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767 Fifth Avenue

New York, NY 10153-0119

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WEIL, GOTSHAL & MANGES LLP

Stephen Karotkin (pro hac vice)

(stephen.karotkin@weil.com)

Ray C. Schrock, P.C. (pro hac vice)

(ray.schrock@weil.com)

Jessica Liou (pro hac vice)

(jessica.liou@weil.com) 

Matthew Goren (pro hac vice)

(matthew.goren@weil.com)

767 Fifth Avenue

New York, NY 10153-0119

Tel: 212 310 8000

Fax: 212 310 8007

KELLER & BENVENUTTI LLP

Tobias S. Keller (#151445)

(tkeller@kellerbenvenutti.com)

Jane Kim (#298192)

(jkim@kellerbenvenutti.com)

650 California Street, Suite 1900

San Francisco, CA 94108

Tel: 415 496 6723

Fax: 650 636 9251

Attorneys for Debtors

and Debtors in Possession

UNITED STATES BANKRUPTCY COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN FRANCISCO DIVISION

In re:

PG&E CORPORATION,

 - and -

PACIFIC GAS AND ELECTRIC

COMPANY,

Debtors.

 Affects PG&E Corporation 

 Affects Pacific Gas and Electric Company 

 Affects both Debtors

* All papers shall be filed in the Lead Case, 

No. 19-30088 (DM). 

Bankruptcy Case No. 19-30088 (DM)

Chapter 11 (Lead Case) (Jointly Administered)

DECLARATION OF JAMES 

MESTERHARM IN SUPPORT OF 

DEBTORS’ OBJECTION TO MOTION OF 

THE AD HOC COMMITTEE OF SENIOR 

UNSECURED NOTEHOLDERS TO 

TERMINATE THE DEBTORS’ 

EXCLUSIVE PERIODS PURSUANT TO 

SECTION 1121(d)(1) OF THE 

BANKRUPTCY CODE

Hearing Date: July 24, 2019

Time: 9:30 a.m. (Pacific Time)

Place: United States Bankruptcy Court

Courtroom 17, 16th Floor

San Francisco, CA 94102

Obj. Deadline: July 18, 2019, 4:00 p.m. (PT)

Case: 19-30088 Doc# 3076 Filed: 07/18/19 Entered: 07/18/19 16:16:29 Page 1 of

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I, James Mesterharm, pursuant to 28 U.S.C. § 1746, hereby declare that the following 

is true to the best of my knowledge, information, and belief:

I am a Managing Director of AlixPartners, LLP (“AlixPartners”), an affiliate of both 

AlixPartners, LLC and AP Services, LLC, which, by Order dated April 9, 2019 [Docket No. 1299],

is authorized to provide interim management services to PG&E Corporation and Pacific Gas and 

Electric Company, as debtors and debtors-in-possession (collectively, “PG&E” or the “Debtors”)

in the above-captioned Chapter 11 Cases (the “Chapter 11 Cases”). I am generally familiar with 

the Debtors’ day-to-day operations, business and financial affairs, and books and records.

I have been a full time restructuring advisor for over 25 years. I received a B.S. in

Accounting and Management in 1990 from Purdue University and a Masters of Business

Administration in Finance and Organizational Behavior in 1998 from Northwestern University’s

Kellogg School of Graduate Management, where I have been a guest lecturer on restructuring topics. 

I am a Certified Public Accountant and a Fellow of the American College of Bankruptcy. I have 

been employed by AlixPartners since September 1996 and am the Head of the Americas Turnaround 

and Restructuring Practice. AlixPartners is a global independent restructuring consulting firm that 

has a wealth of experience in providing restructuring advisory services, and has assisted, advised, 

and provided strategic advice to debtors, creditors, bondholders, investors, and other entities in 

numerous chapter 11 cases of similar size and complexity to these chapter 11 cases. Since its 

inception in 1981, AlixPartners, its predecessor entities, and its affiliate, AP Services, LLC, have 

provided restructuring or crisis management services in numerous large cases. Some notable, 

publicly-disclosed restructuring assignments that I have personally led include American Tire 

Distributors, Pacific Drilling, Linn Energy, Inc., Paragon Offshore PLC, Walter Energy, Inc., 

Nautilus Holdings Ltd., Eastman Kodak Company, General Growth Properties, Hilex-Poly, Silicon 

Graphics Inc., Parmalat USA, Safety-Kleen Corporation, and Zenith Electronics Corporation.

I submit this Declaration in support of the Debtors’ Objection (the “Objection”), 

filed contemporaneously herewith, to the Motion of the Ad Hoc Committee of Senior Unsecured 

Noteholders to Terminate the Debtors’ Exclusive Periods Pursuant to Section 1121(d)(1) of the 

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Bankruptcy Code, dated June 25, 2019 [Docket No. 2741] (the “Termination Motion”).1 Except 

as otherwise indicated herein, the facts set forth in this Declaration are based upon my personal 

knowledge, my review of relevant documents, including the Ad Hoc Term Sheet and the Amended 

Ad Hoc Term Sheet (each as defined below), and information provided to me by the Debtors’ 

employees or the Debtors’ legal, restructuring, and financial advisors. If called upon to testify, I 

would testify competently to the facts set forth in this Declaration. I am authorized to submit this 

Declaration on behalf of the Debtors.

Funding Deficit under the Ad Hoc Plan

I have reviewed the “Term Sheet for Plan of Reorganization” (the “Ad Hoc Term 

Sheet,” and the plan described therein, the “Ad Hoc Plan”) annexed by the Ad Hoc Committee as 

an exhibit to its Termination Motion, as well as the Amended Plan Term Sheet filed by the Ad Hoc 

Committee on July 17, 2019 (the “Amended Ad Hoc Term Sheet” and the amended plan described 

therein, the “Amended Ad Hoc Plan”). Based upon my review of the Amended Ad Hoc Term 

Sheet, the proposed Amended Ad Hoc Plan does not account for approximately $3.8 billion of 

funding necessary for the Debtors to emerge from chapter 11 based on the sources of financing and 

funds needed for emergence contemplated by the Amended Ad Hoc Plan. The uses that are not 

accounted for in the Amended Ad Hoc Term Sheet include the following: (a) approximately $1.4

billion of accrued interest on funded debt that is proposed to be refinanced and exchanged for 

replacement notes as part of the Amended Ad Hoc Plan, and (b) approximately $3.1 billion of 

expected emergence costs related to prepetition trade claim payments, professional fees, transaction 

fees, proposed backstop fees, and including a 15% contingency. This shortfall does not include any 

estimate for contract rejection damage claims, disputed claims, CPUC fines and penalties or other 

statutory payments required to emerge from chapter 11. A chart summarizing the shortfall in 

funding is set forth below.

 

1 Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such 

terms in the Objection.

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Sources of Plan Emergence Financing 

Under Amended Ad Hoc Plan 

(in billions)

Funds Necessary to Emerge From 

Chapter 11 Under Terms of 

Amended Ad Hoc Plan 

(in billions)

New Unsecured Debt Issuance $4.0 Wildfire Claims Settlement $16.0

New Secured Debt Issuance $5.5 Initial Contribution to New 

Go-Forward Wildfire Fund

$5.0

New Investment in Equity of 

Reorganized Debtors

$19.0 Repayment of DIP Facility $2.6

Company Insurance Proceeds $2.2 Repayment of Bond Maturities 

through 2022

$6.4

Accrued Interest on Funded Debt 

(excluding makewhole or similar costs)

$1.4

Trade Claims and Other Emergence 

Costs (excluding any pre and 

postpetition interest)

$3.1

Total $30.7 Total $34.5

Shortfall = $3.8 Billion

Therefore, in my opinion, the Amended Ad Hoc Plan does not provide the necessary 

funding for the Debtors to successfully emerge from Chapter 11. 

The Debtors Have Made Substantial Progress 

Towards Formulation of a Chapter 11 Plan

Since the commencement of these Chapter 11 Cases, the Debtors’ resources have 

been devoted to successfully assuring a smooth transition into chapter 11 and minimizing the 

business disruptions normally attendant thereto, maintaining relationships with the Debtors’ business 

partners, and establishing a collaborative working relationship with the US. Trustee, the Committees, 

the CPUC, and the advisors to the Governor’s Office, as well as with the Debtors’ other key 

economic stakeholders. Despite their short duration, I believe the Debtors have made substantial 

progress in the administration of the Chapter 11 Cases and towards the formulation of a viable and 

confirmable plan of reorganization, including:

 Stabilizing business operations, including restoring trade credit, and thereby 

substantially enhancing the Debtors’ liquidity profile;

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 Virtually eliminating demands for cash collateral and other forms of credit 

enhancement that were rampant at the inception of these cases and presented 

a significant liquidity challenge; 

 Achieving a key settlement with the Public Entities resolving all of their 

wildfire claims for an aggregate amount of $1 billion;

 Creating a $105 million fund to address the housing needs of those displaced 

by the wildfires;

 Hiring a new Chief Executive Officer with significant utility experience and 

a well-documented safety record;

 Installing new senior leadership in both the Debtors’ electric and gas 

businesses; 

 Refreshing the Debtors’ Board of Directors with new members with 

substantial safety and utility experience;

 Engaging in ongoing negotiations and discussions with the other two 

wildfire claimants’ constituencies in an effort to achieve a consensual 

resolution of their claims to be embodied in a chapter 11 plan; and

 Engaging in regular weekly meetings with the CPUC to assure that all issues 

within the jurisdiction and authority of the CPUC are timely and 

comprehensively addressed in the context of a chapter 11 plan.

As stated, I believe the Debtors have made substantial progress in the administration of 

these cases. The Debtors achieved a major milestone in settling with the Public Entities, and the 

Debtors are engaged in ongoing settlement discussions with the subrogation claimants and the Tort 

Claimants Committee and its constituency. The Court only recently established October 21, 2019, as 

the Bar Date for filing claims, an important element of the plan process, and in either negotiating or 

estimating the Debtors’ aggregate liability for the remaining wildfire claims. Furthermore, in order to 

address the fundamental issue of the Debtors’ aggregate liability for the wildfire claims that are to be 

treated under the plan, concurrently with the filing of the Objection, the Debtors are filing a motion 

for the establishment of wildfire claims estimation procedures in order to implement a formal process 

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to address the parties’ disparate views on this issue in a timely manner. I believe that establishing 

such a process also will serve to create the environment to facilitate and foster settlement negotiations. 

[Remainder of Page Intentional Left Blank]

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Pursuant to 28 U.S.C. § 1746, I declare under penalty of perjury that, to the best of 

my knowledge and after reasonable inquiry, the foregoing is true and correct and that this Declaration 

was executed in San Francisco, CA, on July 18, 2019.

/s/ James Mesterharm

By: James Mesterharm

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