Sources have confirmed to The Current that the Robideaux administration is in ongoing discussions with Bernhard Capital Partners Management to purchase or manage the electrical division of Lafayette Utilities System. Those sources, who have knowledge of the negotiations, say any potential deal may be structured as a long-term management agreement with the Baton Rouge-based firm.
An energy services-focused private equity management firm, Bernhard Capital expanded into the electrical transmission and distribution business earlier this year when it acquired Maryland-based W.A. Chester from publicly traded Exelon Corporation for an undisclosed sum. W.A. Chester became the seventh portfolio company owned wholly or in part by Bernhard Capital, founded by Jim Bernhard in 2013 within months of his $3 billion sale of The Shaw Group to CB&I.
Reached by phone early Friday afternoon, LUS Director Terry Huval, who is retiring in October from the system he has run since 1994, referred all questions to Mayor Joel Robideaux.
Robideaux could not be reached by press time.
Talks between the administration and Bernhard Capital have been underway since at least the first of the year; the company has made visits to LUS and has interviewed employees, according to our sources. LUS Fiber and the water and wastewater divisions are not part of the negotiations, the sources say.
A spokeswoman for Bernhard Capital's New York-based public relations firm, Joele Frank, Wilkinson Brimmer Katcher, said late Friday afternoon that she would pass The Current's request for comment along to the company. A phone message left with Bernhard Capital Partners' Patrick Bernhard, Jim's son, was not immediately returned.
In March, The Advocate reported that Bernhard Capital Partners has invested $750 million in companies across the country, helping them grow from 1,000 employees to 5,000 employees. The paper reported that Jim Bernhard said earlier this year he has aggressive plans to expand the company and is looking at investing as much as $5 billion over the next three years. In 2015, Bernhard Capital purchased Lafayette-based ATC Associates, now called ATC Group Services, and that same year, according to Business Report, one of Bernhard Capital's portfolio companies acquired and combined TME of Little Rock; EP Breaux Electrical of Lafayette; Metairie-based MCC; and Lafayette-based Bernhard Mechanical, which was founded in 1919 by Jim Bernhard’s grandfather. The company was rebranded this year and now operates as Bernhard Energy Solutions.
The Current's sources did not have specific knowledge of how a potential transaction — likely valued between $650 million to $800 million — might be structured and what the administration would do with any proceeds from the sale. There is widespread sentiment that any proceeds could be used to create a perpetual pool of resources, a type of community fund, for capital improvements within the city limits of Lafayette. One example that has been cited is the Rapides Foundation, which was formed in 1994 when Rapides Regional Medical Center was sold.
A potential agreement with Bernhard Capital raises various questions about the future of this 122-year-old community asset, which makes annual in-lieu-of-tax contributions to Lafayette Consolidated Government totaling more than $23 million, a figure far greater than a private provider would pay. What would annual tax and franchise payments total if LUS were sold? Will there be a competitive bidding process? Do employees retain their civil service status? Will their retirements be affected? Will LUS's historically low rates increase?
Among the most pressing questions, however, is whether the administration must bring any potential sale to a vote of the people, those who own the system by virtue of their 1896 petition to the mayor and city council to call an election creating LUS. A likely first step toward any sale would be approved by the Lafayette Public Utilities Authority, made of the five council members with districts that include at least 60 percent city voters. The deal could then require a full vote of the City-Parish Council, adding another layer of tension to ongoing negotiations to create separate city and parish councils.
While the Home Rule Charter requires approval from city voters to sell or lease LUS (Section 4-08), our sources indicate that the Robideaux administration has received at least one legal opinion that the transaction could be structured to avoid a public vote.
Former Mayor Joey Durel acknowledges he has heard speculation of active discussions with Bernhard Capital. Robideaux's predecessor, Durel says no offers were ever made for LUS during his three terms nor did he entertain the notion, but he readily acknowledges that talk of selling LUS has been around for decades.
"My initial reaction is defensive," Durel says. "It has been the goose that laid the golden egg for over 100 years, so it better be well-thought out and well-considered. Once you lose it, you lose it. I'm not going to say it's a good thing or a bad thing, but having hundreds of millions of dollars in a fund in the Community Foundation has always been one of the attractions to the potential sale of LUS." The millions of dollars in annual interest alone would help fuel capital projects in the city, he suggests.
"I'm hoping that at some point there will be an opportunity for other utility companies to put a bid in," Durel offers. "I would think that's how you get the best deal."
Additional reporting by Christiaan Mader