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UIL's Torgerson is cool with PGW purchase

NEW HAVEN, Conn. - If the deal to privatize Philadelphia Gas Works is in peril, James P. Torgerson is not letting on.

(Charles Fox / Staff Photographer)
(Charles Fox / Staff Photographer)Read more(Charles Fox / Staff Photographer)

NEW HAVEN, Conn. - If the deal to privatize Philadelphia Gas Works is in peril, James P. Torgerson is not letting on.

Torgerson is chief executive of UIL Holdings Corp., the Connecticut energy company that has agreed to pay $1.86 billion for the gas utility. City Council has declined to consider Mayor Nutter's proposal until a consultant weighs in, creating apprehension that UIL might nix the deal if no action is taken before a July 15 deadline.

"This is a big deal, and it's probably the biggest vote some council members are ever going to have to take," Torgerson said in an interview last week in UIL's offices in New Haven. "I think they've got to do their due diligence. We respect that."

The 61-year-old Cleveland native has worked with utilities for much of his career, mostly on the financial side. It's not an industry that nurtures flamboyance, and Torgerson fits the analytical, unemotional, and patient image.

"I'm more the introvert," he said. "I'm not going to be the big cheerleader, yelling and screaming. That's not my style."

According to its first-quarter earnings report, UIL has already spent $6.9 million for advisers and financing fees for the acquisition, not to mention travel costs - its campaign to acquire PGW was known internally as "Project Acela." So it is unlikely Torgerson will casually walk away from a deal. It is scheduled to close by next March.

Torgerson has journeyed the merger-and-acquisition road before. In a previous stint in Seattle, he was one of the chief financial officers in a merger of a gas and an electric utility.

At UIL, where he became chief executive in 2006, Torgerson first supervised the divestiture of the company's nonutility businesses to concentrate solely on its electrical utility, United Illuminating Co.

"My view is that utilities know how to run utilities," he said.

Public utilities operate in a highly regulated business environment that rewards caution and prudence with guaranteed rates and steady earnings. "Our first priority is for safety and to make sure we're taking care of customers," he said.

UIL doubled its size in 2010 by acquiring three New England gas utilities: Southern Connecticut Gas Co., Connecticut Natural Gas Corp., and Berkshire Gas Co. in western Massachusetts. UIL's four utilities have a total of more than 700,000 electric and gas customers and 1,895 employees.

PGW's half-million customers would increase UIL's customer base by 70 percent.

Critics of the sale say UIL is too small - it's a $2.1 billion company - and its BBB credit rating by Standard & Poor's is on the low side of the investment-grade scale.

But Torgerson winces at the suggestion that UIL won't be able to manage the deal. UIL has a $1.9 billion credit line from Morgan Stanley, and says it will issue stock and long-term debt to pay for the acquisition and maintain its investment-grade credit rating.

"PGW is a big operation, it will be challenging," he said. "But it's not more than we can handle. With the acquisition of those three gas companies, I think we proved that."

Torgerson is no neophyte to tangling with public officials.

In 2009, he literally went toe-to-toe with New Haven Mayor John DeStefano Jr. at a news conference in a dispute over a UIL rate-increase request. DeStefano was also irked by UIL's plans to move operations and its corporate headquarters to a new suburban campus.

"We disagreed and moved on," the former mayor recalled. DeStefano said that he and Torgerson developed a collaborative relationship on economic development and storm response. "He was readily available 24/7 to me," said DeStefano.

It also didn't hurt that UIL kept its corporate headquarters - 120 employees - downtown. About 200 other employees moved to the suburbs.

The PGW acquisition involves navigating a treacherous political environment with a mayor and City Council at odds.

The Nutter administration has conducted the deal like a corporate sale, with an auction process supervised by investment bankers designed to elicit the highest price from 33 qualified bidders. UIL's bid came in near the top of the range financial advisers expected.

"We believe we're paying a very fair price," said Torgerson. Its offer is at a higher multiple to earnings than it paid in 2010 for the three other gas utilities.

But if any Philadelphia council members are enamored of the deal, they are keeping that to themselves. PGW's union is actively campaigning against a sale.

Torgerson said he and UIL executives have met with council members and union and business leaders since the agreement was announced May 3.

UIL has promised to split the company's headquarters between New Haven and Philadelphia and to freeze rates for three years. It wants to double PGW's pipe-replacement rate.

It also agreed that all PGW employees would be offered jobs. Total employment, which now stands at 1,650, may not dip below 1,350 for three years.

The union is characterizing UIL's promise as a 20 percent workforce reduction. It says the three-year guarantees include loopholes.

"People say, What about after three years?" Torgerson said. "Well, we need people. You can't run a utility without people. You need people in the streets, you need people answering the phones."

Torgerson said UIL had offered to keep current PGW employees in a traditional defined-benefit pension program that would mirror its current plan. New hires would be covered by a defined-contribution program.

Nutter says the net income from a sale - estimated from $420 million to $631 million - will go toward the city's underfunded pension plan. Council may have other ideas.

"I think City Council has to look at this now, and look pretty hard," said Torgerson. "It brings a lot of cash to the city that I believe they could use."

James P. Torgerson

Chief executive officer, UIL Holdings Corp., since 2006.

Age 61. Born in Cleveland. Accounting degree from Cleveland State University.

Until 2006, was CEO of Midwest ISO, regional grid operator based in Carmel, Ind.

Previous utilities: Washington Energy, Puget Sound Energy, Dayton Power & Light.

Total 2013 UIL compensation:

$3.3 million, including salary of $738,411.

Golf handicap: 12.