Utility District makes counter-offer
It was almost exactly a year ago in the final hours of the 2017 session of the Rhode Island General Assembly that legislation enabling the formation of the Block Island Utility District was passed into law. The intent of the legislation was to form a not-for-profit utility, controlled by ratepayers, that would acquire the Block Island Power Company, a private for-profit company. As a means toward that end, the Town of New Shoreham by vote at a Special Financial Town Meeting had previously purchased two-thirds of BIPCo’s stock. The remaining third of the stock belongs to Sara McGinnes.
There are two ways in which the Utility District could acquire BIPCo. One is to purchase all of the stock, the other is to purchase the assets of the company.
On June 21, the Block Island Power Company’s Board of Directors made an offer to the Block Island Utility District to sell its assets to them for $6 million. It was just the first step in the negotiations, and on Wednesday, June 27, it was the Utility District’s turn to consider the offer.
Most of the Utility District’s meeting was held in closed session, but when they came back into open session, they announced that they had taken three votes — two with extensive stipulations.
The first vote was to approve using CFC Bank for its financing needs. The commissioners had also reviewed an offer for financing from CoBank.
The second vote was in response to BIPCo’s offer to sell its assets to them for $6 million. The counter-offer from the District is for $5.5 million, cash, to purchase the assets of BIPCo. The offer is contingent on four separate conditions.
The offer is “subject to executing an asset purchase agreement,” subject to obtaining adequate financing, and that the assets have clear title, i.e. they are free of encumbrance.
The final stipulation is the “termination of any orders of the RI Superior Court restricting any of the activities contemplated by this offer.”
After the initial offer from BIPCo, Sara McGinnes, who owns one third of the stock of the company, filed a motion in Rhode Island Superior Court, via her attorney W. Mark Russo, asking for a temporary restraining order to prevent the BIPCo Board “from taking any action on an alleged vote of the BIPCo Board of Directors to purportedly sell all of the assets of BIPCo to Defendant, Block Island Utility District for $6M with the Utility District assuming existing debt.”
In fact, at the June 21 meeting of the BIPCo Board, which The Block Island Times attended, the idea of the Utility District assuming BIPCo’s debt was not part of the stated offer as presented by the BIPCo. Sara McGinnes was not at that meeting, although her husband Cliff McGinnes was in attendance.
Cliff McGinnes, in a notarized affadavit attached to the restraining order request, stated: “I, Clifford McGinnes swear and depose as follows: 1. I attended the Block Island Power Company Board of Directors’ meeting on Thursday, June 21, 2018 at 12 p.m. My wife could not attend. 2. At that meeting, I witnessed the Block Island Power Company Board of Directors voted (sic) to sell all the assets of Block Island Power Company to the Block Island Utility District for $6 million and the Block Island Utility District would assume the Block Island Power Company’s debt.”
Utility District Board of Commissioners Chair Barbara McMullan told The Times that the motion for the temporary restraining order resulted in an emergency hearing on Tuesday, June 26, at which the judge ruled that BIPCo was free to negotiate the sale, but could not “conclude” the sale until legal matters were decided.
Along with the restraining order, McGinnes had filed a suit on April 19 challenging, among other things, the valuation of BIPCo. Although the members, the named defendants in the case, have filed a motion to dismiss, the case has not been settled or decided upon by the court. A hearing has been tentatively scheduled for July 12.
The final vote of the Utility District Commissioners was to send an offer to the Town of New Shoreham to purchase the two thirds of BIPCo stock that the town owns. The offer is for $1.8 million — the price the town paid for the stock, plus accrued interest.
This vote was also subject to conditions, and there are four. The first is “successful negotiation with Sara McGinnes to purchase her shares of BIPCo stock.”
The remaining three conditions are much the same as the vote to offer $5.5 million for the assets: Executing a purchase and sale agreement; obtaining adequate financing; and “termination of any orders issued by the RI Superior Court.”