** CORRECTION – City Council to review the deal Tuesday, Nov. 18th. Details now online from AP&T here.
Alameda Power & Telecom has struck a deal to sell their struggling Cable TV and Internet division to Comcast. Here are some of the details, including a video statement by AP&T General Manager Girish Balachandran.
The offer from Comcast is for $17 million, but after adjustments, the net payment from Comcast will be $15 million. AP&T has pledged the full $15 million to the holders of bonds which come due in June of 2009, and which AP&T can’t re-finance nor pay back in full. 95% of the bond holders have agreed to the sale of the telecom division and agreed to accept their pro-rated portion of the $15 million as re-payment for the bonds. The other 5% have not agreed, and AP&T is in litigation with them.
The final net to AP&T, however, may be as low as $10 million, or roughly $1000 per subscriber. AP&T may incur as much as $3 million in additional costs associated with the sale, which must come out of revenue, not the proceeds from Comcast. Further, the terms of the deal require AP&T to reserve $2 million in escrow to cover potential claims from Comcast after they take over the system. This money would be used, for example, to pay for some defect in the system that AP&T did not identify or was not aware of when negotiating the sale, and which Comcast discovered only after operating the system for some time. This too must come out of AP&T revenue. Of the net $15 million from Comcast, as much as $5 million may be eaten up in these indemnification reserves and additional transactional costs, resulting in a potential “net net” sale proceed of $10 million.
Nonetheless, this is the right thing for Alameda Power & Telecom and the right thing for Alameda residents. Earlier this year, we looked at comparable system sales and thought that AP&T’s system might fetch $18 million or so, if a buyer could be found. We were pretty close. It’s time to stop the Telecom division from draining funds from the utility, which should be generating revenue for the City’s general fund from their successful electric division. Now AP&T might have more time to focus on insinuating their way into the Alameda Point development and talking some sense into SunCal about expanding their project’s planned solar/renewable power components to serve all Alameda residents with renewable energy, and not just SunCal’s homes.
AP&T Management will recommend to the Public Utilities Board to accept the offer from Comcast at their November 17th meeting, after which, it will go to Alameda City Council on November 21 for their approval.
Here is a statement on the Comcast deal from Alameda Power & Telecom General Manager Girish Balachandran.