Louisiana State University board settles $810M energy deal

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LSU

BATON ROUGE, La. (AP) — Louisiana State University’s governing board has agreed to enter into an $810 million energy contract for outside companies to operate, maintain and improve the campus’ energy plants for three decades.

The deal had grown controversial amid fighting about which contractor should be elected, closed-door negotiating with companies and the lack of a public bid process.

The Advocate reports that the final agreement, adopted by the LSU Board of Supervisors, involves two contractors: Enwave Energy Corp. and a joint venture that includes Baton Rouge businessman Jim Bernhard and the national firm Johnson Controls Inc.

The agreement over how to modernize aging campus energy systems that heat, cool and power the university calls for Enwave to operate and maintain LSU’s energy plants for the next 30 years. Louisiana Energy Partners will design and build LSU’s energy plant and distribution systems.

If more upgrades and infrastructure are needed in the future, Enwave will have the chance to finance them. Louisiana Energy Partners will also have the chance to design, build and finance future building mechanical system upgrades in the future.

The price of the deal wasn’t disclosed during Tuesday’s meeting, but LSU officials confirmed it calls for the university to pay Enwave $27 million per year over the next three decades. How much money Enwave makes off the deal will fluctuate annually based on natural gas prices and the price of the energy Enwave produces for LSU, said university spokesman Ernie Ballard.

Enwave will pay Louisiana Energy Partners — the name of the joint venture between Bernhard LLC and Johnson Controls — directly, instead of LSU paying both entities, Ballard said.

University system board members billed the agreement as a cost-savings measure. The university budgets $30 million annually for utilities, operations and maintenance. Ballard said the $27 million annual payment to Enwave positions LSU to save $3 million each year — $90 million over 30 years.

The process for awarding the contract has been steeped in secrecy for months. LSU held no public talks with either contractor during their negotiations, and the university never publicly released its criteria for awarding the contract despite taxpayers and students footing the bill.

Consultants from the firm KPMG, hired by LSU, warned the board in September that LSU was unlikely to get the best possible deal — or the best expertise on building and maintaining energy systems — without inviting public bids. The consultants said they had already reached out to several companies that expressed interest in bidding on the project.

But the board rejected the advice.

Instead, board members voted five months ago to conduct a 90-day negotiation period with the two outfits that already have existing cooperative endeavor agreements with LSU. Those two outfits were Enwave and Louisiana Energy Partners.

Enwave runs the energy systems for LSU Health Sciences in New Orleans. And Bernhard’s companies have done plenty of work for LSU and other state offices in the past.

LSU will create a cooperative endeavor agreement including the university, the LSU Real Estate and Facilities Foundation, Enwave and Louisiana Energy Partners.

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