PG&E proposal and other news +3

07:09 28-Mar-19

There are two pieces of news that are pertinent to CWEN(A) shares this morning.  Court approval of a $5.5b operating loan is merely in line with what I've always said would happen: that the lights would stay on and providers would be paid at the same rate at least until the thornier issues were sorted out.  The decision simply affirms the likelihood of those being made in timely fashion.

As for the thornier issues, Bloomberg broke the news that a coalition of creditors is pitching a $35b plan.  More than half of that would come from the creditors themselves in exchange for equity and debt-linked securities.  The breakdown would be:

• $8b to re-capitalize PG&E, allowing it to exit from bankruptcy within a year.
• a $14b cash trust to pay for claims
• $2b from insurance proceeds
• a California wildfire fund of at least $13b, financed by utilities, state bonds and other government sources
  

There is almost certainly lots of wrangling ahead, particularly over my last bullet point.  Nonetheless, I see some version of this plan as likely to go through, if only because it requires relatively little from government.  Hopefully, California can be more decisive than the U.K., but it lacks the deadlines that have been built into Brexit.  eMagin's results this morning lead me to reiterate how time is just as important as eventual returns.  Moving forward is also important beyond just state finances and individual investments as delay has the potential to impact further renewable development, where California often sets a much needed example for the rest of the country, and indeed, the globe.

The proponents claim this solution will be “mainly neutral for consumers.”  That depends on what other solution one might compare it to, but I see a pattern where the finance industry profits from real-life operations wrecked by debt and then providing that debt all over again, all the while avoiding any assignment of true responsibility.  I very much doubt that is good for society, but it's good for Clearway and indirectly for other elements of the finance industry such as BGC.

Lest readers think that I never have a good word to say, I'll close by documenting progress in the fight for Net Neutrality, where the House has advanced the Save the Internet bill.  This is the best of several such efforts in that it would seek to completely undo the damage done by the FCC.  Of course, that means that it would face an uphill battle in the Senate and Oval Office.  As ever, we will see how politics play out.