NextGen Utility Systems is proposing to take over management of the Lafayette Utilities System for 40 years in a deal the company says is worth as much as $1.3 billion in the form of upfront payment, annual installments and debt relief. Company officials also say they'll reduce customer electric bills by 10 percent over the first three years.
NextGen, an affiliate of Bernhard Capital Partners, says further it will make Lafayette the home of a future Fortune 500 headquarters, creating 400 new jobs. The company says it will build an $8 million mixed-use, commercial building to serve as a hub for its utility operations in the southeastern United States.
An economist's report accompanying the proposal provides more details about plans for a corporate headquarters than it does about the proposal itself. The new jobs will come with an average annual salary of $75,000, and construction will take 12 to 15 months, according to economist James Richardson's report. An additional 250 jobs could be indirectly created.
Lafayette city-parish government released NextGen’s proposal on Monday in advance of a public presentation before the Lafayette Public Utilities authority scheduled for Tuesday evening. City-parish council members whose districts are primarily within city limits serve on the authority.
No vote is expected.
The City of Lafayette would retain ownership and “ultimate control of the assets,” according to the proposal. NextGen would receive all revenues from the LUS electric, water and wastewater divisions. LUS Fiber, the city-owned telecommunications system, is not part of the deal. Direct compensation to the City of Lafayette under the proposal includes:
- A $140 million lump-sum payment
- Estimated annual payments of $23 million, comparable to what LUS currently contributes in annual "in lieu of taxes" payments
- $184 million to satisfy all outstanding bond obligations
- $64 million in "earn-out payments" if LUS hits revenue targets
The proposal is more sweeping than the outlines of a deal that Mayor-President Joel Robideaux agreed to six months ago, as sketched out in a non-binding letter of intent. That deal was worth $526 million and was limited to the LUS electric division.
Release of the formal proposal, which will need City-Parish Council blessing, ends months of speculation about what might be in the offing for the utility and telecommunication systems, which are currently merged under the leadership of a single interim director.
Robideaux wants to split the sister agencies under separate directors, but council members have said they want to see the NextGen management proposal before endorsing any staffing plan. Robideaux has argued that a utilities director is necessary even if the system shifts to private management.
A NextGen assessment of the utility system outlined several ongoing risk factors, including a safety culture that "is cause for concern as evidenced by a historical pattern of missing self-identified safety targets," according to the assessment.
Another is a federal administrative order identifying illegal wastewater discharges into the Vermilion River. NextGen estimates that upgrades required by the federal order could cost more than $100 million over the next decade.
LUS disagrees with this estimate, according to the NextGen assessment, which noted that "LUS believes that its current forecast for wastewater operations is sufficient to comply" with the order.
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