Engie and Meridiam Strike $1.2B Deal to Operate College Utilities, including Possible Microgrid

Dec. 13, 2019
The University of Iowa this week approved a $1.2 billion deal that allows Engie North America and Meridiam to manage its utilities under a plan that includes a possible microgrid.

The Board of Regents of the University of Iowa this week approved a $1.2 billion deal that allows Engie North America and Meridiam to manage its utilities under a plan that includes a possible microgrid.

The contract calls for Engie, which provides energy services to more than 150 colleges and hospitals in the US, to operate the university’s utility system, reduce operating costs, improve efficiency and performance and reduce emissions.

Under the deal, Engie and investment firm Meridiam agreed to pay the university $1.165 billion for the 50-year concession. The University of Iowa said it plans to put the payment into an endowment in order to acquire additional funding for “institutional priorities.” After paying off $153 million in existing utility system bonds and $13 million in consulting fees, the endowment will have about $999 million.

The university estimates it will reap yearly allocations from the endowment that will allow it to invest $15 million per fiscal year via grants dedicated to supporting its strategic objectives of teaching, research, and scholarship. The university also agreed to pay an annual fee for Engie to operate the utility system. The fee will start at $35 million and increase by 1.5% annually in five years.

For the Iowa City university, the public-private partnership represents a new source of revenue to fill its annual funding shortfall. In addition to the fees, the partnership will provide Engie-Meridiam with tax benefits from capital investments that the university, as a public institution, cannot use.

Goal to be coal free

Under the agreement, the University of Iowa will retain ownership of its utility system and Engie will perform all operations with respect to steam, cooling, water, and electricity.

Engie-Meridiam also agreed to help the university meet its goal of being coal free by Jan. 1, 2025, and to explore the use of renewable, sustainable and low cost fuels. The partners also agreed to welcome all of the university’s current utility system employees and, finally, to provide opportunities for students, faculty and staff to benefit from internships, projects and research in energy and other areas.

In the bid they submitted to win the contract, the partners said they would develop and build capital projects in close collaboration with the University. They also said they would be able to achieve the university’s coal free goal by 2023, two years ahead of target. Engie said one of its first priorities would be to convert a boiler at the university to operate on local biomass fuel.

Engie also said it would collaborate with the university to develop a long-term decarbonization strategy that could include combined heat and power and renewables projects to replace “vintage boilers on campus.”

Together, Engie and the university will create a comprehensive plan to meet the university’s needs. The plan may include a customized strategy for 5- to 10-year green power purchases supplemented by the purchase of renewable energy credits. The approach could mitigate power and gas exposure and budget volatility via customized hedging solutions.

AI and microgrid

Engie is also looking to deploy its energy-as-a-service, artificial intelligence aided energy management platform to reduce costs and improve system performance. In the future, Engie said it plans to use that platform “to innovate towards a fully optimized microgrid that positions the University as a leader in energy innovation, and sustainability.”

Engie and Meridiam are 50-50 partners in the venture. Engie North America is a unit of French energy and infrastructure firm Engie, which was formed in 2008 by the merger of Gas de France and Suez. Meridiam, also based in France, is an investor and asset manager specializing in greenfield infrastructure development with an emphasis on sustainability.

In July 2017, Engie won a similar contract to manage the utility system for Ohio State University in a deal that called for a $1.015 billion upfront payment to the university and a $150 million commitment to support academic priorities.

Interested in university microgrid projects?  Read about more in the Microgrid Knowledge special report: The Rise of Clean Energy Microgrids.

About the Author

Peter Maloney

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