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13

Philadelphia to Pay Investment Banking Firm to Study Future of Gas Works

The Street administration will pay the investment banker Lehman Brothers...

The Street administration will pay the investment banker Lehman Brothers $200,000 to study the feasibility of selling or restructuring the Philadelphia Gas Works.

Lehman Brothers was chosen after the administration reviewed proposals from a number of investment bankers, including Goldman Sachs.

In an agreement with the Pennsylvania Public Utility Commission earlier this year, the city promised to study a range of strategic options, including sale of the financially strapped utility.

Joyce Wilkerson, Mayor Street's chief of staff, in a memo explaining the hiring of Lehman Brothers, wrote to City Council that the administration was not "committed to any particular strategic option, and will instead analyze each with an open mind, guided by the best interests of the city and its citizens."

Should the city-owned utility be sold, Lehman Brothers stands to earn a fee of six-tenths of a percent on a sale price that could be in the billions of dollars. A $1 billion sale price would net a $6 million fee, for example.

If the city decides to transfer the company to another public authority or even back to the city's Public Property Department, a so-called alternate transaction, Lehman Brothers would be paid a flat $2 million.

Goldman Sachs had proposed an advisory fee of $300,000, a flat $5 million if the utility was sold and $2 million if the company was shifted to another public authority.

Meanwhile, the administration is continuing its search for a new chief executive officer. Wilkerson said the city's search firm has identified a number of candidates and interviewing has begun. Among the candidates interviewed is Thomas Knudsen, the company's current interim chief financial officer.

Wilkerson said Lehman Brothers was expected to set out a series of options for the city, along with associated costs and benefits. That process should be done by Labor Day

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