The city of Philadelphia has issued a request for proposals for a broker to manage a potential sale of the Philadelphia Gas Works, which serves around 500,000 residential and commercial customers.
“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 Mayor Michael Nutter. “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.”
Philadelphia is one of only two major cities in the United States that still owns its gas company.
In a 48-page report released earlier this year, Lazard Ltd. recommended the city pursue a strategic sale of the company, saying the city could realize a net of $496 million from the sale, after accounting for PGW’s liabilities.
The company has over $1 billion of revenue bonds outstanding, as well as other major liabilities, including debt defeasance costs and termination and transition costs.
On Friday, a spokesperson for the city said that if the sale is completed, PGW’s outstanding bonds would be defeased.
The majority of PGW’s debt is rated Baa2 by Moody’s Investors Service and BBB-plus by Standard & Poor’s and Fitch Ratings.
On Nov. 6, a block of insured PGW revenue bonds maturing in 2025 traded at 3.208%.
“The broker will help identify potential buyers with demonstrated utility management and investment experience, financial strength and ability to meet our public policy criteria,” said David Seltzer, chairman of the Philadelphia Facilities Management Corporation, which operates PGW.
The city expects to evaluate responses to the RFP with the assistance of its advisors and a review panel. Lazard, which has been retained as financial advisor, will conduct an independent review of the bids.
After its selection, the broker is expected to begin work on or about Jan. 21.