ATLANTA --- The financial advisor to Lake Worth, Fla., said yesterday that the city's electric utility system is worth much more than the bid offered by Florida Power and Light.
Earlier this month, the Juno Beachbased Florida Power submitted the only proposal to buy the system, which Lake Worth has sought to sell in order to reduce its customers' electric rates, currently the highest in the state. Under the privatization plan, the city would also defease its utility's outstanding power debt, estimated at $21.4 million.
A fair purchase price for the utility system is $73.2 million, with a book value for the system set at $63.8 million, according to the city's financial adviser, James Lentz. He compared this with Florida Power's purchase price offer, which he pegged at $38 million.
"They [Florida Power] are at one end of a valley and we are at the other end," said Lentz. "But if they are willing to work with us I think we can move forward."
Lentz said he presented his findings in a workshop held by the city late Wednesday afternoon.
Yesterday, Florida Power explained its bid in another workshop before city officials, according to a spokesman for the company. Lentz said the Florida Power officials did not address the discrepancy between their bid and his evaluation.
Earlier this month, Florida Power said it would pay $38 million to acquire the utility assets and take over Lake Worth's obligation to buy power from a statewide public power consortium, the Florida Municipal Power Agency. Under a second option presented to the city, Florida Power bid $66 million, which did not include assumption of the contract with the agency.
According to Lentz, there is no difference in the two options, given the $28 million cost of the agency contract.
Lentz said Florida Power's $38 million figure is based on the sum of an estimated book value of $31.1 million, a $32.4 million transitional rate imposed on Lake Worth customers, and an employee allowance of $2.5 million -- from which the $28 million agency contract has been subtracted.
Lentz said the largest portion of his $63.8 million estimate of the system's equity is the book value of the system as of Sept. 30, 1993, the end of the city's most recently concluded fiscal year, set at $39.5 million. To this he added the system' s current financial assets, $4.3 million; his estimate of the system's increase in book value during the current fiscal year, $10 million; and the worth of its customer base, $10 million.
The financial adviser said that the ultimate purchase price should also include other expenses: a $5 million employee allowance and the $32.4 million in an additional transition rate Florida Power expects ratepayers to absorb after the sale. But from this amount, $28 million can be subtracted for the agency contract.
In addition, Lentz provided further details on Lake Worth's outstanding utility debt, which the city council insists must be eliminated as part of a sale of the system. Lentz said the electric utility portion of that debt totals $21.4 million.
According to the financial adviser, the city has three outstanding water and electric debt issues totaling $31.3 million. They are $14.4 million from a 1993 issue, $11.9 million from a 1978 deal, and $5 million from a 1992 offering. To that he adds $11.7 million owed to the Florida Municipal Power Agency for the city's participation in a pooled loan.
With $11.9 million in a sinking fund and $6.7 million in cash on hand subtracted, Lentz said the city has total utility obligations of $24.4 million. However, $3 million of this is for water assets, which will be defeased with a taxable bond issue.
Under the adviser's purchase price scenario, the city has $45.8 million left for investment after defeasance of the debt and payment of the $5 million employee allowance. This compares with $13.1 million available for investment under the Florida Power and Light bid, according to Lentz.
If the city decides to move forward to the next stage, negotiation in good faith, Florida Power would be required to put a nonrefundable bond of $225,000 to cover the city's expenses, said Lentz.