UIL Holdings To Buy Philadelphia Gas Works Operations For $1.86 Bln; Backs View

(RTTNews) - UIL Holdings Corp. (UIL), a Connecticut-based investor-owned gas and electric utility holding company, has agreed to acquire assets and certain liabilities of Philadelphia Gas Works or "PGW Operations", the nation's largest municipally-owned natural gas utility, from the City of Philadelphia for $1.86 billion cash. The PGW Operations would be purchased on a cash-free and debt-free basis.

Unanimously approved by UIL's board, the transaction would enable PGW Operations to increase investment in infrastructure and expand its services. Upon closing, the deal is expected to be immediately accretive to UIL's operating and free cash flow; and is expected to be initially earnings neutral and long-term earnings accretive to UIL.

UIL has secured a $1.9 billion fully committed facility to support the transaction 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 Transaction and capitalize a new operating unit at close. UIL would maintain PGW Operations headquarters in Philadelphia and its six Customer Service Centers city-wide. Following the transaction closure, UIL would maintain dual corporate headquarters in New Haven and Philadelphia. In addition, UIL would honor the existing collective bargaining agreement with PGW Operations' union.

As part of the agreement, UIL would maintain PGW Operations' current base rate structure through 2017. Approvals would be required from the Philadelphia City Council and the Pennsylvania Public Utility Commission. UIL anticipates closing by the first quarter of 2015.

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