The attorney, who has a number of municipal power projects under his belt, said he's never seen anything remotely close to that type of guaranteed, never- ending payment.
"The numerous people that I have spoken
to -- and some of them very substantial in the energy circles -- specifically state that with a $5 million obligation to the consultant, Inland Energy, that they would never take on the development," said Dan Tate, a local developer who's been involved with meetings to help broker a deal on the plant. "When I broached this with the city, I was told that the city had requested Inland Energy to make the city an offer to buy them out of their contract."
But with no termination fee written into the contract and the life of power plants established at around 30 years, that would put the value of the Inland Energy obligation at around $150 million. Even if Inland Energy agrees to a termination fee at a fraction of that amount, it's money the struggling city simply doesn't have.
The consultant for the potential international buyer insists that it was ready to make the city an offer for the plant last year, long before the city fell into default over a late $126 million payment to General Electric for the plant's equipment. But, he said, when his clients indicated the annual payment to Inland Energy could be a deal-killer, Inland officials pushed their proposal aside and sought out other prospects -- a "conflict of interest" claim raised by representatives for three potential buyers.
"That is a major issue," the consultant said. "If a bidder has an issue with the 5 percent participation fee that Inland is claiming, the city should hear about that directly and not through Inland. ... It's highly usual that Inland would be involved in the vetting process or the review process at all."
Now, the consultant said, his client is looking elsewhere to develop a plant, with prospects in Kern and Riverside counties or elsewhere in San Bernardino County.
"It's actually hard for us to read the stories about the GE situation and the layoffs that are coming," the consultant said, "because the city probably wouldn't be facing any of those issues had our deal gone through."
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