NextEra Energy offered $11 Billion for JEA

[marcuscnelson]

https://www.jacksonville.com/story/news/local/2020/08/26/nextera-energy-parent-fpl-offered-11-billion-buy-jea/3443048001/

Death Spiral my ass.

[marcuscnelson]

Here it is from the Daily Record.

https://www.jaxdailyrecord.com/article/nextera-energy-bid-dollar11-05-billion-to-buy-jea

[Ken_FSU]

Any other similarly sized city in America, $6.5 billion (once outstanding debt is satisfied) is an incredibly tempting offer, and a possibility that's at least worth exploring or putting on the ballot. We've just go no track record whatsoever though of being able to properly steward public money. We'd squander it within a decade, and the have-nots would be left holding the bag.

[marcuscnelson]

We all know Curry would have immediately handed that bag to Khan and his buddies. All of a sudden the Shipyards + Convention Center + Lot J + Stadium Rebuild would cost $8 billion and require at least half of it in public money. The District would add a few zeroes, Curry would get the bright idea to buy the FBC complex and "prepare it for redevelopment."

And Northwest Jacksonville would still not have sewer lines.

On top of that, we'd be losing our public utility to people whose primary objective is profit, and our rates would quickly reflect their wish for a return on their investment.

[CityLife]

Any other similarly sized city in America, $6.5 billion (once outstanding debt is satisfied) is an incredibly tempting offer, and a possibility that's at least worth exploring or putting on the ballot. We've just go no track record whatsoever though of being able to properly steward public money. We'd squander it within a decade, and the have-nots would be left holding the bag.

That is an astronomical amount of money for a city to have in it's coffers. For comparison, if Jacksonville was a university, that amount alone would make it the 18th highest endowment in the US. Higher than Johns Hopkins, USC, Vandy, Dartmouth, NYU, Brown, and several other elite private schools. It would be more than the entire combined endowment's of the twelve universities that comprise the State University System of Florida.

Even COJ could not find a way to squander that type of money. I've said it before, but I think there is a good chance that it could have been a great deal for Jacksonville, but unfortunately due to complete political ineptness and greed, we never even got to properly evaluate it.

[CityLife]

On top of that, we'd be losing our public utility to people whose primary objective is profit, and our rates would quickly reflect their wish for a return on their investment.

For 1,000 KWH's the residential rates are:
FPL   $99.66
JEA   $108.50

That is including the franchise fees charged, so it should be an apples to apples comparison. As someone that has been serviced by both providers, I can comfortably say FPL is a million times better. FPL is also being much more proactive with storm hardening and burying power lines underground.

Also, in regards to profit...JEA is the same entity that tried to pull off the shady buyout deal. Do you really think the board and management team care about the people of Jacksonville?

[vicupstate]

Does anyone on here, a financial advisor type perhaps, have any idea how much of an annual revenue stream would be created by an $6.5 billion endowment?  If the endowment would exceed the revenue stream, THAT money could go to infrastructure and economic development without negatively impacting anything else.

If you could get the endowment to fully replace the funds JEA was paying the city annually, that would be a pretty significant fact. The new owner would pay property taxes and a business license fee as well, so that would be significant new revenue too.

Of course, there would no doubt be much higher utility rates on the citizens too.

[Steve]

I believe related.....Chris Hong and Nate Monroe at the T-U have, "....Hooked a Biggun." Monroe's normal Thursday column won't be running tomorrow while they work on it.

Something tells me it's going to be worth the read:)

[marcuscnelson]

Even COJ could not find a way to squander that type of money.

Wanna bet?

[Steve]

Even COJ could not find a way to squander that type of money.

"Hold my Beer."
-Lenny Curry

[jaxlongtimer]

Does anyone on here, a financial advisor type perhaps, have any idea how much of an annual revenue stream would be created by an $6.5 billion endowment?  If the endowment would exceed the revenue stream, THAT money could go to infrastructure and economic development without negatively impacting anything else.

If you could get the endowment to fully replace the funds JEA was paying the city annually, that would be a pretty significant fact. The new owner would pay property taxes and a business license fee as well, so that would be significant new revenue too.

Of course, there would no doubt be much higher utility rates on the citizens too.

It's all about the assumptions and management of the funds.  If it was strictly treated as an endowment, traditionally, non-profits have siphoned off 5% annually of the balance at an annual snapshot date or of a multiyear average balance.  With today's low interest rate environment, many have lowered that to 3%. 

A bigger question is how do you invest the money:  In fixed income, the stock market, hedge funds, private equity, real estate, precious metals, venture capital, etc.?  Most large university endowments will do some mix of all of these with a somewhat heavier weighting toward the more risky, but higher reward, investments.  I don't know if the taxpayers could stomach that.

Keep in mind, if one skims off all the annual investment returns or more, the income created will get depreciated over time by inflation.  At 3%, $6.5 billion yields $195 million a year.  If no funds are added to the endowment via net investment gains or contributions, in 20 or 30 years that would have a lot less purchasing power than today.  This is one reason why nonprofits must constantly work to add to their endowments.

[Steve]

Here's the thing: I truly believe there's more to this:

-NextEra on the surface is WAY higher than anyone else. When that happens it usually does NOT mean that they grossly overvalued JEA.
-What about the Project Vogtle liability, or other liabilities? I know they reported these liabilities would be on COJ.

If COJ got $11B free and clear (or was even under consideration for anything resembling this), there's no point to shroud this in secrecy. Everyone on earth would agree to this deal, because you'd have enough to put money in a trust to ensure rates stayed low, subsidize Low income households, etc.

There's more to this. Mark my words.

[marcuscnelson]

"Hold my Beer."
-Lenny Curry

Great minds think alike!

Here's the thing: I truly believe there's more to this:

-NextEra on the surface is WAY higher than anyone else. When that happens it usually does NOT mean that they grossly overvalued JEA.
-What about the Project Vogtle liability, or other liabilities? I know they reported these liabilities would be on COJ.

If COJ got $11B free and clear (or was even under consideration for anything resembling this), there's no point to shroud this in secrecy. Everyone on earth would agree to this deal, because you'd have enough to put money in a trust to ensure rates stayed low, subsidize Low income households, etc.

There's more to this. Mark my words.

Exactly. NextEra would have wanted that $11B back and then some, they're not fools. There's so much more we don't know yet.

[Steve]

"Hold my Beer."
-Lenny Curry

Great minds think alike!

Here's the thing: I truly believe there's more to this:

-NextEra on the surface is WAY higher than anyone else. When that happens it usually does NOT mean that they grossly overvalued JEA.
-What about the Project Vogtle liability, or other liabilities? I know they reported these liabilities would be on COJ.

If COJ got $11B free and clear (or was even under consideration for anything resembling this), there's no point to shroud this in secrecy. Everyone on earth would agree to this deal, because you'd have enough to put money in a trust to ensure rates stayed low, subsidize Low income households, etc.

There's more to this. Mark my words.

Exactly. NextEra would have wanted that $11B back and then some, they're not fools. There's so much more we don't know yet.

Hong and Monroe's column runs online Friday and in print over the weekend they said. I think they put something together.

[jaxlongtimer]

As Diamond noted in the article, don't forget to subtract paying off the Vogtle nuclear plant liability the City was going to keep from the $6.5 billion proceeds (after paying off JEA's debts).  If one estimates this at around $3 billion or so (and counting), the City nets "only" about $3.5 billion.  Subtract transaction costs for brokers, lawyers, etc. and the number drops some more.