A politically connected unsuccessful bidder for Philadelphia
Gas Works is positioning itself to move into the breach if Mayor Nutter's
embattled plan to sell the utility collapses.
Liberty Energy Trust, a year-old firm started by Russia-born,
Harvard-trained former Enron executive Boris Brevnov, last month hired a
lobbying firm, S.R. Wojdak & Associates, to "coordinate
discussions" about energy-development opportunities.
City officials say Liberty is quietly promoting alternatives
to Nutter's plan to sell PGW to UIL Holdings Corp. of New Haven, Conn., for
$1.86 billion.
One alternative is to lease the utility's liquefied natural
gas (LNG) plant in Port Richmond, which would give its operator a key component
in developing Philadelphia as a Marcellus Shale natural gas energy hub.
Nutter's proposal to privatize the 176-year-old utility
already faced stiff headwinds with City Council, which must approve the sale.
The shadow campaign to tout an alternative the Nutter administration says is
unworkable has angered the mayor's team, which has spent the last two years
organizing an auction in which UIL outlasted 33 bidders, including Liberty.
"They lost in a fair process," Suzanne Biemiller,
Nutter's first deputy chief of staff, said of Liberty Energy. "And now
they are seeking to essentially upend that process by using means that I would
argue are unethical."
Stephen R. Wojdak, Liberty's lobbyist, said in a e-mail that
at no time has his firm or Liberty addressed "any pending transactions
currently before City Council." Although technically the UIL deal is not
currently pending before City Council, Council President Darrell Clarke has
directed Council members not to introduce sale legislation while a Boston
consultant is evaluating the UIL deal on Council's behalf.
"There's been no attempt to be anything but transparent
about what we're doing," Kevin Feeley, a Liberty spokesman, said Friday.
Liberty's effort to keep its name in contention began in the
days before the mayor's March 3 announcement that he had chosen UIL Holdings,
which operates an electric utility and three natural gas systems in New
England.
Liberty's lawyer, Stephen A. Cozen, sent letters to Clarke
and several other public officials protesting the mayor's choice.
Cozen said Liberty had the backing of labor,
"well-known civic leaders and foundations," and Philadelphia Energy
Solutions, owner of the South Philadelphia oil refinery. He said UIL's winning
bid was based upon the assumption that "labor will pay the price."
"Perhaps it is time for City Council to come up with
its own plan and to that extent, we would be happy and open to the proposition
of working with City Council to develop an acceptable alternative to the
mayor's apparent decision," Cozen wrote in the letter to Clarke, which was
copied to Rep. Bob Brady, the city's Democratic chief.
Cozen invited Clarke to "feel free to share this letter
with other council members to whom I have not yet spoken."
In a Feb. 24 letter to Nutter, Brevnov repeatedly emphasized
the labor-friendly aspects of his bid. "Our proposal is built on the
belief that there is a unique value creation opportunity at hand for the city,
not through a reduction of the labor force of PGW, but rather through expansion
and growth."
Sources said Liberty's offer came in $160 million short of
UIL's final bid. The investment bankers who evaluated the bids discounted the
offer because Liberty has no experience running a utility and no assets and
because its financing was not committed.
UIL, whose shares are traded on the New York Stock Exchange,
provided a $1.9 billion letter of credit from Morgan Stanley. It plans to
finance the purchase permanently with stock and long-term debt.
"We went back to Liberty two times and said, 'Your
price is not competitive, you have not given us confidence of the financial
backing of your transaction,' " Biemiller said.
Liberty was not even in the final running. UGI Corp., the
Valley Forge energy company that owns three Pennsylvania gas utilities - and
operated PGW until 1972, when it was ousted by Mayor Frank L. Rizzo - was the
other finalist, according to sources.
Biemiller said UIL's commitment to maintain a minimum
workforce of 1,350 employees for three years was unmatched by other bidders.
While Liberty's letters to the city touted its labor support, its proposal
protected only PGW's union employees, not management.
Brevnov, who is in his mid-40s, has built an impressive
career as an energy-industry deal-maker. A banker who was named chief executive
of the Russian power utility UES at age 29, he was ousted during a battle for
political control of the company. He then hooked up with Enron Corp. as a
managing director of Eurasia operations.
After Enron imploded, he worked for Integrys Energy Group
Inc., then became vice president of mergers and acquisitions for AES Corp. Last
year, he incorporated Liberty Energy Trust in Delaware. He lives near
Middleburg, Va.
Feeley, Liberty's spokesman, said Brevnov's firm was not
disparaging the UIL deal, only responding to Council questions about
alternatives for PGW.
That distinction is not always clear to the listeners. City
Controller Alan L. Butkovitz said Liberty "has raised some questions
regarding the deal that's on the table" while also floating the idea of
leasing the LNG plant, an option that may be enticing to opponents of an
outright sale.
Everett A. Gillison, Nutter's chief of staff, on Friday sent
a letter to Council President Clarke outlining obstacles to leasing the LNG
plant, which PGW uses for storing natural gas for harsh winter days.
Entrepreneurs say the plant has big growth potential for producing fuel for
long-haul trucks, ships, and trains.
As a city agency, Gillison said, PGW is constrained on
partnering with private companies. The city might have to pay off tax-free
bonds if the plant were used by private operators.
And a lease would produce nothing close to the minimum $440
million the city expects to net from the UIL sale. Sale proceeds would pay down
the city's underfunded pension obligations.
Source: Philly.com
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