Details of BIPCo assets discussed
Now that the Block Island Utility District has agreed, in principle, to acquire the assets of the Block Island Power Company for $5.8 million, it is time to hash out a more detailed purchase and sale agreement. Steps towards that goal were taken at a Utility District meeting on Friday, July 27.
The first step was to understand what the assets on BIPCo’s balance sheet represent. BIPCo’s accountant, David Bebyn, CPA attended the meeting by phone to go over the items, line by line, with the members of the Utility District Board of Commissioners. Bebyn detailed the numbers included in a balance sheet for May 31, 2018, showing the assets, liabilities, and equity of the company. Also attending were BIPCo Chair Nancy Dodge and board member and BIPCo President Jeffery Wright.
The unaudited balance sheet from May 31, 2018 showed total assets of $5.784 million. Of that amount, 70 percent is the net value of property and equipment after depreciation.
Land, which under accounting rules is not depreciated, is shown at its original purchase price of $79,720. When the assets are recorded on the Utility District’s books, the value would receive a “bump-up” to reflect its current value.
Current assets, at $930,828, include cash and savings accounts, customer receivables and deposits, prepaid expenses (mainly insurance), and fuel inventory. The customer receivables include the then- unbilled electrical use for May.
There was another category — deferred assets — with three separate items. One is deferred retirement costs, which is matched on the liability side of the balance sheet by a retirement liability for former employees. The other two items are deferred funds for engine maintenance and interconnection costs that arose in connecting the power plant to the National Grid substation.
When it came to going through the liability side of the balance sheet, Utility District Treasurer Bill Penn asked: “Why go over the liabilities when we’re not acquiring them?”
However, others wanted an explanation of the items anyway, and Bebyn explained that some of the short-term liabilities would need to be assumed, as they relate to some of the assets. For instance, some of the accounts payable are related to the power sold in May, as represented by the customer accounts receivable. Liabilities for customer deposits received would also need to be transferred.
Some of the short-term liabilities would stay with BIPCo, such as accrued property taxes and interest expense.
Long-term liabilities, including a line of credit and Rural Utility Service loans, would stay with BIPCo and be paid off with the proceeds of the sale.
Actual assets and liabilities at the time of the closing of the sale may look very different than they did as of May 31 due to the seasonality of the business.
Other items to consider are the transfer of contracts, and Wright said he was putting together a list, which include vehicle leases for a bucket truck and pick-up truck, and contracts with Blue Cross and Blue Shield for employee health insurance, ISO (operator of the regional electric grid), National Grid, General Electric (smart meters), Verizon (poles) and NASC, which has developed the new billing and accounting system.
Other leases that would need to be transferred are for those renting space on the cell tower, or on the grounds of BIPCo.
Of taking on contractual obligations, Utility District Commissioner Everett Shorey said: “We don’t have any choice” since that was what was written into the enabling legislation that allowed for the establishment of the Utility District.
There may be wiggle-room regarding some items that will be negotiated in closed session, which the Utility District went into after the general discussion on BIPCo’s assets and liabilities. That discussion was held in open session as the finances of BIPCo are deemed to be open to the general public since the Town of New Shoreham is the majority owner of the company.