ESCANABA - Escanaba City Council approved a final agreement Wednesday to sell the power plant for $1.5 million to a local company, concluding a five-year effort by the city to do something with the aging and inefficient coal-fueled facility. City officials are expected to sign the contract Friday.
In a 4-1 vote, council approved the asset purchase agreement with Escanaba Green Energy (EGE), which plans to convert the power plant to burn biomass. In addition to the $1.5 million, EGE will pay for the 16,000 tons of coal remaining on the property.
Council member Pete Baker cast the lone no vote during Wednesday's joint meeting with the Electrical Advisory Committee (EAC).
After the meeting, EGE President Charles Detiege signed the sale agreement. He commented "it feels great" to have reached a final contract with the city. The two parties have been negotiating a deal since March. EGE is purchasing the power plant along with the investment firm of Huntley MacMillan Energy Ventures.
"This is a great opportunity for the power plant and the city and the county to put money into the local economy, and keep people working, and add more new jobs," Detiege said, expressing gratitude to city council, the EAC, city administrators, and the negotiating team.
"The negotiating team worked very hard. It was a good cooperative effort," he added.
The next step for EGE is to finalize its bank loan, he said, anticipating the process to be completed sometime next week.
According to the city's attorney, Ralph "B.K." Peterson, EGE has until July 31 to deposit $1.3 million in an escrow account. The transfer of assets will follow and is expected to take one to four months as regulatory paperwork is processed, he added.
"We hope that this closing will take place on or before Sept. 30 of this year depending on government approvals," Peterson said, adding the final closing could take as long as until Nov. 30.
"Hopefully, the transition to closing will run smoothly and ... the matter will be done," he said.
As part of the agreement, EGE is obligated to maintain the operation of the facility for at least three years, Peterson explained. Escanaba will have the right to use the current substation until the city's new substation is completed, he added.
EGE will also commit to a $2 million performance bond as a backup for the city if the company goes broke or fails to convert the facility, said Peterson. Once the conversion is complete, the bond can be cancelled.
"It's been a long and bumpy road," Peterson commented prior to outlining the basics of the final agreement between the city and EGE. The sale includes all the machinery, buildings and 19.8 acres of land.
For the past five years, the city has been exploring various options on what to do with the power plant because it's more costly for the municipality to self-generate power compared to buying energy off the market. Currently, the city is buying power from a supplier. The city also generates power on demand for the regional market.
Because of the need to keep the local plant on the market as a regional power source, Escanaba is working on an agreement with the Midwest Independent Transmission System Operator, Inc. MISO - an interconnection agency which regulates energy sales. MISO will reimburse Escanaba the costs to keep the facility in operable status rather than allow the city to temporarily idle the plant as officials previously requested.
When the power plant sale is finalized and all assets have been transferred, MISO will reimburse EGE as the new owner and the city will be released from any liability, noted Peterson.
Prior to Wednesday's meeting being adjourned, City Manager Jim O'Toole thanked everyone who participated on the negotiating team. Council members Pat Baribeau and Brady Nelson also expressed gratitude to everyone involved.
Council member Ron Beauchamp said he was disappointed council did not ask the EAC for a recommendation prior to approving the final sale agreement.
EAC Chairperson Tim Wilson commented it is great that the power plant will continue to operate.
After the meeting, Electrical Superintendent Mike Furmanski said he is looking forward to the sale of the power plant coming to a conclusion.