AIDEA Board OKs Sale of Pentex, Clearing Last Hurdle for Acquisition by Interior Gas Utility
The Alaska Industrial Development and Export Authority’s board of directors on Thursday approved selling Pentex Alaska Natural Gas Company and its assets, including Fairbanks Natural Gas, to the Interior Gas Utility.
AIDEA’s seven-member board made its sale of Pentex to the IGU official Thursday with unanimous votes on four resolutions that each addressed different aspects of the sale. Before the first vote, board member Gary Wilken of Fairbanks likened AIDEA and IGU to two members of a football team that was finally ready to score, after nearly a year of due diligence and negotiations over the deal.
“Today,” Wilken said, “I hope we’re going to take that ball and pass it to IGU, and they’re going to score a touchdown and make this an investment-grade utility that benefits Interior Alaska.”
Bernie Karl is another Fairbanksan who serves on the board. He said he would’ve preferred a better deal, but he urged fellow board members to approve the one before them.
“I’m telling you, this is the best deal we have going,” he said. “So, we have to go for it.”
In his comments, board Chairman Dana Pruhs pointed out two advantages to the three-year gas-supply contract that comes as part of the deal. He said it freezes the gas price at the present level, which should protect IGU ratepayers from price hikes. And it allows an increase in volume without any price penalty. Pruhs says that should help the IGU as it brings on additional customers by convincing them to convert from fuel oil or firewood or other heating sources.
“The hurdle I see is the focus on conversions,” Pruhs said. “That’s critical – all hands on deck. It’s important that the community gets behind it, and the community does things to facilitate it.”
The deal approved Thursday calls for IGU to buy Pentex for $54 million, the amount AIDEA paid for the company in 2015, plus about $5.5 million – the rate of return since AIDEA acquired Pentex in 2015. The company’s assets include Fairbanks Natural Gas; the Titan Alaska LNG production facility at Point MacKenzie, in southcentral; and other subsidiaries that manage LNG storage and transport for Pentex.
When it came his turn to vote, Karl made his support trebly clear when the clerk called on him for his vote, to which he replied: “Yes, yes, yes!”
The fourth and final vote on the deal called for construction of an additional LNG storage tank and processing facilities in Fairbanks. The complex, including the 5.25-million-gallon tank, would cost $45.5 million to build and would be paid for through a loan that AIDEA has offered as part of the whole Pentex-sale package.
Dan Britton, president of both Pentex and Fairbanks Natural Gas, says the tank would provide capacity for additional customers who convert to natural gas. And he says it also would boost the city’s existing five day gas-storage supply capacity to up to 40 days’ supply. He says that would to provide assurance to customers who may hesitate to convert over concerns about an interruption in the supply of gas.
“So that gives a comfort level to people converting from an alternative heating source to gas – knowing that we have LNG in a tank in Fairbanks ready for use during the extreme cold in the winter,” he said.
Britton says site work on the project will begin almost immediately, so the contractor can begin work while the ground is frozen and stable.
Editor’s note: This story was revised to include a reference to the $5.5 million that was added to the Pentex purchase price of $54 million, which IGU had agreed to pay AIDEA as a rate of return. The Pentex purchase deal is expected to close on May 31.