News Reedy Creek Improvement District and the Central Florida Tourism Oversight District

GoofGoof

Premium Member
Small related story. The full article is behind a paywall, but the summary is Duke Energy (one of the largest suppliers of electricity to WDW through RCID) asked for RCID to post a letter of credit from a bank for $3M in case the district is dissolved in June and hasn’t yet paid their May electric bill.

It is common practice for a company to require some sort of collateral posting in these types of commodity transactions, but it is usually based on the credit worthiness of the counter-party. I assume Duke is just being cautious and I’m sure they are within their contractual rights to request this, but it highlights that there are real costs to this “game” and despite the state’s assurances that nobody will be left holding the bag if/when this plan is executed at least one company is concerned that won’t really be the case. For now all this really means is RCID pays some LC fees to a bank and continues business as usual.

 

Sirwalterraleigh

Premium Member
Small related story. The full article is behind a paywall, but the summary is Duke Energy (one of the largest suppliers of electricity to WDW through RCID) asked for RCID to post a letter of credit from a bank for $3M in case the district is dissolved in June and hasn’t yet paid their May electric bill.

It is common practice for a company to require some sort of collateral posting in these types of commodity transactions, but it is usually based on the credit worthiness of the counter-party. I assume Duke is just being cautious and I’m sure they are within their contractual rights to request this, but it highlights that there are real costs to this “game” and despite the state’s assurances that nobody will be left holding the bag if/when this plan is executed at least one company is concerned that won’t really be the case. For now all this really means is RCID pays some LC fees to a bank and continues business as usual.

Lmao!!

That is the most “Duke energy” thing ever
 

GoofGoof

Premium Member
Lmao!!

That is the most “Duke energy” thing ever
Yeah, it’s not uncommon for any utility, especially when the business on the other side is not highly credit worthy. That’s what makes it interesting to me…that they felt the need to require this. Since it’s an LC and not cash margin paid to Duke there is no real economic benefit unless RCID defaults and doesn’t pay the bill in June. Then they would draw on the LC and get cash from the bank to be made whole. I wonder if the credit downgrade triggered something in the contract to allow this. I’ve seen contracts where the counterparty gets a certain amount of unsecured credit as long as they stay above a certain credit rating. If you drop below you need to post collateral.
 

Disstevefan1

Well-Known Member
Small related story. The full article is behind a paywall, but the summary is Duke Energy (one of the largest suppliers of electricity to WDW through RCID) asked for RCID to post a letter of credit from a bank for $3M in case the district is dissolved in June and hasn’t yet paid their May electric bill.

It is common practice for a company to require some sort of collateral posting in these types of commodity transactions, but it is usually based on the credit worthiness of the counter-party. I assume Duke is just being cautious and I’m sure they are within their contractual rights to request this, but it highlights that there are real costs to this “game” and despite the state’s assurances that nobody will be left holding the bag if/when this plan is executed at least one company is concerned that won’t really be the case. For now all this really means is RCID pays some LC fees to a bank and continues business as usual.

RCID should simply stop paying WDWs electric bill and let WDW go dark.
You will see how quickly TWDC pays the electric bill to keep their park lit.
 

Sirwalterraleigh

Premium Member
Yeah, it’s not uncommon for any utility, especially when the business on the other side is not highly credit worthy. That’s what makes it interesting to me…that they felt the need to require this. Since it’s an LC and not cash margin paid to Duke there is no real economic benefit unless RCID defaults and doesn’t pay the bill in June. Then they would draw on the LC and get cash from the bank to be made whole. I wonder if the credit downgrade triggered something in the contract to allow this. I’ve seen contracts where the counterparty gets a certain amount of unsecured credit as long as they stay above a certain credit rating. If you drop below you need to post collateral.
How much those shares of Duke up to?

…the notion of “not credit worthy”…like this entire dissolution of RCID…is still laughable
 

GoofGoof

Premium Member
How much those shares of Duke up to?

…the notion of “not credit worthy”…like this entire dissolution of RCID…is still laughable
I don’t disagree. $3M to Duke is like 3 cents to me. However, the manger of their credit group and/or some lawyers would still get reamed out if they didn’t address the situation and then they were out that money. In a corporate bankruptcy they would have a clear lean on the assets of the bankrupt entity and would get in line with other creditors and get paid eventually, especially if the cash on hand was enough to pay off the creditors.

I have no idea how this situation actually works. If the municipal entity who is the party to the contract is just dissolved where do the assets of the district actually go (in this case specifically the cash that could be used to pay the bills)? It’s not just Duke, it’s every vendor that RCID owes money to for goods or services. If those parties then need to get in line with the bond holders to try to recover what they are owed it may take months and they may all get pennies on the dollar. I think that’s the fear and why they requested the collateral posting. Now if this thing goes sideways and it’s a complete goat rodeo come June they cut the power off and collect what they are owed from the LC and walk away.
 

GoofGoof

Premium Member
RCID should simply stop paying WDWs electric bill and let WDW go dark.
You will see how quickly TWDC pays the electric bill to keep their park lit.
That may actually sorta be what could happen. RCID would not pay the bill and Duke would stop providing power to the district who then provides it to Disney. I am not sure how the specific utility laws in FL work, but in other states they have the concept of a provider of last resort which is usually the legacy utility in the area. If a power supplier stops serving you electricity for some reason the provider of last resort steps in and sells you power at a regulated utility rate which I can guarantee is higher than what Disney is paying RCID. So I don’t think the parks go dark, Disney would just be paying someone different for the power.
 

Sirwalterraleigh

Premium Member
I don’t disagree. $3M to Duke is like 3 cents to me. However, the manger of their credit group and/or some lawyers would still get reamed out if they didn’t address the situation and then they were out that money. In a corporate bankruptcy they would have a clear lean on the assets of the bankrupt entity and would get in line with other creditors and get paid eventually, especially if the cash on hand was enough to pay off the creditors.

I have no idea how this situation actually works. If the municipal entity who is the party to the contract is just dissolved where do the assets of the district actually go (in this case specifically the cash that could be used to pay the bills)? It’s not just Duke, it’s every vendor that RCID owes money to for goods or services. If those parties then need to get in line with the bond holders to try to recover what they are owed it may take months and they may all get pennies on the dollar. I think that’s the fear and why they requested the collateral posting. Now if this thing goes sideways and it’s a complete goat rodeo come June they cut the power off and collect what they are owed from the LC and walk away.
Reedy isn’t going anywhere. It was a stunt for donations and that’s why it has been crickets since the cameras got bored and went elsewhere

I’d say at most there is some semantics “name change”…more likely is they let the clock “run out” and some other pols down the road officially drop it.
 

GoofGoof

Premium Member
Reedy isn’t going anywhere. It was a stunt for donations and that’s why it has been crickets since the cameras got bored and went elsewhere

I’d say at most there is some semantics “name change”…more likely is they let the clock “run out” and some other pols down the road officially drop it.
I think that’s easy for us to say and is a valid opinion and a likely outcome, but for vendors and employees who need to be paid come June it’s still not so clear cut. The clock is ticking and the closer we get to June the more worried I would be if I were in their shoes. Even just a semantics name change could lead to delays in payments and disruptions to services if they don’t have everything locked down and formalized by the deadline. I also don’t think the government cares too much if that happens.
 

GoofGoof

Premium Member
With the subject of energy being discussed, are the solar farms owned/operated by WDW or RCID? Just wondering
It’s an interesting question. Duke Energy operates the facilities and sells the output to RCID and they sell some but not all of the power to Disney. I believe the land is/was owned by RCID so I’m not sure if they are leasing the land to the project company or if it was contributed as part of the agreement to build there. Either way, this is part of the mess that needs to be sorted out if the district really is dissolved. What happens to both contracts?

 

Sirwalterraleigh

Premium Member
I think that’s easy for us to say and is a valid opinion and a likely outcome, but for vendors and employees who need to be paid come June it’s still not so clear cut. The clock is ticking and the closer we get to June the more worried I would be if I were in their shoes. Even just a semantics name change could lead to delays in payments and disruptions to services if they don’t have everything locked down and formalized by the deadline. I also don’t think the government cares too much if that happens.
I get it…but that’s why they shouldn’t have started this stunt in the first place
 

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