LPEA seeks other buyers for REANET

LPEA seeks other buyers for REANET

Empire Electric hangs back, hopes original offer holds

Feb. 24, 2001

By Janelle Holden
Journal Staff Writer

La Plata Electric Association announced on Friday that the co-op would consider additional offers to buy the controlling interest in REANET, other than the $200 million offer made by Kelly Bloomer, the former CEO of REANET, earlier this month.

"The money is not there. Bottom line is he promised $200 million and we haven’t seen it," explained David Waller, a spokesman for LPEA, who said the money was promised last week.

Bloomer resigned from his position at REANET to chair REANET Telecom, a company founded by a group of investors interested in buying REANET, a Durango-based telecommunications company owned by LPEA and Empire Electric Association. Bloomer refused to comment on the announcement, citing "on-going contract negotiations."

"We’re not counting on him to have the money, so we’re looking elsewhere," explained Waller. "If he comes up with the money, that’d be great. He knows the business, he’d be a natural to take it over, but we haven’t seen it."

Empire did not join LPEA in announcing plans to consider other offers on Friday. Neal Stephens, the general manager of Empire and interim CEO of REANET, said that Empire is "hoping that Kelly Bloomer and RNT will find the funding to purchase REANET."

Waller said that another potential suitor is interested in buying 84 percent of the shares LPEA and Empire currently own. Waller refused to release the name of the interested party, but said it is another telecommunications company. "They are not a huge player, but they are established — they have a track record. They have proven results."

Empire and LPEA plan to retain a small minority interest in REANET, no matter who purchases the company. In addition Waller said the co-ops would require any interested party to guarantee it would finish building its planned fiber optic loop and provide high speed communications to the Four Corners region.

"Whoever buys out our portion of it needs to guarantee that they will finish out the project," said Waller.

"It’s a real tight market right now for technology investment capital; you know with all the dot-coms going down and the tech markets taking a dive, the NASDAQ at a 25-month low it’s difficult finding technology investment capital right now. So we’re having to look hard and shake a lot of bushes."

Both LPEA and Empire recently approved a 90-day extension for REANET’s $15 million line of credit. The credit is funded by the National Cooperative Services Corporation, a national financier for rural electric systems.

REANET has until Aug. 28 to repay the loan, unless a prospective purchaser agrees to pay off the debt before then. "From the way I understand it, that Aug. 28 deadline will not be extended any further," said Waller. "If we don’t have something in place by then, the loan is called."

Originally due on Nov. 30, the line of credit was extended on Nov. 15, 2000.

Critics of LPEA and Empire have charged that electric cooperatives take an unwarranted risk by investing in for-profit ventures that directly compete against members’ businesses. A pending lawsuit filed by a member of LPEA asks the court to force the co-ops to divest themselves of these ventures.

Stephens said REANET would be laying off three to four employees whose positions were "doubling efforts." Stephens explained that the reductions in the work force are simply a normal

LPEA officials admit that REANET has grown past their expectations. "REANET took the project to a much larger scope than we had ever imagined," said Waller.

Empire and LPEA started REANET, formerly Tri-Corners Telecommunications, Inc., in 1997 as a joint telecommunications venture — each guaranteeing a $7.5 million loan to build REANET’s Durango facilities.