Baton Rouge-based private equity firm Bernhard Capital Partners announced today it is making a major investment in Ascension Wastewater Treatment, the largest private provider of sewer services in that parish, with more than 16,000 households.
The firm declines to say how much it is investing in the company, but BCP principal Jeff Jenkins describes the deal as a “significant investment … a partnership.”
The announcement comes as BCP’s plans to partner with Ascension Parish on the development of a new parishwide sewer system are up in the air.
On Dec. 20, the Ascension Parish Council voted to defer until at least late January a vote on a 30-year contract with a BCP-created company, Ascension Sewer, that planned to invest some $225 million developing a new parishwide system. The deal—which would be done in partnership with Ascension Wastewater Treatment—would effectively consolidate the splintered wastewater treatment delivery systems that have proved problematic for the rapidly growing Ascension.
BCP worked with the outgoing parish administration on the deal for a year and pushed it as a way to not only upgrade the aging system but address looming environmental issues that could ultimately force the U.S. Environmental Protection Agency to get involved.
But members of the incoming parish administration and council began questioning the terms of the deal, which they say lacked key specifics and stood to benefit Ascension Sewer at the expense of parish ratepayers. If approved, residential ratepayers would see their monthly sewer bill increase nearly $60, while commercial customers would see an even bigger rate increase.
Jenkins says the deal with the parish is not dead and BCP is optimistic it will ultimately go forward. But he acknowledges that if the new administration chooses to renegotiate the terms of the deal, it may no longer make sense for the BCP investors who are behind Ascension Sewer.
In the meantime, the firm’s investment in Ascension Wastewater Treatment, which Jenkins says would have happened under the deal with the parish anyway, makes sense for BCP.
“We are focused on building more investments in municipal-type regulated utilities,” he says. “We like the regulated utility business.”
While that may be, BCP has had trouble getting established in the utilities sector. In late 2018, Lafayette rejected a deal that would have given a BCP-owned company management of the Lafayette Utility System.
Though the Ascension and Lafayette deals hit snags for very different reasons, both underscore the challenges the private equity firm continues to face as it attempts to move into the space.
Jenkins acknowledges the deals are complex and “take a lot of work and effort to put together.” But he believes the country is at a tipping point, where more private-sector partners will be needed to invest in aging utility infrastructure.
“Communities need capital but people don’t want to raise taxes and the feds are not going to have an infrastructure bill,” he says. “So we think there is going to be a lot of opportunity to do these types of projects.”