Get the Facts
Pine Tree Power’s $13.5 Billion Debt
Eminent Domain and Fair Market Value
The Pine Tree Power referendum requires the new “quasi-governmental power company” to seize the assets of Central Maine Power and Versant Power through eminent domain. The U.S. Constitution requires just compensation for assets seized by eminent domain.
Pine Tree Power will start out in massive debt for the total acquisition cost of CMP and Versant – a cost energy experts estimate to be $13.5 billion. This would be over two times Maine’s entire state budget.
Who Determines Fair Market Value?
The short answer is that the court will ultimately set the final acquisition price if Pine Tree Power were to pass.
The calculation starts with the Net Book Value (NBV) of the hard assets. Think Blue Book Value on a used car. But unlike purchasing a used car, these poles and wires come with a fully operational business along with it, including hundreds of skilled employees. So to account for the additional value of the business operation, the court sets a multiplier, which gets multiplied by the Net Book Value to determine the final acquisition price.
Although nothing of Pine Tree Power’s magnitude has happened before anywhere in the U.S., some recent examples of smaller takeovers can give us an idea of these court-determined acquisition multipliers:
| Municipality | Acquisition Price [$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 very 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, at the earliest. Then would begin the refereed legal proceeding to determine the fair market value. By 2030, NBV is estimated at $6.75 billion. Again assuming an acquisition multiple of 2.0, the total cost is $13.5 billion.
The “biggest problem” with this proposal:
"It 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 [we] know the final cost."— 2020 Report by London Economics International, Evaluation of the Ownership of Maine’s Power Delivery System, commissioned by the Maine Public Utilities Commission