The LSU Board of Supervisors voted Tuesday to split an $810 million energy deal between two contractors, Enwave Energy Corp. and a joint venture that includes Baton Rouge businessman Jim Bernhard and the national firm Johnson Controls Inc.
The LSU board did not disclose the price of the deal during the meeting, but LSU officials confirmed it afterward. The agreement calls for the university to pay Enwave $27 million per year over the next three decades. How much money Enwave makes off the deal will fluctuate annually based on natural gas prices and the price of the energy Enwave produces for LSU, said LSU spokesman Ernie Ballard.
Enwave will pay Louisiana Energy Partners — the name of the joint venture between Bernhard LLC and Johnson Controls — directly, instead of LSU paying both entities, Ballard said.
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The agreement calls for Enwave to operate and maintain LSU's energy plants for the next 30 years. The company will also provide financing for initial improvements to LSU's energy plant and distribution systems, which LSU will pay back later on.
Louisiana Energy Partners will design and build LSU's energy plant and distribution systems.
If more upgrades and infrastructure are needed in the future, Enwave will have the chance to finance them. Louisiana Energy Partners will also have the chance to design, build and finance future building mechanical system upgrades in the future.
LSU will now create a cooperative endeavor agreement including the university, the LSU Real Estate and Facilities Foundation, Enwave and Louisiana Energy Partners over how to modernize aging campus energy systems that heat, cool and power the university.
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LSU board members billed the agreement as an important cost-savings measure for LSU going forward. The university budgets $30 million annually for utilities, operations and maintenance. Ballard said that the $27 million annual payments to Enwave position LSU to save $3 million annually over 30 years — or a $90 million cost savings total.
He said the project will not affect tuition and student fees.
“This is exactly the way it’s supposed to work,” said Robert Dampf, the LSU board chairman during the meeting. He said board members used their expertise to help negotiate with the two companies and to bring the deal over the finish line.
The process for awarding the contract has been steeped in both secrecy and controversy for several months. LSU held no public talks with either contractor during their negotiations, and the university also never publicly released its criteria for awarding the contract despite taxpayers and students footing the bill.
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Consultants from the firm KPMG, hired by LSU, warned the board in September that LSU was unlikely to get the best possible deal — or the best expertise on building and maintaining energy systems — without inviting public bids. The consultants said they had already reached out to several companies that expressed interest in bidding on the project.
While KPMG consultants have been deeply involved in the process, none spoke or made a public recommendation for the deal on Tuesday.
And nearly a year ago, Interim LSU President Tom Galligan noted that "bidding is usually not a bad thing,” when he spoke of the energy contract.
But the board rejected the advice. Instead, board members voted five months ago to conduct a 90-day negotiation period with the two outfits that already have existing cooperative endeavor agreements with LSU. Those two outfits were Enwave and Louisiana Energy Partners.
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Enwave runs the energy systems for LSU Health Sciences in New Orleans.
“We look forward to bringing the same success we’ve seen in New Orleans to this project and continuing to create benefits for the state,” said Enwave president and CEO Doug Castleberry in a news release Tuesday.
And Bernhard's companies have done plenty of work for LSU and other state offices in the past. Bernhard Mechanical LLC, then run by Jim Bernhard's brother, Kenneth, contracted with LSU in 2003 to build a cogeneration plant on campus. The plant is still operating today, but its construction resulted in a major lawsuit between LSU and Bernhard Mechanical, along with a state Ethics Board scandal.
“Our long-standing relationship with LSU gives our team deep insight into the university’s facilities and their energy systems,” said Bernhard’s CEO, Ed Tinsley, in a news release. “As a company with deep roots in Louisiana, we share the Baton Rouge community and its history and future. Any promise made to LSU is a promise made to our own family.”
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Two months before LSU started negotiating with Bernhard and Enwave, Gov. John Bel Edwards offered Jim Bernhard an appointment to the LSU Board of Supervisors. But Bernhard, a major supporter of the governor and political donor to the Democratic Party, turned down the seat without explanation.
Sitting on the LSU board would have prohibited him from doing business directly with the university.
During the negotiation process, Bernhard's companies filed a complaint against Enwave with the Louisiana State Licensing Board for Contractors, alleging Enwave did not have a contractor's license. The licensing board's executive director said last month the joint venture between Bernhard and Johnson Control also lacked a contractor's license "in accordance with its legal entity name.”
However, the contractor's license issue did not end up sidelining either candidate from receiving the LSU deal.