Victorville continues mission to recoup $76M for VV2
December 16, 2012 7:42 AM
Brooke Edwards Staggs
VICTORVILLE • It’s back to the drawing board for the Victorville 2 Power Plant, as the city continues a nearly five-year search to find someone who’ll take over the stalled project and help Victorville recoup some of its $76 million investment.
Victorville was optimistic in August about a deal with Panda Fund Development Company, a private equity firm headquartered in Dallas. Under the proposed agreement, rather than sell the plant’s land and development rights — as Victorville has attempted to do for years — the city would contract with Panda to build VV2. Panda would sell the plant to the Los Angeles Department of Water and Power, which needs additional electricity to meet demand going forward. Then Victorville would receive $25.3 million, covering its investment minus $50 million lost when the city failed to make timely payments to General Electric for the plant’s turbines.
However, Panda recently withdrew from the Victorville project after its offer to LADWP expired without a deal being struck, according to company spokesman Bill Pentak.
“We are disappointed but not surprised,” City Manager Doug Robertson said in an email.
Robertson said LADWP’s request for proposals had called for repowering of an existing power plant, but that the city and Panda were confident they could build VV2 in time to meet the agency’s deadlines.
“We felt we could meet the deadlines for power requested but were not short-listed to continue in the process,” Robertson said. “Although our project wasn’t what they were looking for, it cost the city nothing in the attempt.”
Victorville has invested at least $76 million into land, plans and equipment for VV2. The hybrid natural gas- and solar-powered plant was supposed to be complete in 2010 near Southern California Logistics Airport. Instead, financing fell apart and the city failed to land an agreement to buy the power, and so construction never started.
In its highly critical June 29 report on the city, the San Bernardino County Grand Jury attributed the failure of VV2 largely to Victorville’s failure to perform due diligence before committing to spend tens of millions in taxpayer dollars. And the decision to take that risky venture was based largely on recommendations of contractors such as Inland Energy that had a vested interested in the project.
Inland Energy, which oversaw development plans for VV2, attended meetings on the city’s behalf to explore the option of selling to LADWP. Had that deal advanced, the Newport Beach-based company was supposed to release the city from a vague and generous 2005 contract that guaranteed Inland an estimated $5 million annually for the life of VV2 — estimated to be 30 years.
However, a source close to the deal said that Inland contract helped drive Panda away, just as it has with other potential buyers of the plant who were unwilling to give up such a significant chunk of the revenue stream.
The city recently found some resolution to its other flopped energy venture, after securing a $54 million settlement with the designer of the failed Foxborough Power Plant. Victorville launched that project at around the same time as VV2, but was forced to abandon it in 2007 after investing $120 million.
While residents, online commentors and some city leaders have suggested Victorville also consider suing Inland Energy for its role in VV2, there has been no public discussion about that possibility.
Still, city officials remain hopeful that there will be a happy ending for VV2.
“We will continue to look for opportunities to bid into requests for proposals for power purchases,” Robertson said, with confidence there will be additional calls for power within the next two to three years. “As the economy comes back we anticipate more opportunities and a need for more power, especially if San Onofre is ultimately shuttered for good.”
See Sunday’s Daily Press for a timeline of the power plant’s development.
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