Postscript: Alameda Power & Telecom
This week brought with it an epilogue of sorts in the story of Alameda’s telecommunications adventure: The release of the former Alameda Power & Telecom’s annual (independently audited!) financial review.
The report had to be held to include details of the sale of the telecom business to Comcast, in November, and it offers hints about the remaining financial burdens it could impose on the utility’s remaining electricity business in its wake.
At its hearing earlier this week, Public Utilities Board president Ann McCormick said that despite the telecom’s losses, the city’s electric utility is doing well.
“We’ve got a full snapshot of the telecom. Obviously, it’s not what we’d like to see. But the utility is still strong,” McCormick said.
The newly monikered Alameda Municipal Power is still talking with its bondholders, several of whom are suing the utility, in an effort to “negotiate settlement of the remaining debt service due.” The folks at AMP don’t expect the outcome of the suits to have a “material adverse effect” on the utility, which has $36 million in insurance to cover judgments and claims, according to the financial review.
The two litigants – Nuveen Funds, which held around two-thirds of the $33 million in the telecom’s main bond series, and Vectren Communication Systems, which held another series offered when the utility bought out Vectren’s right to build and operate the system – estimated their losses at around $20 million, according to court papers.
The utility is also still in talks with the city regarding repayment of the $2.2 million loan it issued to help finish construction of its network – a cost that could, along with a bevy of legal and other expenses, spark a new wave of interfund transfers from the city’s electric business, on top of the $43.616 million it has already donated to the telecom.
Meanwhile, the telecom’s capital assets, which in 2007 were valued at nearly $42.3 million, fell to a value of $14.6 million after the sale in 2008 – a $27.7 million loss. And that $14.6 million is money that’s being use to pay off the utility’s bondholders. In 2008, its balance sheet showed it to be nearly $25 million in the hole, including the bonds due – and even with the interfund transfers from the electric utility on the books.
AMP spokesman Bill Garvine questioned the assets-to-sale-price comparison, though. “You sell for what you can get,” he said, comparing the sale of the telecom to that of a baseball card with a high book value. “We did the best we could in the market.”