UAF Vice Chancellor Queen is working with UA Chief Finance Officer Dosch and started an RFP in early 2020 to engage a financial institution that has experience with these types of complicated utility structures. After a delay due to the pandemic, the university selected the Royal Bank of Canada to assist in developing options that best suit the needs of the institution.

After an initial evaluation and analysis of the financial elements of this privatization transaction, the administration believes there is merit in examining the utility assets UAF owns and operates to understand if an economically viable option exists. A P3 would allow UAF to shift operating responsibility to a concessionaire, refresh capital/infrastructure assets moving forward on a regular schedule, allow opportunities to retire debt, and provide access to an upfront payment that would be structured to ensure affordable and known utility rates.

These proceedings do not preclude UAF from maintaining or extending the existing short-term power purchase agreement(s).

An outreach process consisting of requests for qualification and information is needed to understand the utility market and potential concessionaire options. The process is estimated to take between 10-12 months. If the results of the process warrant further pursuit of a request for proposal process leading to transaction close, the administration would bring it to the UA Board of Regents for approval at that time.

Summary of Actions Meeting of the Full Board
November 11-12, 2021

12. University of Alaska Fairbanks Utility Systems Privatization Project PASSED
    “The Board of Regents supports the president, or designee, in a request for qualifications and information from interested parties in connection with the University of Alaska Fairbanks Utility Systems Privatization Project, and to commit the requisite resources for such effort, as presented. This motion is effective November 12, 2021.”

Estimated timeline

The public-private partnership (P3) is structured so the university’s utility system — including steam and condensate, electrical distribution, chilled water, domestic water, compressed air, and sanitary sewer — is leased to a third party (the concessionaire) for a term of up to 50 years. The concessionaire is obligated to operate the utility system for the term of the agreement and is the exclusive provider of utilities to UAF, and is responsible for funding capital improvements to the infrastructure. 

A 50-year term is standard for P3 leases at universities across the country. The long-term investment provides stability and consistency for the university, investors and the operators, which maximizes the value of a partnership for UAF. 

We recognize that 50 years is a long time, which is why we are building the appropriate controls and flexibility to allow for adjustments over time. UAF would control our sustainability goals and policy decisions, and the partner would propose how to best meet those.

Outsourcing agreements are designed to save universities money over time through efficiency initiatives alone. A P3 is more complex and functions as a mutually beneficial partnership agreement, more than just outsourcing. The university brings on a world-class utility operator as a partner that can employ best practices. The partnership provides a career path for our utilities employees. It also provides an up-front concession payment to the university to fund the 50-year capital plan and strategic initiatives. It creates a known and stable capital improvement plan and operational schedule well into the future. Outsourcing agreements do not traditionally provide these additional benefits.

The University of Iowa, the University of Idaho and The Ohio State University have entered into these same kinds of agreements for their utility systems, and other universities, including the California State University system, have used P3 for the construction of new utility infrastructure. The Ohio State University and Eastern Michigan University have similar agreements for their parking assets, and the University of Georgia system and Purdue University have monetized their student housing assets. According to a survey last year from The Chronicle of Higher Education and George Mason University, 83% of college leaders said P3 use is increasing on their campuses.