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UIL DEAL TO PURCHASE PGW

MYTHS/TRUTHS
11/05/2014 Revised

1.) MYTH: The Administration did not consider any options for PGW other than a sale
TRUTH: NOT TRUE
 All options for the maximization of potential for PGW were considered through two separate Lazard studies
 Both studies concluded that a sale of PGW would provide the highest and best value to the City. Page 6 of the
Lazard February 2012 report states, "Lazard believes that, of the potential privatization structures, a strategic
sale would likely generate the greatest expected potential synergies from a transaction, and therefore maximize
proceeds to the City.” See also pages 16-18
 City Council was briefed on the Lazard recommendations in 2012, before the start of the sale process and again
in 2013 (after the sale process had started) on the second Lazard report. Council was also briefed during the
PGW sale process by the City’s brokers. (See list of attendees at end of document). And Council staffers were
briefed on the APA and the Ordinance in April 2014.
 A lease or public / private partnership would not rid the City of its environmental and its other post employment
benefits “OPEB” liabilities, PGW debt, nor provide net proceeds for the pension fund
2.) MYTH: The existing deal with UIL cannot be amended or changed
TRUTH: NOT TRUE
 The Ordinance could be changed or amended to address deal points of interest to Council
 Section 8.1(b) of the APA provides as follows: City Council Approval. The Council of the City of Philadelphia
shall have enacted, and the Mayor of the City of Philadelphia shall have approved, an ordinance to authorize
and facilitate the transactions contemplated by this Agreement in substantially the form set forth on Section
8.1(b) of the Seller Disclosure Letter, provided that Seller may amend, revise or add to the ordinance so long as
such amendments, revisions or additions do not adversely affect Buyer and Seller shall consult with Buyer
regarding any proposed amendment, revision or addition to the ordinance and take into account Buyer’s
reasonable comments and provide a copy of the ordinance to Buyer prior to submission to City Council of
Philadelphia, which ordinance shall include the repeal or modification of any previous ordinances of the Council
of the City of Philadelphia in order to effect the transactions contemplated by this Agreement and the Related
Documents (the “Ordinance”), and the Ordinance shall remain in full force and effect.
 Clearly there is a real and reasonable ability of Council to amend the sale ordinance.
3.) MYTH: The deal is not a financial win for the City
TRUTH: NOT TRUE
 The sale price ($1.86bn) actually exceeds the estimate of value given by City Council’s own advisors, Concentric,
($1.39bn-$1.80bn), and is at the highest end of range provided by the City’s Financial Advisor, Lazard
 There is no negative financial impact to the City from loss of $18mm/year franchise fee because the amount of
money that will be saved annually due to lower mandatory pension contributions is projected to be over $40mm
per year as soon as 2017
 The sale of PGW will allow the City to strengthen its severely underfunded pension fund through net sale
proceeds estimated to be between $419 and $630mm
 Based on the APA, all OPEB and environmental liabilities are transferred to UIL and the City will have no future
liabilities related to PGW (estimated at $1bn)
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4.) MYTH: The deal with UIL doesn’t protect workers
TRUTH: NOT TRUE
 Employment level of 1,350 with no layoffs for 3 years is guaranteed, the highest guaranteed employment level
offered by any bidder that submitted a binding bid for PGW, this is a stronger protection than employees at
PGW currently have. (While there are some restrictions on layoffs in the current CBA, there is not a strong “no
layoff” clause as in the UIL APA)
 Wages and benefits will be the comparable or higher than they are now
 PGW’s pension will be fully funded at closing of the sale, protecting its workers and retirees
 UIL has offered additional guarantees to PGW’s workforce, including the Union, above and beyond what was
outlined in the APA that it will put in writing (such as allowing eligible employees to continue with their current
retiree medical plans)
 UIL will commit in writing to invest in training and development programs in Philadelphia to create jobs for
Philadelphians

5.) MYTH: Programs for the poor and elderly will be cut under UIL ownership
TRUTH: NOT TRUE
 Such programs are approved by the PUC which has control over the future of these programs.
 Any owner of PGW, including the City or UIL, is required to work with the PUC to maintain these programs in
their current form
 Any owner of PGW, including the City or UIL, is required to ask the PUC to maintain the hardship fund and
energy efficiency program
 All other privatized utilities in the State of Pennsylvania have similar programs
 UIL has similar customer programs in the utilities it currently owns in Connecticut
 Collections and shut offs for PGW would still be regulated by the PUC under UIL ownership and UIL would not be
able to operate differently than PGW currently operates without PUC approval

6.) MYTH: Rates will go up
TRUTH: NOT TRUE
 Customer bills will actually go down immediately based on a return on capital methodology versus a cash flow
methodology
 City Council has stated that if PGW remains under City ownership they want to increase the DSIC charge
immediately which will be an immediate increase in cost to the customer

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7.) MYTH: PGW can do everything a private buyer can do
TRUTH: NOT TRUE
 PGW has significant barriers to operating like a private utility and its own management team has said it is
hindered to invest in the business or explore new business opportunities, not to mention that changes to the
City Charter and the State Constitution would be required to accomplish this goal
 UIL has access to capital that allows them to replace cast iron mains significantly faster that PGW currently can,
which will increase jobs in skilled labor and trades
 City Council’s own consultant concluded that expansion of LNG and NGL sales could not be pursued by PGW
under its current governance structure
 A privatized PGW has the best option of creating an energy hub in Philadelphia due to its ability to expand the
business through access to increased types and levels of access to capital.
 If this were true why isn’t PGW “doing all of the things a private company could do” now?

8.) MYTH: The Administration did not invite Council to participate on the deal team and did not tell City Council
about the sale until UIL was selected
TRUTH: NOT TRUE
 City Council had representation on the steering committee for the first Lazard engagement that determined a
sale of PGW was the best option for the City (refer to list of meetings beginning on page 4)
 The Council President was asked to have a member of his staff on the steering committee for the sale process
but he declined the offer
 Briefings on the sale process with individual members of Council and their staff took place on June 24th, July
8th, August 22nd, and September 11th of 2013 (refer to list of meetings beginning on page 4)
 Council President Clarke met privately with the 6 short-listed bidders on December 9th and December 11th of
2013, where he had the opportunity to hear their proposals, provide input, and offer suggestions of how the
deal could be made palatable to the Council

9.) MYTH: PGW has been profitable for the City
TRUTH: NOT TRUE
 From 2004 – 2010, PGW did not provide the annual $18mm franchise fee to the City. (Total loss to City of
$126mm)
 In 2000, the City had to give PGW a $45mm loan, which was repaid much later than originally scheduled due to
PGW’s poor financial condition
10.) MYTH: Council has decided not to sell PGW
TRUTH: NOT TRUE
 There is no legislation pending in the Council and many members indicated that they had not read Council’s
Concentric report
 It is known that a losing bidder, their lawyer and their lobbyist, have been actively engaging in potentially illegal
discussions with Council members-- which may violate the confidentiality agreements in this transaction-- in an
effort to block or defeat the current proposal
 The City administration chose the best financial and operational deal for the City, which was supported by
Council’s own consultant, Concentric
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11.) MYTH: Council was not involved in the PGW sale process
TRUTH: NOT TRUE
 The Administration offered to involve Council at every step in the process – from when Lazard was engaged in
2011 to briefing Council and its staffers in the spring of this year
 Additionally, the Council President met with 6 final bidders in December of 2013 and was offered the
opportunity to fully participate in the complete vetting process that ultimately led to UIL being selected as the
winning bidder in February of 2014
 Furthermore, a full schedule of meetings held over two years with various City officials and others is delineated
below:
July 2010: City administration hires Lazard to perform Strategic Assessment
October 2011: Meetings with Lazard, City’s Financial Advisors Reviewed Lazard draft and the group gave
comments about areas that it thought Lazard should emphasize.
Derek Green
Janet Parrish
December 2011: Meetings with Lazard, City’s Financial Advisors Lazard presented its draft report and
opportunity was given for people to weigh in. Lazard recommendation was that the time was right to sell
Marion Tasco
Alan Butkovitz
Curtis Jones
Derek Green
Janet Parrish
February 6, 2012: At the Greater Philadelphia Chamber of Commerce luncheon, Mayor announces
upcoming release of Lazard report and the potential sale of PGW to a private entity to the Chamber of
Commerce
February 12-13, 2012: Mayor personally calls Council President Clarke and Councilwoman Tasco to notify them
of the expected release of the Lazard Strategic Assessment and that he expects to proceed with the sale process
based on that report.
Spring 2012: Briefings with Council members in one-on-one sessions to review Lazard report
Summer and Fall 2012: proceedings before Gas Commission for approval of sale advisor budget; RFP process for
sale advisors, including communications, government relations and law firms. City performs appraisal of all
PGW properties
August 2012: City announces selection of sale advisors to assist with the sale
September 2012: Lazard hired to draft Cost Benefit Analysis (second Lazard report). City Project Manager Saskia
Thompson appointed to manage sale process
November 26, 2012: Mayor makes a speech to the Executive Committee of the Chamber of Commerce
regarding the sale of PGW
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Winter 2012: City administration working with actuary to refine pension and benefit numbers for inclusion in
Lazard’s second report; sale advisors under contract; Broker RFP posted
February 2013: Mayor invites Council President Clarke’s staff to be part of Broker selection team; Council
President Clarke declines
April 24 2013: JPMorgan and Loop Capital announced as broker.
May 21, 2013: Sale Process kick off: Chamber of Commerce meeting with Brokers
June 24, 2013: Meetings with J.P. Morgan and Loop Capital, Brokers for the PGW sale process. The purpose of
the meetings was to explain the process the City would use to select a buyer.
Bill Greenlee
Kenyatta Johnson
Sade Olanipekun-Lewis and Derek Green (Marian Tasco Chief Legislative Aide)
Curtis Jones
July 8, 2013: Meetings with J.P. Morgan and Loop Capital, Brokers for the PGW sale process. The purpose of the
meetings was to explain the process the City would use to select a buyer.
Bobby Henon
Maria Quinones-Sanchez
Andy Maykuth, Inquirer
Philadelphia Business Journal
August 1, 2013: City posts RFQ to initiate the auction process.
August 22, 2013: Meetings with J.P. Morgan and Loop Capital, Brokers for the PGW sale process. The purpose
of the meetings was to explain the process the City would use to select a buyer.
Mark Squilla
Blondell Reynolds Brown
Cindy Bass
Curtis Jones’ staff
September 11, 2013: Meetings with J.P. Morgan and Loop Capital, Brokers for the PGW sale process. The
purpose of the meetings was to explain the process the City would use to select a buyer. Mayor announces
response is “robust” in the PGW RFQ process.
Alan Butkovitz
Curtis Jones
Gene Brown
Janet Parrish, Gas Commission meetings
Jan Ranson, Daily News
October 2013: Lazard releases Cost Benefit Analysis (second Lazard report)
October 16 2013: Lazard briefed Chamber of Commerce on the second Lazard report.
October 18, 2013: Mayor issues press release that Cost Benefit Analysis shows increased value for sale of PGW.
November 19, 2013: Mayor issues press release that we have “narrowed the field of buyers”.
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December 5, 2013: Meetings with J.P. Morgan and Loop Capital, Brokers for the PGW sale process
Philadelphia State Senate Delegation
State Rep. Cherelle Parker
December 9 and 11, 2013: Council President Clarke met privately with 6 short listed bidders
February 4, 2014: Preliminary review of final bids with City Administration, Lazard, Ballard Spahr, JPM and Loop
February 6, 2014: Review of final bids with the Mayor
February 7, 2014: Brokers review of final bids with the Steering Committee (Council President Clarke declined to
participate on the Steering Committee)
February 18, 2014: In-person meetings with final 2 bidders and City Administration. Mayor addressed the
Greater Philadelphia Chamber to offer an update on the PGW sale process.
March 3, 2014: Mayor announces UIL as winning bidder
March / April 2014: Council briefings on the sale ordinance and the deal points

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