City says 2011 sale of stake in biomass plant violated contract

Published: Thursday, December 13, 2012 at 9:00 p.m.
Last Modified: Thursday, December 13, 2012 at 9:00 p.m.

Gainesville Regional Utilities officials say the company behind the biomass plant violated its contract with the city last year when a part owner sold its stake without offering the city the right of first refusal.

That prevented the city from buying a controlling interest in the plant, officials said Thursday.

GRU will ask the City Commission next week for permission to file an arbitration claim against the Gainesville Renewable Energy Center, the limited liability corporation that the partnership American Renewables formed for the Gainesville biomass plant.

GRU will seek to require GREC to fulfill the part of the contract that allows the city "an opportunity to offer to purchase a controlling interest in the facility," GRU attorney Shayla L. McNeill said in an email on Thursday.

Should the city pursue a controlling interest, that would be a significant change of course from the city's long-standing plans to buy all the plant's output but not own the facility.

It's unclear what the benefit to the city would be.

The city's potential claim involves Kansas-based Tyr Energy Inc.'s late December 2011 sale of its 40 percent share of the plant to Starwood Energy Group Global, a Connecticut private equity firm that focuses on energy projects.

Under the city's 30-year contract to purchase power from the plant, GREC may not sell the plant without providing the city notice and then giving Gainesville a 60-day window to make an offer to purchase.

GREC informed the city on Dec. 27 of Tyr Energy's intent to sell its share and closed the deal on Dec. 30.

"That sale did not comply with the contract," City Commissioner Thomas Hawkins said. "What it comes down to is they have some liability because they didn't follow the letter of the contract."

GRU spokeswoman Katie Weitekamp said Thursday that utility officials did not want to discuss the issue in detail publicly before next Thursday's City Commission meeting.

Al Morales, the chief financial officer of GREC, said company officials "strongly believe" the contract was not violated because Tyr's sale to Starwood Energy did not change ownership of a controlling interest in the plant.

"It did not change the control to trigger any claim under the PPA (power purchase agreement)," Morales said.

He declined further comment.

In January, a GRU spokesperson told The Sun the utility expected "no anticipated impact" from the sale but that GRU's attorney was reviewing paperwork to confirm that.

GRU then "requested additional documentation and information from GREC" but the company has, so far, "failed to provide the requested materials and information," according to the agenda item for the Dec. 20 meeting.

The potential claim for arbitration come as GRU nears the one-year deadline for filing a claim, which looms on Dec. 30.

McNeill's statement did not specifically address questions on what documentation GRU sought from GREC or why the recommendation for arbitration comes close to the legal deadline, except to say that the "timing of the request for arbitration is in full accordance with Florida law."

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