Thursday April 29, 2010
Six years ago, we predicted this day would come – the day when E.ON would announce a sale of LG&E and Kentucky Utilities.
Rather than sit on the sidelines to watch and wait, we got in the game – we got in the game to protect the franchise that serves our hometown and people and businesses in 94 counties across Kentucky.
Our goals were clear and straight forward. To protect:
· the relatively low energy rates for homeowners and businesses
· thousands of good-paying jobs across the state;
· a major corporate headquarters in Louisville
· the financial support of many civic and charitable interests
· and the investment in Kentucky coal, clean-coal technology and alternative energy sources
We felt our best chance to ensure those goals and to control our own destiny was to be prepared to make a competitive bid for public ownership if E.ON decided to sell.
And that’s exactly what we did six years ago. We assembled an expert team of financial and legal advisors to position Louisville to compete.
We kept that team together. And when it became clear about two months ago that E.ON was serious about selling LG&E and Kentucky Utilities, I took our plan off the shelf and put it into action.
I told our citizens that I would do my best to protect LG&E’s importance to our community without putting taxpayers’ money or the city’s assets at risk.
I contacted E.ON’s leadership in Germany and in Louisville and asked to be part of the sales process.
I spoke with Gov. Steve Beshear, who had the same concerns about a sale and its impact on people and businesses across Kentucky. He too contacted E.ON’s leadership to ensure the sales process would be fair and to protect Kentucky’s interests.
We approached several leading Wall Street investment firms to help us finance the purchase. Three weeks ago, I flew to New York to hear presentations from several of those firms.
We ultimately chose Wells Fargo as our financing partner. And they went to work aggressively to determine a bid price.
Two weeks ago, I asked the Louisville Water Company board and the company’s leadership to assist. And to their credit, they saw the importance of this rare opportunity and voted unanimously to create a subsidiary, Wildcat Acquisition, that provided the legal vehicle to get us into the bidding process.
We were confident all along that the City of Louisville could offer a competitive and winning bid for two key reasons -- our borrowing costs would be lower and we would not have the same profit motive as a corporation.
However, we recognized that, regardless of the attractiveness of our offer, we would be asking E.ON to accept risks since we did not plan to commit any public funds or assets.
Last Friday, our team flew to New York to hear a presentation from E.ON’s leadership and the investment bankers who conducted the sales process. I participated by teleconference in a portion of the day-long meeting in which E.ON provided us information based on our credentials and financial backing.
During our discussions, we learned that E.ON would require the City of Louisville or the Water Company to put up earnest money to protect their interests in the event that a sale to the City could not be closed. They did not want to accept the risks, they told us, especially since they had other proposals from companies that did not pose similar risks.
In other words, if for some reason we could not sell the bonds to finance the deal or if we could not get Public Service Commission approval, or if our agreement could not be completed for any other reason, they wanted us to accept the consequences and pay a break-up fee. That could have been a payment of tens of millions of dollars. That is not unusual in a deal of this magnitude, but it was a tremendous hurdle for us.
Our team worked through the weekend searching for a way to clear the hurdle. But in the end, I could not convince E.ON to waive the risk we asked them to take. And in good conscience, I could not recommend to the Metro Council or the Louisville Water Company that we put our assets at risk.
So I went to Plan B and talked with E.ON’s leadership about what I felt was critical to gain the community’s support for a sale. It was those same goals I listed before.
I am pleased to say that E.ON shared those goals. And so did the winning bidder -- PPL.
Because the City of Louisville didn’t sit on the sidelines but got in the game, we helped ensure:
· thousands of good-paying jobs across the state are protected. I’ve been assured no jobs will be eliminated as a direct result of this purchase;
· LG&E’s corporate headquarters remains in Louisville, and the company retains the senior leadership team; PPL has agreed to keep the company’s headquarters in Louisville for at least the next 15 years.
· The company will continue to provide grants and financial support to many community, educational and charitable interests
· The company will continue to invest in Kentucky coal, clean-coal technology and alternative energy research
In addition, E.ON has generously decided to make $6 million in donations to Kentucky in recognition of its strong relationship here over the past eight year:
· $2 million will go to the University of Louisville for engineering and energy efficiency programs
· $2 million will go to the University of Kentucky to support clean coal research
· $2 million will go to the LG&E Foundation to continue support of community and charitable efforts
I want to thank E.ON not only for their generosity for these gifts but also for their good stewardship and contributions to this community and this commonwealth over the years.
I am also pleased that PPL is keeping in place the LG&E management team headed by president and CEO, Vic Staffieri. They have been good partners in community leadership roles and in economic development activities over the years, and I look forward to that continuing.
And based on what I’ve read, I’m very optimistic that PPL will be that same kind of corporate citizen – an owner that is a true partner with the Commonwealth and its communities.
I had a chance to speak briefly a few minutes ago with PPL’s president and CEO, James Miller, who personally assured me of the company’s commitments. I look forward to meeting him and welcoming him to Louisville.
In closing, I want to thank a number of people for standing up for the City of Louisville and the Commonwealth of Kentucky to give us the best chance to protect LG&E and KU’s strengths:
· Gov. Beshear and Economic Development Secretary Larry Hayes, who championed our efforts
· David Jones, who helped finance our exploration so we didn’t spend taxpayer dollars
· Kennedy Helm and Stites and Harbison, our legal team
· Scott Magrane and Coady Diemar, our financial advisors
· Wells Fargo, our banker
· The Louisville Water Company board and leadership
· My leadership team in the Mayor’s Office
· And the citizens of my hometown
I’m hopeful the future of LG&E and KU will be as bright as the past.