Burson skeptical of Cleco sale

A $3.53 billion bid to buy Cleco, the utility company that serves Eunice, and turn it into a privately-owned company drew the skepticism of Jack Burson, Eunice alderman at-large.
“My question would be if I went to the hearing, aren’t you looking to make a profit in buying the business? If you are, where else is the profit going to come from but the utility bills that are paid to you by customers?” he asked at Tuesday’s council meeting.
The sale of Cleco to an investment group was approved in February by 94 percent of its shareholders.
Darren Olagues, president of Cleco Power, defended the sale after the meeting.
The investment group is a quality partner that owns other utilities and has a “great track record,” Olagues said.
Olagues said, “They have proposed significant commitments to the head counts, maintaining the headquarters in Pineville, maintaining the business operations, maintaining medical benefits, pension benefits, retiree benefits.”
The Federal Energy Regulatory Commission approved the sale in July to Macquarie Group Ltd., of Australia. The group includes British Columbia Investment Management Corp. together with John Hancock Financial and other investors, the Acadiana Advocate reported.
Cleco shareholders are to receive a 14.8 percent premium per share.
Burson took aim at the debt the private company would create in a Cleco buyout.
A watchdog group, The Alliance for Affordable Energy, estimated $435 million would be paid to Cleco shareholders and six Cleco executives would divide $47 million after the sale.
Of the $3.53 billion, $1.45 billion is new debt to add to the company’s existing $1.37 billion debt, the Advocate reported from federal filings.
The alliance said Cleco’s customers would be obligated to repay the debt as part of their monthly utility bills.
Burson said, “Now you stop and think about that a little bit. You are doubling the debt of the utility company to finance your purchase of it.”
The city recently approved a 33-year extension of Cleco’s contract with the city.
“I voted for that in spite of the fact I’ve had some very stringent disagreements with Cleco in the past,” Burson said.
Burson said Cleco maintenance problems were exposed by Hurricane Lili in 2002. The community battled water usage and toxic emissions from the Calpine generating plant south of Eunice, he said.
“I think some democratic action on the part of citizens may be in order again right now,” Burson said in urging a letter-writing and calling campaign on the Cleco sale.
A Louisiana Public Service Commission hearing on the sale is scheduled Nov. 9, he said.
Olagues said, “The commission, through their process, will absolutely make sure there is no stretching of the balance sheet. There is no ability to put the utility in a precarious position and not be able to provide safe reliable power in the years to come.”
The debt involved in the deal is not the customers’ problem, he said. “There are legal protections that the commission has mandated.
The debt is on their nickel, not ours. If it goes bad it is their problem, not our customers.”
Olagues said the company will continue to be regulated by the state’s Public Service Commission after the sale.
There are advantages that come with the sale, he said.
“They will help us be a long term successful company,” he said. “In terms of what the customers see day to day they will see absolutely no difference.”
Olagues also said if people have concerns, now is the time to express them to the Public Service Commission.
Cleco has about 286,000 Louisiana customers.