Bernhard Capital Partners, a private equity management firm based in Baton Rouge, La., is pitching plans to officials in Lafayette, La., under which the electric division of public power utility Lafayette Utilities System would become privatized.
And, beyond those plans, Bernhard Capital Partners, which was established in 2013, appears ready to pursue a similar strategy with other utilities in the South.
In early April, Lafayette Mayor-President Joel Robideaux signed a non-binding letter of intent authorizing Bernhard Capital Partners to review LUS’ electric division for a possible $526 million transaction that would privatize the utility’s electric division. Under discussion is a management contract for the LUS electric division.
Local news reports in Lafayette have reported that Bernhard Capital Partners envisions including a privatized LUS electric division as part of what would eventually become a Fortune 500 company with its headquarters in Lafayette.
Bruce Conque, a member of Lafayette’s City-Parish Council, was one of several local officials who were recently briefed by Bernhard Capital Partners on the firm’s plans.
Conque said the presentation was compelling and that “they have done their homework.” But ultimately it did not convince him that there was merit to the idea of effectively privatizing the utility’s electric division.
In an interview, Conque said that when it comes to LUS, “there is a great deal of community ownership. We take pride in the fact that we have a utility system that is among the best in the South. We take pride in the utility system that helped launch what is the second largest fiber optic system in the country. We provide fiber optics to every premise in the city of Lafayette.”
He noted that LUS and LUS Fiber are active in the community, marketing, sponsoring and supporting a number of community activities.
Moreover, LUS is a utility with one of the most reliable systems and offers some of “the best rates and certainly the best customer service you will find anywhere in the state and we’ll compare it to the rest of the South, and those are three aspects that you only find, in my mind, in community-owned utilities.”
Conque said that LUS Fiber should be off the table in terms of a possible sale. LUS Fiber is a “huge asset. We have forty percent of the market right now against private entities.”
Meanwhile, recent local news coverage has described plans by Bernhard Capital Partners to approach other utilities in the region.
An August 8 article in the Louisiana Current reports that the private equity firm has said it hopes to acquire or take over management of 30 to 40 power companies, primarily in small cities and ranging in size from to $100 million to $1 billion. That article also referenced a Bernhard Capital Partners official recently saying that the firm was in talks with entities similar to LUS in the South.
Conque said that with respect to the type of utility systems Bernhard Capital Partners would likely be looking at beyond LUS, he would expect that a large percentage, if not all, of those systems would be public power utilities.
Where things stand today
As things stands today, any proposal from Bernhard Capital Partners would be voted on by the council and would not go to a public vote. The city-parish charter includes a loophole that would not require a public vote on a management contract such as one that could be proposed by Bernhard Capital Partners.
However, there is a charter amendment process underway in Lafayette that would close that loophole and require a public vote. The charter amendment as proposed would not be in effect until January 2020, if approved by voters in December of this year.
With respect to where things stand with Bernhard Capital Partners’ review of the LUS electric division, Conque said it is his understanding that the firm is wrapping it up.
Bernhard Capital Partners purchased business from Exelon
In early March, a group of investors led by Bernhard Capital Partners announced that it had acquired W.A. Chester from investor-owned Exelon Corporation. W.A. Chester is an electrical contractor for installation, maintenance and repair of underground high voltage cable transmission and distribution systems.
“Through its newly formed T&D services platform, Bernhard Capital intends to deploy additional capital to add capabilities that will complement W.A. Chester's leadership in underground transmission and distribution services,” a news release announcing the deal said.
On its website, W.A. Chester notes that its clients are electric utility companies and independent power producers.
Interim director named at LUS
On July 18, Terry Huval, announced that he was retiring as director of LUS and LUS Fiber. In late July, Robideaux appointed Jeffrey Stewart as interim director of LUS until a permanent director is named. Stewart, who most recently served as the engineering and power supply manager for LUS and has worked for the utility system for more than 17 years, assumed the role effective immediately.
The American Public Power Association offers public power utilities assistance in evaluating potential sellout proposals through its guide, The Future of Your Utility: Positioning Your Community to Succeed in a Sellout Evaluation, available through its product store.