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Attorney & Counselor at Law
Reply to: (352) 337-2700
P.O. Box 6008 (877) 288-6167 (toll free)
Gainesville, Florida 32627 (352) 374-9548 (fax)
DATE: OCTOBER 25, 2011
FROM: GAINESVILLE CITIZENS CARE, INC. COUNSEL RAY WASHINGTON
TO: MEMBERS OF THE GAINESVILLE MEDIA AND THE PUBLIC
RE: CONTEXT OF THE NOW KNOWN GRU-GREC BUYOUT AGREEMENT
Last week, the not-for-profit public interest group Gainesville Citizens CARE, Inc. (for Clean, Affordable, Renewable Energy) came into possession of a previously secret memorandum written on September 26, 2008 by GREC Project Manager Josh Levine and addressed to GRU Assistant General Manager Ed Regan, who was one half of the two-man-GRU-leadership team that negotiated the GRU-GREC deal on behalf of the City of Gainesville.
It previously has been represented by leaders of GRU and Gainesville City Commission that no “buyout” provision had been possible in GRU’S negotiation of the $3-billion-to-$4-billion deal between GRU (the city-owned utility Gainesville Regional Utilities) and GREC (the out-of-state shell corporation created for the express purpose of collecting payments from GRU for building, managing and operating a 100-megawatt wood-burning electricity generator).
As the attached copy of the Levine-Regan memorandum now establishes, these representations were false. Not only was GREC’s shell corporate parent – American Renewables (then known as Nacogdoches Power LLC) willing to agree to include a buyout clause in what has come to be known as the GRU-GREC Power Purchase Agreement (PPA), GREC/American Renewables/Nacodoches at the time the Levine-Regan memo was written had included the buyout clause in a proposed version of the GRU-GREC PPA.
Specifically, Mr. Levine wrote Mr.Regan: “At the request of Gainesville Regional Utilities (GRU), we have included a Termination for Convenience Clause (Section 29) within the PPA between GRU and Gainesville Renewable Energy Center, LLC (GREC).”
Gainesville Citizens CARE, Inc., for more than a month, has been attempting to acquire a copy of the September 2008 GRU-GREC PPA, and every other iteration of the PPA, which public records GRU, to-date, has not released. When these records are obtained they will be made available to the public at Gainesville Citizens CARE’s website, www.gc-care.org.
In the meantime, the Levine-Regan memorandum makes clear that GREC/American Renewables/Nacodoches had agreed to include in the $3-billion-to-$4-billion GRU-GREC PPA a “convenience” clause that would have allowed the City of Gainesville to get out of the deal for a “termination fee” of $32 million plus “development costs” (which costs Mr. Regan a few months earlier had told the city commission he estimated would be about $2 million until after the developer filed a final notice to proceed).
This approximately $34-million buyout provision would have amounted to only about one percent of the GRU-GREC’s PPA’s 30-year-cost to GRU ratepayers, and less than the total payment GRU ratepayers would have to pay in the first year of the biomass contract for biomass fuel. And yet this buyout provision – which the Gainesville City Commission had voted unanimously to require to be included in the GRU-GREC PPA – was not included.
At this point, all the public knows is that Gainesville Mayor Craig Lowe, Gainesville City Commissioner Jeanna Mastrodicasa, GRU General Manager Robert Hunzinger and GRU Assistant General Manager Ed Regan have all made on-the-record statements implying or directly stating that the reason no buyout clause was included in the GRU-GREC PPA was because GREC/American Renewables/Nacodoches had never agreed to such a clause.
The $3-billion-to-$4-billion question is whether some or all members of the Gainesville City Commission misled the public, or whether someone at GRU misled some or all members of the Gainesville City Commission, or some combination of the two.
In short, what did the Mayor and members of the 2008-2009 Gainesville City Commission know, and when did they know it?
As a starting point for understanding the context in which this important question is asked, I have prepared, on behalf of my client Gainesville Citizens CARE, Inc., a chronological list of facts I believe to be undisputed.
At some point, the Mayor, some city commissioners, and some GRU executives are going to have to answer the still unanswered question of how much it will cost to get out of the GRU-GREC deal without a buyout clause. Meanwhile, the public now knows the city commission had the chance to buy out of the deal for only 1 percent the contract price. But he $3-billion-to-$4-billion question remains: Did some or all members of the Gainesville City Commission mislead the public, or did GRU executives GRU mislead some or all members of the Gainesville City Commission? In short, what did the Mayor and members of the 2008-2009 Gainesville City Commission know, and when did they know it?