Four separate Pacific Gas & Electric Co. (PG&E) entities could emerge from bankruptcy with BBB- ratings if all goes well with the company’s reorganization plan, Standard & Poor’s said Thursday. That means the bankruptcy court would have to approve the company’s plan to split itself into four units, and it would have to pass regulatory muster, meet certain financial conditions and be implemented within the expected time frame.

The ratings agency evaluated the reorganization plan at the request of PG&E in light of the approximately $8.5 billion in debt the new companies will have to issue. The rating is its lowest investment grade. S&P noted, however, that the plan, which would transfer much of the regulatory oversight from the California Public Utilities Commission (CPUC) to the Federal Energy Regulatory Commission (FERC), is vigorously opposed by the state agency and subject to a bankruptcy court decision.

Those are the major hurdles. In addition PG&E would have to make good on myriad financial elements and assumptions that could affect cash flow and credit quality. PG&E has proposed splitting off the electric and gas distribution functions into one company that would be state-regulated. Three other companies for electric transmission, gas transmission and power generation would come under FERC regulation. The CPUC has submitted its own plan to the bankruptcy court that would maintain the company as a single entity under its jurisdiction.

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