AMP: Over the river, but not out of the woods
When Alameda Power executed a successful, $15 million divorce with its troubled Telecom last November, the collective sighs of relief at 2000 Grand Street and City Hall were audible Island-wide. But newly released financial statements show the utility faced fresh difficulties this year, in the guise of higher costs, sharply reduced investment returns and lower electricity usage.
The utility’s Consolidated Annual Financial Report for the fiscal years that ended on June 20, 2008 and June 20, 2009 showed a utility whose credit rating improved and whose net assets surged after being freed by the crushing weight of its telecom debt (unless a federal court says otherwise).
But the report also showed that this was a tough year for the Island’s newly single electric company, which saw its electric expenses rise by $4.2 million, largely on a $2.9 million rise in the cost of purchasing power. At the same time, the utility’s investments took a nearly $2 million hit, and a decline in electricity usage cost it another $1.1 million.
Overall, the utility had $56.3 million in net assets this year, compared with $36 million in 2008. But its end-of-year cash balance declined from $28.6 million in 2008 to $24.2 million this year.
And the utility is still experiencing the aftereffects of its telecom adventure, the full extent of which are to be seen. The electric utility paid an additional $1.1 million on top of the $43.616 million it “lent” its telecom over the years and won’t get back, this latest payment to help cover the expenses of the telecom sale (though the utility did get back $750,000 of the $2 million being held in escrow on the sale, and a second, to-be-determined payment is due back next year).
The fate of an additional $2.2 million loan from the city – which was due to be paid back on June 1 – has yet to be decided, and remains on the utility’s books.
Meanwhile, three federal lawsuits lodged by holders of the utility’s telecom bonds who are seeking $25.7 million in damages are pending (though the financial report says, intriguingly, that it “has been in negotiations” with its former telecom bondholders). And if the utility were to lose the suits, it’s not clear if its insurance would cover the judgments (though the city attorney has said, according to the report, that the outcome of the suits “will not have a material adverse effect” on the utility’s financial position).
One of the suits, lodged by Vectren Communication Services, is set for trial in Feburary; the other suits, lodged by the Bernard Osher Trust and Nuveen Municipal High Income Opportunity Fund, are set for a settlement conference in March 2010 and trial in September 2o1o.
We’ll keep you posted on those. In the meantime, the 86-page report is available on the utility’s website.