Hoping the state’s regulators will change their minds on the $4.9 billion sale of Cleco, the Pineville-based utility, investors Tuesday offered what amounts to a free month of electricity this summer for most of its customers.
“You would see the (monthly) bill go to zero,” said Darren J. Olagues, president of Cleco Power LLC, about the upfront credit of $370 for the average residential and small-business customers to be paid within 30 days of the closing of the sale. For customers whose bills are lower, the remaining amount would roll over to the next month, he said in an interview Tuesday.
It’s part of sweetened package being offered by a coalition led by Macquarie Infrastructure and Real Assets that includes British Columbia Investment Management Corporation and investors. The Louisiana Public Service Commission last month refused to allow the Macquarie investors to purchase the 80-year-old utility that serves about 286,000 customers in parts of Acadiana, the north shore and much of central Louisiana.
The investors have requested a rehearing, which the commission will consider at its meeting next week.
“We obviously heard, loud and clear, the commissioners’ and the interveners’ concerns,” Olagues said, adding that he believes that the transaction would benefit customers, employees and communities served by Cleco.
The Cleco buyers committed to paying $101 million upfront. Initially, the buyers agreed to pay customers $125 million over a 15-year period.
This new plan would pay out about $73 million in rate credits and add in $28 million, which the coalition calculated would be about half the taxes — embedded in the rates that the new company would have been able to pocket. Instead of paying it out over time, the buyers propose to pay it all at once, provided the commission approves, which would amount to about $370 for the average residential customer, sometime over the summer when bills are highest.
March’s bill for residential customers using 1,500 kilowatt hours of electricity is $158.65, the highest in the state.
The investors would pay the amount themselves, according to Andrew Chapman, senior managing director at Macquarie. “The additional money would be equity, basically money that we put up, or money in the company, or we will fund it by cutting our own dividends back,” Chapman said in an interview Tuesday.
But a New Orleans-based consumer advocacy group that held town hall meetings and spearheaded opposition prior to last month’s vote was unimpressed with the new offer.
“They’ve improved the window dressing and that’s it,” Casey DeMoss, who heads Alliance for Affordable Energy, said in an interview Tuesday.
The investors’ proposal also includes a promise to give $15 million, in the form of grants, for Louisiana Economic Development to administer for projects in the Cleco coverage area.
“It would be a fund in the form of grants, loans, equity interests, whatever LED decides to do with it,” Chapman said. “We are putting $15 million into the fund; we are not expecting it back.”
Chapman said about 72 percent of the money being put up by the investors comes from U.S. and Canadian sources. About 90 percent of the funding is being supplied by pension funds.
To allay concerns that this is a takeover of a Louisiana company by foreign investors, the buyers are offering to allow state and municipal pension funds to buy up to 10 percent of the new company, Chapman said. “They could form a group, and if they purchase all 10 percent, they could get a seat on the board, in which case they can be involved in the governance of the company,” he said.
The five elected members of the Public Service Commission rejected the bid last month, led by commission Chairman Clyde Holloway, of Forest Hill, who also is a Cleco customer. He voiced concerns about a tax scheme that would have allowed the new owners of Cleco to pocket taxes collected as part of the monthly rates, rather than turning the proceeds over to state and federal authorities. Holloway also didn’t like plans of the investors to resell the company after eight to 10 years. And he worried about a financing method that allows investors to use borrowed money to secure more loans.
It’s not clear whether the buyers could persuade three of the five commissioners to reconsider their decision on March 22 and hold another hearing.
The commissioners have been busy working on the flooding crisis in the Florida Parishes, on the north shore and in north Louisiana. The rehearing request was to be considered Wednesday but was postponed because of the flooding.
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