BATON ROUGE, La. — Louisiana has reached a deal that will privatize energy systems across dozens of state buildings, and possibly more broadly to other state agencies and universities.
Gov. John Bel Edwards's administration struck the agreement with LA Energy Partners, a joint venture between Johnson Controls and Baton Rouge-based Bernhard Energy Solutions.
State lawmakers reviewed the complex deal Tuesday, raising no objections to the final terms.
The Advocate reports LA Energy Partners will lease chiller systems at the Shaw Center for the Arts, a state-owned building in Baton Rouge, from the state for $3 million over 20 years. The state will buy back the chilled water, used to cool the building, for $6 million.
The company also will make energy upgrades at 31 state buildings, including the Louisiana Capitol, governor's mansion and Louisiana Supreme Court building, in exchange for $54 million.
Aside from the cash, LA Energy Partners will make money selling the extra chilled water to other companies to cool their commercial buildings.
But the deal isn't limited to that list of facilities.
Other agencies and universities can opt into similar deals with LA Energy Partners. If those entities want to privatize their energy systems, they would not have to go through a public bid process. Instead, they could contract with LA Energy Partners using similar terms outlined in the state deal.
The Edwards administration says energy savings from the improvements at state buildings will offset the millions in costs.
"We're satisfied it's very much a positive for the state," Commissioner of Administration Jay Dardenne, the governor's chief budget adviser, said Tuesday. "But it's a unique arrangement, and that's why it took so long to negotiate."
The deal will be signed in the "very near future," he said, after a joint House and Senate budget committee reviewed it for the second time. The administration made several changes sought by lawmakers, giving the legislative auditor oversight and clarifying the contract will end if lawmakers don't appropriate the money.
The contract calls for LA Energy Partners to make a 5% return on equity for the state deal, as well as an 8% return for subsequent deals with other entities. The initial deal lasts 20 years.
Former Gov. Bobby Jindal's administration initially proposed privatizing some state-owned chiller systems several years ago. The Edwards administration revived the idea shortly after the governor took office.
Bernhard Energy Solutions partnered with the HVAC company Johnson Controls at the request of the Edwards administration after both firms submitted proposals. Bernhard Energy Solutions is one of several companies controlled by Bernhard Capital Partners, a private equity firm run by former Democratic party official Jim Bernhard.