ATLANTA -- Lake Worth, Fla.'s plan to sell its electric utility system has attracted a single bid, offering the city as much as $66 million if the privatization occurs, its financial adviser said Friday.
Juno Beach-based Florida Power & Light submitted the only bid by Lake Worth's Sept. 1 deadline, said James Lentz, the financial adviser. Lentz, who is also president of Capital Markets Consultants, noted that Florida Power presented the city with two purchase options.
Under the first option, he said, the private utility would offer $66 million for the system assets, including its generating plant, customer account base, and licenses.
Under the proposal, however, the utility would not assume Lake Worth's obligation to pay the Florida Municipal Power Agency for a share of that system's power output. Accessing the agency's power has been costly, partly because of its participation in the St. Lucie III, Stanton, and Stanton II nuclear power projects.
Under a second option, Florida Power said it would buy the system's assets for $38 million and take over Lake Worth's contract with the agency, according to Lentz.
The city has sought to sell its utility in an effort to reduce electric rates, currently among the highest in the state at about $93 per 1,000 kilowatt hours. This compares with the $71 per 1,000 kilowatt hour rate that Florida Power provides to customers statewide.
"We are in the process of evaluating the bid, and that evaluation could take some time," said Lentz.
A city spokesman said Friday that Lake Worth has set Sept. 22 as the date for a public presentation of Florida Power's proposal.
When Lake Worth made its request for bid proposals in June, it set a number of conditions.
Heading the list was the provision that "there must be significant, longterm reduction in the commercial and residential utility rates. At a minimum the achieved reduction in rates must be consistent with average current and projected statewide utility rates."
Lake Worth also insisted that the sale "maintain or increase the level of support currently paid from the electric utility to the City's General Fund."
Under the first option, the city would receive a $6 million annual cash flow, including about $3 million in interest income from a fund set up with net proceeds from the sale. The remainder would be derived from taxes and franchise fees.
Under the second option, the city would derive about $4 million a year, including about $1 million in interest payments. The utility system currently contributes about $3 million a year to the city.
In addition, the bid request specifies that sale of the utility must provide for "elimination of any debt pledged by the utility system."
The system currently has about $50 million in outstanding utility debt, including debt of the city's water works, which are not being offered for sale, according to Lentz.
As a condition of the privatization, the financial adviser said that the electric utility portion of the debt would be retired outright, while taxable bonds would be issued to pay off the water debt.
The city also insisted that the bidder must "establish a level of service and a climate critical to attract new commercial customers."
Officials at Florida Power said that the bid meets the city's specifications. "FPL is very interested in satisfying the long-term needs of the citizens of Lake Worth," said Michael Yackira, a senior vice president.