Date: May 6, 2011
Source: News Room
Harrisburg, Pennsylvania's troubled incinerator which has threatened to put the capital city into bankruptcy has now garnered a second purchase offer in a deal that could relieve the city of a large part of its $310 million debt burden. The latest proposal comes from New York financier Jacob Frydman (LambdaStar Infrastructure Partners LP and EQT Infrastructure Ltd.) who is offering an upfront payment of $140 million to lease and operate the incinerator for 99 years. However, that offer stipulates that the city must also agree to the venture's previous offer to lease its parking garages and lots, for either 75 years for $215 million or 50 years for $195 million. It would also require the city and county to create a joint authority to own the plant. The second major offer came from the Lancaster County Solid Waste Management Authority (LCSWMA), which increased its previous offer to buy the Harrisburg incinerator from $45 million to $124 million. The bid, which started at $45 million in March, was recently raised with conditions: the city and county must guarantee the amount of waste available to generate power and the electricity rates it can charge. LCSWMA's CEO James Warner said that the new offer still allows lower disposal fees for the city which he estimates would result in savings of $109 million over 20 years. He has said that acquiring the Harrisburg facility would be cheaper and less risky than expanding Lancaster's own site, 18 miles away.
Either offer would go a long way to helping the city pay off debt that it guarantees on the nearly 40-year-old plant which is owned and operated by the Harrisburg Authority. Much of the debt resulted from years of mismanagement and a failed $125 million upgrade of the facility after it was shut down by regulators in 2003. Covanta Energy came to the rescue with a $22 million investment to get the plant working and continues to operate it today. Dauphin County and bond insurer Assured Guaranty Municipal have made payments on the debt when the city failed to do so. The county and insurer are suing the city to recoup their payments, restructuring costs, and principal and interest owed to the county and insurer have expanded the burden.