American Gas - July 2013 - (Page 20)

plant is offset in large part by fuel savings. “At FPL, we’re investing billions of dollars every year in our infrastructure—improving the efficiency of our power plants to keep fuel costs and emissions down,” said Silagy. In 2011, FPL also demolished a 1960s-era power plant in Palm Beach County. The replacement—the $1.1 billion natural gas-powered Rivera Beach Next Generation Clean Energy Center—is set to begin operations in June 2014 with a production capacity of 1,250 MW of electricity. It will power 250,000 homes and businesses. —G.J. THe COrner OffICe For Sale: Municipal Gas Utility The proposed sale of PGW reflects a continuing trend Your name here? Philadelphia Gas Works’ downtown Philly headquarters. 20 AmericAn GAs july 2013 PhiladElPhia—Established in 1836, Philadelphia Gas Works is the nation’s largest municipal gas utility. Now, the city wants to sell it. The venerable utility could command a premium. “We expect PGW to sell for an amount that would pay off the utility’s liabilities, debt, and sales costs, which total about $1.25 billion, plus bring in several hundred million dollars more than that for the city,” Kirk Dorn, project spokesperson, told American Gas. The city has hired JPMorgan and Loop Capital Partners as brokers, and Lazard Ltd. as a financial advisor. The sale must first be approved by Philadelphia’s city council and then the Pennsylvania Public Utility Commission. Opposition is expected from critics who say private-equity owners, for example, could raise rates over time to increase profits. Still, Dorn anticipates that the deal could go through within a year, although, he said, “it is likely to take longer than that.” The proposed sale reflects a trend that should continue. “Both strategic and financial buyers have shown strong interest in gas utilities,” George Bilicic, Lazard’s vice chairman of Investment Banking and global head of Power, Energy, and Infrastructure, told American Gas. Strategic buyers include other utilities or utility holding companies. Financial buyers include pension, infrastructure, and other private-equity funds. “Gas utilities have become attractive acquisition targets largely because strategic buyers, facing a combination of rate pressures, earningsgrowth challenges, and increasing investment requirements, are seeking new ways to increase scale and efficiencies and diversify cash flows,” Bilicic said. “Pension funds as well as infrastructure funds are interested in opportunities to invest in long-term assets such as gas utilities,” Bilicic continued, “because they offer consistent cash flows, diversification, regulated returns, and inflation protection.” Private-equity investors, for their part, look for ways to improve operations or grow the business into new areas. The industry has seen four or five sizable M&A deals every year for the past four years, Bilicic noted. For example, in 2010 SteelRiver Infrastructure Partners bought Peoples Natural Gas Co. in western Pennsylvania. Then last year it reached an agreement to acquire Equitable Gas Co. in Pittsburgh. Most recently, in May, Florida’s Teco Energy Inc. moved to buy New Mexico Gas Co. in a deal pegged at $950 million. “There could be enhanced [M&A] activity in anticipation of changes to interest rates or as a consequence of such changes,” Bilicic

Table of Contents for the Digital Edition of American Gas - July 2013

American Gas - July 2013
Contents
President’s Message
Subject Index
Shining a Light for Gas Efficiency
Digest
Issues
Issues
Update
Need to Know
By the Numbers
Places
Scratch, Sniff—Evacuate?
Capitol Hill
Cape Canaveral
The Corner Office
AGA Ops Conference
Elm Street
Work in Progress
Profile
For Good Measure
Law
Jobs
Marketplace
Buyer’s Guide
Headway

American Gas - July 2013