Nutter's proposal to privatize the 176-year-old utility already faced stiff headwinds with City Council, which must approve the sale. The shadow campaign to tout an alternative the Nutter administration says is unworkable has angered the mayor's team, which has spent the last two years organizing an auction in which UIL outlasted 33 bidders, including Liberty.
"They lost in a fair process," Suzanne Biemiller, Nutter's first deputy chief of staff, said of Liberty Energy. "And now they are seeking to essentially upend that process by using means that I would argue are unethical."
Stephen R. Wojdak, Liberty's lobbyist, said in a e-mail that at no time has his firm or Liberty addressed "any pending transactions currently before City Council." Although technically the UIL deal is not currently pending before City Council, Council President Darrell Clarke has directed Council members not to introduce sale legislation while a Boston consultant is evaluating the UIL deal on Council's behalf.
"There's been no attempt to be anything but transparent about what we're doing," Kevin Feeley, a Liberty spokesman, said Friday.
Liberty's effort to keep its name in contention began in the days before the mayor's March 3 announcement that he had chosen UIL Holdings, which operates an electric utility and three natural gas systems in New England.
Liberty's lawyer, Stephen A. Cozen, sent letters to Clarke and several other public officials protesting the mayor's choice.
Cozen said Liberty had the backing of labor, "well-known civic leaders and foundations," and Philadelphia Energy Solutions, owner of the South Philadelphia oil refinery. He said UIL's winning bid was based upon the assumption that "labor will pay the price."
"Perhaps it is time for City Council to come up with its own plan and to that extent, we would be happy and open to the proposition of working with City Council to develop an acceptable alternative to the mayor's apparent decision," Cozen wrote in the letter to Clarke, which was copied to Rep. Bob Brady, the city's Democratic chief.
Cozen invited Clarke to "feel free to share this letter with other council members to whom I have not yet spoken."
In a Feb. 24 letter to Nutter, Brevnov repeatedly emphasized the labor-friendly aspects of his bid. "Our proposal is built on the belief that there is a unique value creation opportunity at hand for the city, not through a reduction of the labor force of PGW, but rather through expansion and growth."
Sources said Liberty's offer came in $160 million short of UIL's final bid. The investment bankers who evaluated the bids discounted the offer because Liberty has no experience running a utility and no assets and because its financing was not committed.
UIL, whose shares are traded on the New York Stock Exchange, provided a $1.9 billion letter of credit from Morgan Stanley. It plans to finance the purchase permanently with stock and long-term debt.
"We went back to Liberty two times and said, 'Your price is not competitive, you have not given us confidence of the financial backing of your transaction,' " Biemiller said.
Liberty was not even in the final running. UGI Corp., the Valley Forge energy company that owns three Pennsylvania gas utilities - and operated PGW until 1972, when it was ousted by Mayor Frank L. Rizzo - was the other finalist, according to sources.
Biemiller said UIL's commitment to maintain a minimum workforce of 1,350 employees for three years was unmatched by other bidders. While Liberty's letters to the city touted its labor support, its proposal protected only PGW's union employees, not management.
Brevnov, who is in his mid-40s, has built an impressive career as an energy-industry deal-maker. A banker who was named chief executive of the Russian power utility UES at age 29, he was ousted during a battle for political control of the company. He then hooked up with Enron Corp. as a managing director of Eurasia operations.
After Enron imploded, he worked for Integrys Energy Group Inc., then became vice president of mergers and acquisitions for AES Corp. Last year, he incorporated Liberty Energy Trust in Delaware. He lives near Middleburg, Va.
Feeley, Liberty's spokesman, said Brevnov's firm was not disparaging the UIL deal, only responding to Council questions about alternatives for PGW.
That distinction is not always clear to the listeners. City Controller Alan L. Butkovitz said Liberty "has raised some questions regarding the deal that's on the table" while also floating the idea of leasing the LNG plant, an option that may be enticing to opponents of an outright sale.
Everett A. Gillison, Nutter's chief of staff, on Friday sent a letter to Council President Clarke outlining obstacles to leasing the LNG plant, which PGW uses for storing natural gas for harsh winter days. Entrepreneurs say the plant has big growth potential for producing fuel for long-haul trucks, ships, and trains.
As a city agency, Gillison said, PGW is constrained on partnering with private companies. The city might have to pay off tax-free bonds if the plant were used by private operators.
And a lease would produce nothing close to the minimum $440 million the city expects to net from the UIL sale. Sale proceeds would pay down the city's underfunded pension obligations.