Education

Top stories of the 2010s: University of Iowa utilities deal will bring in millions

It's one of largest such public-private partnerships in nation

Steam rises from the University of Iowa power plant in Iowa City. The UI in December signed a 50-year, $1.165 billion de
Steam rises from the University of Iowa power plant in Iowa City. The UI in December signed a 50-year, $1.165 billion deal that turns over management of campus utilities to Engie, a global French energy company. (Liz Martin/The Gazette)
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The eve of a new decade presents a perfect time to reflect on the past 10 years, to look at the changes in our lives and in our state and nation. For Iowa, The Gazette chose 10 storylines of the decade that have changed or will change the state’s trajectory. This is one of those stories. See the full list and read them here.

The University of Iowa inked a $1.165 billion deal in December for private management of its utility system for the next 50 years — a deal that will bring millions to the campus it almost certainly would not otherwise see.

The private-public partnership is modeled on a deal signed three years ago by Ohio State University, also worth $1.165 billion. The UI contract is the second largest of this scale and the first of its kind in Iowa.

The upfront money — from Engie, a global French energy company, and infrastructure investment firm Meridiam — will be used to pay off the UI’s $153 million in utility bond debt and $13 million to the consultants who put together the complex deal.

The remainder will be invested in an endowment. The return on that investment will pay Engie a fixed fee of $35 million a year to manage campus utilities; the fee increases 1.5 percent a year after the first five.

The UI also must pay for the fuel, employees, facilities and other expenses required by utility operations.

Bottom line: After expenses, the UI expects to have about $15 million this coming year — and $735 million over the next 50 years — to fund campus initiatives.

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By comparison, UI students are paying about $475 million in tuition this fiscal year. Iowa taxpayers are providing $219 million to UI general education operations.

The UI’s utility partnership — and its new dollars — won praise from Gov. Kim Reynolds, who has encouraged the state’s public universities to find revenue streams outside of state support.

Some people criticized the private discussions and lack of public comment leading up to the utilities deal. But it can be seen as a win for UI President Bruce Harreld, whose hiring in 2015 was criticized because he had a business, rather than academic, background.

Two other benefits:

• The University of Iowa Energy Collaborative, as the new public-private organization will be called, will pay $256 million in Iowa taxes over the length of the contract, according to Harreld. Right now, the UI, as a public entity, does not pay those taxes.

• Engie has pledged to work to make the UI coal-free by 2023, two years earlier than its previously stated goal.

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We value your trust and work hard to provide fair, accurate coverage. If you have found an error or omission in our reporting, tell us here.

Or if you have a story idea we should look into? Tell us here.