By Becky Yerak and Katherine Blunt
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (January 25, 2019).
A hedge fund that recently raised its stake in PG&E Corp.'s
stock is pushing to oust the California utility's board of
directors and says the shares, now trading around $14, could be
worth more than $50 with the right corporate governance.
BlueMountain Capital Management LLC, which owns about 11 million
of PG&E's 519 million shares, on Thursday sent a letter to
shareholders urging support for a proxy fight to replace the
company's entire 10-member board during an annual shareholder
meeting in May. The investor said it plans to nominate a new slate
by Feb. 21.
"When sound governance is restored, and structural issues
addressed, the company will resolve its financial issues,"
BlueMountain said in its Thursday letter to PG&E
shareholders.
Last week BlueMountain urged the utility's board of directors to
reconsider recently announced plans to file for bankruptcy soon to
tackle liabilities from wildfire damages that PG&E estimates
could run into the tens of billions of dollars.
Talk of a chapter 11 filing shook BlueMountain and other
investors that bought up the stock before California's deadly Camp
Fire, which killed 86 people. The utility's equipment is suspected
of having triggered some wildfires.
PG&E shares, selling for $48.80 just before the Camp Fire
broke out in November, closed Thursday at $13.95, up almost 75%
after California's forestry and fire protection department, known
as Cal Fire, said one deadly 2017 fire was caused by a private
electrical system, not by PG&E's equipment.
"The news from Cal Fire that PG&E did not cause the
devastating 2017 Tubbs fire is yet another example of why the
company shouldn't be rushing to file for bankruptcy, which would be
totally unnecessary and bad for all stakeholders," said a
BlueMountain spokesperson.
"With proper corporate governance and appropriate resolution of
liabilities in the ordinary course, we believe that PG&E common
stock could be worth in excess of $50 per share," BlueMountain
wrote.
The firm hasn't yet divulged the names of any individuals it
plans to nominate to the board at the upcoming shareholder
meeting.
The current board's plans to file "a voluntary, costly and
unnecessary bankruptcy" violates its "fiduciary duties to the
company and to you," BlueMountain said in its shareholder
letter.
"Instead of rolling up their sleeves and getting to work,
current board members are poised to concede defeat and pass the
buck to a bankruptcy judge," BlueMountain said. "There is no
imminent financial crisis -- there is a leadership crisis."
BlueMountain said a new board would have the ability to
investigate the decisions that led to the company's
"value-destroying bankruptcy announcement and take appropriate
action."
"If a new board agreed with the overwhelming evidence that
PG&E is solvent, it could exit bankruptcy on an expedited basis
without impairing creditors," BlueMountain wrote.
PG&E has lost the public's trust and has severely damaged
its relationship with regulators and elected officials,
BlueMountain said.
Already, state investigators have tied the utility's equipment
to 18 wildfires in 2017, and they are working to determine whether
one of the company's high-voltage transmission lines started the
Camp Fire.
Earlier this month PG&E, the parent of Pacific Gas &
Electric Co., said the boards of directors of the corporation and
the utility are in the process of searching for new directors and
are currently interviewing several candidates.
PG&E said Thursday that its board is working with a search
firm on its "board refreshment process."
PG&E also said earlier this month that Chief Executive
Geisha Williams was stepping down and John Simon, the company's
general counsel since 2017, would serve as interim CEO as the
utility's board of directors conducts a search for a new chief.
Rothschild Vice Chairman Roger Kimmel has also resigned as a
director.
PG&E has said that, following a comprehensive review that
included help from outside experts, its board unanimously
determined that a chapter 11 reorganization is the only viable
option and the best way to maximize the value of the business for
all interests, which include wildfire victims, customers,
employees, creditors and shareholders.
BlueMountain, with offices in New York and London, has about $19
billion in assets under management.
It is unclear whether BlueMountain would have the support of
other shareholders in electing new directors at PG&E. Other
major hedge funds including Baupost Group LLC and D.E. Shaw
continue to own PG&E shares. Baupost and D.E. Shaw declined to
comment.
-- Peg Brickley contributed to this article.
Write to Becky Yerak at becky.yerak@wsj.com and Katherine Blunt
at Katherine.Blunt@wsj.com
(END) Dow Jones Newswires
January 25, 2019 02:47 ET (07:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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