Connecticut firm said to be Nutter's choice to take over PGW

The neighborhood office of Philadelphia Gas Works at 5230 Chestnut St in West Philadelphia. (Alejandro A. Alvarez / Staff Photographer)
The neighborhood office of Philadelphia Gas Works at 5230 Chestnut St in West Philadelphia. (Alejandro A. Alvarez / Staff Photographer)
Posted: March 02, 2014

The city's yearlong quest to find a buyer for the Philadelphia Gas Works is passing into a new, frenetic phase, and a Connecticut utility that entered the natural-gas business only three years ago is said to be Mayor Nutter's choice to take over PGW.

UIL Holdings Corp. of New Haven, parent company of Connecticut electric utility United Illuminating Co. and three New England gas utilities, has been selected by Nutter, according to a published report. Sources said a deal is incomplete, and no terms were disclosed. If UIL succeeds, the PGW acquisition would nearly double its size.

The selection of a winner will launch a high-stakes game with City Council, whose members have been excluded from the selection process but must approve a sale. A skeptical Council is hiring consultants to help analyze the bid and examine alternatives to a sale.

UIL's name emerged this week as the front-runner. The Philadelphia Daily News, citing a letter to an unnamed recipient from lawyer Stephen A. Cozen, identified UIL Holdings as the mayor's choice. Cozen, who represents a rival bidder, declined to comment. So did spokesmen for the mayor and UIL.

Cozen represents a one-year-old company called Liberty Energy Trust L.L.C., founded by Russian-born Boris Brevnov, a former Enron executive who lives in Virginia and has spent the last decade engineering energy mergers.

Liberty Energy recently identified itself as a PGW finalist to leaders of the union that represents 1,150 gas workers.

James F. Runckel, the union's lawyer, said Liberty Trust had financial backing from a labor-owned investment company, Ullico Inc. But the gas workers union, which has vociferously opposed a sale to any bidder, declined to endorse Liberty Energy, he said.

Brevnov did not respond to requests for comment.

Though terms of a deal have not been announced, Nutter has said any deal would respect existing labor contracts and low-income assistance programs.

Last year, Nutter launched the bidding process to sell PGW, the nation's largest municipally owned gas utility. JPMorgan Chase & Co. and Loop Capital Partners are managing the sale. A financial adviser calculated that PGW could command a price of $1.4 billion to $1.9 billion, with net proceeds to the city of $422 million to $872 million. Nutter has proposed using the money to shore up the city's underfunded pension program.

Though PGW's business of distributing gas to 503,000 customers is stagnant, the utility is being marketed as a growth opportunity for investors looking to gain a foothold in a region repositioning itself as an energy hub tied to Marcellus Shale natural-gas development.

UIL, with a market value of about $2.2 billion, is a pure-play utility that got into the gas business only in 2010, when it paid $1.3 billion to acquire three New England gas utilities: Southern Connecticut Gas Co., Connecticut Natural Gas Corp., and BerkShire Gas Co. in western Massachusetts. The acquisition doubled UIL's size.

The company's chief executive, James P. Torgerson, was questioned by analysts at a Feb. 21 earnings call about merger-and-acquisition opportunities.

"Well, I think what we've said in the past is that if there are opportunities, we'd like to look at them for utilities in the area or in the region, kind of a broad region," he said.

UIL shares closed at $38.72 Friday, down 73 cents or 1.85 percent.


amaykuth@phillynews.com

215-854-2947 @maykuth

comments powered by Disqus
|
|
|
|
|