TELECOM SALE IMMINENT
So here’s the deal on the deal: Comcast has offered Alameda Power & Telecom $17 million to take the boondoggle that is its cable and Internet business off the city’s hands. If the city accepts, Comcast could take over next Friday.
The deal would, as AP&T financial consultant Mark Northcross put it at a public workshop Wednesday night, stop the bleeding inflicted by the telecom business. Persistent critics, including City Treasurer Kevin Kennedy – who pretty much said this wasn’t economically feasible from the get-go – hailed the sale as a necessary move that will allow AP&T to focus its energy and cash flow on its successful electric business.
So the city’s out the $44 million in interfund transfers AP&T’s electric business advanced to its telecom side, plus upwards of a few million more in costs associated with the sale. A dozen jobs plus six unfilled positions will also be lost (subject to union negotiations).
The utility is also facing two lawsuits from bondholders, including a counterclaim from Nuveen Funds, which holds more than $20 million of the $33 million that was due to bondholders in June 2009 (the city sued them first to maintain local jurisdiction over Nuveen’s anticipated suit) and another suit from Vectren Communication Systems, which was originally hired to build and operate the system and which held another $6.3 million in bonds for the system.
The city had originally planned to spend $10 million on the system and to incur, maximum, $20.5 million in bond debt. But the telecom system’s costs were far higher than anticipated.
Northcross said the utility’s other two options, both of which involved refinancing the telecom’s bonds, were basically a no-go because nobody would buy the bonds unless they were backed by electric revenues or the city’s general fund. Including a voice option in AP&T’s basket of services could have cost the cash-strapped city another $2 million.
AP&T’s general manager, Girish Balachandran (who we’ll just point out, inherited this mess) said he’s hoping for a seamless transition to Comcast for customers. Internet customers will be able to keep their addresses for another 12 months. And the channel lineup for cable customers will change (the hubby has already checked it out on Comcast’s website and his eyes lit up when he saw the channels we could be offered, though probably at a much higher price).
The Public Utilities Board will get a more detailed presentation offer on the sale in order to make their recommendation on Monday; the City Council is slated to make a decision next Tuesday.
Wednesday’s presentation and staff reports for Monday’s PUB meeting are among the documents slated to be available on AP&T’s website later today.