GREC drops $50 million arbitration counterclaim


Published: Friday, August 23, 2013 at 4:25 p.m.
Last Modified: Friday, August 23, 2013 at 6:31 p.m.

Gainesville no longer faces a $50 million legal threat over the biomass plant.

On Friday, the company behind the Gainesville Renewable Energy Center told the city it was dropping its arbitration counterclaim with prejudice, which means it cannot be refiled.

GREC had requested the "cooperation" of the city in efforts to draw in tax equity investors or sell off the plant before construction is formally declared substantially complete in about a month. That milestone in construction is a deadline to capitalize on the renewable energy tax benefits of the plant, GREC President Jim Gordon said in a letter to the city.

The company had asked the city to suspend its right of first offer to buy the plant for about four months. GREC also asked the city to suspend for that same 120-day span its authority to consent to or reject any transfer of ownership "so long as the purchaser is an affiliate of one of the top ten largest by market capitalization regulated utilities in the United States."

"This has been a long and difficult period for all parties," Gordon said in a letter to the city. "Resolving disputes through the legal process is a time-consuming, emotional and absurdly expensive ordeal. We are pleased to put this matter behind us and look to the future. Our goal from the beginning has been to build a state-of-the-art biomass facility that provides reliable renewable energy, jobs and economic stimulus to the Gainesville area. With plant construction now approaching completion, we are very close to accomplishing this goal."

"It's good news," Commissioner Thomas Hawkins said of GREC's decision to drop the counterclaim. "It's very good news."

Hawkins said that since he'd just received the GREC proposal, he hadn't decided on the voluntary contract changes the company sought.

Commissioner Todd Chase, who had argued that GREC should drop the counterclaim without conditions, said Friday's decision from the company was a positive move.

"It's certainly a step in the right direction," Chase said. "It's always better to talk to a business partner without a gun sticking against their head — and they just removed the gun."

Mayor Ed Braddy said it was a relief to no longer have a $50 million legal claim over the city's head. Braddy said Friday's developments increased his consternation with the fact that Gainesville Regional Utilities General Manager Bob Hunzinger last week signed a settlement agreement on terms requested by GREC.

"The general manager's push to settle is now way out of line and now really disturbing," Braddy said.

On Aug. 15, Hunzinger signed a proposed settlement agreement that had GREC dropping its counterclaim if the city waived its right of first offer to buy the plant, making it easier for GREC to sell the plant and significantly reducing its ability to file a lawsuit or legal claim under the contract.

City Attorney Nicolle Shalley would not sign off on the settlement, which still needed and did not get final approval from the City Commission.

The city's arbitration claim alleged that two sales combining to make a 57 percent stake in the biomass 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 that GREC sell the plant to the city.

On Aug. 1, the arbitrator granted GREC's motion to dismiss, ruling that the transactions were unrelated sales of minority ownership interests.

The GREC counterclaim alleged that potential tax equity investors, who would put money toward the project in exchange for receiving its tax incentive benefits, did not move forward because the city's arbitration claim was a "cloud" hanging over the plant.

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