Anchorage voters will decide in April whether the city should move forward on a deal to sell Municipal Light & Power to Chugach Electric Association.
Once-confidential records obtained by the Anchorage Daily News show that at least five other buyers had shown interest in the city-owned power company.
In November and December, the companies wrote letters to Anchorage Mayor Ethan Berkowitz to express interest in buying ML&P, the electric utility that serves downtown, Midtown and parts of East Anchorage.
But by then, Anchorage officials say, the city had spent weeks discussing a sale with Chugach Electric Association — the member-owned cooperative serving much of the Anchorage Bowl. It wasn't long before Berkowitz announced a deal to sell ML&P to Chugach, for an estimated $1 billion.
The letters from other potential buyers were obtained through a public records request and shed new light on the terms and pace of the deal and the perceived value of the utility.
In the Chugach Electric proposal, more than half the money would pay off ML&P's debt. Another portion would be deposited in a trust fund, which spins off close to 5 percent annually to pay for city services, like police and snowplows. The deal also includes payments over time and money to replace lost taxes — and Chugach has promised that rates wouldn't rise and employees would not be laid off because of the sale.
The other proposals came from utilities in Fairbanks, Juneau and the Mat-Su Valley, from an energy subsidiary of an Alaska Native corporation and from a financial firm in New York City. Most laid out temporary freezes on layoffs and rate hikes.
Price estimates ranged from $750 million to more than $1 billion.
"Folks who really dig into this should be left with a sense of confidence that Chugach is giving us a very fair price," said city manager Bill Falsey. He said the city could not voluntarily provide the records because of non-disclosure agreements.
The mayor's December announcement that the city would seek to sell the company for $1 billion to Chugach surprised some of the potential buyers who said they thought they were still in the running.
The member-owned Fairbanks cooperative Golden Valley Electric Association started talking with the city in late September or early October, said Cory Borgeson, the chief executive of the utility. The Fairbanks utility buys 20 percent of its power from ML&P.
Borgeson said the co-op hired a financial firm to assess ML&P's value. He called the utility's final estimate of up to $1.05 billion "fairly conservative." The estimate included more up-front cash than other proposals because the offer did not include tax payments, according to an analysis by the city.
Then, Borgeson said, he got word that the city had decided to sell to Chugach.
"You sometimes wondered if they were just stalking horses, if it was always going to go to Chugach," Borgeson said. "It appears they had done an awful lot of negotiation back and forth, and we did not have that opportunity."
The president of CIRI Energy LLC, Ethan Schutt, also said in an interview that his group thought the letter was the first of a two-step process. He said materials provided to the prospective buyers indicated that the city would ask the Assembly to approve a sale to the highest bidder, not specifically Chugach.
Anchorage has talked for decades about a merger or sale of ML&P. But the current deal stemmed in part from rate increases proposed in 2016 to pay off the cost of ML&P's new power plant, Plant 2A. Business customers of the power company took their concerns to the Anchorage Economic Development Corp., which recommended the city look hard at a merger or sale of the utility.
In June 2017, the Anchorage Assembly passed a resolution urging the city, ML&P and Chugach Electric Association to look at a merger. In July, the city of Anchorage hired the investment fund Goldman Sachs to analyze ML&P's worth. That analysis completed in August, indicated that $1 billion was at the upper limit of what ML&P was worth.
After the Assembly resolution, Falsey said, the city started discussions with Chugach Electric. But Falsey said other groups eventually approached the city as well.
By October, Falsey said, the city created what's known as a "data room," a website for prospective buyers with information about ML&P's financials.
Two months later, the city asked all interested bidders to write letters. Falsey said the city wanted a sense of how much they would pay for ML&P and what they would do. The first deadline was Nov. 22; a second was set at Dec. 12.
In addition to Golden Valley Electric Association and CIRI Energy, letters of interest came in from Avista Corp., which owns Juneau's electric utility, and Ares EIF Management LLC, a New York City-based financial fund.
The general manager and chief executive of Matanuska Electric Association, Tony Izzo, wrote a letter to Berkowitz on Dec. 7 that generally stated his utility's interest. Izzo wrote that he looked forward to further discussions.
A Dec. 12 email exchange showed the city's adviser, Steven Kantor, telling Tony Izzo that the city wanted a range of what MEA would expect to pay. Izzo wrote that his organization would expect a "significant reduction in head count" and would need to review labor contracts.
Kantor then told Izzo that the city wanted a two-year rate freeze and a two-year guarantee against layoffs.
Borgeson, of Golden Valley Electric Association, said he expected to be involved in negotiations down the line. He said he's concerned about the impact of the sale on the cost of energy for Fairbanks ratepayers.
Schutt, meanwhile, said CIRI Energy had wanted to see what would happen for ML&P in a pending regulatory case. He said he expected that could affect the terms of a deal.
"We are very skeptical of the promises that have been made here as far as ratepayer and community benefits, especially when paired with promises in the short term," Schutt said.
Falsey said the Chugach offer was consistent with the city's independent analysis and looked as good as any of the other proposals that came in.
He said there were larger reasons the city went with Chugach, in addition to the financial details. That included, he said, the ability for Anchorage taxpayers, as current or future members of the cooperative, to decide whether to sell the utility to themselves.
A town hall meeting on the ML&P sale has been scheduled for Monday, March 5, at 6 p.m. in the Anchorage Assembly chambers in the Loussac Library.
The meeting will also be broadcast live in Channel 9 and recorded.
Read the letters from the other companies:
Golden Valley Electric Association — Nov. 22 letter
Avista Corp. — Nov. 22 letter
CIRI Energy, LLC — Nov. 22 letter
Ares EIF Management, LLC — Nov. 22 letter
Matanuska Electric Association — Dec. 7 letter
Golden Valley Electric Association — Dec. 12 letter
Avista Corp. — Dec. 12 letter
Ares EIF Management, LLC — Dec. 12 letter
Matanuska Electric Association — Dec. 12 email exchange