HomeTop StoriesWall Street analysts were concerned about the utility privatization case

Wall Street analysts were concerned about the utility privatization case

The JEA process is still ongoing. This story will be updated.

A Wall Street credit analyst told jurors Thursday in the corruption trial of JEA’s former leaders that he disagreed with aspects of the bleak business case the agency used to investigate privatization in 2019 and that he tried unsuccessfully to convince JEA executives JEA to ask in-depth questions about this. That testimony is critical to prosecutors, whose case includes that former CEO Aaron Zahn used contrived, exaggerated negative financial projections to trick the board of directors into believing that privatization was the only viable way to avoid future financial problems .

Zahn’s defense has emphasized that JEA was simply engaged in an exercise called “scenario-based planning,” which was not intended to be viewed as a definitive picture of JEA’s financial future. But the board acted on that planning tool, including allowing Zahn’s team to invite bidders to make offers to acquire JEA. And credit analyst Jeff Panger, who specializes in public utilities for S&P Global, testified Thursday that Zahn’s view of the agency’s future was “so out of step with what we saw historically, and projected by JEA, and also with what we saw.” across the sector.”

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Panger said even planning exercises still need to “align” with financial forecasts. In the case of JEA, at the same time that Zahn was presenting his bleak vision of the future to the board, his team was also giving much more optimistic numbers to Wall Street rating agencies like S&P. That contradiction caused concern in Panger’s eyes.

“The planning itself is not necessarily a full reflection of the financial forecasts, but if done properly should contain largely the same types of assumptions, which in our view was not the case,” Panger said of the work of JEA.

Panger sent an email to JEA’s financial leaders in real time, telling them that some assumptions, such as a forecast revenue decline, did not match what others in the industry had predicted. “If this is indeed JEA’s position, why is this not reflected in JEA’s forecast…,” he wrote.

The tone of Panger’s email angered then-CFO Ryan Wannemacher, a JEA finance official told federal prosecutors. Instead of responding to Panger, JEA contacted its banker to intercede with a senior analyst at S&P. After that, Panger’s tone had “softened,” according to previous court testimony.

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Nate Monroe is a Metro columnist whose work appears regularly every Thursday and Sunday. Follow him on Twitter @NateMonroeTU.

This article originally appeared in the Florida Times-Union: S&P analysts worried about privatization of Jacksonville utility

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