GREC, Gainesville Can’t Reach Biomass Plant Purchase Agreement

By on October 31st, 2013

Negotiations between Gainesville and the Gainesville Renewable Energy Center to purchase a biomass plant have likely come to a close.

City commissioners proposed buying the biomass plant from GREC for $400 million, but GREC said the biomass plant is valued for hundreds of millions of dollars more than that offer.

Gainesville Regional Utilities suggested purchase prices from $520 million to $720 million, interest rates from 4.8 to 5.8 percent and potential savings to customers under each one of the scenarios, according to David Richardson, lead negotiator from GRU.

In a 4-3 vote, the city commission voted in favor of making an offer to buy the plant for $400 million on Oct. 17. The commission presented the offer to GREC on Oct. 21. GREC and the commission have 30 days to reach an offer for the city to buy the plant before GREC can look at offers from other companies.

Gainesville entered a 30-year, $3.1 billion power purchase agreement with GREC in 2009 to buy the power that will come from the biomass plant. Now, the negotiations are to buy the plant itself.

“Buying the plant would allow the city to remove any profit margin that a private entity, such as GREC, already builds into their rate,” said city commissioner Susan Bottcher. “That would pass along savings to our rate payers.”

Bottcher voted against the city buying the biomass plant. She said she was not surprised when GREC rejected the offer.

Bottcher would rather allow the people who designed and built the plant to ensure it’s functioning the way it’s supposed to before the city takes on that risk, she said.

Commissioner Todd Chase said he also voted against buying the biomass plant because of the uncertainty around it, such as the operational risk of the plant, the risk of the city’s ability to finance half a billion dollars or more and the risk around biomass as a fuel source.

“It does not appear that there is a viable agreement that can be made between the utility, the city, and the contractor GREC at the $400 million price,” said commissioner Randy Wells.

Thus, he said having more meetings would not be beneficial.

The announcement of GREC’s rejection of the offer will be presented to the commission at the Nov. 7 meeting.

The negotiation period will end on Nov. 20.

GREC has said that if a deal has not been reached after the 30-day period ends, it has other incentive options to bring to the city.

GREC did not return multiple phone calls to discuss this purchase.

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