Agreement Nears for Sale of Youngstown Thermal
YOUNGSTOWN, Ohio – The court-appointed receiver who manages the assets of Youngstown Thermal Cooling LLC says he’s optimistic that a sale of the district heating and cooling company could be reached in the coming weeks.
“We’re waiting and hoping for a purchase contract,” said Reg Martin, who was appointed receiver of the then-troubled utility in August 2017. “As soon as the attorneys reach an agreement, we’ll motion the court for approval of the sale.”
Martin said Youngstown Thermal has been in discussions with Columbus area-based SOBE Energy Solutions Inc. for several months. “I’m optimistic. I think the reports we’ve given are strong.”
He added that the agreement with this company would mean better rates for those customers currently served by Thermal’s system. According to its website, SOBE Energy uses waste-to-energy conversion technology that produces a clean, synthetic fuel gas that can be used directly in burners for process heating, or in gas turbines and reciprocating engines for electricity generation.
According to the receivers fifth report filed with the Mahoning County Court of Common Pleas in January, an asset purchase and management agreement was drafted and sent to SOBE for consideration.
“The receiver is hopeful that within the next 90 days he will have a signed contract for the sale of the assets” of Youngstown Thermal, the report said.
Details of the proposed agreement were not divulged and representatives from SOBE could not be reached for comment.
In September, SOBE sent a nonbinding letter of intent to Youngstown Thermal considering the purchase of the steam plant, according to a previous receiver’s report.
Youngstown Thermal produces steam heat and chilling services for buildings and customers downtown. It serves about 36 customers in the central business district, most of which use the company’s steam heat services.
SOBE’s letter of intent includes a proposal to use renewable fuel through Ensyn Corp., a Canada-based company that manufactures fuel oil from wood waste. Ensyn supplies about 70% of Youngstown Thermal’s North Avenue plant with biomass fuel, which reduces its fuel costs by about $1 million a year, according to previous reports filed with the court.
However, Martin said Ensyn experienced supply problems last year starting in September, which were exacerbated by the government shutdown in December. As such, Youngstown Thermal received about half of its normal allocation from Ensyn and was forced to use higher-cost natural gas to heat some of its boilers.
According to the receiver’s latest report, the Youngstown Thermal plant on North Avenue “continues to run very well.” A second heat exchanger was added to the plant, while several deferred maintenance projects were completed to the system over the winter. These included repairing eight separate leaks in the pipelines and replacing several malfunctioning valves in the water and drain lines, the report said.
Youngstown Thermal started to experience financial difficulty in 2017 after its largest customer, Youngstown State University, left the system and opted to build its own boiler units. The company was forced into receivership in August 2017 when it was unable to pay its bills.
While under receivership, the downtown district heating system was able to erase a $1.8 million deficit by cutting costs, reducing the workforce, levying an emergency surcharge on customers and establishing a new rate structure. In 2018, the company realized a small profit of $2,500.
Initially, Martin had hoped that the city would assume ownership and management of the heating system, citing the company’s desire to keep costs down.
However, Mayor Jamael Tito Brown balked at any notion of the city owning the utility, citing excessive maintenance costs and the lack of experience among the city in operating a plant.
Although Martin feared a sale to a for-profit company would likely result in rate hikes, he said the SOBE business model would keep rates low for end users.
“It would be beneficial to the customers,” he said.
Copyright 2019 The Business Journal, Youngstown, Ohio.
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