Administration: PGW sale looking like a good deal

Posted: October 20, 2013

MAYOR NUTTER'S administration yesterday continued to build the case for the sale of Philadelphia Gas Works, releasing a cost/benefit analysis showing how the sale could be a good deal for taxpayers.

The new report, completed by the city-hired consulting firm Lazard Freres, estimates that PGW will fetch $1.45 billion to $1.9 billion in a sale - a $50 million increase from an estimate 18 months ago. That would result in a net profit of $422 million to $872 million, after PGW's substantial debts are paid off.

Budget Director Rebecca Rhynhart said the report provides a conservative estimate of the utility's value for two reasons: It did not take into account the potential for new business opportunities that bidders may be eyeing through a purchase, and it did not consider rate increases that PGW is already pursuing.

Nutter, who would like to see money from a sale go to the city's severely underfunded pension system, has said he will only go through with it if it's a good deal for the city.

The sale's skeptics, who include labor groups and some consumer advocates, point out that selling the utility will mean the loss of about $18 million per year that PGW sends to city coffers.

Rhynhart said that hole would be more than filled by a reduction in the city's state-mandated payments to the pension fund that will occur if the unfunded liability decreases with the cash from the sale.

"The general fund right away is held harmless," Rhynhart said. "Then we actually have additional room in the budget to give a bigger contribution than what's required to the pension fund."

The city is accepting nonbinding bids for the sale until Nov. 1. Rhynhart said there has been "robust" interest so far but declined to disclose the number of bids.

The next step will be for the city to make a short list of potential buyers, who will have until early January to submit a binding bid.

Finally, the administration will seek approval from City Council in the spring and from the state Public Utility Commission in 2014.

Twitter: @SeanWalshDN

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