University of Iowa settles with P3 utilities partner following contract breach accusations

IOWA CITY — Just weeks before the University of Iowa was set for trial over a dispute with its private utilities operator — who sued the campus in 2023, just three years into a $1.165 billion 50-year contract — the two sides have reached a settlement.

“The University of Iowa and the UI Energy Collaborative, with partners ENGIE North America, Meridiam, and HA Sustainable Infrastructure Capital, have reached a settlement in a lawsuit to resolve differences of opinion related to certain contractual terms and conditions that govern the 50-year public-private partnership (P3) to operate the university’s utility system,” UI officials announced in a statement Tuesday.

Although details weren’t immediately made public, UI officials said, “This binding agreement reflects the university’s and UIEC’s strong partnership and ongoing commitment to the success and stability of the P3 agreement, as well as continued investment in strategic initiatives for campus.

“It will have no impact on utility costs.”

‘Breaching its obligations’

The P3 agreement dates back to 2019, when then-UI President Bruce Harreld announced plans to pursue a public-private partnership to operate the 2,000-plus acre campus’ sprawling utilities system, generating enough energy to power a 30,000-home community.

Following an international search, the university signed on with the group of operators and investors that formed a new “Hawkeye Energy Collaborative,” later called the UI Energy Collaborative.

“After the deal closed, UIEC, as promised, made the $1.165 billion up-front payment to the university and assumed its role as the concessionaire responsible for operating, maintaining, and upgrading the university’s utility system and infrastructure,” according to a federal lawsuit the collaborative filed against the university in January 2023.

“Now, however, while UIEC continues to discharge all its obligations under the concession agreement, the university is breaching its obligations.”

Specifically, the collaborative accused the university of:

“On top of this, the university has claimed an entitlement to payment for alleged ‘unplanned’ utility outages, even though the university’s representatives participated in the very meetings and discussions planning for those events.”

The university responded by filing its own lawsuit against the collaborative in district court, accusing it of refusing to provide critical financial information, trying to expand the scope of reimbursable expenses “that would result in duplicative payments to UIEC,” and failing to meet “key performance indicators.”

The collaborative dropped its federal lawsuit and responded with counterclaims to the university’s district court lawsuit, which sought $10 million in financial relief.

“The concession agreement is the result of extensive negotiations between the parties, who were represented by outside counsel and financial advisers with substantial experience in P3 deals throughout those negotiations,” according to the collaborative’s counterclaim. “The contractual provisions were so carefully negotiated and drafted that the university’s president likened the process to ‘writing the U.S. Constitution’.”

‘Duplicative charges’

The deal was inked in March 2020 — with the collaborative paying $1.165 billion in exchange for the right to operate the campus’ utilities for the subsequent 50 years. The university peeled off $153 million to pay its debt and $13 million to cover consultant fees, investing the remaining $999 million in an endowment.

In promoting the plan publicly, UI officials projected its endowment over the deal’s life to allow for $3 billion in disbursements.

But issues began to emerge almost immediately when the two sides began to negotiate the utility fee for the 2021 budget year.

“The university — with its billion dollars now in hand — began searching for ways to reduce its payment obligations to UIEC and chip away at UIEC’s contractual rights,” according to the counterclaims.

In denying those allegations — among many others — the university agreed that it “first became aware of UIEC’s attempt to invoice for duplicative charges during its review of the forecast utility fee for fiscal year 2021.”

In the years that followed, the two sides continued sparring and preparing for a July 28 trial — until agreeing on June 27 to dismiss all claims and counterclaims “with prejudice,” which means they can’t file them again.

Although financial details of the settlement haven’t been made public, court records show each side will pay their own attorney fees.

Vanessa Miller covers higher education for The Gazette.

Comments: (319) 339-3158; vanessa.miller@thegazette.com