Notice of solicitation comes less than two weeks after its board voted to explore possibly taking the public utility private
JEA is seeking private companies and organizations interested in buying some or all of Jacksonville’s public utility.
JEA officials released a notice of solicitation Friday, asking interested and qualified parties to submit their proposals by noon Sept. 30.
The move comes less than two weeks after the JEA board voted July 23 to explore privatization and one day after Mayor Lenny Curry said he would propose using proceeds of the utility’s sale to pay off the city’s $2.2 billion debt.
A timeline included in the invitation shows JEA will have a 2 p.m. Sept. 30 public meeting to formally receive bids. JEA officials expect to begin negotiations with a staff-recommended bidder by Oct. 15.
When negotiations are complete, JEA will release a notice of intent to award the winning solicitation. A date for that final step has not been determined.
Any sale will have to be approved by JEA’s board and any deal to privatize or sell more than 10% of the utility’s assets must be approved by City Council and by Duval County voters in a referendum.
JEA’s message to bidders
In a statement included in the invitation, JEA Board Chair April Green summarized what’s become the municipal electric and water utility’s message since May during a public strategic planning process.
That message is that a changing energy market and government restrictions are making it difficult for JEA to compete.
“The once-static utility industry is rapidly becoming a dynamic and transformative sector, forcing utilities to innovate to meet changing customer demands,” Green wrote.
Green wrote that energy efficiency over the past decade is reducing JEA’s sales. Electricity sales were 30% lower than forecasted in 2006 while customer rates increased by 71% from 2006-18.
“With the industry facing an unprecedented transformation, JEA is seeking the strategic flexibility to adapt to achieve its vision of the future and provide a unique and valuable platform for growth,” she wrote.
“The objective of this Invitation to Negotiate (ITN) is to evaluate proposals on strategic alternatives, subject to the minimum requirements JEA has set forth in the Strategic Alternatives Process Section of this ITN, that are aligned with JEA’s goal of maximizing customer, community, environmental, and financial value over the long term,” she wrote.
“JEA will consider proposals that build upon JEA’s strengths and seek to eliminate certain existing business constraints.”
JEA’s invitation lists the minimum requirements its board approved July 23 to be included in any recapitalization — $400 million distributed to customers, at least $3 billion to the city and protection of employee jobs, pension and retirement benefits.
The requirements also include:
• At least three years of contractually guaranteed base rate stability for customers.
• Commitment to develop and provide the city and the Duval County Public Schools 100% renewable electricity by 2030.
• Commitment to develop and provide 40 million gallons a day of alternative water capacity for Northeast Florida by 2035.
• Protection of certain employee retirement benefits.
• Maintenance of substantially comparable employee compensation and benefits for three years.
• Retention payments to all full-time employees of 100% current base compensation.
• Commitment to new headquarters and employees in Downtown Jacksonville, contributing to the economic development of the community.
Companies seeking to buy JEA’s assets will have to submit a “summary of experience managing related or similar operations of comparable size and scope to JEA” and provide information about its “experience, knowledge, skills, and abilities for owning, operating, and managing electric generation, transmission, distribution, and water systems or other complex business entities.”
JEA officials also will look for specific information regarding experience in other areas of customer service.
That experience, for example, includes billing, complaint management and resolution, experience with purchases of other utility systems, customer question management and emergency repair reply times.
To win the bid, organizations also must provide proof of their financial capability to meet these requirements, according to the solicitation notice.
“Respondents must submit a description of their financial capability, including information relating to access to sufficient debt and equity capital to consummate the transaction contemplated by their Reply (as applicable) and an overview of relevant transaction experience (or experience implementing similar proposals),” the notice states.
JEA’s move toward possible privatization was mentioned by a Bank of America Inc. representative at NextEra Energy Inc.’s July 24 quarterly conference call with analysts.
NextEra is the parent company of private utility Florida Power & Light Co.
FPL serves about 10 million people in the state and has customers and infrastructure in neighboring St. Johns County.
Another private energy company, Emera Inc. subsidiary TECO Energy of Tampa, also could meet JEA’s criteria in a bid to purchase.
TECO’s holdings include Tampa Electric with more than 65,000 customers; Peoples Gas with 390,000 customers; and New Mexico Gas Co., a natural gas distributor in New Mexico serving more than 515,000 customers.
JEA’s value to the city
JEA is the nation’s10th largest municipal utility.
A valuation report of JEA’s assets under previous CEO Paul McElroy, released in February 2018 during the last debate whether to sell, valued the public utility from $7.5 billion to $11 billion.
CEO Aaron Zahn says a $3 billion cash payment to the city would be a requirement for any privatization or sale of JEA. Curry wants to use the money to eliminate $1.1 billion in general and enterprise debt and $1.1 billion in Better Jacksonville Plan debt.
The mayor said Thursday that eliminating the debt would free up $232 million in annual debt service payments and “more than replace” JEA’s annual contribution to the city — projected at $118 million in fiscal year 2019-20.
Curry said the remaining $800 million could be “thrown into a lockbox” with interest becoming another revenue source for the city.