Utility district pursues sales agreement
Quietly, and behind closed doors, members of the Block Island Power Company and the Commissioners for the Block Island Utility District have been hashing out a purchase and sales agreement for the sale of the assets of BIPCo to the Utility District. The two entities agreed on a purchase price this past summer, but since then, discussions about the details of the purchase/sale have occurred in closed sessions.
The BIPCo Board, consisting of Chair Nancy Dodge, Town of New Shoreham First Warden Ken Lacoste, and BIPCo President Jeffery Wright, have adopted a resolution indicating that the sale is moving closer.
The resolution, which was unanimously approved by the Board on Nov. 7, recommends the “sale of BIPCo’s assets to BIUD for the price of $5,800,000 plus the assumption of BIPCo’s liabilities remaining after payment of debt from the purchase funds and directing that the resolution be submitted to a vote at a special meeting of the shareholders.”
The town owns two thirds of BIPCo stock and Sara McGinnes owns the third share. Lacoste and Second Warden André Boudreau represent the town as “shareholders,” and will be the ones, along with McGinnes, to vote on the matter. Per BIPCo’s bylaws, there must be a 20-day notice to the shareholders for the meeting before the final vote will take place. That meeting is now scheduled for Monday, Dec. 3 at 12:30 p.m., at BIPCo, but the shareholders may choose to hold it in closed session.
A vote by the shareholders is something McGinnes, as the minority shareholder, has been pushing for. In her lawsuit filed against the members of the Town Council and the commissioners for the Utility District, and in an appeal to the R.I. Division of Public Utilities and Carriers, she asks that: “The agreed upon sale of the assets of BIPCo to BIUD shall not be approved by the Division unless and until a meeting of the shareholders of the BIPCo has been held and McGinnes has been afforded her right to vote in favor of or against the sale of such assets, and if there is an exercise of dissent, until the Rhode Island Superior Court decides fair value or accepts security for the fair value of McGinnes’ shares in BIPCo and such security is deposited or posted by BIPCo; or in the alternative, that the Division withhold approval of any distribution from the sale of the assets of BIPCo until the Rhode Island Superior Court can rule on the fair value of McGinnes’ share in BIPCo or establish security therefore.”
BIPCo had a valuation of the company performed by George E. Sansoucy P.E. LLC, which was received by BIPCo in mid-June. Using three different valuation methods (cost approach, income capitalization approach, and comparable sales approach) the firm arrived at a value of $5 million to $5.5 million. After paying off BIPCo’s debt, the sales price of $5.8 million would essentially make the town “whole” in recouping its investment of $1.8 million for its purchase of two-thirds of the stock, and McGinnes would receive her equivalent share.
However, the valuation of BIPCo is a big source of contention for McGinnes, who alleges that she has had her own valuation performed. In an Aug. 31 filing with the Division by her attorney, Mark Russo, it is stated that the “true fair value of the Company, exclusive of debt” is $8.7 million.
As if to address this disparity, the resolution adopted by the BIPCo Board also states: “In the event that the shareholders approve the resolution with less than unanimous consent, BIUD shall assume a dubious contingent liability of $300,000 regarding a minority shareholder interest valuation exceeding $900,000.”
While “dubious” is not formal accounting jargon, “contingent liability” is. It is either the recording on the books of a liability, or a disclosure in financial statements, regarding the outcome of an event that is uncertain. If the contingency is considered “probable” and the amount can be estimated, it is recorded on the books. Contingent liabilities, or the disclosure thereof, usually are related to pending legal matters, but may also be for such things as warranties.
After the BIPCo shareholders meet and vote on the sale of BIPCo’s assets, the matter will then go to the Utility District.
In other electric news, the brief power outage on Wednesday, Nov. 7, was caused by “human error,” Wright told The Block Island Times. The company was conducting a training session with National Grid on switching back and forth between the transmission cable and the diesel generators, something that should be achieved seamlessly. However, someone pushed the wrong button, turning off the system by mistake. Despite the outage only lasting for a few seconds, Wright said he received several calls, and looking on the bright side, said that an important “vulnerability” was discovered.
Crews from Davey Tree are back on the island and plans are to do 18 miles of trimming along power lines.
Last spring, BIPCo replaced several utility poles, but were not able to remove the old ones because Verizon, which co-owns the poles, had not transferred its phone lines to the new ones. Verizon has recently transferred most of those lines, so the BIPCo crew will now be removing the old poles.
Wright also told The Times that the new billing and payment system is going well. He estimated that 13 percent of ratepayers were taking advantage of making online payments by credit card, debit card, or other methods. Put another way, $200,000 was collected this way, representing 20 percent of revenues.