LSP Settlement 9-25-12

Published 12:00 am Friday, September 28, 2012

Funds will flow from settlement

By Rupert Howell

A potential settlement with U.S. Bankruptcy Court in Delaware over LSP Energy assets will have purchaser South Mississippi Electric Power Association paying local governmental entities $9,321,089 in ad valorem taxes plus interest and Panola Partnership a lump sum payment of $3,717,075.

Local government entities are expected to receive tax payments in arrears when the sale is finalized and current taxes due at first of the year according to court documents.

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The local energy producer filed bankruptcy in February this year with ad valorem taxes of approximately $4.5 million in arrears. The power producing facility at the Harmon Industrial complex uses natural gas to heat water piped from Enid Lake to make steam that drives the electricity producing turbines.

That water is transported from Enid through a water line that was built with state funds. Through a unique arrangement, LSP Energy paid the local economic development agency, Panola Partnership, a fee with those funds to be used for future infrastructure in the area of economic development amounting to over $30,000 a month.

Panola Partnership Executive Director Sonny Simmons said Panola Partnership’s settlement represented 87.5 percent of what was left of the original agreement less an approximate 8 percent discount rate for taking the money all at once while explaining there were 18 years of the 30-year original agreement left.

Simmons explained that taking a lump sum with the discounted rate was less risky and said, “This way we’re assured the same thing won’t happen again.”

Panola Partnership has continued to receive timely payments throughout bankruptcy proceedings.

South Mississippi Electric Power Association is a non-profit group of 11 distribution cooperatives who supply power to 410,000 customers in 56 of 82 counties in the state. Total purchase price was originally stated as $286 million.

The pending purchase of the facility by a non-profit rural power distributor was not something Panola County government was especially eager to hear, as those types of distributors are exempt from county ad valorem taxes which also make them exempt from school taxes. Municipal or city ad valorem taxes are not exempt. The City of Batesville has assessed approximately $800,000 for the past two years.

The facility is on the county books for a worth of $200 million according to the county’s tax assessor’s office. Commercial and industrial property is assessed at 15% of value, which equals a loss of a $20 million asset to the county for taxing purposes.

Both South Panola School District and Panola County estimated $1.8 million in their previous year’s budget from income from the facility the first year it was put on tax rolls.

The power producer had for 10 years paid local entities in lieu of taxes an amount that equaled approximately one-third of the assessed value amount.

The order approving the sale was issued last Thursday by Federal Judge Mary F. Walrath and is expected to be finalized by the end of the month.