UIL Holdings To Acquire Philadelphia Gas Works Operations For $1.86 Bln

(RTTNews) - UIL Holdings Corp. (UIL) Monday announced that it has reached a definitive agreement to acquire assets and certain liabilities of Philadelphia Gas Works from the City of Philadelphia for $1.86 billion cash. The utility holding firm also affirmed its earnings guidance for 2014.

UIL noted that Philadelphia Gas Works or PGW Operations, the nation's largest municipally-owned natural gas utility, will be purchased on a cash-free and debt-free basis.

The transaction, which has been unanimously approved by UIL's board of directors, is expected to be immediately accretive to operating and free cash flow. The transaction is expected to be initially earnings neutral and long-term earnings accretive to UIL.

According to UIL, the acquisition will significantly expand its regulated natural gas business and drive long-term investment and growth opportunities. UIL anticipates closing of the transaction by the first quarter of 2015.

Under the terms of the agreement, UIL will maintain PGW Operations' current base rate structure through 2017. Any future changes in rates will be determined by the Pennsylvania Public Utility Commission pursuant to its rate case procedures.

James Torgerson, president and chief executive officer of UIL Holdings said, "PGW Operations is an excellent operational and strategic fit for our company and a natural addition to our portfolio of fully regulated utilities."

Founded in 1836, Philadelphia Gas Works manages a distribution system of about 6,000 miles of gas mains and service pipes supplying nearly 500,000 customers in the city of Philadelphia.

UIL said it has secured a $1.9 billion fully committed facility from Morgan Stanley Senior Funding, Inc. UIL intends to issue long-term debt and equity in amounts consistent with maintaining investment grade credit ratings to permanently fund the deal and capitalize a new operating subsidiary at close.

UIL stated that it will maintain PGW Operations headquarters in Philadelphia and its six Customer Service Centers around the City. Upon closing of the deal, UIL will maintain dual corporate headquarters in New Haven and Philadelphia.

For 2014, UIL affirmed its consolidated earnings guidance of $122 million to $134 million or $2.15 to $2.35 per share, that exclude the transaction.

On average, 12 analysts polled by Thomson Reuters expect the company to earn $2.28 per share for 2014. Analysts' estimates typically exclude one-time items.

UIL closed Friday's regular trading at $38.72 on the NYSE.