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
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