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ARPA and the City of Lamar strike a settlement, lawsuit dismissed

by Bill Knowles

TRINIDAD — In a press release dated Nov. 27, 2017 from the Arkansas River Power Authority, ARPA and the City of Lamar have resolved a lawsuit regarding the Lamar Repowering Project (LRP) and Lamar’s Unit 6 generating plant.

The Lamar City Council and the ARPA board of directors both approved a settlement that will dismiss the 2014 lawsuit between the two parties. This settlement allows ARPA to refinance its bonds, which will provide significant savings in interest payments. The anticipated savings will help ARPA in its efforts to maintain stable electric rates for its members’ ratepayers.

The problems within the ARPA membership began in 2004 when plans called for the Lamar power generation plant to be converted from gas to coal fired. After the newly installed coal fired generator exploded during testing, the overall debt rose to a staggering $173 million, with Standard and Poor’s estimating the bond debt alone to be about $153 million.

After the explosion, ARPA exercised its only option and filed suit against Babcock and Wilcox, the Ohio boilermakers who built the generator. The case was settled late last year, leaving the case between Lamar and ARPA the sole remaining lawsuit from the endeavor. Lamar was seeking to sever their relationship with ARPA. The lawsuit was finally settled last week.

During a phone call with the World Journal, Michelle Miles, an ARPA board member appointed by the City of Trinidad, said, “The savings on the interest payments should stabilize rates by reducing the increase in the rates generated by inflation for the foreseeable future.”

The terms of the settlement provide a $2.5 million payment to Lamar once the bonds are refinanced. In addition, ARPA will make a $350,000 annual payment to Lamar for 26 years (approximate term of the LRP bonds). ARPA’s bond insurer, Syncora Guarantee, Inc., has agreed to make a $2.25 million payment to ARPA once the bonds are refinanced. ARPA will also deed over property to Lamar that is adjacent to the LRP and the LRP dome storage facilities located on City of Lamar property. Miles indicated that Goldman Sachs was being looked at as possibly carrying the refinancing.

“The settlement provides ARPA the ability to access a very favorable bond market,” said Rigel. Public Financial Management, Inc. (PFM), ARPA’s municipal adviser, and Goldman Sachs, ARPA’s underwriter for the bond refinancing, recently conducted a financial analysis. “The analysis indicated that the annual savings from a refinancing will significantly reduce our debt service cost over the life of the bonds,” Rigel said. “These savings will allow ARPA to continue to maintain stable rates for the ARPA rate payers for the next several years to come. Our goal is to go to the bond market by second quarter of 2018”.

ARPA is located in Lamar, Colorado, and provides wholesale electricity to its Colorado member communities of Holly, La Junta, Lamar, Las Animas, Springfield, and Trinidad.

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