NextGEN Utility Systems, a company created and owned by Baton Rouge-based private equity firm Bernhard Capital Partners, withdrew its controversial proposal Monday to manage Lafayette Utility Systems just hours before the Lafayette City-Parish Council passed a resolution effectively killing any efforts by anyone to privatize or privately manage the parish-owned utility.
In a letter to parish officials, NextGEN Managing Partner Jeff Baudier essentially conceded that the company was withdrawing its proposal because it faced a sure defeat.
“In response to the many discussions that have been held since submitting our proposal, as well as the importance of this decision, we are respectfully withdrawing our proposal,” he wrote.
BCP officials, including the firm’s founder, Jim Bernhard, did not respond to requests seeking comment.
The defeat of the NextGEN proposal is significant for BCP’s months-long effort to move into the utilities business, though how much of a setback it represents is hard to say. In August, Bernhard told Daily Report BCP plans to invest $15 billion over the next several years acquiring and managing as many as 40 utility companies in small- and mid-sized markets. LUS would have been its first.
If the deal had worked, Bernhard planned to make Lafayette the corporate headquarters for the new company, which he hoped to grow to Fortune 500 status.
LSU Center for Energy Studies Executive Director David Dismukes says BCP will likely continue to explore opportunities in the utilities market. Without LUS, however, it will be more difficult to get a foothold in the industry.
“It made sense to do Lafayette and they were trying to knock that one out to have a first win,” Dismukes says. “They can do this anywhere but they need to have a couple of early successes so they can prove they can do it.”
The problems NextGEN encountered in Lafayette as details of its proposal spread publicly are not surprising or unusual. Efforts to privatize utilities and government services is typically controversial and unpopular, which is one reason such deals are so difficult to pull off, Dismukes says.
“This is always the kind of problem you will run up against in privatization,” he says. “No one wants to change the status quo and it is very political.”