Activist ValueAct Joins BlueMountain's Push to Revamp PG&E’s Board

(Bloomberg) -- BlueMountain Capital Management LLC has found a potent ally in its fight to overhaul leadership of bankrupt utility giant PG&E Corp: activist investor ValueAct Capital Management.

BlueMountain, a PG&E shareholder that pushed to keep PG&E out of bankruptcy, launched a proxy fight to replace its board in the days prior to the company’s Chapter 11 filing in January and has been seeking support from other investors.

On Friday, ValueAct Chief Executive Officer Jeff Ubben stepped forward to say one of his funds has taken a position in the company, and BlueMountain named him as one of its 13 nominations for the board.

In joining the campaign, Ubben said in an interview that PG&E “needs a restart to gain the trust of stakeholders.” ValueAct Spring Fund has bought 1 million shares of PG&E, according to BlueMountain’s open letter to PG&E shareholders. PG&E rose as much as 7.3 percent.

Activist ValueAct Joins BlueMountain's Push to Revamp PG&E’s Board

Both ValueAct and BlueMountain are looking for a major turnaround in PG&E’s leadership that will have the company emerge from the biggest utility bankruptcy in U.S. history with a board that’s ready to tackle the future of the company alongside California and its customers. The state’s largest utility is facing an estimated $30 billion in wildfire liabilities because California holds power companies responsible for any blazes their power lines cause. PG&E has been lobbying state lawmakers to change the policy.

Ubben said a new board and management “can turn the page on a new beginning with customers, regulators, legislators.” BlueMountain said separately that the lineup it’s proposing would lead PG&E to “a better future for its customers, employees and communities.”

For its part, PG&E said in a statement that it’s talking to shareholders including BlueMountain. The San Francisco-based company has already said it’s planning to overhaul the board so that a majority of the directors are “new, independent directors” by the time it holds its annual meeting.

On Thursday, PG&E said its equipment probably sparked the deadliest fire in California history. The November Camp Fire killed 85 people and destroyed the town of Paradise.

BlueMountain owns 11 million PG&E shares as of January 22. In addition to Ubben, the slate the company is proposing includes:

  • Phil Angelides, former California treasurer and chairman of the U.S. Financial Crisis Inquiry Commission
  • Kenneth Feinberg, a lawyer appointed by the U.S. to oversee Sept. 11 victim compensation fund as well as the Deepwater Horizon oil spill fund
  • Christopher Hart, former chairman of the National Transportation Safety Board
  • David Crane, former CEO of NRG Energy Inc.

With an eye on the future, Ubben described PG&E as being at the center of the “new economy” and said the company needs to be able to attract low-cost investments for its grid, which would serve as an open platform for “clean energy and electrification.” The goal for the company’s restructuring shouldn’t be “about carving up the pie” among stakeholders, but rather working toward the most efficient exit from bankruptcy, he said.

ValueAct’s $350-million Spring Master Fund has taken positions in power generator AES Corp., education company Strayer Education Inc. and wood-pellet manufacturer Enviva Partners LP. In October, the fund invested in Hawaiian Electric Industries Inc. and said it would work with the utility to accelerate the use of renewable energy.

ValueAct has a history of agitating for changes at some of the biggest corporations in America, most recently at Citigroup Inc. where it reached an agreement in January to have the bank share confidential information with the fund on strategy, governance, and planning. It has held active positions in companies ranging from private equity giant KKR & Co. and Morgan Stanley to Twenty-First Century Fox Inc. and Microsoft Corp.

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