UIL chief 'disappointed' in failed PGW deal

After spending a year and a half and more than $21 million on its failed bid to buy Philadelphia Gas Works, UIL Holdings Corp. chief executive James P. Torgerson has some words of advice for anybody considering doing business in Philadelphia:

"Make sure you have everything lined up before you commit."

Torgerson, in the first interview he has given since his Connecticut utility company on Dec. 4 terminated its $1.86 billion offer to buy the city's gas utility, on Friday repeatedly used the word disappointed to describe his feeling about the city's sales process.

UIL emerged in March as the winner among 33 entities that responded to Mayor Nutter's 2013 call for bids to buy PGW. The process was brokered by investment bankers, and Nutter's office said UIL was the high bidder.

Council President Darrell Clarke's surprise announcement Oct. 27 declining to hold hearings on the sale doomed the measure. Not one Council member volunteered to introduce Nutter's proposal.

"We're disappointed because it didn't happen the way we thought it would," Torgerson said. "You'd get an ordinance introduced, you get a hearing, and you have a vote. I mean, something of this magnitude, you'd think the city would want to pursue that path, to see how City Council members felt.

"The opportunities didn't happen. I can't say we were wronged, just disappointed."

Torgerson and Michael A. West Jr., UIL's communications director, said they believed the company's proposal could win at least nine votes on the 17-member Council, if the matter had been brought to a vote.

They said Clarke had expressed opposition to privatizing city jobs, but had never indicated the proposal would not get a hearing.

"Going into it, we thought we had a very good proposal, we would get a fair hearing, it was really in the best interests of the city of Philadelphia, and our shareholders," Torgerson said. He said UIL's proposal would have accelerated replacement of the city's dangerous cast-iron mains and injected new investor capital into the city.

Council members said they were insufficiently consulted before the sales process began, and they raised a number of concerns about the deal - whether protections for low-income customers and senior citizens were as strong as portrayed, or employee benefits and protections were as solid as UIL claimed.

The agreement provided for no layoffs for three years.

"We answered, I think, all the questions in individual sessions with those people," Torgerson said. "So it wasn't like we didn't know what the questions were. I met with all but two of the councilpersons multiple times."

Torgerson never met with Councilwoman Marian B. Tasco, who chairs the Philadelphia Gas Commission, or with Councilwoman Jannie Blackwell. West said he got to meet with Blackwell. But he said Tasco declined all offers to talk with UIL.

Could Nutter have done more to sell the deal?

"In retrospect, maybe," Torgerson said. "I don't know. They did a lot of work behind the scenes. It's hard to say they could have done more if people were just so set against it.

"If it was never going to get a hearing, I don't know if there's anything they could have done differently."

Torgerson said he was aware of the friction between Nutter and Council, which many political observers say was decisive in the deal's failure.

"If that weren't there, sure, [a vote] could have happened," Torgerson said. "I guess the reality of the situation is, it's there. And if they couldn't work together, it created a big detriment in how this was ever going to get through."

After Clarke said there would be no hearings on the sale "as proposed" - suggesting the proposal could be modified - UIL hung in and offered to amend the agreement to address concerns.

But the Gas Workers union remained adamantly opposed. Prominent union leaders such as John Dougherty of the Electrical Workers, Pat Gillespie of the Building Trades Council, and Ryan N. Boyer of the Laborers' District Council lobbied to work out a deal, believing that UIL and its private capital could play a big role in sparking regional energy renaissance around Marcellus Shale gas.

"People felt there was still an opportunity to have a hearing and get a vote," Torgerson said. "They were encouraging, I guess is the best way to put it, because they thought it was a good opportunity for their workforces."

The agreement was set to expire Dec. 31.

"It costs us about $9,000 a day just to keep the financing in place," Torgerson said. "So when it became clear there was no path to get approval by the end of the year, we decided it was prudent to terminate at that point."

Would UIL bid if the city tried another sale?

"That, we have no interest in," Torgerson said. "And to be frank, it's really colored our view as to being in Philadelphia right now.

"We would still love to be there, but frankly, what we were led to believe and what happened is not something that we look at as a happy experience."