YSU to Borrow $16M to Build Its Own Steam Plant
YOUNGSTOWN, Ohio – Youngstown State University is borrowing $16 million to build its own steam plant, estimating it will save the university $2 million annually in heating costs as it ends its relationship with Youngstown Thermal LLC.
The project “will be revenue-neutral in Year One,” says Neal McNally, YSU vice president of finance and business operations.
Through an energy performance contract trustees authorized June 17, Johnson Controls Inc. will construct and manage the new steam plant that YSU expects to be operating by June 2016.
New energy efficiency boilers will be installed at the campus utility plant decommissioned 35 years ago, when YSU decided to buy steam heating from Youngstown Thermal’s newly formed district heating system. At that time, it was “cost-prohibitive to rebuild obsolete boilers,” says McNally, and Youngstown Thermal had recently acquired Ohio Edison’s steam plant at 205 North Ave.
YSU spends $3.2 million annually to buy steam heat. Its contract with Youngstown Thermal ends next June.
“The new steam plant will pay for itself,” says McNally. “We are paying just north of $3 million per year to purchase steam. We estimate the cost to produce our own steam will be in the neighborhood of $1 million. So we’ll save $2 million to cover operating costs and pay back debt.”
PNC Equipment Finance is financing the $16 million project through a loan program that rewards energy efficiency investments.
“The timing is right, and the opportunity for financing made perfect sense for us to do this,” McNally says. “The university is going to retire existing debt in December, which frees up debt capacity that we can absorb to build this steam plant.”
Related infrastructure – the “terribly outdated” piping system – would also be replaced, he adds.
YSU issued a request for steam plant proposals in June 2014.
McNally says university officials have been “talking about this for at least five years, particularly when we were building the WATTS facility.” But the loss of steam heat to some campus buildings during the winter of 2013-2014 added urgency to the discussions, he acknowledges, as YSU and Youngstown Thermal attempted to determine the cause.
An April 27 letter sent to Thermal customers from John Rambo, president of the company, red-flagged the dispute and attributed the outages to “a third party within the YSU system and not Youngstown Thermal’s supply system.”
“Many of you had questions concerning [the] winter 2013/2014 steam event when portions of [the] YSU campus experience[d] a steam outage in the midst of the minus-16 degrees cold front,” Rambo wrote customers. “After in-depth research and analysis, we identified the source of the issue to be a series of three orifice plates that restricted flow within the YSU steam tunnel system.”
In an interview with The Business Journal, Carl E. Avers, CEO of Youngstown Thermal, explained YSU “thought we had something wrong with our system. We investigated it. We tried to solve it. Finally we went to YSU and started tracing back their system.”
Over the last 35 years, Avers says Thermal has donated “$30 million to YSU” in the form of “discounted rates.”
He’s convinced that at some point YSU will return to Thermal’s district heating system. “Economics will drive them back because our costs are coming down for two reasons: We are adding customers and using better technology.”
Still, as the loss looms of his company’s largest customer – YSU represents 60% of Thermal’s annual revenue – Avers is working on a $5 million turnaround plan (READ STORY). The Public Utilities Commission of Ohio, aware of YSU’s pending departure, is in “constant communication” with Thermal, Avers says. “We have a dialogue going about the impact, if any, of YSU leaving.”
Meanwhile, the city of Youngstown has set an Aug. 6 deadline for companies to submit proposals for a district heating system or building a municipal steam plant that could also heat all of downtown.
“Our staff stays in regular touch with our regulated utilities, and we’re certainly aware of the city’s concerns,” says the PUCO’s public information officer, Matthew Schilling.
Avers also is embroiled in a two-year personal bankruptcy case that’s bogged down with creditors seeking liquidation values of his tangled companies and family trusts (READ STORY).
One of those companies, Thermal Ventures II, has a past connection to YSU and its former president, Les Cochran.
Thermal Ventures II purchased Penguin Place, the former Clingan-Waddell Hall, at 236 N.Champion St., from Les and Lin Cochran on July 3, 2000. The company paid $637,5000 for the two-story building, which had an appraised value of $417,400.
In March 1994, YSU sold the building to the Cochrans for $2,200. The couple subsequently renovated the structure with $395,000 in improvements, according to the Mahoning County Auditor’s office.
Last December Thermal Ventures II put the building up for auction. It has since been taken off the market.
Copyright 2024 The Business Journal, Youngstown, Ohio.