Florida public power utility JEA received 16 bids in response to an Invitation to Negotiate issued over the summer related to the potential privatization of the utility.
On July 23, the JEA Board of Directors voted to authorize JEA’s CEO Aaron Zahn to explore a “recapitalization event.”
Two days later, JEA announced it had hired J.P. Morgan Securities LLC. and Morgan Stanley & Co. LLC as financial advisors and Pillsbury Winthrop Shaw Pittman LLP and Foley & Lardner LLP as legal advisors “to assist the utility with the execution of a competitive and open solicitation process.”
JEA said it would proceed with a competitive process requesting responses from industry sectors including financial, technology and energy and water.
JEA, located in Jacksonville, Fla., serves an estimated 478,000 electric, 357,000 water, 279,000 sewer customers and 15,000 reclaimed water customers.
JEA opened bids on Oct. 7
On Oct. 7, JEA opened bids submitted in response to the solicitation, which starts a five-month process to negotiate with potential buyers, the Florida Times Union reported.
“For entities that want to purchase JEA lock, stock and barrel, the threshold price to even get consideration would be in the range of $6.8 billion to $7.3 billion, according to information provided to interested buyers,” according to an Oct. 5 report in the newspaper.
While JEA did not disclose any information about the names of the bidders or details of their offers, “three powerhouse utility owners with operations in Florida are among the entities that submitted 16 offers Monday about striking a deal for all or part of JEA,” the newspaper reported.
Those utilities are NextEra Energy, the parent company of Florida Power & Light, Duke Energy and Emera, which owns Tampa Electric and Peoples Gas, according to the newspaper.
Along with the three investor-owned energy companies, an official with Veolia Group, which designs and provides water, waste and energy management solutions, said that Veolia has an interest in partnering with others to buy the water side of the utility.
City Ethics Director, Inspector General to sit in on closed-door meetings
“In a sign of interest in the stakes involved, city Inspector General Lisa Green and city Ethics Director Carla Miller were in the room to watch the bid opening,” the Times-Union reported on Oct. 7. Green and Miller also intend to sit in on closed-door meetings that the public power utility will use to evaluate initial offers “and later negotiate toward final offers from respondents,” the newspaper reported.
According to the article, Miller said that the scrutiny is warranted due to the unusual Invitation to Negotiate process.
The Jacksonville Daily Record reported that in an Oct. 4 letter to Zahn, Green “informed the utility chief that officials from the Office of Inspector General and the city’s Office of Ethics would attend all meetings related to JEA’s possible privatization.”
“Cone of Silence”
Meanwhile, a “Cone of Silence” has been instituted as part of the Invitation to Negotiate process.
A letter from the Jacksonville law firm Foley and Lardner addressed to the board chair and CEO of JEA called for limitation on communication as JEA solicited "strategic alternatives" through an "invitation to negotiate," Kent Justice, an anchor and reporter at News4Jax, reported on Aug. 12.
“The attorney's letter says the invitation to negotiate prohibits "ex parte" communications between potential bidders and JEA and its representatives, referring to that as a "cone of silence,’” wrote Justice.
JEA recently ran ads in which the public power utility described a transformation that could bring $3 billion to Jacksonville, but some city council members voiced concerns about the ads in the context of the Cone of Silence. JEA has since dropped the ads.
In an Oct. 4 memo to City Council Members, JEA Board Chair April Green explained that JEA’s “new strategic communications campaign is meant to engage our customers in an important discussion about the future of JEA.”
Meanwhile, according to an Oct. 8 column by Mark Woods in the Florida Times-Union, JEA customers received a message from Green, along with their bills. According to Woods, in the message, Green says, “We must find ways to avoid going over the financial cliff we are facing.”
City Council holds meeting
In a memo prepared for an Oct. 8 Jacksonville City Council meeting related to JEA’s future, City Council Member Michael Boylan said that the prospect of privatizing JEA “will clearly be a legacy decision that undoubtedly will impact the future of Jacksonville for generations to come.”
The city council would need to sign off on any sale of JEA.
The memo noted that one of the conclusions in a 2018 report of the Council’s Special Committee on the Future of JEA “clearly makes this point.” That report said that JEA “is one of Jacksonville’s most important civic assets and decisions about its future should be made with the utmost care.”
“We as members of City Council need to be fully prepared to enter into that decision-making process, understanding both the advantages and disadvantages of such a transaction,” Boylan said in his memo. “To that end I believe we need to gain a sound understanding of the implications involved in the matter soon to be before us.”
Up to this point, “we have allowed the Independent Authority, JEA, to drive the agenda and the timeline, putting us in the posture of reacting when in fact we should be proactive in addressing this opportunity,” Boylan said in his memo. “I don’t offer that statement to be disparaging of the board and management of JEA but at this juncture I believe we have a responsibility to take charge of the conversation going forward and in advance of the identification of possible suitors.”
The memo said that while this would likely “be a point of consternation for those who want to see the process proceed on a predetermined timeline, hitting the ‘reset’ button right now allows not only Council members but of the citizenry as a whole the opportunity to take a fair and balanced look at the plusses and minuses relating to a privatized utility, a matter which the 2018 report did not fully address.”
Boylan proposed that the council hold hearings “that take up the many questions surrounding this issue and in many respects,” picking up where a 2017-18 special committee left off.
Each hearing would be an opportunity for subject matter experts to provide their perspective regarding a particular issue, the memo said.
Boylan said that a couple of questions that were left unanswered in the 2018 report would be a good place to start. Those questions are: (1) What is the true value to the City government and to the citizens/taxpayers who are its ultimate owners? (2) What factors should be considered relevant in determining whether JEA should be privatized or not?
City council president supports creation of special committee
At the council meeting on Oct. 8, Jacksonville City Council President Scott Wilson said he favors creating a special council committee that would examine questions surrounding JEA’s solicitation.
The committee “would be a sequel to a similar City Council panel that met in the first half of 2018 when JEA originally initiated debate about whether the time had come to sell the utility,” the Florida Times-Union reported.
The meetings of the special council committee “would run parallel to JEA’s negotiations over the next five months with entities interested in purchasing all or part of the utility, or forging some other kind of privatization deal,” the newspaper noted.
Council members agreed to introduce legislation that would allow them “to get their own attorneys to make sure they don't get left behind in a pending sale.”