,911  3,173  
Operating lease right of use asset2,209  2,286  
Income taxes receivable67  67  
Other1,841  1,804  
Total other noncurrent assets13,632  13,396  
TOTAL ASSETS$86,688  $85,196  
See accompanying Notes to the Condensed Consolidated Financial Statements.

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PG&E CORPORATION
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
(Unaudited)
 Balance At
(in millions, except share amounts)March 31, 2020December 31, 2019
LIABILITIES AND EQUITY  
Current Liabilities
  
Debtor-in-possession financing, classified as current$2,000  $1,500  
Accounts payable:
Trade creditors1,851  1,954  
Regulatory balancing accounts1,845  1,797  
Other699  566  
Operating lease liabilities554  556  
Interest payable  
Other1,300  1,254  
Total current liabilities8,253  7,631  
Noncurrent Liabilities
Regulatory liabilities9,251  9,270  
Pension and other post-retirement benefits1,855  1,884  
Asset retirement obligations5,902  5,854  
Deferred income taxes505  320  
Operating lease liabilities1,655  1,730  
Other2,757  2,573  
Total noncurrent liabilities21,925  21,631  
Liabilities Subject to Compromise50,751  50,546  
Equity
Shareholders’ Equity
Common stock, no par value, authorized 800,000,000 shares;
529,785,896 and 529,236,741 shares outstanding at respective dates
13,035  13,038  
Reinvested earnings(7,518) (7,892) 
Accumulated other comprehensive loss(10) (10) 
Total shareholders’ equity
5,507  5,136  
Noncontrolling Interest - Preferred Stock of Subsidiary252  252  
Total equity5,759  5,388  
TOTAL LIABILITIES AND EQUITY$86,688  $85,196  
See accompanying Notes to the Condensed Consolidated Financial Statements.

14


PG&E CORPORATION
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Three Months Ended March 31,
(in millions)20202019
Cash Flows from Operating Activities  
Net income$374  $136  
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and decommissioning855  797  
Allowance for equity funds used during construction(10) (25) 
Deferred income taxes and tax credits, net197   
Reorganization items, net (Note 2) 50  19  
Other35  16  
Effect of changes in operating assets and liabilities:
Accounts receivable(22) (31) 
Wildfire-related insurance receivable—  25  
Inventories 18  
Accounts payable 245  (180) 
Wildfire-related claims—  (14) 
Income taxes receivable/payable—  23  
Other current assets and liabilities(123) 150  
Regulatory assets, liabilities, and balancing accounts, net(310) 343  
Liabilities subject to compromise 208  833  
Other noncurrent assets and liabilities103  130  
Net cash provided by operating activities1,605  2,244  
Cash Flows from Investing Activities  
Capital expenditures(1,641) (1,224) 
Proceeds from sales and maturities of nuclear decommissioning trust investments533  346  
Purchases of nuclear decommissioning trust investments(552) (372) 
Other  
Net cash used in investing activities
(1,655) (1,247) 
Cash Flows from Financing Activities  
Proceeds from debtor-in-possession credit facility
500  350  
Debtor-in-possession credit facility debt issuance costs
(3) (111) 
Bridge facility financing fees(66) —  
Common stock issued—  85  
Other (24) 
Net cash provided by financing activities440  300  
Net change in cash, cash equivalents, and restricted cash390  1,297  
Cash, cash equivalents, and restricted cash at January 11,577  1,675  
Cash, cash equivalents, and restricted cash at March 31$1,967  $2,972  
Less: Restricted cash and restricted cash equivalents included in other current assets(7) (8) 
Cash and cash equivalents at March 31$1,960  $2,964  

15


Supplemental disclosures of cash flow information  
Cash paid for:  
Interest, net of amounts capitalized$—  $(10) 
Supplemental disclosures of noncash investing and financing activities
Capital expenditures financed through accounts payable$326  $242  
Operating lease liabilities arising from obtaining right-of-use assets13  2,816  
See accompanying Notes to the Condensed Consolidated Financial Statements.


16


PG&E CORPORATION
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(in millions, except share amounts)Common
Stock
Shares
Common
Stock
Amount
Reinvested
Earnings
Accumulated
Other
Comprehensive
Income
(Loss)
Total
Shareholders’
Equity
Non
controlling
Interest -
Preferred
Stock of
Subsidiary
Total
Equity
Balance at December 31, 2019529,236,741  $13,038  $(7,892) $(10) $5,136  $252  $5,388  
Net income—  —  374  —  374  —  374  
Other comprehensive loss—  —  —  —  —  —  —  
Common stock issued, net549,155  —  —  —  —  —  —  
Stock-based compensation amortization—  (3) —  —  (3) —  (3) 
Balance at March 31, 2020529,785,896  $13,035  $(7,518) $(10) $5,507  $252  $5,759  

(in millions, except share amounts)Common
Stock
Shares
Common
Stock
Amount
Reinvested
Earnings
Accumulated
Other
Comprehensive
Income
(Loss)
Total
Shareholders’
Equity
Non
controlling
Interest -
Preferred
Stock of
Subsidiary
Total
Equity
Balance at December 31, 2018520,338,710  $12,910  $(250) $(9) $12,651  $252  $12,903  
Net income—  —  136  —  136  —  136  
Other comprehensive loss—  —  —  —  —  —  —  
Common stock issued, net8,871,568  85  —  —  85  —  85  
Stock-based compensation amortization—   —  —   —   
Balance at March 31, 2019529,210,278  $13,000  $(114) $(9) $12,877  $252  $13,129  

See accompanying Notes to the Condensed Consolidated Financial Statements.

17


PACIFIC GAS AND ELECTRIC COMPANY
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME


 (Unaudited)
Three Months Ended March 31,
(in millions)20202019
Operating Revenues  
Electric$3,040  $2,792  
Natural gas1,266  1,219  
Total operating revenues4,306  4,011  
Operating Expenses
Cost of electricity545  599  
Cost of natural gas284  339  
Operating and maintenance1,965  2,104  
Depreciation, amortization, and decommissioning855  797  
Total operating expenses3,649  3,839  
Operating Income 657  172  
Interest income16  21  
Interest expense(252) (101) 
Other income, net93  66  
Reorganization items, net
(93) (111) 
Income Before Income Taxes421  47  
Income tax benefit(30) (86) 
Net Income451  133  
Preferred stock dividend requirement —  
Income Available for Common Stock$448  $133  
See accompanying Notes to the Condensed Consolidated Financial Statements.

18


PACIFIC GAS AND ELECTRIC COMPANY
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 (Unaudited)
Three Months Ended March 31,
(in millions)20202019
Net Income$451  $133  
Other Comprehensive Income
Pension and other post-retirement benefit plans obligations (net of taxes of $0 and $0, respectively)
—  —  
Total other comprehensive income —  —  
Comprehensive Income$451  $133  
See accompanying Notes to the Condensed Consolidated Financial Statements.


19


PACIFIC GAS AND ELECTRIC COMPANY
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED BALANCE SHEETS
 (Unaudited)
 Balance At
(in millions)March 31, 2020December 31, 2019
ASSETS  
Current Assets  
Cash and cash equivalents$1,555  $1,122  
Accounts receivable:
Customers (net of allowance for doubtful accounts of $46 and $43
at respective date
1,319  1,287  
Accrued unbilled revenue946  969  
Regulatory balancing accounts2,102  2,114  
Other2,651  2,647  
Regulatory assets373  315  
Inventories:
Gas stored underground and fuel oil77  97  
Materials and supplies567  550  
Other588  635  
Total current assets10,178  9,736  
Property, Plant, and Equipment
Electric63,750  62,707  
Gas23,045  22,688  
Construction work in progress2,670  2,675  
Other 18  18  
Total property, plant, and equipment89,483  88,088  
Accumulated depreciation(26,985) (26,453) 
Net property, plant, and equipment62,498  61,635  
Other Noncurrent Assets
Regulatory assets6,604  6,066  
Nuclear decommissioning trusts2,911  3,173  
Operating lease right of use asset2,202  2,279  
Income taxes receivable66  66  
Other1,692  1,659  
Total other noncurrent assets13,475  13,243  
TOTAL ASSETS$86,151  $84,614  
See accompanying Notes to the Condensed Consolidated Financial Statements.

20


PACIFIC GAS AND ELECTRIC COMPANY
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED BALANCE SHEETS
 (Unaudited)
 Balance At
(in millions. except share amounts)March 31, 2020December 31, 2019
LIABILITIES AND EQUITY
Current Liabilities  
Debtor-in-possession financing, classified as current$2,000  $1,500  
Accounts payable:
Trade creditors1,819  1,949  
Regulatory balancing accounts1,845  1,797  
Other786  675  
Operating lease liabilities551  553  
Interest payable  
Other1,310  1,263  
Total current liabilities8,315  7,741  
Noncurrent Liabilities
Regulatory liabilities9,251  9,270  
Pension and other post-retirement benefits1,855  1,884  
Asset retirement obligations5,902  5,854  
Deferred income taxes633  442  
Operating lease liabilities1,651  1,726  
Other2,817  2,626  
Total noncurrent liabilities22,109  21,802  
Liabilities Subject to Compromise49,941  49,736  
Shareholders’ Equity
Preferred stock258  258  
Common stock, $5 par value, authorized 800,000,000 shares; 264,374,809 shares outstanding at respective dates
1,322  1,322  
Additional paid-in capital8,550  8,550  
Reinvested earnings(4,345) (4,796) 
Accumulated other comprehensive income  
Total shareholders’ equity5,786  5,335  
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY$86,151  $84,614  
See accompanying Notes to the Condensed Consolidated Financial Statements.

21


PACIFIC GAS AND ELECTRIC COMPANY
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Three Months Ended March 31,
(in millions)20202019
Cash Flows from Operating Activities  
Net income$451  $133  
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and decommissioning855  797  
Allowance for equity funds used during construction(10) (25) 
Deferred income taxes and tax credits, net202   
Reorganization items, net (Note 2) (11) 20  
Other40  12  
Effect of changes in operating assets and liabilities:
Accounts receivable(30) (51) 
Wildfire-related insurance receivable—  25  
Inventories 18  
Accounts payable 221  (132) 
Wildfire-related claims—  (14) 
Income taxes receivable/payable—   
Other current assets and liabilities(121) 171  
Regulatory assets, liabilities, and balancing accounts, net(310) 343  
Liabilities subject to compromise 208  833  
Other noncurrent assets and liabilities114  137  
Net cash provided by operating activities1,612  2,274  
Cash Flows from Investing Activities
Capital expenditures (1,641) (1,224) 
Proceeds from sales and maturities of nuclear decommissioning trust investments533  346  
Purchases of nuclear decommissioning trust investments(552) (372) 
Other  
Net cash used in investing activities
(1,655) (1,247) 
Cash Flows from Financing Activities
Proceeds from debtor-in-possession credit facility
500  350  
Debtor-in-possession credit facility debt issuance costs
(3) (95) 
Bridge facility financing fees(30) —  
Other (24) 
Net cash provided by financing activities476  231  
Net change in cash, cash equivalents, and restricted cash433  1,258  
Cash, cash equivalents, and restricted cash at January 11,129  1,302  
Cash, cash equivalents, and restricted cash at March 31$1,562  $2,560  
Less: Restricted cash and restricted cash equivalents included in other current assets(7) (8) 
Cash and cash equivalents at March 31$1,555  $2,552  


22



Supplemental disclosures of cash flow information
Cash paid for:
Interest, net of amounts capitalized$—  $(8) 
Supplemental disclosures of noncash investing and financing activities
Capital expenditures financed through accounts payable$326  $242  
Operating lease liabilities arising from obtaining right-of-use assets 13  2,807  
See accompanying Notes to the Condensed Consolidated Financial Statements.

23


PACIFIC GAS AND ELECTRIC COMPANY
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDER’S EQUITY
(in millions)Preferred
Stock
Common
Stock
Amount
Additional
Paid-in
Capital
Reinvested
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Shareholders’
Equity
Balance at December 31, 2019$258  $1,322  $8,550  $(4,796) $ $5,335  
Net income—  —  —  451  —  451  
Balance at March 31, 2020$258  $1,322  $8,550  $(4,345) $ $5,786  

(in millions)Preferred
Stock
Common
Stock
Amount
Additional
Paid-in
Capital
Reinvested
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Shareholders’
Equity
Balance at December 31, 2018$258  $1,322  $8,550  $2,826  $(1) $12,955  
Net income—  —  —  133  —  133  
Balance at March 31, 2019$258  $1,322  $8,550  $2,959  $(1) $13,088  

See accompanying Notes to the Condensed Consolidated Financial Statements.

24


NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION

Organization and Basis of Presentation

PG&E Corporation is a holding company whose primary operating subsidiary is Pacific Gas and Electric Company, a public utility serving northern and central California.  The Utility generates revenues mainly through the sale and delivery of electricity and natural gas to customers.  The Utility is primarily regulated by the CPUC and the FERC.  In addition, the NRC oversees the licensing, construction, operation, and decommissioning of the Utility’s nuclear generation facilities.

This quarterly report on Form 10-Q is a combined report of PG&E Corporation and the Utility.  PG&E Corporation’s Condensed Consolidated Financial Statements include the accounts of PG&E Corporation, the Utility, and other wholly owned and controlled subsidiaries.  The Utility’s Condensed Consolidated Financial Statements include the accounts of the Utility and its wholly owned and controlled subsidiaries.  All intercompany transactions have been eliminated in consolidation.  The Notes to the Condensed Consolidated Financial Statements apply to both PG&E Corporation and the Utility.  PG&E Corporation and the Utility assess financial performance and allocate resources on a consolidated basis (i.e., the companies operate in one segment).

The accompanying Condensed Consolidated Financial Statements have been prepared in conformity with GAAP and in accordance with the interim period reporting requirements of Form 10-Q and reflect all adjustments that management believes are necessary for the fair presentation of PG&E Corporation’s and the Utility’s financial condition, results of operations, and cash flows for the periods presented.  The information at December 31, 2019 in the Condensed Consolidated Balance Sheets included in this quarterly report was derived from the audited Consolidated Balance Sheets in Item 8 of the 2019 Form 10-K.  This quarterly report should be read in conjunction with the 2019 Form 10-K. 

The preparation of financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Some of the more significant estimates and assumptions relate to the Utility’s wildfire-related liabilities, regulatory assets and liabilities, legal and regulatory contingencies, insurance receivables, environmental remediation liabilities, AROs, pension and other post-retirement benefit plan obligations, and the valuation of LSTC. Management believes that its estimates and assumptions reflected in the Condensed Consolidated Financial Statements are appropriate and reasonable.  A change in management’s estimates or assumptions could result in an adjustment that would have a material impact on PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows during the period in which such change occurred.

Chapter 11 Filing and Going Concern

The accompanying Condensed Consolidated Financial Statements have been prepared on a going concern basis, which contemplates the continuity of operations, the realization of assets and the satisfaction of liabilities in the normal course of business. However, as a result of the challenges that are further described below, such realization of assets and satisfaction of liabilities are subject to uncertainty. PG&E Corporation and the Utility suffered material losses as a result of the 2017 Northern California wildfires and the 2018 Camp fire, which contributed to the decision to file for Chapter 11 protection. See Note 10 below. Uncertainty regarding these matters raises substantial doubt about PG&E Corporation’s and the Utility’s abilities to continue as going concerns. PG&E Corporation and the Utility have determined that commencing reorganization cases under Chapter 11 was necessary to restore PG&E Corporation’s and the Utility’s financial stability to fund ongoing operations and provide safe service to customers. However, there can be no assurance that such proceedings will restore PG&E Corporation’s and the Utility’s financial stability.

On the Petition Date, PG&E Corporation and the Utility filed voluntary petitions for relief under Chapter 11 in the Bankruptcy Court. The Condensed Consolidated Financial Statements do not include any adjustments that might be necessary should PG&E Corporation and the Utility be unable to continue as going concerns.

25


Pursuant to sections 1107(a) and 1108 of the Bankruptcy Code, PG&E Corporation and the Utility retain control of their assets and are authorized to operate their business as debtors-in-possession while being subject to the jurisdiction of the Bankruptcy Court. While operating as debtors-in-possession under Chapter 11, PG&E Corporation and the Utility may sell or otherwise dispose of or liquidate assets or settle liabilities, subject to the approval of the Bankruptcy Court or as otherwise permitted in the ordinary course of business and subject to restrictions in PG&E Corporation’s and the Utility’s DIP Credit Agreement (see Note 5 below) and applicable orders of the Bankruptcy Court, for amounts other than those reflected in the accompanying Condensed Consolidated Financial Statements.  Any such actions occurring during the Chapter 11 Cases authorized by the Bankruptcy Court could materially impact the amounts and classifications of assets and liabilities reported in PG&E Corporation’s and the Utility’s Condensed Consolidated Financial Statements. (For more information regarding the Chapter 11 Cases, see Note 2 below.)

NOTE 2: BANKRUPTCY FILING

Chapter 11 Proceedings

On January 29, 2019, PG&E Corporation and the Utility commenced the Chapter 11 Cases with the Bankruptcy Court. PG&E Corporation and the Utility continue to operate their business as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.

Under the Bankruptcy Code, third-party actions to collect pre-petition indebtedness owed by PG&E Corporation or the Utility, as well as most litigation pending against PG&E Corporation and the Utility (including the third-party matters described in Note 10 below) as of the Petition Date, are subject to an automatic stay. Absent an order of the Bankruptcy Court providing otherwise, substantially all pre-petition liabilities will be resolved under a Chapter 11 plan of reorganization to be voted upon by impaired creditors and interest holders, and approved by the Bankruptcy Court. However, under the Bankruptcy Code, regulatory or criminal proceedings generally are not subject to an automatic stay, and these proceedings have been continuing during the pendency of the Chapter 11 Cases.

Under the priority scheme established by the Bankruptcy Code, certain post-petition and secured or “priority” pre-petition liabilities need to be satisfied before general unsecured creditors and holders of PG&E Corporation’s and the Utility’s equity are entitled to receive any distribution. No assurance can be given as to what values, if any, will be ascribed in the Chapter 11 Cases to the claims and interests of each of these constituencies. Additionally, no assurance can be given as to whether, when or in what form unsecured creditors and holders of PG&E Corporation’s or the Utility’s equity may receive a distribution on such claims or interests.

Under the Bankruptcy Code, PG&E Corporation and the Utility may assume, assume and assign, or reject certain executory contracts and unexpired leases, including, without limitation, leases of real property and equipment, subject to the approval of the Bankruptcy Court and to certain other conditions. Any description of an executory contract or unexpired lease in this quarterly report on Form 10-Q, or in the 2019 Form 10-K, including, where applicable, the express termination rights thereunder or a quantification of their obligations, must be read in conjunction with, and is qualified by, any overriding rejection rights PG&E Corporation and the Utility have under the Bankruptcy Code.

Significant Bankruptcy Court Actions

First Day Motions

On January 31, 2019, the Bankruptcy Court approved, on an interim basis, certain motions (the “First Day Motions”) authorizing, but not directing, PG&E Corporation and the Utility to, among other things, (a) secure $5.5 billion of debtor-in-possession financing; (b) continue to use PG&E Corporation’s and the Utility’s cash management system; and (c) pay certain pre-petition claims relating to (i) certain safety, reliability, outage, and nuclear facility suppliers; (ii) shippers, warehousemen, and other lien claimants; (iii) taxes; (iv) employee wages, salaries, and other compensation and benefits; and (v) customer programs, including public purpose programs. The First Day Motions were subsequently approved by the Bankruptcy Court on a final basis at hearings on February 27, 2019, March 12, 2019, March 13, 2019, and March 27, 2019.

26


Bar Date

On July 1, 2019, the Bankruptcy Court entered an order approving a deadline of October 21, 2019, at 5:00 p.m. (Pacific Time) (the “Bar Date”) for filing claims against PG&E Corporation and the Utility relating to the period prior to the Petition Date. The Bar Date is subject to certain exceptions, including for claims arising under section 503(b)(9) of the Bankruptcy Code, the bar date for which occurred on April 22, 2019. The Bankruptcy Court also approved PG&E Corporation’s and the Utility’s plan to provide notice of the Bar Date to parties in interest, including potential wildfire-related claimants and other potential creditors. On November 11, 2019, the Bankruptcy Court entered an order approving a stipulation between PG&E Corporation and the Utility and the TCC to extend the Bar Date for unfiled, non-governmental fire claimants to December 31, 2019, at 5:00 p.m. (Pacific Time). By order dated February 27, 2020, the Court extended the Bar Date through and including April 16, 2020, for certain persons or entities that purchased or acquired the PG&E Corporation’s and the Utility’s publicly traded debt or equity securities and who may have claims under the securities laws against the Debtors for rescission or damages.

Other Significant Actions Related to the Chapter 11 Cases

Other significant actions and developments related to the Chapter 11 Cases, including the Tubbs Lift Stay Decision, the Tubbs Trial and the Estimation Proceeding are described in Note 10 (including under the headings “Proceeding in San Francisco County Superior Court for Certain Tubbs Fire-Related Claims” and “Wildfire Claims Estimation Proceeding in the U.S. District Court for the Northern District of California”).

Plan of Reorganization, RSA, Equity Backstop Commitments and Debt Commitment Letters

On September 9, 2019, PG&E Corporation and the Utility filed with the Bankruptcy Court their Joint Chapter 11 Plan of Reorganization for the resolution of the outstanding pre-petition claims against and interests in PG&E Corporation and the Utility, which was thereafter amended on September 23, 2019 and November 4, 2019. On December 12, 2019, PG&E Corporation and the Utility, certain funds and accounts managed or advised by Abrams Capital Management, LP (“Abrams”), and certain funds and accounts managed or advised by Knighthead Capital Management, LLC (“Knighthead” and, together with Abrams, the “Shareholder Proponents”) filed the Debtors’ and Shareholder Proponents’ Joint Chapter 11 Plan of Reorganization dated December 19, 2019 with the Bankruptcy Court (as thereafter amended on January 31, 2020, March 9, 2020 and March 16, 2020, and as may be further amended, modified or supplemented from time to time, the “Plan”).

On September 22, 2019, PG&E Corporation and the Utility entered into a Restructuring Support Agreement with certain holders of insurance subrogation claims (collectively, the “Consenting Subrogation Creditors”). On September 22, 2019, PG&E Corporation and the Utility and the Consenting Subrogation Creditors entered into an amended and restated Restructuring Support Agreement, which was subsequently amended on November 1, 2019, (as amended, the “Subrogation RSA”). The Subrogation RSA provides for an aggregate amount of $11.0 billion (the “Allowed Subrogation Claim Amount”) to be paid by PG&E Corporation and the Utility pursuant to the Plan in order to settle all insurance subrogation claims (the “Subrogation Claims”) relating to the 2017 Northern California wildfires and the 2018 Camp fire (the “Subrogation Claims Settlement”), upon the terms and conditions set forth in the Subrogation RSA. Under the Subrogation RSA, PG&E Corporation and the Utility also have agreed to reimburse the holders of Subrogation Claims for professional fees of up to $55 million, upon the terms and conditions set forth in the Subrogation RSA. See “Restructuring Support Agreement with Holders of Subrogation Claims” in Note 10 for further information on the Subrogation RSA. On September 24, 2019, PG&E Corporation and the Utility filed a motion with the Bankruptcy Court seeking authority to enter into, and perform under, the Subrogation RSA and approval of the Subrogation Claims Settlement. Hearings on PG&E Corporation’s and the Utility’s motion to approve the Subrogation RSA were held on October 23, 2019, December 4, 2019 and December 17, 2019. On December 19, 2019, the Bankruptcy Court entered an order approving the Subrogation RSA. See “Restructuring Support Agreement with Holders of Subrogation Claims” in Note 10 for further information on the Subrogation RSA.

27


On December 6, 2019, PG&E Corporation and the Utility entered into a Restructuring Support Agreement, which was subsequently amended on December 16, 2019 (as amended, the “TCC RSA”), with the TCC, the attorneys and other advisors and agents for holders of Fire Victim Claims (as defined below) that are signatories to the TCC RSA (each a “Consenting Fire Claimant Professional”), and the Shareholder Proponents. The TCC RSA provides for, among other things, an aggregate of $13.5 billion in value to be provided by PG&E Corporation and the Utility pursuant to the Plan in order to settle and discharge all claims against PG&E Corporation and the Utility relating to the 2015 Butte fire, the 2017 Northern California wildfires and the 2018 Camp fire (other than the Subrogation Claims and the Public Entity Wildfire Claims) (the “Fire Victim Claims”), upon the terms and conditions set forth in the TCC RSA and the Plan. On December 9, 2019, PG&E Corporation and the Utility filed a motion with the Bankruptcy Court seeking authority to enter into, and perform under, the TCC RSA. A hearing on PG&E Corporation’s and the Utility’s motion to approve the TCC RSA was held on December 17, 2019. On December 19, 2019, the Bankruptcy Court entered an order approving the TCC RSA. See “Restructuring Support Agreement with the TCC” in Note 10 for further information on the TCC RSA.

Plan of Reorganization

The Plan proposes the following:

compensation of wildfire victims and certain public entities from a trust funded for their benefit in an aggregate value of approximately $13.5 billion (as further described under the heading “Restructuring Support Agreement with the TCC” in Note 10);

compensation of insurance subrogation claimants from a trust funded for their benefit in the amount of $11.0 billion in cash (as further described under the heading “Restructuring Support Agreement with Holders of Subrogation Claims” in Note 10);

payment of $1.0 billion in cash in full settlement of the claims of the settling public entities relating to the wildfires (as further described under the heading “Plan Support Agreements with Public Entities” in Note 10);

entitlement for the holders of claims related to the 2016 Ghost Ship fire to pursue their claims after the Effective Date, with any recovery being limited to amounts available under PG&E Corporation’s and the Utility’s insurance policies;

refinancing of Utility Short-Term Notes, Utility Long-Term Notes and Utility Funded Debt (except Pollution Control Bonds Series 2008F and 2010E, which will be repaid in cash) with the issuance of new notes, reinstatement of Utility Reinstated Notes and reimbursement of the holders of Utility Long-Term Senior Notes for debt placement fees and the members of the Ad Hoc Noteholder Committee for professional fees of up to $99 million (as further described under the heading “Restructuring Support Agreement with the Ad Hoc Noteholder Committee”);

payment in full of all pre-petition funded debt obligations of PG&E Corporation, all pre-petition trade claims and all pre-petition employee-related unsecured claims;

assumption of all power purchase agreements and community choice aggregation servicing agreements;

assumption of all pension obligations, other employee obligations, and collective bargaining agreements with labor;

future participation in the state wildfire fund established by AB 1054; and

satisfaction of the requirements of AB 1054.

The Plan proposes the following key financing sources:

one or more equity offerings of up to $9.0 billion, in accordance with the Backstop Commitment Letters, although the Backstop Commitment Letters (as described below) permit PG&E Corporation to draw up to $12.0 billion;

the issuance of $6.75 billion of new equity to the Fire Victim Trust;

the issuance of $4.75 billion of new PG&E Corporation debt;

the reinstatement of $9.575 billion of pre-petition debt of the Utility;
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the issuance of $23.775 billion of new Utility debt, consisting of (i) $6.2 billion of New Utility Long-Term Notes to be issued to holders of certain pre-petition senior notes of the Utility pursuant to the Plan, (ii) $1.75 billion of New Utility Short-Term Notes to be issued to holders of certain pre-petition senior notes of the Utility pursuant to the Plan, (iii) $3.9 billion of Utility Funded Debt Exchange Notes to be issued to holders of certain pre-petition indebtedness of the Utility pursuant to the Plan and (iv) $11.925 billion of new debt securities or bank debt of the Utility to be issued to third parties for cash on or prior to the Effective Date (of which $6.0 billion is expected to be repaid with the proceeds of a new securitization transaction after the Effective Date);

approximately $2.2 billion in proceeds of PG&E Corporation’s and the Utility’s liability insurance proceeds for wildfire events; and

cash available to PG&E Corporation or the Utility immediately prior to the Effective Date.

On October 4, 2019, the CPUC issued an OII to consider the ratemaking and other implications of the Plan.

The Plan has not been approved and is subject to regulatory review by the CPUC and FERC, as and to the extent required by law, including as potentially causing a change in control under Section 203 of the Federal Power Act. The Plan may be further amended, modified, or supplemented as necessary or desired by PG&E Corporation and the Utility or as required by the Bankruptcy Court or the CPUC. PG&E Corporation and the Utility expect that the CPUC and FERC will issue decisions in advance of the June 30, 2020 deadline for Plan confirmation.

On March 20, 2020, the Debtors filed a motion with the Bankruptcy Court for entry of an order approving a case resolution contingency process to address the circumstance in which the Plan is not confirmed or fails to become effective in accordance with certain required dates (the “Case Resolution Contingency Process”). As further described in the motion, the Case Resolution Contingency Process contemplates a process for the sale of PG&E Corporation or the Utility in the event that the Plan is not confirmed or fails to become effective in accordance with certain required dates. In addition, the motion sets forth certain other commitments by the Debtors in connection with the confirmation process and implementation of the Plan, including among other things, limitations on the ability of PG&E Corporation to pay dividends; commitments by the Utility with respect to cost recovery of amounts paid in respect of “Fire Claims” under the Plan; the terms of a purchase option in favor of the state of California (which would be exercisable only in limited circumstances); and commitments with respect to the Utility’s utilization of the cash benefits associated with wildfire-related net operating losses. Also on March 20, 2020, the California Governor filed a responsive pleading in the Bankruptcy Court stating that, assuming the Bankruptcy Court grants the Motion and the California Public Utilities Commission (“CPUC”) approves the Plan with the governance, financial and operational provisions submitted to the CPUC by the Utility or otherwise agreed by the Utility, with any modifications the CPUC believes appropriate or necessary, the Plan “will, in the Governor’s judgment, be compliant with AB 1054.” The Governor’s pleading also states that “a rate neutral securitization pursuant to Senate Bill 901...would, in [the Governor’s] judgment, be in the public interest...” Following a hearing held on April 7, 2020, the Bankruptcy Court indicated that it would approve the Debtors’ motion and the Case Resolution Contingency Process, subject to certain reservations of rights, and directed the Debtors to submit an order to that effect. The Bankruptcy Court entered the order approving the motion on April 9, 2020.

Disclosure Statement

On February 7, 2020, pursuant to section 1125 of the Bankruptcy Code, PG&E Corporation and the Utility filed a proposed disclosure statement (as updated, the “Proposed Disclosure Statement”), with all schedules and exhibits thereto, for the Plan. On February 18, 2020, PG&E Corporation and the Utility filed certain projections with the Bankruptcy Court as an exhibit to the Proposed Disclosure Statement, and on March 9, 2020, PG&E Corporation and the Utility filed an updated Proposed Disclosure Statement with revised financial projections as an exhibit with the Bankruptcy Court. PG&E Corporation and the Utility filed on February 18, 2020, a motion requesting that the Court (i) establish Plan solicitation and voting procedures, and (ii) approve the forms of Ballots, Solicitation Packages, and related notices to be sent to the various creditors and interest holders in connection with confirmation of the Plan (the “Solicitation Procedures Motion”). By order dated March 17, 2020, the Bankruptcy Court approved the Proposed Disclosure Statement and the Solicitation Procedures Motion. Pursuant to the Solicitation Procedures Motion, PG&E Corporation and the Utility mailed the Ballots, Solicitation Packages and related notices by March 31, 2020, and votes are due by May 15, 2020. A hearing to consider confirmation of the Plan is scheduled for May 27, 2020.

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Restructuring Support Agreement with the Ad Hoc Noteholder Committee

On January 22, 2020, PG&E Corporation and the Utility entered into the Noteholder RSA with those holders of senior unsecured debt of the Utility that are identified as “Consenting Noteholders” below and the Shareholder Proponents. The Noteholder RSA provides for, among other things, (i) the refinancing of the Utility’s senior unsecured debt in satisfaction of all claims arising out of the Utility Short-Term Senior Notes, the Utility Long-Term Senior Notes and the Utility Funded Debt, each as defined below, and (ii) the reinstatement of the Utility Reinstated Senior Notes, as defined below (together with the Utility Short-Term Senior Notes and Utility Long-Term Senior Notes, the “Utility Senior Note Claims”), in each case pursuant to the Plan and upon the terms and conditions set forth in the Noteholder RSA. Under the Noteholder RSA, PG&E Corporation and the Utility have also agreed to reimburse the holders of Utility Long-Term Senior Notes for debt placement fees and the members of the Ad Hoc Noteholder Committee for professional fees of up to $99 million upon the terms and conditions set forth in the Noteholder RSA. The following holders of Utility Senior Notes Claims are party to the Noteholder RSA as “Consenting Noteholders” as of the date hereof: Apollo Global Management LLC, Elliott Management Corporation, Oaktree Capital Management L.P., Farallon Capital Management LLC, Capital Group, Värde Partners Inc., Davidson Kempner Capital Management LP, Canyon Capital Advisors LLC, Third Point LLC, Pacific Investment Management Company LLC, Citadel Advisors LLC and Sculptor Capital Investments, LLC. Any holder of Utility Senior Note Claims or Utility Funded Debt can become a party to the Noteholder RSA by executing the joinder attached to the Noteholder RSA.

The Noteholder RSA provides for the following treatment of Utility Senior Note Claims and Utility Funded Debt which treatment has been incorporated into the Plan:

Utility Short-Term Senior Notes: Currently outstanding Utility notes maturing through 2022 in an aggregate principal amount of $1.75 billion (the “Utility Short-Term Senior Notes”) will receive new Utility secured notes in the following aggregate principal amounts: $875 million of new Utility 3.45% secured notes due 2025 and $875 million of new Utility 3.75% secured notes due 2028 (together, the “New Utility Short-Term Notes”). The New Utility Short-Term Notes will otherwise have substantially similar terms and conditions as the Utility’s 6.05% Senior Notes due March 1, 2034. Additionally, holders of claims arising out of the Utility Short-Term Senior Notes will receive cash in an amount equal to the sum of (1) the amount of pre-petition interest outstanding on the Utility Short-Term Senior Notes calculated using the applicable non-default contract rate and (2) interest calculated using the Federal Judgment Rate on the sum of (A) the applicable principal amount of the Utility Short-Term Senior Notes and (B) the amount in clause (1) for the period commencing on the day after the Petition Date and ending on the Effective Date.

Utility Long-Term Senior Notes: All long-term Utility notes bearing an interest rate greater than 5.00%, of which there is an aggregate principal amount outstanding of $6.2 billion (the “Utility Long-Term Senior Notes”), will receive new Utility secured notes in the following aggregate principal amounts: $3.1 billion of new Utility 4.55% secured notes due 2030 and $3.1 billion of new Utility 4.95% secured notes due 2050 (together, the “New Utility Long-Term Notes”). The New Utility Long-Term Notes will otherwise have substantially similar terms and conditions as the Utility’s 3.95% Senior Notes due December 1, 2047. Additionally, holders of claims arising out of the Utility Long-Term Senior Notes will receive cash in an amount equal to the sum of (1) the amount of pre-petition interest outstanding on the Utility Long-Term Senior Notes calculated using the applicable non-default contract rate and (2) interest calculated using the federal judgment rate on the sum of (A) the applicable principal amount of the Utility Long-Term Senior Notes and (B) the amount in clause (1) for the period commencing on the Petition Date and ending on the Effective Date.

Utility Reinstated Senior Notes: The remaining outstanding $9.575 billion aggregate principal amount of Utility notes (the “Utility Reinstated Senior Notes”) will be reinstated on their contractual terms, including being secured equally and ratably with the New Utility Short-Term Notes and the New Utility Long-Term Notes.

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Utility Funded Debt: Holders of the Utility’s pre-petition credit facilities and Pollution Control bonds (collectively, the “Utility Funded Debt”) will receive new Utility secured notes in the following aggregate principal amounts: $1.949 billion in new Utility 3.15% senior secured notes due 2025, and $1.949 billion in new Utility 4.50% senior secured notes due 2040 (the “New Utility Funded Debt Exchange Notes”). The New Utility Funded Debt Exchange Notes will otherwise have substantially similar terms and conditions as the Utility’s 6.05% Senior Notes due March 1, 2034. Additionally, holders of claims arising out of the Utility Funded Debt will receive cash in an amount equal to the sum of (1) the amount of pre-petition interest outstanding on the Utility Funded Debt calculated using the applicable non-default contract rate, (2) fees and charges and other obligations owed as of the Petition Date in respect of the Utility Funded Debt, (3) reasonable attorney’s fees and expenses of counsel, subject a maximum of $6 million and (4) interest calculated using the federal judgment rate on the sum of (A) the applicable principal amount of the Utility Funded Debt and (B) the amount in clauses (1) and (2) for the period commencing on the Petition Date and ending on the Effective Date.

On February 5, 2020, the Bankruptcy Court entered an order approving the Noteholder RSA. For more information regarding the terms of the Noteholder RSA, see Note 2 of the Notes to the Consolidated Financial Statements in Item 8 of the 2019 Form 10-K.

Equity Backstop Commitments

As of March 6, 2020, PG&E Corporation has entered into Chapter 11 Plan Backstop Commitment Letters (collectively, the “Backstop Commitment Letters”) with investors (collectively, the “Backstop Parties”), pursuant to which the Backstop Parties severally agreed to fund up to $12.0 billion of proceeds to finance the Plan through the purchase of PG&E Corporation common stock, subject to the terms and conditions set forth in such Backstop Commitment Letters (the “Backstop Commitments”). The price at which any such new shares would be issued to the Backstop Parties would be equal to (a) 10 (subject to adjustment as provided in the Backstop Commitment Letters), times (b) PG&E Corporation’s consolidated Normalized Estimated Net Income (as defined in the Backstop Commitment Letters) for the estimated year 2021, divided by (c) the number of fully diluted shares of PG&E Corporation that will be outstanding on the effective date of the Plan (the “Effective Date”) (assuming that all equity is raised by funding the Backstop Commitments).

The Backstop Commitment Letters provide that, under certain circumstances, PG&E Corporation and the Utility will be permitted to issue new shares of common stock of PG&E Corporation for up to $12.0 billion of proceeds to finance the transactions contemplated by the Plan through one or more equity offerings that, under certain circumstances, must include a rights offering (the “Rights Offering”). The structure, terms and conditions of any such equity offering (including a Rights Offering) are expected to be determined by PG&E Corporation and the Utility at a later time in the Chapter 11 process, subject to the terms and conditions of the Backstop Commitment Letters. This may include terms and conditions that are designed to preserve the ability of PG&E Corporation or the Utility to utilize their net operating loss carryforwards. There can be no assurance that any such equity offering would be successful. In the event that such equity offerings (together with additional permitted capital sources) do not raise at least $12.0 billion of proceeds in the aggregate or if PG&E Corporation and the Utility do not otherwise consummate such offerings, then PG&E Corporation and the Utility may draw on the Backstop Commitments for equity funding to finance the transactions contemplated by the Plan, subject to the satisfaction or waiver by the Backstop Parties of the conditions set forth therein. Although the Backstop Commitment Letters permit PG&E Corporation to draw up to $12.0 billion in equity under specified circumstances, the Plan contemplates an equity raise of only $9.0 billion, the maximum available under these circumstances, which equity will be raised in accordance with the terms of the Backstop Commitment Letters.

Under the Backstop Commitment Letters, PG&E Corporation agrees that if the Backstop Commitments are drawn, and PG&E Corporation does not expect to conduct a third-party transaction based upon or related to the utilization or monetization of any net operating losses or tax deductions resulting from the payment of pre-petition wildfire-related claims (a “Tax Benefits Monetization Transaction”) on the Effective Date, no later than five business days prior to the Effective Date, PG&E Corporation and the Utility must form a trust which would provide for periodic distributions of cash to the Backstop Parties in amounts equal to (i) all tax benefits arising from the payment of wildfire-related claims in excess of (ii) the first $1.35 billion of tax benefits, starting with fiscal year 2020. PG&E Corporation intends to explore a Tax Benefits Monetization Transaction. If PG&E Corporation and the Utility implement the capital structure outlined in the Debtors’ Plan of Reorganization OII Prepared Testimony filed with the California Public Utilities Commission on January 31, 2020, such capital structure will be deemed to include a $6.0 billion “Tax Benefits Monetization Transaction” for the purposes of the Backstop Commitment Letter.

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The Backstop Parties’ funding obligations under the Backstop Commitment Letters are subject to numerous conditions, including, among others, that (a) the Backstop Commitment Letters have been approved by the Bankruptcy Court, (b) the conditions precedent to the Effective Date set forth in the Plan have been satisfied or waived in accordance with the Plan, (c) the Bankruptcy Court has entered an order confirming the Plan and approving the transactions contemplated thereunder, which shall confirm the Plan with such amendments, modifications, changes and consents as are approved by holders of a majority of the aggregate Backstop Commitments (the “Confirmation Order”), (d) PG&E Corporation’s and the Utility’s weighted average earning rate base for 2021 is no less than 95% of $48 billion, and (e) there has been no event, occurrence or other circumstance that would have or would reasonably be expected to have a material adverse effect on the business of PG&E Corporation and the Utility or their ability to consummate the transactions contemplated by the Backstop Commitment Letters and the Plan.

In addition, the Backstop Parties have certain termination rights under the Backstop Commitment Letters, including, among others, if:

the Plan (including as may be amended, modified or otherwise changed) does not include Abrams and Knighthead as plan proponents and is not in a form acceptable to each of Abrams and Knighthead,

PG&E Corporation’s and the Utility’s aggregate liability with respect to pre-petition wildfire-related claims exceeds $25.5 billion,

the Plan is amended without the consent of the holders of a majority of the aggregate Backstop Commitments,

the Confirmation Order has not been entered by the Bankruptcy Court by June 30, 2020,

the Effective Date has not occurred within 60 days of entry of the Confirmation Order,

a material adverse effect (as described above) occurs,

the CPUC fails to issue all necessary approvals, authorizations and final orders to implement the Plan prior to June 30, 2020, including approvals related to the Utility’s capital structure and authorized rate of return and the resolution of the CPUC’s claims against the Utility for fines or penalties, all of which must be satisfactory to the holders of a majority of the aggregate Backstop Commitments,

the amount of asserted administrative expense claims or the amount of administrative expense claims PG&E Corporation and the Utility have reserved for and/or paid in the aggregate exceeds $250 million, net of insurance, in each case excluding administrative expense claims that are ordinary course, professional fee claims, claims that are disallowed in the Chapter 11 Cases and the portion of an administrative expense claim that is covered by insurance,

one or more wildfires occur in the Utility’s service area on or after January 1, 2020 that damage or destroy at least 500 dwellings or commercial structures in the aggregate at a time when the portion of the Utility’s system at the location of such wildfire was not successfully de-energized,

as of the Effective Date, the Utility has not elected and received Bankruptcy Court approval, or satisfied the other required conditions, to participate in the statewide wildfire fund established by AB 1054,

at any time the Bankruptcy Court determines that PG&E Corporation and the Utility are insolvent,

PG&E Corporation and the Utility enter into any Tax Benefit Monetization Transaction and the net cash proceeds thereof are less than $3.0 billion, excluding the $1.35 billion of tax benefits to be utilized in the Plan, and

the Plan or any supplements to or other documents in connection with the Plan has been amended, modified or changed, without the consent of the holders of at least 66 2/3% of the aggregate Backstop Commitments, to include a process for transferring the license and operating assets of the Utility to the State of California or a third party (a “Transfer”) or PG&E Corporation and the Utility effect a Transfer other than pursuant to the Plan. There can be no assurance that the conditions precedent set forth in the Backstop Commitment Letters will be satisfied or waived, nor that events or circumstances will not occur that give rise to termination rights of the Backstop Parties.

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The commitment premium for the Backstop Commitments is paid in shares of PG&E Corporation’s common stock (with each Backstop Party receiving its pro rata share of 119.0 million shares of the Corporation’s common stock based on the proportion of the amount of such Backstop Party’s Backstop Commitment to $12 billion). This aggregate 119 million share amount will be adjusted through the issuance of additional shares in the event that the aggregate value of the 119 million shares paid as the Backstop Commitment premium is less than $764 million based on the market price of the Corporation’s common stock following the Effective Date, subject to a cap of 19,909,091 additional shares in total. Such commitment premium was earned in full upon Bankruptcy Court approval of the Backstop Commitment Letters, subject to clawback under certain circumstances set forth in the Backstop Commitment Letters. In the event that a plan of reorganization for PG&E Corporation that is not the Plan is confirmed by the Bankruptcy Court, then the Backstop Commitment premium will be payable in cash if elected by the applicable Backstop Party. Under the Backstop Commitment Letters, PG&E Corporation and the Utility have also agreed to reimburse the Backstop Parties for reasonable professional fees and expenses of up to $34 million in the aggregate for the legal advisors and $19 million in the aggregate for the financial advisor, upon the terms and conditions set forth in the Backstop Commitment Letters.

On March 16, 2020, the Bankruptcy Court approved the Backstop Commitment Letters. As of March 31, 2020, PG&E Corporation expects to record approximately $1 billion of expense related to the Backstop Commitment premium in Reorganization items, net for the year ended December 31, 2020. The total annual expense will be determined based on the price of PG&E Corporation’s common stock as of the Effective Date.

Debt Commitment Letters

On October 11, 2019, PG&E Corporation and the Utility entered into debt commitment letters, which were subsequently amended on November 18, 2019, December 20, 2019, January 30, 2020, and February 14, 2020 (as amended, the “Debt Commitment Letters”) with JPMorgan Chase Bank, N.A., Bank of America, N.A., BofA Securities, Inc., Barclays Bank PLC, Citigroup Global Markets Inc., Goldman Sachs Bank USA, Goldman Sachs Lending Partners LLC and the other lenders that may become parties to the Debt Commitment Letters as additional “Commitment Parties” as provided therein (the foregoing parties, collectively, the “Commitment Parties”), pursuant to which the Commitment Parties committed to provide $10.825 billion in bridge financing in the form of (a) a $5.825 billion senior secured bridge loan facility (the “OpCo Facility”) with the Utility or any domestic entity formed to hold all of the assets of the Utility upon emergence from bankruptcy (the Utility or any such entity, the “OpCo Borrower”) as borrower thereunder and (b) a $5.0 billion senior unsecured bridge loan facility (together with the OpCo Facility, the “Facilities”) with PG&E Corporation or any domestic entity formed to hold all of the assets of PG&E Corporation upon emergence from bankruptcy (the Corporation or any such entity, the “HoldCo Borrower”) as borrower thereunder, subject to the terms and conditions set forth therein. The commitments under the Debt Commitment Letters will expire on August 29, 2020, unless terminated earlier pursuant to the termination rights described below.

Borrowings under the OpCo Facility would be senior secured obligations of the OpCo Borrower, secured by substantially all of the assets of the OpCo Borrower. Borrowings under the HoldCo Facility would be senior unsecured obligations of the HoldCo Borrower. The OpCo Borrower’s obligations under the OpCo Facility, and the HoldCo Borrower’s obligations under the HoldCo Facility, would not be guaranteed by any other entity. The scheduled maturity of each of the Facilities would be 364 days following the date the Facilities are funded. PG&E Corporation and the Utility will pay customary fees and expenses in connection with obtaining the Facilities (including commitment fees and ticking fees but excluding any fees related to the funding of the Facilities). If the entire $10.825 billion of bridge commitments remain outstanding as of June 30, 2020, the aggregate fees payable (including commitment fees and ticking fees, but excluding any fees related to the funding of the Facilities) by PG&E Corporation and the Utility would be approximately $75 million.

In connection with the anticipated funding for the Plan and the anticipated amount of debt and equity to be used for funding thereunder, on February 14, 2020, the Debt Commitment Letters were amended to, among other things, (1) adjust the maximum amount of any roll-over, “take-back” or reinstated debt permitted under the Facilities from $30 billion to $33.35 billion at the Utility and from $7.0 billion to $5.0 billion at PG&E Corporation and (2) increase the amount of proceeds from the issuance of debt securities or other debt for borrowed money as a condition to funding from $2.0 billion at PG&E Corporation to $6.0 billion at the Utility.

The Commitment Parties’ funding obligations under the Debt Commitment Letters are subject to numerous conditions and termination rights, including, among others, certain conditions and termination rights similar to those included in the Backstop Commitment Letters, in addition to conditions that are not in the Backstop Commitment Letters, including (a) the delivery of specified financial information, (b) PG&E Corporation’s receipt of at least $9.0 billion of proceeds from the issuance of equity, (c) the execution of definitive documentation for the Facilities and (d) that the Utility shall have received investment grade senior secured debt ratings. The Utility’s ability to borrow under the OpCo Facility is subject to approval by the CPUC.

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In lieu of entering into the Facilities, PG&E Corporation and the Utility intend to obtain permanent financing on or prior to emergence from bankruptcy in the form of bank facilities, debt securities or a combination of the foregoing.

On March 16, 2020, the Bankruptcy Court approved the Debt Commitment Letters as amended through February 28, 2020. During the three months ended March 31, 2020, PG&E Corporation and the Utility recorded facility fees of $36 million and $14 million, respectively, reflected in Reorganization items, net on the Condensed Consolidated Income Statements. In addition, the Utility recorded $18 million to a regulatory asset for fees that are deemed probable of recovery.

The timing and outcome of the Chapter 11 Cases is uncertain. Although PG&E Corporation, the Utility, the Bankruptcy Court, the CPUC and many other stakeholders have stated that they are working towards confirming a plan of reorganization by June 30, 2020, it is possible that the Chapter 11 process could extend beyond the June 30, 2020 deadline and take a number of years to resolve.

Ad Hoc Noteholder Plan of Reorganization

On October 17, 2019, the TCC and the Ad Hoc Noteholder Committee filed the Ad Hoc Noteholder Plan. On December 19, 2019, pursuant to the TCC RSA (described below), the TCC filed a notice of withdrawal as a plan proponent of the Ad Hoc Noteholder Plan with the Bankruptcy Court. The Ad Hoc Noteholder Plan differed from the Plan in a number of respects, including, but not limited to, its treatment of equity interests, its treatment of holders of claims in respect of debt of PG&E Corporation and the Utility and its financing sources.

On January 22, 2020, the Ad Hoc Noteholder Committee entered into the Noteholder RSA with PG&E Corporation and the Utility, under which it agreed, upon entry of the order of the Bankruptcy Court approving the Noteholder RSA, to withdraw any participation in and support for the Ad Hoc Noteholder Plan, including by taking certain actions to defer further action on the make-whole and post-petition interest issues. On February 4, 2020, the Noteholder RSA was approved by the Bankruptcy Court, and on February 5, 2020, the Ad Hoc Noteholder Committee withdrew the Ad Hoc Noteholder Plan. It is possible that, if the Noteholder RSA is terminated, the Ad Hoc Noteholder Committee could re-file a competing plan with similar or different terms.

Debtor-In-Possession Financing

See Note 5 for further discussion of the DIP Facilities, which provide up to $5.5 billion in financing.

Financial Reporting in Reorganization

Effective on the Petition Date, PG&E Corporation and the Utility began to apply accounting standards applicable to reorganizations, which are applicable to companies under Chapter 11 bankruptcy protection. These accounting standards require the financial statements for periods subsequent to the Petition Date to distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Expenses, realized gains and losses, and provisions for losses that are directly associated with reorganization proceedings must be reported separately as reorganization items, net in the Condensed Consolidated Statements of Income. In addition, the balance sheet must distinguish pre-petition LSTC of PG&E Corporation and the Utility from pre-petition liabilities that are not subject to compromise, post-petition liabilities, and liabilities of the subsidiaries of PG&E Corporation that are not debtors in the Chapter 11 Cases in the Condensed Consolidated Balance Sheets. LSTC are pre-petition obligations that are not fully secured and have at least a possibility of not being repaid at the full claim amount. Where there is uncertainty about whether a secured claim will be paid or impaired pursuant to the Chapter 11 Cases, PG&E Corporation and the Utility have classified the entire amount of the claim as LSTC.

Furthermore, the realization of assets and the satisfaction of liabilities are subject to uncertainty. While operating as debtors-in-possession, actions to enforce or otherwise effect the payment of certain claims against PG&E Corporation and the Utility in existence before the Petition Date are stayed while PG&E Corporation and the Utility continue business operations as debtors-in-possession. These claims are reflected as LSTC in the Condensed Consolidated Balance Sheets at March 31, 2020. Additional claims (which could be LSTC) may arise after the Petition Date resulting from the rejection of executory contracts, including leases, and from the determination by the Bankruptcy Court (or agreement by parties-in-interest) of allowed claims for contingencies and other disputed amounts.

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PG&E Corporation’s Condensed Consolidated Financial Statements are presented on a consolidated basis and include the accounts of PG&E Corporation and the Utility and other subsidiaries of PG&E Corporation and the Utility that individually and in aggregate are immaterial. Such other subsidiaries did not file for bankruptcy.

The Utility’s Condensed Consolidated Financial Statements are presented on a consolidated basis and include the accounts of the Utility and other subsidiaries of the Utility that individually and in aggregate are immaterial. Such other subsidiaries did not file for bankruptcy.

Liabilities Subject to Compromise

As a result of the commencement of the Chapter 11 Cases, the payment of pre-petition liabilities is subject to compromise or other treatment pursuant to a plan of reorganization. Generally, actions to enforce or otherwise effect payment of pre-petition liabilities are stayed. Although payment of pre-petition claims generally is not permitted, the Bankruptcy Court granted PG&E Corporation and the Utility authority to pay certain pre-petition claims in designated categories and subject to certain terms and conditions. This relief generally was designed to preserve the value of PG&E Corporation’s and the Utility’s business and assets. As described above, among other things, the Bankruptcy Court authorized, but did not require, PG&E Corporation and the Utility to pay certain pre-petition claims relating to employee wages and benefits, taxes, and amounts owed to certain vendors.

The determination of how liabilities will ultimately be settled or treated cannot be made until the Bankruptcy Court confirms a Chapter 11 plan of reorganization and such plan becomes effective. Accordingly, the ultimate amount of such liabilities is not determinable at this time. GAAP requires pre-petition liabilities that are subject to compromise to be reported at the amounts expected to be allowed by the Bankruptcy Court, even if they may be settled for different amounts. The amounts currently classified as LSTC are preliminary and may be subject to future adjustments depending on Bankruptcy Court actions, further developments with respect to disputed claims, determinations of the secured status of certain claims, the values of any collateral securing such claims, rejection of executory contracts, continued reconciliation or other events.

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The following table presents LSTC as reported in the Condensed Consolidated Balance Sheets at March 31, 2020:
(in millions)Utility
PG&E Corporation (1)
PG&E Corporation Consolidated
Financing debt (2)
$22,627  $671  $23,298  
Wildfire-related claims (3)
25,548  —