Vero electric sale may finally be back on track
The sale of Vero electric finally appears to be moving forward after what the city’s transactional attorney described as an “encouraging” all-day meeting last week between the interested parties to discuss ways to expedite the closing and clear snags out of the way.
As part of the deal, Florida Power & Light (FPL) would pay more money to buy Vero electric, funds that will be used to convince the Florida Municipal Power Agency (FMPA), to which Vero now belongs, to agree to an amicable divorce.
About 14 people representing Vero electric, FPL, the Orlando Utilities Commission and the FMPA met last Friday at FMPA headquarters in Orlando – some of them by telephone – to flesh out details of a three-point plan offered by FPL President Eric Silagy to FMPA CEO Nicholas Guarriello on Aug. 20. The letter formalized terms discussed over dinner on Aug. 19 by Guarriello, Silagy and Sam Forrest, Vice President of Energy and Marketing for FPL.
The proposal seeks to overcome roadblocks to the sale that have stalled negotiations for about a year by simplifying regulatory approvals and protecting the tax-exempt status of FMPA revenue bonds even after Vero electric extracts itself from the municipal power consortium.
A key component of the new fast-track plan is the elimination of the need for the Internal Revenue Service to rule on the transaction by cancelling the city’s long-term contracts with FMPA and OUC and transferring Vero’s power purchase commitments from OUC’s Stanton 1 and 2 coal plants back to the FMPA.
“FPL was going to buy that power from OUC for a period of three years. This proposal changes that, so FPL would not be buying any power from OUC, but FMPA would hold onto the power and they could sell it to some other party,” said Edwards Wildman attorney John Igoe, the city’s legal counsel on the FPL sale.
As consideration for taking back the power, FPL would pay the FMPA an undetermined amount in cash.
“If we can negotiate an agreed-upon number, then FPL would increase the purchase price and that amount would flow to FMPA,” Igoe said.
The proposal on the table would also require the support of the FMPA and its members. As an added incentive for the FMPA to accept the new deal, FPL and FMPA would re-open talks about FMPA’s participation in FPL’s Turkey Point nuclear plant expansion.
FMPA spokesman Mark McCain also agreed the meeting was positive and made progress, but added that the FMPA was “committed to giving the proposals careful consideration consistent with the existing contract terms and obligations to bondholders.”
When asked if the new proposal might result in closing the deal in 2014, Igoe said, “It’s a burning question that everybody wants to know. We have a lot to work out but I am encouraged by the meeting. It was a positive development. The proposal has just been submitted to FMPA. We still have to work out the development of a strategy with FMPA and once we have a consensus, then everybody can work in earnest to obtain the third-party approvals.”
Once the terms of the deal are finalized, regulators including the Florida Public Service Commission and the Federal Energy Regulatory Commission would need to sign off on the transaction. FPL has already applied for FERC approval of the sale and an answer is expected in early December.
“The meeting went very well, and everyone is working together to find a solution,” FPL’s spokesperson Sarah Gatewood said. “We also felt like progress was made, and the feedback that we got was that things are moving in the right direction. At FPL, we continue to work with all of the parties to identify a path forward to complete the sale, and we hope to have a resolution very soon.”
As the meeting ran into the afternoon, Gatewood said the FMPA ordered lunch. When asked if the spirit of cooperation extended to all the parties sharing a meal around one table, she said “the City, FPL and OUC did all eat together, but I believe the FMPA representatives did not stay in the room.”
From the city’s perspective, Councilman Dick Winger reported he was told “real progress” was made and Councilwoman Pilar Turner said she heard from City Manager Jim O’Connor that ”we opened the door.”
“Jim said it was good to have (FMPA CEO) Nick (Guarriello) there. That had been an improvement and Nick said he would get back with FPL this week,” Turner said.
Councilman Jay Kramer said Monday he had not been briefed on the meeting, but added that was typical of the lack of communication he’d received about the sale over the past three or four months. Kramer, a skeptic that the sale will ever close, had no comment about the proposal. He had not studied it because he was on his way out of town when it was sprung upon city officials on Aug. 21.
Igoe confirmed that the city council as a whole was not specifically made aware that Silagy was meeting with the top FMPA officials or that a solution was in the works, but added that FPL did coordinate with him and with attorney Rick Miller, the pair that heads up the city’s legal team on the sale. “We knew it was coming,” Igoe said. “We were in communication with FPL counsel.”
Igoe said the proposal does not change the base $54 million price set to be paid to OUC at closing.
Of the timeline going forward, Councilwoman Turner said she did not expect negotiations and regulatory approvals to progress fast enough to impact the 2013-14 fiscal budget year, which begins Oct. 1. Based on the deal being stalled prior to last week, city council directed staff to design a budget on the assumption that a sale would not take place prior to Sept. 30, 2014. Best case, should things move along rapidly and the closing is pushed up, Turner said the budget could be amended mid-year.
Vero electric customers can look forward to 40% lower rates the day after FPL takes over the municipal utility and starts supplying power here.