AIDEA approves $52.5M purchase of Fairbanks Natural Gas
Nearly six months after the idea was announced, the Alaska Industrial Development and Export Authority board of directors approved the $52.5 million purchase of Fairbanks Natural Gas during a special meeting June 11.
Included in the purchase price are all of the companies under Pentex Alaska Natural Gas Co., the parent company to Fairbanks Natural Gas and Titan Alaska LNG, which operates the small natural gas liquefaction facility at Point MacKenzie. The two LNG-powered trucks used to transport LNG to Fairbanks are also part of the deal.
AIDEA estimates transitioning the ownership structure of the Fairbanks utility from private to public will save customers more than 13 percent on their bills nearly immediately.
“We expect the Pentex acquisition to be a short-term strategic investment that can play a significant role in helping achieve the long-term success for the Interior Energy Project,” AIDEA Executive Director John Springsteen said in a formal statement. “This acquisition will promote an integrated gas distribution system that can be built and operated in a more efficient manner for the benefit of Interior Alaska residents and businesses.”
AIDEA and Pentex leaders tentatively agreed to the deal back in late January, and in the meantime have been negotiating finer points while the authority has done its due diligence on the deal.
The current management structure at Fairbanks Natural Gas, which serves about 1,100 customers in the heart of Fairbanks, is expected to remain in place to operate the utility after the sale.
Resolutions passed by the AIDEA board allow for up to $54 million to be used from the authority’s Development Finance Program fund, with the added money above the purchase price for working capital. The sale, separate from but related to the Interior Energy Project, also includes Hilcorp’s $15.1 million deal to purchase and operate the Titan facilities.
That deal is under review by the Regulatory Commission of Alaska and Attorney General Craig Richards and is set to close by late September if it passes the regulatory inspections. It would also lessen AIDEA’s total investment in Pentex to $38.9 million.
The proposed Pentex purchase came under fire from some Southcentral Republican legislators when it was announced who questioned whether it is appropriate for the state to purchase a private company and potentially compete with other companies that might want to supply natural gas to the Interior.
While AIDEA is a state entity controlled by the Commerce Department, it is a financially self-sustaining development organization in terms of its day-to-day operations.
Local Interior government leaders have voiced broad support for the plan.
AIDEA leaders have said they plan to sell Fairbanks Natural Gas to a local entity within two years — likely the Fairbanks North Star Borough, which controls the developing Interior Gas Utility. Combining the utilities could provide additional operational and capital efficiencies and subsequent savings to customers, those knowledgeable with the work have said.
Elwood Brehmer can be reached at [email protected].