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Potential JEA buyers weren't obligated to assume Vogtle contract, documents show


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Potential JEA buyers weren't obligated to assume Vogtle contract, documents show

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Although the potential sale or restructuring of Florida municipal utility JEA has been scrapped, documents from the solicitation process show that any buyers would not have been obligated to become involved in the utility's long-running legal entanglements related to power contracts for the delayed Vogtle nuclear project.

The disclosures came after JEA's board of directors voted to end its inquiry for new ownership models Dec. 24, 2019, shortly after terminating CEO Aaron Zahn amid several ethics violations. JEA interim Managing Director and CEO Melissa Dykes said publishing the documents, which include 14 of 16 potential bids, was a step toward "operating in a deliberately transparent way."

According to a Dec. 12, 2019, draft copy of JEA's asset purchase and sale agreement, the company's Vogtle power contract and a proprietary information agreement with Municipal Electric Authority of Georgia, which has a 22.7% stake in the Vogtle project, would have been excluded from any deal that might have resulted from the failed solicitation for alternative ownership structures. JEA remains in a legal battle, provoked by nuclear construction cost overruns, to terminate its power purchase agreement with Municipal Electric Authority of Georgia.

While the solicitation was ongoing, most analysts had expected the Vogtle contract dispute to represent a hurdle for potential buyers to work around but that it would be a part of any deal. In a Nov. 22, 2019, report, for example, S&P Global Ratings analyst Jeffrey Panger said that if JEA proceeded with privatization, the utility "would necessitate the defeasance of about $1.9 billion of debt outstanding and the buyer's assumption of substantial power purchase obligations" from the Vogtle agreement.

In its disclosures, JEA revealed that five respondents made it to the final stages of negotiations: investor-owned utilities Duke Energy Corp., Emera Inc. and NextEra Energy Inc.; JEA Public Power Partners, a consortium including Emera, private equity firm Bernhard Capital Partners Management LP, water and wastewater system operator Suez SA and nonprofit asset development organization Provident Resources Group; American Water Works Co. Inc., and Macquarie Group Ltd. subsidiary Macquarie Infrastructure & Real Assets Inc.

Duke, Emera and Macquarie in their bids expressed interest in all of JEA's assets, including its electric and water businesses, for a transaction value of at least $3 billion as part of the solicitation requirements. Both utilities and Macquarie said they would have been open to partnering with other companies to help run JEA's water and wastewater operations, with Emera adding that it would allow JEA to keep the water segment government-owned.

JEA Public Power Partners' proposal would have allowed JEA to enter into a 30-year agreement for a concession structure to allow the city of Jacksonville to maintain ownership and receive private capital from the utility. That deal would have had a net value of at least $3.61 billion.

NextEra and American Water Works had not consented to allow JEA to publish their bids as of Jan. 6.