The Virginian-Pilot
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A New York company has submitted a bid worth $338 million to purchase SPSA and privatize all trash and recycling services in South Hampton Roads as early as April.
The offer is the third in the past year from ReEnergy Holdings LLC, and is the most detailed and generous yet.
Two earlier offers were rejected without public comment or debate by the board of the Southeastern Public Service Authority, which has handled regional wastes since the 1970s but nearly went broke just months ago.
The latest bid from ReEnergy comes as SPSA this week announced that it intends to sell one of its biggest assets, a trash-burning power plant in Portsmouth, to one of two private suitors, Covanta Energy or Wheelabrator Technologies.
The deal is expected to net $200 million for the trash agency.
SPSA cannot sell its power plant to one of the suitors and still be bought out by ReEnergy, so the board and its eight member communities must make a choice, and soon.
In its latest proposal, ReEnergy promises myriad system improvements and changes. Among them:
- Expanding curbside recycling in communities that want to do so;
- Restarting a regional yard waste program to again create compost and mulch, as well as wood chips for biomass fuel;
- Cutting municipal trash-disposal rates, or tipping fees, in half by 2013 for six cities and counties while raising rates in two others, Suffolk and Virginia Beach;
- Paying Suffolk and Portsmouth annual "host fees" for allowing the regional landfill and the power plant to exist within their borders.
Because of a new state law aimed at overhauling SPSA, the agency must fully review the ReEnergy proposal before passing judgment on it.
"Hopefully, they'll take up this matter in a public forum and not behind closed doors in executive session, the way they always seem to do their business," said state Del. John Cosgrove, R-Chesapeake, a frequent SPSA critic who sponsored the bill that became law on July 1.
Rowland "Bucky" Taylor, SPSA's executive director, said his staff and board members have received copies of the ReEnergy offer and will consider it along with the bids for the Portsmouth power plant.
To be approved, the ReEnergy proposal would require a unanimous vote from the board, since the company is asking each of the eight localities to sign new, 20-year service agreements in lieu of existing agreements with SPSA, Taylor said.
To finance its takeover bid, ReEnergy would put up $81 million in cash and equities and $242 million in borrowed money through tax-exempt bonds. The company also would create a $15 million debt reserve fund, according to proposal documents, for a total purchase price of $338 million.
Larry Richardson, a principal of ReEnergy, said Thursday that all of SPSA's outstanding debts would be paid off, mostly with bond money.
The company would spend an additional $45 million to fix up the Portsmouth power plant and modernize other local facilities, and it would set aside $20 million to close and monitor the regional landfill in Suffolk when it runs out of storage space late next decade.
Richardson said the new bid includes two big changes from earlier versions: Instead of dissolving SPSA entirely, the agency would remain as a much smaller entity, a sort of contract manager; and local garbage-transfer stations would be given to the cities or counties in which they exist.
ReEnergy, based near Albany, N.Y., was launched in 2008 as a subsidiary of the Riverstone/Carlyle Renewable and Alternative Energy Fund. While the company has not managed a waste system such as SPSA before, its chief officers have.
ReEnergy will have partners, too, including Waste Industries USA and Kaufman & Canoles, a Norfolk law firm. A partner with the firm, Vince Mastracco, has been lobbying local leaders and setting up meetings to introduce ReEnergy to South Hampton Roads for months now.
Richardson said ReEnergy "has no plans" to import trash to the region if its takeover bid is approved and does not anticipate building a new landfill.
It is likely most operational employees at SPSA would be retained, he said, while those in administration and management might be replaced, though with "an appropriate severance."
Scott Harper, (757) 446-2340, scott.harper@pilotonline.com
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Beck Report
That's great. How do I get a copy? I checked my usual source and its not online yet. Maybe you can post a link in your next post. As for Reenergy's intentions, I have no idea what they plan to do for Virginia Beeach but their proposal suggests they have a plan that's worthy of a real discussion/debate. If its all smoke and mirrors I'm sure the people, press and elected officials will figure that out. But if Reenergy's plan is a "better" option, I am hopeful that the SPSA Board and Members will give it a shot. As for the other two bids, we the citizens really have no idea what's being negotiated behind closed doors and we have no idea whether the financial impact will be equal to Reenergy. We have no idea whether SPSA will be able to get the Members'/ citizens' costs back to a reasonable rate. What we do know is that SPSA has proposed "fixes" to their financial problems dozens of times and has never been able to deliver an economically sustainable program.
Response
You have an old copy of Beck; the latest is dated March 12, 2009, and makes note of the fiscal crisis. Of course, since then, all the actions they recommend have been taken. The bids are due tomorrow, and when received, will be analyzed by SPSA's financial advisors. They will be presented at the next board meeting on the 29th, public hearings will be scheduled in August at each member jurisdiction, a public hearing will be held at SPSA, and then in early September, the board will meet to deliberate about whether to enter into a contract to sell the WTE system and if so, to whom. If you have read the ReEnergy proposal as you say, you know that they claim that the..."ReEnergy proposal presents a longer-term solution for the Member Communities and treats all Member Communities the same with respect to tipping fees under the Waste Supply Agreements." You say you don't think that is what they mean. Is that true for other sections of their proposal as well?
Covanta and Wheelebrator
I'm really curious why the proposals from Covanta and Wheelebrator haven't been shared with the public. Here's an easy question... What's the highest "bid" price? So what price relief is staff projecting? How much debt will the Members still have to deal with after the sale? Who will be responbsible for closing the landfill and maintaining it for 30 years? Alot of this information is out there in a detailed 75 page proposal from ReEnergy but the other "bids" are deemed "secret" for some reason. What happens in 2018 when the Support agreements run out? Why doesn't the Pilot submit a Freedom of Information request and give us the scoop on these competing proposals? My prediction... the final proposals will be delivered to SPSA this week, SPSA staff will pick thier favorite and present it to the Board in closed session. The Board will come out of closed session and immediately vote to accept staff's favorite without any real analysis or debate. Public hearings will be scheduled for appearances but the deal will be fully baked by then.
Fiscal year
Of course you are right on the Fiscal year, my mistake. I was looking at the Beck rpt which hasn't been updated since Feb 2008. SPSA should not "pre-judge" the proposal based on asumptions like yours. I am sure ReEnergy fully understands that Virginia Beach, Suffolk and Portsmouth aren't going to agree to absorb more costs and will therefor have a proposal that makes them whole through the Host Agreement or some other method. Each member will be negotiating the new agreements for themselves. SPSA on the other hand should try to act based on what's best for the region. If SPSA acts "regionally" and let's the members take care of themselves on the new disposal agreements, host agreements etc, then we should get what's best for all citizens. The ReEnergy proposal is well thought out, offers clear value for the region and if seriously considered, analyzed, debated and adopted we the citizens could finally put this nightmare behind us. Face it, SPSA has not been able to deliver its promises and its time to give someone else a try.
Best Interest of Whom?
Well, my point all along has been that I don't think it delivers price relief to everyone; in fact, it is quite clear that the citizens of Virginia Beach and Suffolk will get only prive increases. Alternately, once the sale of the RDF/WTE facilities is approved and then completed, it is fully anticipated that there will be price relief to all the members. The requirement for each member to abrogate their current Use and Support Agreements, which are set to expire on January 24, 2018, and sign new, twenty year contracts with ReEnergy, may not be perceived to be in the best interest of all the political jurisdictions. You mention the audi; SPSA is on a fiscal year basis which just ended on June 30, so the audit is underway and should be completed shortly. It is always presented in open session for all to see. It is done under GAAP standards and some deficiencies in the past have been noted and corrected. Frankly, with the turmoil in staffing at SPSA, I expect that to be the case this year as well.
More excuses.
Nothing that has happened since 12/31/08 goes into the audit and survey so there are really only three reasons for it not to be complete well before now. 1)Accounting Records that have not been managed to GAAP standards, 2)Very significant deficiencies that would require the auditor to write an audit letter warning of or stating as fact, SPSA's insolvency 3)the financials and audit have been complete for some time and withheld from publiication for the purpose of deception. I don't have any idea which reason applies but none of them are acceptible. All I'm saying is that "we the people" deserve to have all the facts presented without spin, they deserve to hear an unbiased review of the competing bids and they deserve to have their voices heard. This should not be a "political" decision. The SPSA staff clearly has a conflict of interest and should not have a say in the debate. People and businesses are suffering through this economy and they NEED the price relief offered by ReEnergy, not more of the same. SPSA simply cannot deliver.
Summary
Yes, there has been some disruption on the staff at SPSA as the workforce has been reduced by about 20%, and as you know, the administrative and executive personnel have borne much of the brunt of that. I expect a revised financial statement in a few days as the effect of the recent refinancing through VRA is made available. That refinancing did not change the overall debt structure by very much, but it did restructure the payments so that the annual amounts are more consistent in the last years of SPSA's existence. When I have received that statement, I will be pleased to provide a summary of the major categories which of course now includes debt owed to Virginia Beach for its agreement to forestall payments due to the Beach under the Ash and Residue contract.
My Source? That's easy...
I read the actual proposal online at www.sellspsanow.com. I read the "error filled" Pilot article as well as the articles in Suffolk and Tidewater newspapers. I also read the SPSA audit and RW Beck report a few months back and have attended a couple of your "public" meetings over the last 5 years. I'm a retired businessman so I have plenty of time for this and I enjoy keeping myself informed. Having run a business before, I have a pretty good understanding of how things work and what is and isn't possible. I can read a balance sheet and profit/loss statement. After watching the SPSA craziness for the last 10 years it's obviously become one of my hot buttons. The fact is, SPSA has not been straight forward with the members or the citizens and they continue to circle the wagons rather than find an answer. For instance, the latest public information is for the year 2007. I accepted your challenge but you didn't answer my questions. I could of course rely on the 2007 numbers but who knows how much worse things have gotten since???
Point of view
Well Burt, you surely know quite a bit about the proposed contract. Care to divulge your source of information? In any case, my reading of the proposed deal leads me to different conclusions about a number of topics. SPSA actually proposes to lower tip fees as well over the period of time through 2018 especially if the anticipated sale of RDF/WTE actually occurs. And at this point in time, SPSA has made no demand to each member that it must renegotiate its agreement and sign a new long term agreement in its place. That is an important issue to the Beach as of course you know we have a permitted, operational landfill and may simply decide that in the future we will be better off simply using our own capacity. Further, I do not see anything in the proposed deal that will make Virginia Beach whole as you say. I make no derisive comments about ReEnergy; I just need to evaluate the proposal as a business proposal and listen to the advice of others as well.
TOTAL DEBT
Mr. Barrett, OK, I'll take your challenge of my assertion that all the debt is paid off. So what is SPSA's total debt? What is the total debt NET of the Debt Service payment reserve balance? What is the accrued closure and post closure account balance? What is the book value of the assets ReEnergy is not proposing to buy? I think if you do the math on these numbers the offer price pretty much covers it. The fact is, the public has never been told the complete unbiased truth and so we can't say for certain whether it will or won't pay all the debt. ReEnergy's proposal says "substantially all" the debt which is close enough for me. In year 4, assuming the Members deliver about 400,000 tons of waste they will be saving $30,000,000 PER YEAR! Please just admit it, this proposal deserves a full, detailed, PUBLIC, accurate analysis and debate. I'll bet the members can find something better to do with all that money once this thorn is removed from thier side!!! I'm confused by your position. Do you think ReEnergy wrote a 100 page proposal and its all lies?