in capital investment
in projected savings over 30 years
On completion, the partner's cost to operate and maintain the plants came in below what LSU had been spending to do it in-house.
What I did
I led LSU’s team on this transaction — shaping what the university asked the market for, designing the competitive process with our KPMG advisor Chase Haislip, and then negotiating the terms that decided whether the deal was worth doing at all.
The work that mattered was not the headline number. It was pushing the parties past the deal structures the market was used to, and forcing the operational detail and the risk allocation to be specific enough to hold up over a thirty-year term.
On the record
The selected partner, and a firm that competed against them.
CenTrio was selected. Bernhard competed for the partnership and later performed the construction scope under CenTrio. CenTrio’s retired president speaks to the fairness of the selection; Bernhard’s chief executive speaks to the effect on the market. Being able to show both is rare for a public procurement.
“The competitive process Patrick and Chase designed allowed the university to truly compare apples to apples in evaluating two very different companies with very different project concepts, in a way that was fair to both competitors.”
— Doug Castleberry Retired President and COO, CenTrio — the selected partner
“It is not an exaggeration to say that Patrick’s leadership has shifted the market conditions for higher education P3 energy transactions.”
— Ed Tinsley Retired Chief Executive Officer, Bernhard — competed for the partnership, then built it under CenTrio
And from the lawyers on the deal
“Patrick drove the parties to think beyond the existing market precedents and to consider operational details and operational risk transfer in ways that would benefit the university and its stakeholders while also meeting the needs of the private industry partner and the realities of the financial market for these transactions.”
— Joseph Seliga Partner, Mayer Brown LLP
“Patrick, with his unique blend of legal, business, and university administrative experience, was exceptionally helpful in identifying, communicating, and building consensus for reasonable solutions to complex problems that at times felt intractable.”
— David Horner Partner, Hunton Andrews Kurth
LSU’s utilities infrastructure is essential to the long-term success of the University and consists of three elements — the utility plant system, the distribution system, and the building mechanical systems. Cohesively, these three elements are responsible for providing heating, cooling, and electricity to the campus. Although many of the major components of the infrastructure had continued to operate long beyond their expected useful life, the maturity of these systems combined with the necessity of extensive deferred maintenance due to a lack of capital funding failed to provide redundancy for the campus, meaning that even a small failure in one component of the system could cause large portions of campus to suffer a loss of heating and cooling. Major components of the utilities infrastructure were beginning to fail, resulting in large, unplanned expenses for emergency repairs and replacements in order to maintain uninterrupted heating and cooling services on campus — which not only diverted resources from other campus priorities, but was neither financially sustainable nor economically strategic.
Rather than continuing to engage in reactive and expensive maintenance of their existing utilities infrastructure, LSU sought to strategically invest in a more modern and efficient system that would reliably meet the campus’ current and future needs based on anticipated growth described in the Comprehensive and Strategic Campus Master Plan.
The Initiative
Working with its consultants, LSU prepared the Utilities Modernization Initiative (“UMI”), which called for a public-private partnership with an energy services firm to finance, construct, and operate significant renovations to LSU’s utility plant system (the Central Utility Plant and the Highland Utility Plant) and portions of its distribution system. The UMI also provided for the same private firm to operate the improved plants for the term of the agreement, as well as for the potential future construction of improvements to the various building mechanical systems.
Upon completion of construction, the positive financial benefit for LSU was immediately evident in that the expense for the vendor to operate and maintain the utility plant system was less than the cost for LSU to perform the same services in-house. Additionally, the capital improvements made by the vendor resulted in greater energy efficiencies in the production of steam and chilled water to heat and cool the campus, which reduced the amount of commodities (electricity and natural gas) consumed by LSU.