GREC's settlement offer would alter biomass contract

Published: Thursday, August 15, 2013 at 9:49 p.m.
Last Modified: Thursday, August 15, 2013 at 9:49 p.m.

The biomass plant company has sent Gainesville its terms for dropping a $50 million arbitration counterclaim and some city officials say the terms are unacceptable.

The Gainesville Renewable Energy Center seeks no money to settle. Instead, GREC, which filed its counterclaim on the grounds that the city’s arbitration claim was an opportunistic attempt to force contract renegotiations, wants a series of modifications to the city’s contract to purchase power from the plant.

Some of the requested changes would make it easier for the company to sell the plant. Another requested change would require that the city notify GREC of any potential legal claim for breach of contract within 45 days of discovering the facts that would serve as the foundation of that claim. Otherwise, the city would lose its right to bring the legal claim.

City Attorney Nicolle Shalley said consenting to that request would significantly reduce the city’s legal rights when the statute of limitations to bring a claim in Florida is five years.

The City Commission will again discuss GREC’s proposed terms — and how to move forward — at the end of Monday’s Community Redevelopment Agency meeting.

Asked by Commissioner Todd Chase if she would recommend a settlement based on the terms proposed, Shalley said she would not.

GRU General Manager Bob Hunzinger, on the other hand, said in more general terms that he would “lean toward” the city accepting a settlement. He said GREC was under a tight timeline for a financial transaction it is attempting to complete involving the plant. Against that backdrop, Hunzinger said that, while commissioners saw the proposed terms for the first time Thursday, if the City Commission does not make a decision, then GREC could potentially say by Monday that the offer is off the table and “see you at arbitration.”

Chase said that, if GREC is sincere in its effort to rebuild good relations with the city, the company would drop the counterclaim without any demands. In response to a question from Chase, Shalley said GREC had initially communicated to the arbitrator it planned to drop its counterclaim if the arbitrator had dismissed the city’s claim. Now the firm is seeking conditions, Chase noted.

Commissioner Thomas Hawkins said he wanted to settle because the city could face significant liability if it loses at arbitration. But Hawkins said he opposed conditions “not in the city’s best interest” and he opposed deciding too quickly. He voiced opposition to GREC’s requested condition placing the 45-day time limit for notification of potential legal claims.

Among the requested changes allowing GREC to sell the plant more easily, the city would, for 5 1/2 years, waive the contractual right that initially led to its arbitration claim — Gainesville’s right to make a first offer to purchase the plant before GREC may sell a controlling interest in it.

Another would have the city waiving for 5 1/2 years its right of approval before GREC may transfer its contractual duties and obligations to another company.

Such a company would have to have at least five years’ experience with power generation and meet specific financial criteria — or it would have to be the subsidiary of a company meeting those criteria.

The city’s arbitration claim alleged that two sales combining to a 57 percent stake in the plant constituted a change of controlling interest that should have triggered the city’s contractual right of first offer to buy the plant.

At arbitration, Gainesville was seeking to require GREC to sell the plant to the city.

On Aug. 1, the former federal judge serving as arbitrator granted GREC’s motion to dismiss, ruling the transactions were unrelated sales of minority ownership interests. The arbitrator told the two sides to attempt to work out an agreement to resolve the GREC counterclaim.

That counterclaim alleges that potential tax equity investors, who would put money toward a project in exchange for receiving some of its tax incentive benefits, did not move forward because the city’s arbitration claim was a “cloud” hanging over the plant. That caused GREC some $50 million in damages, according to the counterclaim.

Shalley said GREC’s attorneys would have to prove that allegation if the arbitration fight over the counterclaim continues.

“They are actually going to have to show that these are real and actual loses,” she said.

Chase said he “can’t find any reason to believe there is any validity” to the counterclaim.

As it stands, the city has paid the New York City-based law firm of Orrick, Herrington & Sutcliffe some $1.1 million for legal fees related to arbitration and mediation.

If there is no settlement and arbitration goes to a one-day hearing, the company would cap additional fees at no more than $107,000, Shalley said. Fees for any additional days of hearings would be capped at no more than $12,000, she said.

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