OSU Trustees to Vote This Week on $1B Energy Outsourcing Deal

Ohio State University officials want to clinch a deal to lease the university’s energy facilities to a contractor that will make a $1 billion, up-front payment to the OSU endowment fund, The Columbus Dispatch reported on March 30.

In turn, the university would pay Ohio State Energy Partners about $55 million annually to operate the university’s energy-distribution asset – about what OSU spends now. The yearly fee would fluctuate, if operating costs change.

Under the terms of the pact, which will go before the university’s Board of Trustees for a vote on April 7, Ohio State would sign a 50-year agreement with Ohio State Energy Partners – a new entity that combines the interests and expertise of French multinational energy player ENGIE and the global investment management firm Axiom Infrastructure.

The partnership was chosen from among three bidding teams that emerged after a two-year process involving multiple rounds of proposals, according to the local news outlet.

OSU officials say that the privatization deal would enable the school to become more energy-efficient, and to boost research and development in energy technology.

In addition to the $1 billion up-front payment, Ohio State Energy Partners would pay Ohio State $150 million to support academics, including money for scholarships and faculty research. That payment would come in three phases over the life of the deal.

Moreover, the deal calls for the partnership to invest $250 million over the years in energy-conservation measures and other capital projects to further reduce the university’s energy use. It aims to improve energy efficiency by 25 percent over ten years, the newspaper reported.

For the capital projects, Ohio State will pay an agreed-upon amount of interest on the money that Ohio State Energy Partners spends or borrows for the projects. The arrangement allows the university to preserve its own borrowing capacity for other projects, officials told the news outlet.

The deal has been controversial, The Columbus Dispatch said, noting that union employees now paid by OSU to operate the energy platform – representing about half of the 52 affected jobs – would lose their positions to outsourcing. Opponents also say the deal will dilute public control of what energy sources the university uses.

In response, OSU officials told the newspaper that Ohio State Energy Partners is willing to hire all 52 university employees affected by the energy deal. Ohio State also has offered to transfer any affected employee who does not want to work for the new company to a different university job at similar pay.

Under the terms of the agreement, the university would continue to buy its electricity, gas, and other power sources directly from suppliers, but officials believe that their new partners can help them to get a better price, the local news outlet said.

Finally, the proposed deal calls for OSU and ENGIE-Axiom to join in building a $50 million Energy Advancement and Innovation Center on campus, where faculty, industry experts, and students can investigate new energy technologies.

“This partnership would position us as an international leader in energy and sustainability and further strengthen Ohio State as a national flagship public research university,” President Michael V. Drake said in a written statement.

Jen King, senior research analyst for the American Council for an Energy-Efficient Economy, told the news organization that the proposed OSU deal is “definitely more comprehensive and extensive” than typical energy-management deals because of its long time span and the fact that it incorporates funding for academic and research purposes.

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