Florida municipal utility JEA is still committed to exploring all ownership structures to strategically position the company for success, JEA's leadership team said Sept. 24, reiterating that they have not yet determined whether to privatize the utility.
During JEA's board meeting, Managing Director and CEO Aaron Zahn pushed back against critics and media reports claiming the Jacksonville, Fla., utility will definitely seek privatization to address anticipated financial difficulties related to needed infrastructure and generation improvements.
"We're not predicting that the sky is falling or that we're in a death spiral," Zahn said. "We're making sure that this entity has the tools, resources and capital" to participate in technology disruptions occurring in the industry, such as behind-the-meter technologies."
"It gets drowned out in the conversation of 'sell vs. don't sell,'" the CEO said, later adding that the debate over whether it is better for JEA to stay public or go private is "not the question."
JEA's board of directors voted July 23 to allow the utility's senior leadership to solicit interest in various ownership structures, including privatization, and launched the official process on Aug. 5. JEA officials have said the company could face a $2.3 billion cash gap in 2030 if it maintains a "business as usual" approach and be forced to dramatically raise rates or cut about a quarter of its staff. Utility executives have expressed concern that its status as a government-affiliated entity severely limits JEA from considering other options to improve its business operations.
In its solicitation document, JEA wants potential bidders to propose initiatives that would "future-proof" the business, such as investing in distributed generation and renewables and adding new services. JEA's minimum requirements for bids include keeping the utility's value to at least $3 billion, distributing at least $400 million to customers and protecting certain employee retirement benefits.
"The way we're looking at the world is not how we see it together now, but how we see it in the future," Zahn said during the board meeting.
JEA previously explored privatization in late 2017, creating buzz on Wall Street after a third-party consultant estimated JEA's market value at between $7.5 billion and $11 billion. The utility ended privatization talks in May 2018 after backlash from Jacksonville Mayor Lenny Curry and his administration. Zahn told S&P Global Market Intelligence in late 2018 that JEA's privatization inquiry was "dead."
Kevin Hyde, an attorney with Foley & Lardner LLP who is advising JEA on the solicitation process, said bids for the utility's solicitation for various ownership structures will be disclosed after Oct. 7, when proposals are due. However, JEA will not release the identities of the companies and organizations behind the bids to ensure one party does not have an unfair advantage over the other, Zahn added.
JEA will evaluate the bids with negotiations estimated to begin in late October. Respondents will be invited to submit additional information to demonstrate their ability to meet JEA's requirements through October and November, with further discussions with the utility anticipated in early 2020. JEA expects it will have a recommended contract to review in late February 2020.
Once a proposal is picked, JEA will also release a recording of the negotiations, Zahn said, in an effort to be transparent about the utility's decision-making with its customers and members of the public.
"We want to be as open as possible," Zahn said.
