Pine Tree Power will put us $13.5 billion in debt

Energy experts estimate that the cost to acquire CMP and Versant would be $13.5 billion – more than 2x Maine’s annual state budget. That’s because the Fifth Amendment to the U.S. Constitution requires just compensation for private assets seized for public use by eminent domain.

If Question 3 passes, eminent domain will be used to force CMP and Versant to sell their assets at fair market value to the newly formed quasi-governmental power authority, Pine Tree Power (Sec. 7. 35-A MRSA §3501, sub-§1, ¶D). Right from the start, Pine Tree Power will be in massive debt for the total acquisition cost of CMP and Versant. 


Who Determines Fair Market Value?

The short answer is that the court will ultimately set the final acquisition price if Question 3 were to pass.

The calculation starts with the Net Book Value (NBV) of the hard assets. Think Blue Book Value on a used car. But unlike purchasing a used car, these poles and wires come with a fully operational business along with it, including hundreds of skilled employees. So to account for the additional value of the business operation, the court sets a multiplier, which gets multiplied by the Net Book Value to determine the final acquisition price.

Although nothing of Pine Tree Power’s magnitude has happened before anywhere in the U.S., some recent examples of smaller takeovers can give us an idea of these court-determined acquisition multipliers:

Municipality Acquisition Price [$M] Net Book Value [$M] Acquisition Multiplier
Hermiston, OR $8.0 $3.8 2.1x
Winter Park, FL $43.1 $7.8 5.5x
Jefferson County, WA $109.3 $46.7 2.3x

Concentric Energy Advisors estimates that the combined Net Book Value of CMP and Versant in 2024 will be approximately $5.5 billion. Assuming a conservative acquisition multiple of 2.0, the total cost to Mainers would be $11 billion.

But the board of Pine Tree Power would not even be elected until November 2024. Then would begin the refereed legal proceeding to determine the fair market value. The Office of the Public Advocate states that process “could take approximately 5- 10 years.” By 2030, NBV is estimated at $6.75 billion. Again assuming an acquisition multiple of 2.0, the total cost is $13.5 billion.


Where Will All The Money Come From? 

The total cost to forcibly acquire the two utilities would be financed by debt. According to the precedent established in Section 141(d) of the Internal Revenue Code, also known the Rostenkowski Rule, tax free bonds cannot be used to buy a utility. That means the money can only come from big banks in the form of loans with interest.


Even More Costs…

Added to the $13.5 billion will be legal fees for the inevitable years-long legal battle; start-up costs for integrating the two companies; maintenance costs for tens of thousands of miles of wires; and a steady stream of investment capital necessary for infrastructure upgrades. 

On top of all that, management fees – estimated at $82 million every year – will be paid to a private contractor that will still make a profit to operate the grid. 

Question 3 requires us ratepayers to assume responsibility for all of Pine Tree Power’s costs. Every dollar Pine Tree Power spends will be rolled into our electric bills. A Maine Public Utilities Commission report indicated we should expect our electric rates to increase over the first ten years.

One thing to remember – the more time that passes, the more the costs associated with the takeover will escalate.


The “Biggest Problem”

"The biggest problem with the process... may be trying to take possession of property for which it does not yet know the final price. It could be years after the fact before the MPDA knows the final cost to acquire the IOU assets."