IGU Completes Pentex Purchase, OKs AIDEA Pledge to Resolve Disputes with Mediation

Jun 19, 2018

The Interior Gas Utility has completed its nearly $60 million purchase of Pentex Alaska and its subsidiary, Fairbanks Natural Gas. The IGU board of directors last week approved the purchase, as did the board of the Alaska Industrial Development and Export Authority, or AIDEA, which until last week owned Pentex and its natural-gas liquification plant at Point MacKenzie.

“Finally we have an opportunity here to have a tremendous effect on the cost of utilities in the Interior of Alaska, and that is absolutely incredible,” says IGU board Chairwoman Pam Throop. “We’ve waited and struggled for this for years and years.”

Workers last week began erecting sections of the approximately 85-foot curved wall that will contain the 5.2-million-gallon LNG tank the IGU is building on the south side of Fairbanks, near Fairbanks International Airport. The double-walled tank is scheduled to be completed in Fall 2019.
Credit Fairbanks Economic Development Corp.

Throop says board members voted 4-1 to approve the deal, with Patrice Lee voting against. Lee was concerned about the degree of control AIDEA would exercise over IGU board decisions.

Throop says she shared those concerns, especially because of a provision in the Pentex financing agreement that requires approval by AIDEA’s board of directors on any capital investment worth more than $250,000 dollars. But she ended up supporting the agreement because of an arrangement she worked out with AIDEA board chairman Dana Pruhs to seek mediation to resolve disagreements.

“Now that we’ve been able to clarify it,” she said, “we understand that we will have a mediation process until we get a resolution. They can’t unilaterally make a decision. It has to be mediated if we can’t come to an agreement.”

AIDEA helped get the IGU up and running by providing financial support, including a loan to purchase Pentex as part of AIDEA’s Interior Energy Project. Throop says the agreement with AIDEA will enable the IGU board to continue exploring other sources of LNG, including a proposal by a subsidiary of the Germany-based industrial giant Siemens.

“The direction that we were going to go before may be dramatically changed,” she said, “if we determine that the Siemens’ proposal is the best way for this utility to go forward,  and be the best benefit to the ratepayers of the community.”

Officials with Siemens Government Technologies have offered to pay for construction of a smaller and more efficient LNG facility near Wasilla, if the IGU agrees to a long-term gas-sales contract. Throop says if the board goes ahead , the IGU may keep the Pentex plant in warm storage as a backup gas-supply facility.

Earlier this spring, workers tied together re-bar in preparation of pouring concrete for the base of the tank, which is 100 feet in diameter.
Credit Fairbanks Economic Development Corp.

“We would not build or own a liquifaction plant” under Siemens’ proposal, she said. “We may keep the plant down at Point MacKenzie, and keep it as our spare, in case there’s an emergency.”

Throop says the board will make that decision over the next two to three months after a careful analysis of both Siemens’ and Pentex’s proposals. She says she and other board members are very interested in the Siemens offer, but won’t vote on it until they thoroughly vet the proposals.

“We are going to do a side-by-side comparison,” she said, “so it will be based on what is best for this community. It won’t be guessing. I don’t know if Siemens is the best or not, but we will not know that until we lay them down side-by-side, with all the numbers trued-up, and all the assumptions on both sides trued-up.”

Throop says the board now will focus on reorganizing the staff of the IGU and Fairbanks Natural Gas. She says that includes replacing general manager Jomo Stewart with Dan Britton, who formerly held the title of president and CEO of Fairbanks Natural Gas. She says Stewart did a great job with his transactional savvy and extensive statewide contacts.

IGU board chairwoman Pam Throop, left, and Jomo Stewart, IGU's former general manager.
Credit KUAC file photos

“He’s very astute, and he knew a lot of the people all over the state,” she said, referring to Stewart. “And we felt like he could do a great job, and he did for us, and got us to the finish line.”

Throop says the job now calls for a manager who has experience with running a utility. She says that’s why the IGU has assumed the contract Britton had with AIDEA, which is effective through October 2019. Stewart agrees Britton has more of the kinds of experience needed to run the IGU, and agrees the IGU board made a good decision to elevate Britton to general manager.

“Really, it’s pretty simple,” Stewart said. “There is a person involved in these two organizations who has long experience running and operating utility. And that is Mr. Britton, with FNG. He’s been doing it for 20 years.”

Throop says she can’t divulge what Britton will be paid. She says she expects to be able to provide that information in the near future.