Trends and Tremors in the Sustainable Investing Landscape
Goodbadugly
1. The Good, The Bad & The Ugly ALEC 2010 Annual Meeting Bob Patton, Sr. Principal for Education robert.patton@nreca.coop July 26, 2010
2. Overview Good News* Touchstone Energy Co-ops providing superior service. Building the value of membership yields dividends. Co-ops get strong marks for reliability. Co-ops are a name you can trust. *Touchstone Energy 2008 National Survey on “The Cooperative Difference”
3. Top Ratings Easy to understand bills 9.2 Provides reliable service* 9.0 Treats members fairly 8.9 A name that can be trusted* 8.8 Outage restoration 8.7 Delivers on promises* 8.7 Handles problems promptly 8.6 Provides information on safety 8.5 * Key attributes for member loyalty
4. Good Ratings Good Value for the money* 8.4 Looks out for you 8.3 Communicates about costs 8.2 Gives money back* 8.2 Helps manage energy 8.0 * Key attributes for member loyalty
6. Members Respond to Values of Co-op Model Locally-owned and operated Because consumers own, co-ops are more responsive Co-ops are working to manage costs Provide reliable service
7. The Membership Advantage Those with some member identity are more satisfied AND Loyalthan those who self-identify as “customers only”. “Those who limit their relationship to “customer” rate their satisfaction with the cooperative 6% lower than members who acknowledge some level of member or owner identity.” Touchstone Energy 2008 National Survey
8. Keeping Co-ops as Co-ops Since inception 93 co-ops presented formal offers to “sell out”. Seventy-two (73) offers have been rejected by the membership
9. Overview Bad News 20 co-ops have voted to be purchased Few know much about electric co-ops View non-profit status as “inefficient” Don’t want to “own” the thing Little loyalty to co-op model
10. The BAD News Co-ops Jordan ID 1945 Donnelly ID 1946 Phelan CA 1947 Bossier LA 1947 Vale OR 1949 Beaver OR 1952 Sandy OR 1956 Freehold NJ 1958 Cotton AZ 1959 Palms CA 1965 Camp CA 1970 Clinton MS 1973 Cody WY 1986 Auke AK 1988 Fairfield ID 1992 Bossier C LA 1993 Jeanerette LA1995 Aurora ME 1995 Cap Rock TX 1998* Valley , LA 2010*
11. The Equity Issue “Sells” 1998—Cap Rock, TX (Member Equity Conversion to stock)* Member Options: “Earn more with your money” or credit on your bill. Director Options: Incentive Plan provides for granting options to purchase common stock & certain related rights to eligible officers and directors. Employee Options: Employee stock purchase plan to purchase common stock through payroll deductions.
12. Dissolve Rather Than “Sell” 2010—Valley EC, LA (7,351 members out of 33,000 vote to “dissolve” the co-op and allow Board to accept sale offer-avoiding majority of all members voting required by law)* Members Offered: More than 20 percent lower rates & their equity interests Board Offered: Advisory role Employees Offered: Employees keep jobs
13. The Equity “Sells” Difference 1995—Teche EC, LA Takes CLECO’s Second-time Offer Members get $1,000 checks 20% lower rates Hire board as consultants Million dollar scholarship fund Keep and promote employees
14. Overview Ugly News Current litigation against some co-op’s cause. members to question trust in co-op model. Some co-ops are being targeted for “takeover” and purchase inquiries offered. Buyers will make lots of promises. In “takeovers” Boards come under attack. Buyouts occur where members are “in the dark” about the business they are selling.
15. The UGLY News! The Buyers Test & Attack Poll co-op members Talk to community & political leaders Recruit “concerned” members Open fire in the media Demand a meeting with Board Send in the poor
16. More UGLY News The Buyer Promises Checks to members Lower rates “Because equity is high, you’re paying too much” Employees will get jobs “We’ll share equity in form of employee raises” Service from “the pros” “Because we’re bigger our service is better. Co-op employees have more opportunities to advance” Keep “advisory board”
17. New Players Making Inquires Third party entities soliciting some co-ops’ interest in selling to “interested buyers.” Quentin Capital ABP International, Inc.
18. Handwriting on the Wall? AEP’s stated vision: “To maintain our leadership as the largest generation and transmission company in the United States. “To maintain our leadership as the largest electric distribution business throughout the regions we serve.” 2008 AEP Annual Report
19. Even UGLIER News Buyers Attack Boards That Refuse Offers Accuse Board of blocking rate cuts Protecting their “free vacations” Private investigator reports on Board members Top IOU execs join the co-op Spend over $1-million to elect sympathizers to board of directors Promote amending laws and force sale vote
20. Common Traits in Successful ‘Takeovers’/Sellouts Bad perception of co-op (poor/unresponsive service) Little value for what they pay (rates too high compared to others) Capital Credits issues (members get all their money back) Little trust in co-op model (board not fulfilling fiduciary duty)
