GREC presses City Commission for an answer to its offer
Published: Tuesday, September 10, 2013 at 3:54 p.m.
Last Modified: Tuesday, September 10, 2013 at 3:54 p.m.
The biomass plant owner is pressing the Gainesville City Commission for an answer to its request for contract changes to ease the potential sale of the plant to another electric company.
In a letter sent Friday, Gainesville Renewable Energy Center President Jim Gordon said the company faces "an incredibly tight timeframe" to draw in tax equity investors or sell the plant outright in time to benefit from federal tax incentives for renewable energy projects.
Gordon said GREC needs a response by Sept. 23 for its requested contract changes or its offer to reimburse the city for about $1.5 million spent on legal fees during the arbitration fight between the city and the company would expire. The reimbursement is contingent on the city agreeing to the contract changes.
On Tuesday, Mayor Ed Braddy said the City Commission, which meets next on Sept. 19, should not rush to a decision in response to the deadline. Braddy said the $1.5 million was no small amount but that the city should weigh all options to see if it can realize a greater financial benefit.
GREC has asked the city to waive for 120 days its contractual right of first offer before the company may sell the 100-megawatt plant. GREC also asked the city to waive for that same 120-day span its approval authority over the sale of all interests in the plant as long as the purchaser is among the 10 largest utilities in the country or an affiliate of one.
That list includes two companies with a major presence in Florida: Duke Energy and Florida Power & Light, which is a subsidiary of NextEra Energy. The list also includes Southern Company, the owner and operator of a sister biomass plant in Texas that first was proposed and permitted by the companies initially behind GREC.
In late August, an FPL spokesperson said the company was not in talks to purchase the plant. A spokesperson for Duke and a spokesperson for Southern said it was company policy not to comment on questions about any potential acquisitions.
Gordon's letter came the day after city commissioners voted to prepare an analysis for the Oct. 3 meeting of the possible benefits and risks of making an offer to purchase the plant.
At the request of Commissioner Randy Wells, GRU staff members will not prepare such an analysis on their own. The city manager, city attorney and auditor also will be involved.
When commissioners voted to move ahead with the biomass plant back in 2008, the premise was that the plant would be privately owned and operated in order to protect the city from construction risk and debt. With construction now nearing completion, the plant is generating limited electricity, and the city, which is locked into a 30-year contract to purchase all its output, has been unable to sell off 50 megawatts as originally planned.
Since the vote in December to file an ultimately unsuccessful arbitration claim, the purchase of the plant has emerged as an option to find some savings to the $100 million that the city is slated to pay GREC annually.
"At the right price, there is a real savings and benefit to the citizens of Gainesville," John Stanton, the GRU assistant general manager for energy supply, told commissioners Thursday. "Would that price that works for Gainesville be one that works for GREC? I don't know. So that, I think, is the paradox here."
The city's 60-day window to make an offer to purchase the plant expires on Oct. 22. If the city makes an offer, GREC is contractually bound to negotiate on a potential deal for at least 30 days.
Based on comments at Thursday's meeting, some commissioners oppose making the concessions that GREC seeks.
"I have no interest in suspending our contractual right" to make an offer to buy the plant, Commissioner Lauren Poe said.
"I would not in a million years give up our rofo (right of first offer) for a million and a half … it's just not worth it," Commissioner Todd Chase said.