Updated: Is Lafayette Utilities System for sale?

Claire Taylor | The Daily Advertiser

Show Caption Hide Caption Inside the old Rodemacher power plant See inside of the former Curtis A. Rodemacher Generating Station. The building, which includes a non-digital control room and other interesting features, is still used for storage by the Lafayette Utilities System.

Lafayette Utilities System's electric division could be managed by or sold to an outside company for the right price.

Mayor-President Joel Robideaux told The Daily Advertiser a Baton Rouge-based company, Bernhard Capital Partners Management, is studying LUS' electric division with an eye on either buying or managing and operating the system.

Other electric utility companies, Entergy and firms that bought Cleco, also expressed an interest in the city-owned electric division, he said.

The benefit to approximately 67,000 LUS electric customers if the system is managed by someone else would be smaller rate hikes, Robideaux said.

Under a management agreement, customer rates could be frozen for some time, he said, but LUS will have to raise rates to increase production because of the growing population and to convert a coal-fired plant to natural gas.

A management agreement could include a cash payment to LUS

"I'm not for doing it. I'm not against doing it," Robideaux said of the proposed management or sale.

Robideaux, a CPA, said he wants to analyze the numbers to determine the best way to utilize that asset.

Bernhard officials approached Robideaux in 2017. The company signed a due diligence agreement. When it is completed, he said, Berhnard and the city will discuss what the company believes the value is, what they're willing to pay the city to manage the LUS division, and Robideaux will run numbers from there.

Under a management agreement, Robideaux said the city would still own its electric division and electric plants. The company would be expected to give LUS a "significant" cash payment and assume some debt, he said.

"I expect there will be some payout amount," Robideaux said, "some assumption of current liabilities and the ability to avoid future bond indebtedness that makes it something we have to consider."

LUS may be facing upcoming expenses and rate hikes

What could make it a good deal, Robideaux said, is that LUS electric is facing upcoming expenses.

Five-year capital projections suggest, because of growth, LUS will have to produce more electricity than it is able to, which is expensive, he said.

LUS, along with its partners in a coal-fired plant in Boyce, is considering converting it to natural gas, which would be more cost-effective.

"Between the coal plant conversion and our production needs, we are going to have to spend north of $100 million, which would require significant rate increases," Robideaux said.

"All those things ," he added, "beg for me to entertain any option that's out there."

In September 2016, the City-Parish Council approved a 9 percent rate hike spread over three years to generate money for capital improvements to the electric, water and sewer systems. Officials said at the time the improvements were needed to keep up with growth in the city and repair aging infrastructure.

Before that, the latest rate hike was in 2010.

The city's sewer, water and telecommunications/fiber divisions would not be involved.

A vote of the people may not be necessary

The Robideaux administration cannot sell or lease the utility system without a vote of the people, according to the Home Rule Charter that establishes and governs Lafayette Consolidated Government.

Less clear, he said, is whether the people need to vote to approve a management agreement.

Robideaux said he received unofficial conflicting feedback from two attorneys, so it's not clear.

The city utility system has been operating since 1898 and pays LCG's general fund millions of dollars every year instead of the taxes private company would pay.

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Build a gas plant in Lafayette, one resident suggests

Harold Schoeffler of the local Sierra Club does not support the sale, lease or management of LUS electric division.

"If they want to convert the coal plant to natural gas, they should sell the plant as is and put a natural gas plant in Lafayette next to Henry Hub," he said Monday.

For $240 million, the city could build a combined-cycle plant in Lafayette, Schoeffler said. It would save money and it's environmentally friendly.

Schoeffler also believes if the city wants to sell the LUS division it should go to a vote of residents in the city of Lafayette, customers of LUS, who own the utility system.

Bernhard contributed to Robideaux's campaign

Campaign finance reports filed by Robideaux for 2016-2018 show Bernhard and related companies contributed at least $7,500 to the mayor-president's campaign.

Bernhard Services of Lafayette, Bernhard Energy of Little Rock, Arkansas, and Bernhard Investment of Lafayette each contributed $2,500, campaign finance reports show.

Robideaux said Tuesday morning, "My only consideration regarding LUS's future is what's in the best interest of our citizens."

Corporate filings with the Louisiana Secretary of State Office list Jeffrey S. Jenkins and Jim Bernhard as officers and partners in Bernhard Capital Partners Management of Delaware.

According to The Current, Bernhard Capital, an energy services-focused private equity management firm, "expanded into the electrical transmission and distribution business earlier this year when it acquired Maryland-based W.A. Chester from publicly traded Exelon Corporation for an undisclosed sum. W.A. Chester became the seventh portfolio company owned wholly or in part by Bernhard Capital, founded by Jim Bernhard in 2013 within months of his $3 billion sale of The Shaw Group to CB&I."

The Current reported Friday, citing The Advocate, in 2015, Bernhard Capital purchased Lafayette-based ATC Associates, now called ATC Group Services, and that same year, according to Business Report, one of Bernhard Capital’s portfolio companies acquired and combined TME of Little Rock; EP Breaux Electrical of Lafayette; Metairie-based MCC; and Lafayette-based Bernhard Mechanical, which was founded in 1919 by Jim Bernhard’s grandfather. The company was rebranded this year and now operates as Bernhard Energy Solutions.

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