Reporting Mike Dunn
By Mike Dunn
PHILADELPHIA (CBS) — The Nutter administration insists that the potential sale of the Philadelphia Gas Works would be a good deal for taxpayers, despite a loss of the $18 million that PGW sends each year to the city’s coffers.
Lazard Frères & Co., the financial advisor guiding the administration through the proposed sale of PGW, now predicts a potential sale price of between $1.45 billion and $1.9 billion.
After PGW debts are paid, remaining monies would be used to shore up the struggling city workers’ pension fund.
Critics of a sale point out that the city’s general fund would lose its annual $18 million payment from the natural gas utility. But city budget director Rebecca Rhynhart says that on the whole, the city will come out ahead.
“What Lazard finds is, on the whole, the present value benefit is in the hundreds of millions of dollars. Meaning (that) even taking into account the lost $18 million each year, selling PGW will benefit the city and taxpayers. Once we contribute the money into the pension fund, the required contribution will go down by much more than the $18 million in lost revenue,” Rhynhart told KYW Newsradio today.
November 1st is the deadline for companies interested in purchasing PGW to submit what are called “indicative” bids — non-binding estimates of what they believe the utility is worth.
“The non-binding bid gives their best estimate of what they would value PGW,” Rhynhart explains. “We’ll take those results and narrow down the field to a smaller number of potential bidders.”
Rhynhart won’t say how many firms will be submitting these bids, other than that the number is “significant.” Final, binding bids from the resulting shorter list of firms would be due by early January.
“They are given much more information and access to management and tours of facilities, to help them come to a binding number that they are willing to purchase PGW for,” Rhynhart says.
And Rhynhart says if those numbers come in where the city hopes, the mayor will move forward with selling PGW.
“At the right valuation, he believes it’s the right thing to do. It needs to be the right value,” she says.
If Nutter proceeds, the next steps — likely in the spring — would be to seek approval from City Council and the state Public Utility Commission.
PGW is the largest city-owned utility in the nation. The Nutter administration contends that rate increases will be minimized by a sale, since a private firm could expand into other areas that PGW now cannot.