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Youngstown Thermal in Talks with Potential Buyer

YOUNGSTOWN, Ohio – A company based in suburban Columbus is performing due diligence toward a possible purchase of Youngstown Thermal LLC’s assets — an acquisition that could result in lower rates for customers, according to documents filed with the Mahoning County Court of Common Pleas.

SOBE Energy Solutions Inc., Dublin, has sent a non-binding letter of intent “for the proposed purchase of Youngstown Thermal” to the downtown district heating and cooling utility, according to the receiver’s fourth report.

“The receiver determined that the prospective acquisition by SOBE would likely result in lower rates since SOBE would provide ancillary services which would offset the need for rate increases,” the report said.

Youngstown Thermal was placed into receivership in August 2017 to restructure the failing business. The district energy system supplies steam heat and some cooling services to about 30 customers and 22 buildings downtown, including City Hall.

Reg Martin, the court-appointed receiver, could not be reached for comment.

Stephen Hubbard, CEO of SOBE, said it would be premature to comment on any agreement or purchase. “There is a lot of due diligence to be completed yet,” he said.

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 or reciprocating engines for electricity generation.

SOBE’s letter of intent includes a proposal to the use biomass oil through Ensyn, a renewable energy company based in Canada, according to documents. The company supplies Youngstown Thermal with fuel oil that is converted from wood waste, which should reduce its energy costs by about $1 million this year, according to previous court filings by Youngstown Thermal. Ensyn provides at least 70% of Youngstown Thermal’s fuel.

Still, the most recent receiver’s report cautions that as of yet, no deal has been reached with SOBE and that the downtown utility should continue to pursue other options.

The most preferable option is for the city to acquire Youngstown Thermal, the report stated. Should this happen, Ensyn has indicted that it would construct a new renewable energy plant in the city that would create 400 construction jobs and 50 permanent positions.

Plus, a city-owned utility would ensure that heating and cooling rates remain reasonable for downtown customers, Martin said during a presentation last summer to Mayor Jamael Tito Brown and members of City Council. A sale to a for-profit corporation, he said, would likely result in higher rates for consumers.

The mayor stated last year that the city is not interested in operating a steam-heat plant, and would not consider taking it over.

Another option would be to create a cooperative among the central business district’s customers to run the plant on North Avenue, the report stated.

“I think I’d be in favor of exploring that with the stakeholders,” said Fourth Ward Councilman Mike Ray, chairman of city council’s public utilities committee. “District steam makes sense if it’s run properly.”

However, Ray said that the administration would have to support the effort. “It’s good to at least start the conversation,” he said.

Nevertheless, the receiver “has executed non-disclosure agreements and exchanged confidential with two other potential purchasers for Youngstown Thermal,” according to the most recent report.

Martin has said that maintaining lower rates for customers is key to signing up others to use the system. In September, the company received notice that the Youngstown Fire Department would discontinue using Youngstown Thermal’s steam service, the report said.

“Unfortunately, the loss of even one customer has a negative impact on all other customers as it causes rates to increase,” the report stated. “It is in the best interests of all customers as a whole that each individual customer continue to use Youngstown Thermal as their provider.”

Published by The Business Journal, Youngstown, Ohio.