Editor’s note: Former Vero Beach City Councilman Randy Old will be running again for a seat on the Council this coming November. Old today released a statement supporting the sale of Vero Electric on the terms recently proposed by FPL.
FPL’s offer to buy the full utility system is coupled it with agreement to a partial sale of the City’s Indian River Shores customers for $30 million. If the board of the Florida Municipal Power Agency does not approve the deal, or if for any other reason it cannot be completed, Vero Beach will be obligated to sell its Shores customers and infrastructure to FPL for $30 million.
While running for re-election last fall, Old said agreeing to sell the Shores portion of Vero Electric for $30 million would have been a violation of his fiduciary responsibility to the City and to the people of Vero Beach. The statement Old released today does not make clear whether he now supports a partial sale at $30 million, though he did indicates some points in FPL’s proposal may “need to be altered or negotiated.”
Florida Power and Light Makes Offer to City Electric Business
FPL’s offer to the City to buy the entire electric business was announced yesterday. Simply put, FPL is offering to pay $185 million leaving the City with $37 million in cash after the City pays to exit its contracts with FMPA ($108) and OUC ($20), and pays off electric business debt ($20). This should be accepted by the City Council.
The agreements are long and detailed, and there may be some issues that need to be altered or negotiated, but most seem straight forward and reasonable. There are some key issues included. FMPA’s board must unanimously approve the transaction. One City voting against the sale could stop it. I believe that FMPA will approve the transaction and the full sale will be achieved. However, the other key point is, that if the full sale does not go through then, there is a commitment to sell the Indian River Shores portion of Vero Electric to Florida Power and Light.
FMPA reduced its price for Vero to exit its obligations from over $350 million to $108 million, or a 70% reduction. This reduction which happened in the fall, allowed the transaction to become viable. FPL’s past offer was similar to this in size but included our existing plant and other issues not appropriate in this offer. However, had past City Councils agreed to take FLP’s offer of $185 million, and had to pay $350 million to get out of FMPA, plus pay OUC $20 million to exit its contract, and repay its debt of $20 million, the City would have had a net loss on the transaction of $205 million ( +$185 – $350 -$20-$20 = – $205). An impossibility. With the reduced cost to exit FMPA, the transaction is not only possible but attractive.
FMPA changed its mind, was is the new CEO, was is the amount of legislative pressure in Tallahassee, or just a change of heart. But it doesn’t really matter; this is a reasonable transaction that should be accepted.
Next steps, be sure the city uses the proceeds of the sale wisely to minimize the adverse effect on Vero’s finances and its taxpayers. Also, it goes without saying, that it will be a huge relief to the community to have this issue not dominate and divide the city, as it has for the past several years.
There’s at least one fly in the ointment. I’m still reviewing the offer and will surely find more.
Tying up the Power Plant Property for 99 years for $10M would mean taking the city’s most valuable vacant waterfront property off the market for generations as a means of generating income for sale. Of course there may be an out to that if the contract terminates the lease if the transformer farm is moved (not in the current offer).
How much would it cost to move it? $10M is probably on the low side. So the sale price is likely less than $25M, or less than 4 years of the city’s net income from operations. In my mind, $24M would not pay for the market value of the users, much less the value of the transmission and distribution system.
Also very reluctant to see the land tied up in a lease for 99 years. Have a bad feeling about that, though I won’t be around then – nor will anyone else alive today. Most likely.
Ten million dollars for this waterfront property on the Indian River is ,in my opinion, too low for this very valuable land. I also do not believe that FPL will be able to turn this land to its best and highest use. More importantly, Vero residents should have an opportunity via a referendum to let our elected council know what we want.