The City is looking into
the potential sale of
the Philadelphia Gas Works.

PHILADELPHIA–Hoping to reap as much as $496 million from the sale, the City of Philadelphia has issued a Request for Proposals for a broker to manage the potential sale of the Philadelphia Gas Works.

The city and Philadelphia Gas Works, which is a city-owned utility that services more than a half-million residential, commercial and industrial customers, issued the RFP on Nov. 14 and are hopeful to identify a qualified broker on or about Jan. 21, 2013.

“We believe that PGW will be viewed as a valuable asset by the private sector and that the sale could result in a substantial profit for the city,” said Philadelphia Mayor Michael A. Nutter in a statement. “We begin the search for a qualified broker with the same goal we will maintain throughout the process: ensuring that any deal for PGW will benefit customers and our city.

In February 2012, a 48-page report authored by Lazard Freres & Co., Ltd., put the potential profit of a sale of PGW to the city at between $146 million to as high as $496 million. At the time of the study, PGW had estimated liabilities of approximately $1.5 billion. City officials note that Philadelphia and San Antonio are the only two major U.S. cities that own their own gas companies. At the time of the study’s release, PGW employed more than 1,600 workers.

The study also concluded that pursuing a management services agreement in the form of a long-term lease to a private company would not lead to any significant liability reduction or risk transfer for the city. The recommendations by Lazard prompted Mayor Nutter to have the city continue to explore the benefits of a possible sale of the utility.

The broker selected in the RFP process will manage the sale on behalf of the city and PGW. City officials say the broker that wins the RFP will present an analysis of the bids to help the city and PGW determine whether a sale would be beneficial for city taxpayers and the utility. Lazard will perform an independent review of the bids from potential buyers of the utility.

“The broker will help identify potential buyers with demonstrated utility management and investment experience, financial strength and ability to meet our public policy criteria,” says David Seltzer, chairman of the Philadelphia Facilities Management Corporation (PFMC), which operates PGW. “Once the broker performs due diligence, the list will be whittled down and we’ll see final binding offers.”

City officials, PGW and PFMC and a team of advisors will evaluate the broker RFP responses.