Proposed SERF, PERC merger worries some

ORRINGTON–The proposed merger between the Penobscot Energy Recovery Co. and the landfill that takes its residue could result in higher costs for the 130 communities that send their trash to the waste-to-energy incinerator facility, some town officials said earlier this week.

The merger agreement between KTI Inc., which owns PERC, and Casella Waste Systems Inc., which owns Sawyer Environmental Recover Facility, is due to end Thursday unless KTI clarifies some details of its operations, according to the vice president of Casella.

But the up-in-the-air status of the merger did not stop community representatives from wondering if PERC could be unduly influenced to award bids for disposal to SERF, even though the Hampden landfill may not offer the best proposal.

“What we want for the good of PERC and the communities is always an arms-length transaction that’s done in an open, impartial bidding process and that assures us the best possible deal for the plant and the community,” said Orono Town Manager Gerald Kempen, president of the Municipal Review Committee board of directors. The nine-member board is elected by the communities to oversee the day-to-day operations of the MRC, a group that comprises representatives of the communities that use PERC.

Communities have nothing to worry about, according to Bob Field of KTI. He said his company could not exert undue influence because it is one of two partners that each owns 50 percent of PERC. The other partner is ENINRG in Minnesota.

“The fact is, KTI doesn’t dictate what happens; the partnership approves what goes on, and if either partner dissents, [the action] doesn’t carry,” said Field. “It’s kind of a checks and balances–transactions would always be at arm’s length.”

PERC has purchased wood chips from a KTI-affiliate in Lewiston, according to Field, “and they received no better price than anyone else,” he said. “Whatever’s the best deal for the partnership, that’s the deal that went through.”

That assessment did little to appease MRC director Greg Lounder. “The flip side is that one of the two partners could obstruct a transaction that would provide the most favorable terms to the communities,” he said.

Based in Guttenberg, N.J., KTI has 1600 employees who operate 51 recycling facilities in 21 states and one Canadian province.

Casella, the parent company of SERF, has headquarters in Rutland, Vt., and provides garbage collection and recycling services throughout Vermont, New Hampshire, Maine and parts of Massachusetts, New York and Pennsylvania. It has about 1300 employees.

The companies have been trying to arrive at “some common ground,” said Joe Fusco of Casella, who declined last week to predict the outcome of the discussions. Casella, which alleged last month that KTI misrepresented some details of its operation, had given the company 30 days to answer their concerns.

If the merger were to happen, the competitive bid process “would be alive and well,” said Fusco. “There would be the same number of bidders, but one of the bidders [would] have an immense amount of resources and talents and [could] offer communities an unparalleled collection of waste management resources.”

The merger would have little effect on the day-to-day operations of PERC, according to plant manager Peter Prata, who makes recommendations to the partners once he assesses the bids based on a number of criteria, including cost and the reliability of a long-term disposal site.

SERF has been taking all of PERC’s ash and a portion of the glass, grit and nonprocessable, oversized bulky waste since 1988.

Towns may be in a holding pattern as they wait to see if the merger goes through, but there’s no question about what they are looking for, according to Kempen, who said officials have voiced their concerns to the Attorney General’s Office. “When you have two parties, each negotiating for their own best interest, you produce the fairest deal,” he said. “We want every deal between PERC and SERF to be as though they don’t know each other.”

KTI management has assured community representatives that all transactions would be above-board, according to Kempen who said the company “allayed our fears to a degree.”

“But our towns want assurance that what KTI promised us verbally is actually what’s going to happen,” he continued. “Our concern is that when we go back to our communities, we need to say more than `don’t worry’–we need some objective measurable protection.”

To that end, the MRC has outlined a postmerger PERC ownership structure which “we believe addresses the needs of our communities,” said Lounder, who could not be specific about the proposal.

If the structure can’t be reached cooperatively with the company, we intend to pursue other means to have our needs addressed,” said Lounder, who pointed out that the Attorney General’s office could draw up what’s called a “consent decree,” stipulating certain conditions that need to be met if the merger goes through.

Guidelines for the merger are vital, according to Hampden Town Manager Marie Baker. “There needs to be some mechanism to assure taxpayers that PERC is getting the best price,” said Baker.

While Stephen Wessler of the Attorney General’s Office could not comment specifically on the review of the KTI-Casella situation, he said that his office investigates mergers and acquisitions that “appear to have the potential for significantly affecting competition.”