Letters to the Editor

PUD will stop foreign takeover

As we consider the various costs of forming a PUD we must also consider the costs ratepayers will absorb should PSE be acquired by a consortium of Canadian and Australian pension funds, led by Macquarie Bank of Australia.

Macquarie Bank has built its global reputation by privatizing government assets like bridges, toll roads, and airports into pension funds. It has acquired a couple of other publicly traded utilities like PSE, but most of its deals have focused on government owned assets.

Macquarie’s deals are always leveraged buyouts financed with debt that uses the cash flow of the asset purchased to pay related debt service. In the case of the Macquarie / PSE leveraged buyout, PSE cash flow will be used to service the $3.5 billion debt associated with the purchase.

Often leveraged buyouts result in diminished service and layoffs by the companies being acquired. I would not count on additional service crews being based on Whidbey Island after the buyout. It’s more likely that our power outages will last longer, not be dealt with faster as PSE now promises.

The fees Macquarie will earn and the stock option buyouts PSE execs will garner on this deal could reach $350 million or more. Debt service on $3.5 billion at 6 percent per year means ratepayers would absorb interest of $210 million per year totaling $2.1 billion if Macquarie finances with a 10-year bond issue.

Add the fees earned by Macquarie Bank to make the deal happen and we are talking $2.45 billion in fees and interest associated with this deal. Additionally, PSE also needs to make $5.7 billion in infrastructure investments before 2013. All this means major upward pressure on our rates in the coming years.

The six pension funds that would control PSE are Macquarie Infrastructure Partners 31.8 percent, Canada Pension Plan Investment Board 28.1 percent, Macquarie Capital Group 15.9 percent, British Columbia Investment Management Corp. 14.1 percent, Alberta Investment Management 6.3 percent, Macquarie FSS Infrastructure trust 3.7 percent. The purpose of an acquisition like this is asset appreciation. In other words, the pension fund consortium will likely sell PSE when the $3.5 billion bond issue matures and we ratepayers will have to absorb another round of even higher interest rate and deal fees.

We can put a stop to unending acquisitions by forming a PUD now. A PUD is a very elegant and simple entity that is beholden to us, the citizens it provides energy to. Simple municipal bonds can be issued to finance the $50 to $120 million acquisition of energy assets at the best rates available. When the purchase is completed, citizens of Whidbey Island will own the energy assets (power lines, transfer stations, etc.), not a consortium of pensions funds. By law, PUDs have access to clean hydropower from the Bonneville Power District eventually at the best tier one pricing. The 23 PUDs that do business in Washington state all have better rates than PSE and they all rely heavily on the Bonneville Power District for their energy needs.

Experienced potential commissioners have come forward, one of the group a former PUD commissioner in Alaska and another a former PSE engineer for Whidbey Island.

We can manage our own energy affairs with a PUD. Vote yes on the Whidbey PUD, because it makes financial sense.

Fred Geisler


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