The UI P3 State of Iowa Audit

Having written extensively in these virtual pages about the prior and illegitimate president of the University of Iowa, former businessman J. Bruce Harreld — who, shortly after signing a three-year contract extension, distinguished himself by quitting on the school and fleeing to his multi-million-dollar chalet near Vail, Colorado, hopefully never to be heard from again — I was surprised in writing this post that I had to look up how long it’s been since he left office. Whether because of the time-dilation effect of the COVID-19 pandemic, which has expanded the past three years into an epoch in my mind, or because my protective subconscious blanked out the convergence of those dark times, I did not remember that it has only been, and at the same time already been, a little less than two years since Harreld left office. Specifically, Harreld’s last day at what I now think of quite distantly as my collegiate alma mater was May 16th of 2021.

While there are plenty of lingering questions about Harreld’s shocking appointment and controversial tenure, short of guilt-ridden confessions or questioning under oath by the principals who conspired to impose him on the school — despite his jaw-dropping lack of qualifications or experience — I hold no illusion that any of those questions will ever be answered. (And even if they were, I would be hard-pressed to believe any statements made by the perpetrators.) Even with the disorienting passage of time, however, there was one issue I did expect to learn more about, and from a credible source. That issue was the billion-dollar, fifty-year, public-private energy partnership (P3) that the University of Iowa and Iowa Board of Regents entered into in December of 2019, toward the end of Harreld’s entrepreneurial reign.

As might be expected of a complex financial arrangement documented in an 1,800-page contract, let alone one that was hammered out behind closed doors by legions of shadowy bankers and attorneys, when that deal was finally disclosed there were multiple aspects of the UI P3 which required translation into plain English, including the basic premise of the deal. Although willfully misrepresented by the university and board as a massive up-front “payment” to the school from its private-sector energy partners, the UI P3 essentially amounted to the state borrowing roughly $1.2B in cash — through statutory powers granted to the board — on the pretext of leasing the university’s utility system for fifty years. After retiring $158M in outstanding debt, paying $12M in consulting fees, and absorbing another $8M in associated costs, the remaining $986M was deposited in a university endowment to then be gambled in the markets, to hopefully generate the $3B necessary to turn a profit for the school, pay the school’s annual utility costs, and service that massive loan over half a century.  

A Non-Disclosure Disclosure
On the day the UI P3 was formally agreed to during a live-streamed meeting of the Iowa Board of Regents, one detail stood out. Included in the winning French consortium was a previously unknown group of Iowa investors. From the 22:48 mark of the P3 approval meeting, here is illegitimate UI president J. Bruce Harreld commenting on the winning ENGIE-Meridiam proposal:

Harreld: “Second, is from roman page — page, uh, page number roman-numeral three…on the bottom-right, which illustrates that 21.5% of the private financing for this transaction is coming from Iowa-based investors. So while ENGIE and Meridiam are global companies, investors from our own state are part of this collaboration, and we couldn’t be prouder of this.”

The document Harreld referred to in the video can be found here on the Iowa Board of Regents website, among a group of background documents which were appended to the posted agenda during or shortly after that meeting. The specific document in question is titled Redacted RFP Submission, and comprises the ENGIE-Meridiam response to the university’s prior request for proposals.

Because Harreld was being Harreld, the disclosure of Iowa investors actually appears on Roman-numeral page iv, not iii, and here is how that local investment is described in that document:

21.5% of the Hawkeye Energy Collaborative’s committed private placement financing comes from Iowa-based investors

So who were the Iowa investors that made Harreld so proud? Well not only did Harreld provide no specifics in his presentation to the board, but the document he cited also provided no details. (Section 2 of the ENGIE-Meridiam proposal is titled Concessionaire/Team Overview, but the great majority of those pages are redacted and show only solid back. Section 6, titled Financing, is not simply blacked out, but entirely omitted, leaving only a single page with the word “REDACTED” in the center.)

Shortly after the ceremonial approval meeting concluded, AP reporter Ryan Foley published a short Twitter thread about the meeting, including the following tweets:

* This document says Iowa-based investors will put in 21.5 percent of the private financing for the new venture. https://iowaregents.edu/media/cms/NY36165469v1Redacted_submission_upd_E04250A03D45F.PDF Who are these investors? @uiowa says their identities are “trade secrets”

* A spokesperson for @uiowa new utilities operator, Paris-based ENGIE, says these investors put in 21.5 percent of the “total debt capital.” Both the size of the debt capital and the investors’ amounts/ identities are secret, she says

And from Foley’s subsequent reporting on the UI P3 that same day:

The secrecy continued even after the vote. The university said that it would not release the identities of Iowa-based investors who are expected to put in 21.5 percent of the private financing for the venture, saying the bidders considered those details confidential trade secrets.

That a public university and its governing board expected to be applauded for involving Iowa investors in the UI P3, while at the same time refusing to disclose the identities of those investors, was absurd on its face. Having spent much of the previous five years paying close attention to public higher education in Iowa, however, I was not surprised by that flagrant display of arrogance and contempt. I don’t know how the board and state universities functioned prior to 2010, but from that year forward they seemed primarily organized around political patronage, while only incidentally discharging statutory obligations to public higher education. In that crony business and political context the board leadership, and a majority of the board — including their sole direct employee at the University of Iowa, J. Bruce Harreld — acted as if it was their right to be lauded for any decision they made, no matter how opaque. Indeed, more often that not the public relations posture of the board and its university presidents reflected not an obligation to transparency, accountability, integrity or ethics, but a self-aggrandizing bureaucratic noblesse oblige — with Harreld’s crony appointment serving as the preeminent example.

Questions, Questions
Following the December 2019 UI P3 approval meeting the obvious mystery concerned the identities of the secret Iowa investors, and for obvious reasons. Not only had the then-president of the University of Iowa been corruptly appointed by, and for the benefit of, university and board cronies, but the former president of Iowa State University had resigned in disgrace because of his own crony abuses of power. In that larger context, there was every reason for the public to suspect that the secret investors in the UI P3 constituted another back-door payoff to business or political interests.

A related but less-obvious mystery was why the university and board disclosed the participation of the Iowa investors at all. It did make business sense for the ENGIE-Meridiam consortium to highlight inclusion of significant Iowa investors in their confidential proposal, because that money and its sourcing might help them land the contract. But that internal discussion did not seem to compel subsequent disclosure to the public.

Indeed, when the previously confidential ENGIE-Meridiam proposal was released at the UI P3 approval meeting the regents allowed some information in that document to be redacted, yet did not redact the existence of the Iowa investors — even as they insisted that the identities of those Iowa investors were protected trade secrets. Whether ENGIE and Meridiam were merely being opportunistic in their proposal, or were legally obligated to disclose the participation of Iowa investors to comply with the bid process, that information could have remained an internal matter. Likewise, while Harreld was a weasel he wasn’t a blithering weasel, and he had to know that refusing to identify the Iowa investors would generate responses ranging from idle curiosity to accusations of corruption, thus blunting any public-relations benefit from mentioning the Iowa investors at all.

In fact, not only did the public have no ability to derail the UI P3 approval process — meaning there was no imperative to sell the project to the citizens of the state — but the approval meeting precluded any opportunity for public comment, while still minimally complying with Iowa’s Open Meetings law. If neither the board, the university, nor its foreign private-sector partners wanted to publicly identify the Iowa investors — and clearly they did not — then why did Harreld, in his public remarks at the approval meeting, go out of his way to note that Iowa investors were included in the winning proposal? By the same token, if there was some advantage to disclosing the participation of Iowa investors, why didn’t the Iowa investors want their names disclosed, to take maximal advantage of that benefit themselves?

To truly grasp the sinister implications, try to imagine who — among the exceedingly small group of potential Iowa investors with hundreds of millions in cash on hand — would not want their names disclosed. Almost by definition every god-fearing, law-abiding Iowan with millions of dollars in cash kicking around would be happy to be recognized for their patriotic investment in the state. So if ENGIE and Meridiam were willing to use the participation of Iowa investors to advantage, and the board and Harreld were willing to use the participation of Iowa investors to advantage, in what way could it possibly injure the Iowa investors themselves to have their identities disclosed — particularly after the deal was already consummated?

The simplest answer I could come up with was that merely identifying the secret Iowa investors would convey an appearance of impropriety. In fact, precisely because of the number of corrupt acts that had been reported in the regent enterprise during the preceding decade, the idea that crony political or business interests had been given the opportunity to buy into a guaranteed fixed rate of return for fifty years — backed by the state’s taxpayers no less — seemed like nothing so much as business as usual. And yet, while the political corruption of the Iowa Board of Regents cannot be overstated, I also found myself thinking about dark parallels between the UI P3 development process and the fake 2015 presidential search that led to J. Bruce Harreld’s corrupt appointment.

And that in turn led to the most important question of all. Whatever else transpired behind closed doors, the very fact that the secret Iowa investors were part of the winning proposal raised the possibility that the bid process itself had been rigged to ensure that outcome. And from other information disclosed at the approval meeting, there was good reason to believe that may have been the case.

A Conspicuous Bid
While there was plenty of valid speculation and concern about who the secret Iowa investors might be, that wasn’t the only issue that stood out in the information released during the P3 approval meeting. In an apparent attempt to demonstrate transparency by showing that the ENGIE-Meridiam bid was quite literally the winning bid, the regents also released a terse document which included the names and final bids for the four competing teams. (Apparently oblivious to their own haughty hypocrisy, this also put the board in the novel position of arguing that the names and bids of the losing bidders were not trade secrets, while the identities of one or more in-state investors — who would now profit from doing business with the state for half a century — were protected from public disclosure.)

In looking at the final bids on the day of the approval meeting, what stood out to me was that one of those bids — and in fact the winning bid — was not like the others. Specifically, as disclosed in this document, here are the final bids, in descending order, from the four groups that completed the convoluted proposal process:

ENGIE-Meridiam – $1,165B

Axium, Veolia – $950M

Plenary, Sacyr, Kiewit – $882.8M

Harrison Street, Ever-Green Energy, City Water – $881.7M

My experience in the world of high finance is certainly limited, but when I saw those numbers my immediate response was that the bid from ENGIE-Meridiam was simply not possible on the merits of the deal. To understand why, first note that we’re not talking about bids for providing a service or product, no matter what the university and regents claimed. If the groups were bidding on the construction of a building, then yes — it’s possible that one or more of the bidders may have submitted a high bid in the hope of making a killing. But that’s not what the UI P3 bid process was about. The money in the P3 bids was the maximum amount that each consortium was willing to lend to the university in exchange for a projected annual rate of return over fifty years.

Put another way, in calculating their bids each consortium evaluated the deal to figure out how much money they could give to UI while still turning an acceptable profit. And when I say they evaluated the deal, I mean dozens and dozens of people on each team pored over reams and reams of data and simulations and scenarios until every possible permutation and risk was accounted for. Call it due diligence, call it whatever you want: companies who participate in deals at this scale either become very good at determining the financial viability of their own proposals or they don’t last very long.

Even if you know nothing about high finance or public-private energy partnerships, it should be glaringly obvious that one consortium reached a financial conclusion wildly at odds with the other three bid teams. Specifically, the three losing proposals ranged from roughly $880M to $950M, or a relatively narrow spread of about $70M — which might be expected given the complexity of the deal, differences in desired profit, variability in anticipated costs, etc. As for the winning bid, however, it exceeded the second-place bid by more than three times that spread, meaning ENGIE-Meridiam apparently found a way to give UI an extra $215M in cash under the same financial conditions that three other experienced consortia valued at substantially less money.

Analyzing the ENGIE-Meridiam Bid
If the bid totals were the only numbers the Board of Regents released during the approval meeting, we would not be able to advance our understanding of the ENGIE-Meridiam proposal. As previously noted, however, the board released one other number that does allow us to look inside their extravagant winning bid. Again, from page iv of the Redacted RFP Submission:

21.5% of the Hawkeye Energy Collaborative’s committed private placement financing comes from Iowa-based investors

I don’t know what “committed private placement financing” means in a technical sense, but if we simply multiply the $1.165B ENGIE-Meridiam bid by 0.215 (21.5%), we end up with a financial contribution from the secret Iowa investors of roughly $250M. If we then subtract that amount from the $1.165B total, the financial commitment from the non-Iowa ENGIE-Meridiam investors was roughly $915M.

Not only is this math bracingly simple, it confirms our prior conviction that the people at ENGIE-Meridiam are not idiots. Just like the other three bid teams, ENGIE and Meridiam seem to have valued the deal between $880M and $950M, because $915M is the amount of money they were willing to put into the deal. Why another $250M in Iowa cash was added to the ENGIE-Meridiam bid is not clear, but before we even begin to speculate we can take two possible explanations off the table.

First, as we will see shortly, the ENGIE-Meridiam partnership did not have to look elsewhere for additional funds, because despite cresting a billion dollars the UI P3 was a drop in the bucket relative to the scale of deals those firms engage in. Second, and by extension, if there was additional profit to be made from increasing the amount of the bid, ENGIE and Meridiam could have and would have done that on their own, instead of looking for home-grown Iowa investors with which to share the wealth. Coupled with the consensus agreement among the other bidders on the core valuation of the deal, and given that there was no business imperative for bringing other investors aboard, how can we explain the inclusion of another $250M in funds in the ENGIE-Meridiam bid from publicity-shy Iowa investors?

Here it is important to remember that there was a critical hurdle to the UI P3 as a business opportunity. It wasn’t enough just to figure out what the deal was worth. To earn the right to participate in that business opportunity the competitors had to win the bidding process. And as just noted, if we deduct $250M in Iowa cash from the $1.165B ENGIE-Meridiam bid we get $915M, which would have placed second — and lost. In fact, had that $250M in Iowa cash been appended to any of the final bids, that infusion of capital in itself would have determined the winner of the bidding process in every case.

The Iowa State Auditor Objects
The general impression most people seem to have about the Iowa Board of Regents — because the regents encourage that impression at every opportunity — is that the board is an independent, apolitical government agency run by nine benevolent volunteers who feel called to support public higher education in the state of Iowa. In reality, the Board of Regents is part of the executive branch, its members are appointed by the sitting governor, it is routinely populated with business and political cronies, and if the regents aren’t sufficiently loyal to the governor’s personal and political objectives they don’t see a second term. And of course because the regents are chosen by the governor they are also effectively protected by the governor, who is usually the only person in the entire state who can compel the board to do anything, including tell the truth. Usually.

We will probably never know the true origins of the UI P3, but in terms of publicity the deal was the governor’s baby. Not only had the governor indirectly initiated the UI P3 with a letter to the president of the board, but she showed up at the approval meeting to read a few words and take conspicuous credit. So when the university and the regents divulged the participation of a shadowy group of unidentified Iowa investors at that same meeting, and said they were never, ever going to reveal the identities of those secret Iowa investors, that refusal also implicitly carried the blessing of the governor herself.

In the aftermath of the UI P3 approval meeting I had two questions. Like everyone I wondered who the secret Iowa investors were, but I also wondered how $250M in Iowa cash ended up attached to — and effectively ensuring — the winning bid. Unfortunately, because of the board’s imperious refusal to provide additional information I had no hope that either of those questions would ever be answered.

While the governor, her regents, and their toady university president were aligned in bureaucratic obstinacy, however, the Iowa State Auditor was concerned that such secrecy could jeopardize the state’s financial standing. To make a long story short, that governmental standoff eventually made its way to the courts, and ultimately to the Iowa Supreme Court, where, after careful deliberation, the school and board got their asses handed to them for trying to stiff the state auditor about information relevant to the financial well-being of Iowa. Although that ruling was handed down in late April of 2021, however, it was only in mid-December of 2022 that the auditor released his report on the UI P3, including the identities of the secret Iowa investors. (Excellent context and details here, from the Gazette’s Vanessa Miller.)

The Secret Iowa Investors
My specific concern regarding the unnamed Iowa investors was that one or more of the individuals who rigged the UI presidential search in J. Bruce Harreld’s favor in 2015 may have used that crony connection to enrich themselves through financial participation in the UI P3. So when the audit was released it was reassuring to learn that was not the case, and that the secret Iowa investors had no obvious association with the abuses of power that led to Harreld’s illegitimate appointment. From p. 19 of the auditor’s report:

With the permission of the University and ENGIE, we are able to disclose the Iowa investors. They are:

• Transamerica – Headquartered in Cedar Rapids, Iowa
• Principal Global Investors – Headquartered in Des Moines, Iowa
• Athene – Headquartered in Des Moines, Iowa (Athene has since merged with Apollo Global Management based in New York City.)

While my nightmare scenario was averted, however, that did not mean the Iowa investors were without ties to state government. Unless you obsess over Iowa news there’s no reason you would know this, but if Governor Kim Reynolds has a ‘work husband’ in Iowa’s private sector it is undoubtedly Dan Houston, President, CEO and Chairman of Principal Financial Group — of which Principal Global Investors is a subsidiary. Along with Future Ready Iowa in 2017, and the Economic Recovery Advisory Board in 2020, we now also know that at some point prior to December of 2019, Dan Houston and Principal became involved in funding the UI P3 as well.

Unfortunately, other than concluding that there were no obvious conflicts of interest in the UI P3, the audit did not address how and why Iowa investors were brought into the deal. (See p. 20 for the audit’s discussion of conflicts of interest.)

Additional Findings in the UI P3 Audit
With that one caveat I do believe the state audit was thorough and complete within the scope of the auditor’s statutory purview. The problem with any audit — which is also endemic to humanity — is that there are always indirect ways that people can reward each other by steering business one way or the other, and that includes lucrative deals backed by taxpayer funds. That is in fact the whole point of cronyism, and why government agencies are routinely converted into patronage operations by political parties the world over.

While individuals who worked at the university and board may have been prevented from materially participating in the P3 themselves, in brokering that deal they could still enrich favored local investors. Those investors could then turn around and donate some of their profits back to the political party that is currently in control of Iowa state government, or to the university, thus profiting everyone involved without violating existing policies or laws. In a moment we will dig into that concern, but before we do here are a few additional disclosures which both deserve notice on their own and inform that inquiry.

* From p. 19, immediately following identification of the Iowa investors:

Based on the attachment from the ENGIE and Meridiam RFP response which listed the companies that agreed to initial purchase commitments, we were able to calculate approximately 23% of the initial purchase commitments were provided by the three firms listed above. At the time the agreement was closed, all three firms were headquartered in Iowa.

Multiplying ENGIE-Meridiam’s $1.165B final bid by 0.23 (23%) gives us a $268M contribution from the Iowa investors, up from an initial estimate of $250M. That in turn means the contribution from ENGIE and Meridiam dropped to $897M — which would still have placed second relative to the other bids, but is significantly closer to the two lowest bids.

* As previously noted, the core deception perpetrated by the university and board involved repeated assertions that the school would receive a “payment” from its private-sector partners. In reality, the school and board were taking on the largest debt obligation in the history of the state, which is why the auditor was not only right to question the deal, but why the courts agreed. From p. 24 of the audit:

During our review we were asked if Moody’s reclassified the payment to the University as debt. As noted above, the payment received is shown as an advance and recorded as a liability on the University’s financial statements as required by GASB. University officials stated they were unaware of any changes made by Moody’s and provided us their contact at Moody’s so we could follow-up on the questions. According to a representative from Moody’s, Moody’s recently updated their credit rating methodology to account for P3s as more universities enter into P3 agreements. Based on their analysis, the advance is included as “Other Debt Like Instruments” when they calculate the rating score for a university. The representative also stated the reason for this is the possibility a P3 may/could fail or be allowed to fail if they are not essential university services.

* From the “Summary” on p. 19, which also makes clear that the UI P3 is a thinly disguised loan:

As previously stated, the P3 agreement leases the Utility System to the Collaborative for 50 years. Unlike a normal lease, where an entity receives monthly payments, the University received proceeds of approximately $1.165 billion at the time of closing when the lease begins. According to information provided by University officials, they will pay approximately $2.418 billion in fixed fees to the concessionaire over the life of the project, including interest payments, and will need approximately $2.292 billion of that amount from the Endowment (that is, returns on the investment of the initial payment made at financial close) to cover the total cost of the P3 agreement plus an additional $735 million the University will use to fund strategic projects.

* On p. 20, in the section on potential conflicts of interest, the audit also makes clear that ENGIE and Meridiam would not have needed outside investors to fund any bid:

Finally, because this investment is, for these companies, relatively small, it would not have a unique impact on their valuation such that the purchase of stock or other forms of ownership prior to the P3 would be financially impactful.

* While it has been four months since the audit was released, I do not believe the university, regents or legislature have acted on any of the suggested “Items for Consideration” on p. 25-26, which would improve accountability and transparency for public-private partnerships in the future. And that’s a problem given that the regents have already signaled they plan to pursue similar deals.

How to Rig a Public-Private Partnership
Immediately following the board’s live-streamed UI P3 approval meeting in mid-December of 2019, I had two questions. Who were the secret Iowa investors, and how did those investors become part of the winning bid? Prior to that meeting there was no hint that Iowa investors might be interested in the project — nothing in the press, nothing in official releases, nothing for a year and a half. And of course following the approval meeting the university and board waged an incongruous legal war to prevent disclosure of the identities of those investors, further heightening concerns about their role.

While the Iowa State Auditor did ultimately compel disclosure of the names of the Iowa investors, and did clarify their financial stake, after three-plus years that is still all we know about those investors and their participation in the UI P3. And that is the one reservation I have regarding the thoroughness of the state audit. Before you conclude that nothing nefarious took place in a governmental bid process — let alone one in which the government insists it does not have to disclose the identities of winning in-state investors — I think you need to answer questions about how the winning proposal came together.

We don’t know why the Iowa investors preferred ENGIE-Meridiam to the other three bid teams, but the very fact that participation with any of the other groups would have determined the winner makes that motivation extremely important. To see why, imagine there were no independent Iowa investors, and instead that the governor, board, or university had access to a $268M slush fund they could add to any of the private-sector bid proposals. Simply by directing that pile of cash to one proposal or another they could determine the outcome of the bid process, so who’s to say they didn’t do that by proxy?

Regarding the Iowa investors and their participation in the ENGIE-Meridiam bid, how did those parties come together? The Iowa investors could have learned about the UI P3 from press reports, but how would they have connected with the ENGIE-Meridiam bid team when the bid process was supposedly secret? Likewise, if ENGIE and Meridiam were open to including Iowa investors, how would they have learned that a quarter of a billion dollars in Iowa cash was looking to join forces?

From p. 50 of the UI P3 audit (Appendix 5 page 13):

The University requires that all contact related to the RFP submission be made through Wells Fargo and that the University and its related parties as noted in the non-disclosure agreement not be contacted directly. Failure to abide by such requirement may lead to the disqualification of a team.

If we understood the financial relationship between the Iowa investors and the other members of the winning bid proposal that might go a long way toward pacifying our concerns. Unfortunately, while the state audit included a review of the concession contract between the University of Iowa and the winning bid team, there is no indication that the auditor reviewed the terms of the deal between the members of the winning ENGIE-Meridiam bid. And that means we don’t know if all of the investors have the same profit participation, or if one or more of those investors accepted different terms.

The state audit concluded that the UI P3 bid process complied with state laws and bidding guidelines. At the same time, however, if $268M in Iowa cash had been directed to any of the bidding groups, that group would have won the bidding — as ENGIE-Meridiam ultimately did. In that context, one bit of information that would be crucial would be determining when the Iowa investors joined the ENGIE-Meridiam proposal. Unfortunately, because the state auditor has closed his inquiry, and members of the winning bid team are unlikely to provide any additional information without a subpoena, we are left to sift through publicly available information to see if there was ever a point — prior to the conclusion of the bidding — when the University of Iowa expressed a preference for one bid team over the others.

The UI P3 Bid-Process Timeline
Among the patent absurdities perpetrated by the University of Iowa during the P3 development process, none was more contemptuous of the university community and general public than the official insistence that no matter what was happening in plain view or reported by the press, the university was still merely considering whether to engage in a public-private utility partnership. In fact, no firm commitment to pursue a deal was ever announced prior to the formal conclusion of the process. Even after a year and a half in the development pipeline, as the university and board streaked toward the approval meeting in early December, spokespersons were still insisting that the school was merely exploring the idea of a partnership, and that no firm decision to commit to a deal had been reached.

As I have learned simply by watching official statements from the board and its universities for the better part of a decade, this instinct to deceive pervades the regent enterprise. All the university had to say was that the P3 was being pursued, but the school reserved the right to terminate the process at any time for any reason. Because higher-ed administrators are no different than self-interested administrators in any public or private bureaucracy, however, they got cute and attempted to delegitimize questions and concerns by characterizing the UI P3 as perpetually locked in an exploratory phase.

What follows are key moments of visibility into the UI P3 development process as it picked up speed in the second half of 2019. In that context, and knowing what we now know about the secret Iowa investors, see if you can detect any indications that the University of Iowa preferred one bid team over the others prior to the conclusion of the bid process. Because the moment the Iowa investors added their $268M to any of the bid proposals, that proposal was going to win the bidding — even as the university continued to pretend, to the very end, that it had not committed to pursuing a deal.

04/09/19 — as noted on p. 9-10 of the state audit:

In consultation with Wells Fargo and Jones Day, University officials reported they determined the best approach to identifying parties who would have an interest in entering a P3 agreement would be to issue a “Teaser.” On April 9, 2019 a PDF document entitled “Project Hercules – Investment Overview” was disseminated by Wells Fargo. According to University officials, Wells Fargo provided the “Teaser” to private equity firms and utility system operators that have extensive experience in the energy sector and have the financial capacity to complete a transaction of the planned magnitude.

…

Based on responses to the “Teaser,” University officials decided to proceed with a P3 agreement.

06/21/19 — as noted on p. 11 of the state audit:

University officials met with Wells Fargo representatives on June 21, 2019 to review the RFQs received and advance eligible bidders to the Request for Proposal (RFP) stage. As previously stated, there were 155 potential investors with a mix of both strategic and financial parties, and 72 nondisclosure agreements (NDAs) were executed prior to preparation of an RFQ. Of the 72 NDAs, 14 RFQ proposals were received. Table 2 lists the 14 respondents that submitted an RFQ proposal.

In the “14 RFQ proposals received”, comprising 37 companies, none of the Iowa investors attached to the winning ENGIE-Meridiam bid — Transamerica, Principal Global Investors, and Athene — were named.

07/11/19 — from a post on the Iowa Now website:

The University of Iowa is continuing its exploration of a potential public-private partnership (P3) with its utility system, moving forward from the request for qualification (RFQ) stage to the request for proposal (RFP) stage. The campus community will have two new opportunities to share feedback about the proposal.

“Following a rigorous RFQ process, which involved shared governance and academic leadership, we are ready to take the next step in our exploration,” says UI President J. Bruce Harreld.

Mid-to-late July, 2019 — as inferred from p. 12 of the state audit:

A “Request for Proposal Submission Process Letter” was provided to each respondent who was advanced to the RFP stage. In addition, a draft of the Concession Agreement was provided to each respondent. A copy of the letter sent to the five respondents is included in Appendix 5. During the RFP phase, the University interacted with the respondents to answer questions and provide clarification. The University also scheduled a separate site visit for each respondent to tour the facilities and campus. In addition, University officials also visited each respondent prior to evaluating the RFP submitted.

The audit is less than clear about the specific dates and order of these events, frustrating our ability to determine when the Iowa investors became attached to the ENGIE-Meridiam bid. Still, from the information above, and the following dates on p. 50 (Appendix 5, page 7), we can conclude that notice was given to the five respondents (one subsequently dropped out) of advancement to the RFP phase in mid-to-late July:

Executive level site visits concluded on August 2, 2019

2 day site visit focused on a technical review of the Utility system concluded on August 23, 2019

The University management team visited select Bidder operational sites and / or corporate offices during the month of September (post Labor Day)

Along with UI site visits by members of the bid teams in August, and visits by UI administrators in September to consortium facilities, multiple versions of the RFP “Process Letter” were sent out during that period. Included in that time frame were multiple interactions between UI and the bid teams, during which the bid packages evolved.

09/23/19 — from Marissa Payne at the Daily Iowan, reporting on an interview conducted that same day:

DI: More recently at the Cy-Hawk game, we’ve seen in the last week or so since the members of the Hawkeye marching band alleged physical harassment by Iowa State fans, Iowa opened and closed the investigation in a matter of a few days following that incident. Can you talk about the initial decisions to close the investigation?

Harreld: I’ve been moving really quickly here so my personal involvement on campus has been … last week in other parts of the world trying to deal with the [public/private partnership] and meeting all the companies that are bidding.

10/08/19 — from Eleanor Hildebrandt at the Daily Iowan:

A member of University of Iowa Graduate and Professional Student Government said in a meeting Tuesday night the UI will soon select a bidder in its exploration of a public/private partnership.

In the meeting in the IMU, GPSG Sustainability Committee co-chair Christian Bako commented on the potential partnership at the UI, which would allow the university to collaborate with a private company and financially benefit from its own utility system.

“I’ve been focused on the [public/private partnership] negotiations that have been going on with weekly conference calls,” he said. “The bidders are finishing their bid materials and the final bidder is supposed to be selected by Nov. 15. It’s a fast-moving process.”

In an email to The Daily Iowan, UI Media Relations Director Anne Bassett said in a statement that the university of Iowa is still only exploring a public/private partnership involving its utility system.

“A decision to move forward beyond the exploration phase has yet to be determined by the campus team, which includes shared governance,” the statement read.

10/10/19 — from Charles Peckman at the Daily Iowan, reporting on J. Bruce Harreld’s State of the University address:

In an email to The Daily Iowan on Wednesday, UI media-relations director Anne Bassett said in a statement that the university is still very much in the exploration phase of public/private partnerships.

10/23/19 — from the audit p. 52 (Appendix 5 page 9):

Please send your RFP Submission in written form, via attachment to an e-mail, to the Wells Fargo contacts listed below no later than 12:00 pm EST on November 5, 2019 (“Bid Deadline”).

A “Third Amended and Restated Request for Proposals Process Letter” (audit Appendix 5) is sent to the four remaining bid teams, in anticipation of receipt of the final RFP’s and bid packages.

12/03/19 — from the university’s live-streamed informational webinar about the P3 [1:17:04]:

Harreld: “Yeah…I-uh-uh…first of all, we need to let the operator get in here; they’ve already done quite a bit of work already and they’ve indicated to us they think they can accelerate that quite a bit. … So yes, the simple answer to your question — yes, I think, without any question this will accelerate it. They’ve indicated that’s what they expect and anticipate doing. … I think this relationship in particular…all of us believe, as we started working with this company in particular, which we will talk about next week with more specificity, they’re leaders in this field.”

Seven days before the formal approval meeting at the Iowa Board of Regents, and three days before the nine Iowa regents review the bid packages of the four remaining consortia, UI President J. Bruce Harreld reveals that the winning bidder has not only already been selected, but representatives of the winning consortium are already working on campus.

12/03/19 — from reporting about the informational webinar by Ryan Foley of the Associated Press:

The University of Iowa advanced a multibillion-dollar plan Tuesday to lease its utility system to a for-profit operator for 50 years in exchange for a large upfront payment that would be used to support its strategic goals.

University President Bruce Harreld detailed the plan during a special informational meeting of the Iowa Board of Regents, which is expected to consider approving the selection of the operator next week.

The plan would turn over the operation of several plants that provide power, steam and water to the UI campus to a newly-formed company that is a collaboration of two energy and investment firms.

Harreld didn’t identify them but said they were “leaders in the field” that emerged from a monthslong, closely guarded competitive bidding process.

12/05/19 — from the Gazette’s Vanessa Miller, five days before the UI P3 approval meeting, and two days after J. Bruce Harreld let the cat out of the bag that the winning bid team was already working on campus:

The nine-member board that governs Iowa’s public universities this week will receive the four finalist bids for a 50-year, multibillion-dollar deal to operate the University of Iowa’s utilities system.

…

Board of Regents Executive Director Mark Braun over the course of the monthslong inquiry into the viability of a partnership has participated in several meetings “when the university was discussing RFP responses,” Board of Regents spokesman Josh Lehman told The Gazette.

Braun, like the other nine volunteer regents, will receive the four final bids this week, Lehman said.

“If a vendor is selected, that information will be released publicly on Dec. 10,” he said.

Here the regent spokesperson presents the awarding of the UI P3 as undetermined, when in fact representatives of the winning team are already working on campus. Like the corrupt 2015 presidential search which culminated in the done-deal appointment of J. Bruce Harreld as president of the University of Iowa, the board’s review of the four final UI P3 bids is fake.

12/06/19 — from the AP’s Ryan Foley, on Friday, in advance of the board’s review of the final bids that weekend:

The university hasn’t released the names of the two companies that formed the recommended winning bid or the size of the lump sum payment they’d make under the deal.

12/08/19 — from Marissa Payne at the Daily Iowan, reporting on a local legislative forum hosted by the DI:

Information identifying the bidder and how much money the UI will receive in the upfront payment has not yet been revealed to the public but will be shared when the regents convene Tuesday to consider the deal.

“The amount of secrecy in keeping Iowans in the dark on the process side has been a failure — a failure of the Board of Regents and a failure of the administration at the university here,” Bolkcom said.

The lawmakers criticized that information-sharing timeline, but UI media-relations director Anne Bassett said in an email that university officials held several forums with the public and with shared-governance branches to discuss the potential partnership.

Regarding why the request-for-proposals process has been private and not publicly shared, [UI media-relations director Anne Bassett] said, “Throughout the entire consideration of a public-private partnership with its utility system the University of Iowa has followed its existing purchasing process. This process, which has been in place for decades, was created to ensure the most competitive bids in order to benefit students, families, and taxpayers.”

12/09/19 — from a periodic interview with UI President J. Bruce Harreld by the Daily Iowan staff:

[ENGIE] were by far and away the most responsive. To say the others weren’t — they were, but not like this. My biggest fear, I called the CEO of ENGIE the other day, and I said to her, we all left the meeting really excited about all the incredible things that ENGIE’s doing in the whole educational space in Europe and in the United States, and then all of us said, ‘Boy, it’d be a shame for them not to be the winning bidder.’

So we were excited but depressed, because maybe they wouldn’t be the winning bidder. And you know, how much would we reach into our values, to have to overcome and lower financial debt? And it turns out, as the case may be, they won both counts.

…

Meridiam has financed a lot of things, they’re a newer company, started in the 2000s, a financial firm. And so their mission is to finance these types of projects. So they’re a great partner as well.

While a transcript will not be published until 12/15/19, it is clear from the date in an accompanying photo caption that the interview took place on the eve of the UI P3 approval meeting. Note also that the “meeting” Harreld references in the quote above is the site visit UI administrators made to ENGIE in September, sometime between Labor Day and 09/23. Immediately following that meeting, by Harreld’s own words, UI administrators already knew which group they wanted to win.

12/10/19 — during the UI P3 approval meeting, Harreld talks up the contributions of the secret Iowa investors [22:48].

12/10/19 — after insisting for a year and a half that the university was only exploring the possibility of a public-private energy partnership, Board of Regents President Mike Richards formally welcomes the University of Iowa’s new utility partners >before< taking the actual vote [38:51 ].

Theater is hard.

12/10/19 — from Marissa Payne at the Daily Iowan, reporting on the UI P3 approval meeting — including quotes from the DI staff interview with Harreld the day before:

When University of Iowa President Bruce Harreld visited the headquarters of French energy conglomerate ENGIE in September, the environment he saw impressed him.

…

After leaving that meeting, he said UI officials thought it would be a shame for ENGIE not to be the winning bidder for the university’s utility system public/private partnership. The company was responsive, boasted an educational space to support student learning, and demonstrated a commitment to leading the world through a transition to relying on more sustainable energy sources.

The UI wished for a good partner, and Harreld said it received one. The state Board of Regents on Tuesday approved the UI’s proposal to partner with ENGIE and Paris-based investment firm Meridiam to operate and maintain its utility system, which will result in an upfront lump sum payment to the UI of $1.165 billion to manage over 50 years in a new endowment fund.

…

“Harreld on Monday likened creating the agreement with the Hawkeye Energy Collaborative — the concessionaire formed with ENGIE and Meridiam to…partner with the UI to manage campus utility assets — to drafting the U.S. Constitution.”

Another Door Opens
Because the $268M infusion of cash from Iowa investors not only determined the result of the UI P3 bid process, but did so in furtherance of the university’s desired outcome, it seems odd that we still know literally nothing about how those investors came to be affiliated with the ENGIE-Meridiam team. When the state audit was released in mid-December of 2022, and contained no new information other than the identities of the Iowa investors, the possibility that we would ever learn more about the Iowa investors seemed exceedingly remote. A little over a month and a half later, however, those odds improved.

From the Gazette’s Vanessa Miller, on 01/30/23:

In a federal lawsuit filed Thursday, the UI Energy Collaborative outlined four main ways the UI was reneging: refusing to pay money it owes; rescinding approval to repair the utility system; refusing to file casualty insurance claims; and demanding payment for “unplanned” utility outages “even though the university’s representatives participated in the very meetings and discussions planning for those events.”

UI spokesman Steve Schmadeke said the UI and its public-private partners “have a disagreement regarding some of the terms and conditions” of the deal.

“The university has been working with its utilities partner to resolve these differences,” he said in a statement. “We are disappointed that our utilities partner has a different interpretation of the contract and felt the need to file a lawsuit against the university. We are eager for the court to provide us with a clear definition of the contract for both parties to adhere to.”

I don’t know if the ENGIE-Meridiam complaints are legitimate, but one possibility is that they want to blow up the UI P3 after only three years in operation, and I wouldn’t be surprised if that was the case. Whatever the profit expectations were in 2019 when the deal was agreed to, the economic picture has changed dramatically, and inflation must surely be taking a toll on deals that were predicated on low interest rates. Also, between the UI P3 approval meeting in mid-December of 2019, and the financial close of the deal in March of 2020, the ENGIE CEO who pursued the UI P3 was sacked in early February. Because the UI P3 was small potatoes by ENGIE’s standards it is unlikely that the deal itself contributed to her termination on performance grounds, but the current CEO and management team probably have no particular affinity for the project.

If ENGIE and Meridiam are having second thoughts, one way to get the University of Iowa to agree to a dissolution would be to introduce damaging information in court that the university prefers not be made public. And in that context I have to wonder what ENGIE and Meridiam know about how — and particularly when — the Iowa investors became part of their winning bid proposal. Because if someone in state government did steer that $268M investment to the ENGIE-Meridiam consortium at just the right time, not only would that be a scandal in itself, but the three bid teams that lost out would likely have legal claims against the state.

From the Gazette’s Vanessa Miller on 12/13/19, reporting on UI travel expenses for the September meetings with UI P3 bidders:

University of Iowa executives this fall traveled to Madrid and Paris to vet a deal approved this week that will land the campus a lump sum of over $1 billion and turn its utilities operation over to private management for five decades.

In all, the UI spent more than $26,000 in travel expenses exploring the public-private partnership. Officials expect the deal, approved Tuesday by the Board of Regents, to generate about $15 million a year the UI can use to support its educational mission and strategic plan.

Most of those travel expenses — $25,319 — went toward one overseas trip to Paris and Madrid from Sept. 8-14. Traveling were UI President Bruce Harreld, Senior Vice President of Finance and Operations Rod Lehnertz, Chief Financial Officer and Treasurer Terry Johnson and UI General Counsel Carroll Reasoner.

One other trip Harreld, Lehnertz and Johnson took Sept. 19-20 to Minneapolis cost $1,136, according to documents the UI provided.

Harreld’s transportation expenses for the overseas trip — $6,432 — were more than three times those for Lehnertz and Johnson and nearly double Reasoner’s. The UI said that was due to “the timing of President Harreld’s flights and also the cost in effect when the flight reservations were made.”

The UI did not incur any other travel expenses related to its inquiry.

Two French companies — energy firm Engie and asset management firm Meridiam — won the deal and had representatives in Urbandale Tuesday for regent approval of the agreement.

Officials told The Gazette that bidders who entered into the extensive inquiry process knew they would incur “significant costs” in putting together a proposal, and the UI “has not reimbursed and will not reimburse bidders for their proposal costs, including travel expenses.”

From the RFQ — p. 7:

No Liability for Costs
The University and its advisors are not responsible for costs or damages incurred by teams, subcontractors, or other interested parties in connection with the solicitation process, including, but not limited to, costs associated with preparing responses, qualifications, and proposals, and participating in any conferences, oral presentations, or negotiations[.]

From the RFP — p. 12:

No Liability for Costs
The University and its advisors are not responsible for costs or damages incurred by teams, subcontractors, or other interested parties in connection with the solicitation process, including, but not limited to, costs associated with preparing responses, qualifications, and proposals, and participating in any conferences, oral presentations, or negotiations.

At every step of the process the university made it clear to the participating bid teams that they would not be compensated for their costs. That said, if it turned out the outcome was effectively rigged by directing $268M in Iowa capital to the winning bid team, I’m pretty sure the losing bidders could sue the university, board and state on that basis, not only to recoup their costs, but for punitive damages. Whether ENGIE or Meridiam intend to, or would be willing to, divulge whatever knowledge they have about how that Iowa capital came to be part of their winning proposal, they certainly know the answer.

— Mark Barrett