ACR Energy Partners Sues for Right to Stop Supplying Electricity to Revel Casino
Overshadowed by the court battle this week between the owners of Revel Casino and Glenn Straub is the plight of ACR Energy Partners, which is asking for the right to stop supplying energy to the casino. ACR Energy Partners wants to shut down the energy supply to the Revel Casino, because of unpaid bills, but needs Judge Gloria Burns’s approval to do so.
While Glenn Straub was finalizing the last details of his purchase for the Revel Casino for $94.5 million, ACR Energy Partners agreed to provide for the heating and fire prevention systems to remain powered-up. But the energy coop claims it is nearing bankrutpcy and cannot sustain the energy costs much longer without payment.
About ACR Energy Partners
ACR Energy Partners is a joint venture formed in 2011 between South Jersey Industries Inc. and DCO Energy LLC. The cooperative has a $3 million per month contract to supply energy to the Revel Casino. One of the reasons the Revel Casino went bankrupt was due to an unrealistic budget, and the three million per month bill was part of that problem. Brookfield Assets Management, the Canadian-based company which owns the Atlantis Casino in the Bahamas and manages a casino on the Las Vegas Strip, claimed AGR Energy was being unreasonable in renegotiating for the lower energy costs.
Brookfield Assets Management was prepared to buy Revel Casino, but the Brookfield balked at the $3 million per month energy price tag and backed out of the deal. When Polo North became the provisional owner, Glenn Straub went to court to have the ACR Energy contract voided. Everyone involved with the deal seems to think the energy costs are too much, but ACR Energy says it cannot continue to operate without an influx of cash.
South Jersey Industries Statement
Don Lockwood, a spokesman for South Jersey Industries, told Bloomberg Onine that ACR Energy Partners had nothing to do with the Brookfield negotiations. Instead, the bondholders of ACR Energy are the ones who negotiated–and their negotiations went nowhere.
The energy company said in September 2014 that it was in danger of going bankrupt, just like Revel Casino itself. ACR Energy said that the bankruptcy process of Revel Casino put their venture in its own bankruptcy crisis. During the months-long bankruptcy proceedings, Revel AC continued to make payments, but with a fair amount of throttling involved. As statement from ACR Energy in September said they were subjected to a “drip-feed of payment,” a process which in turn led to an “an escalating liquidity crisis” within their own company. It would seem the bankruptcy of Revel Casino has had a cascading effect, where everyone connected eventually has financial problems.
The company has said one reason it has kept a continuous energy supply is to reduce the risk of mold and mildew that would increase, if the building was unlit most of the time. Such a service is therefore to the benefit of the owners of such an asset.
Finding True Value
One way to end that cycle is for the market to right itself. In other words, the price of Revel Casino is likely to continue to drop until a buyer can purchase the casino and make a profit. To do that, the debt payments on the purchase have to be manageable. So far, the $100 million purchase price does not appear to have been feasible.
If so, then the price of Revel Casino is likely to continue declining. Stuart Moskovitz, the lawyer for Glenn Straub, recently suggested that Revel AC’s decision to terminate their sale of their bankrupt casino would be a financial disaster for them. Moskovitz suggested that the next auction would yield a much lower price–which is likely the case.
Loss for Revel AC
So far, Revel AC has been able to pocket a $11 million deposit from Brookfield and intends on pocketing a $10 million deposit from Glenn Straub. But the Polo North lawyer suggested the next sale price might be closer to $40 million. If so, then Revel AC would have frittered away $33 million in funds by terminating the casino purchase to Polo North.
The same might be said for ACR Energy Partners. While the bondholders might think they have a contract which assures $3 million and therefore they will enforce the terms of that contract, it is shortsighted, even myopic, to think it’s a sustainable price. When every single buyer has balked at the price, then the price is too high. Even if Glenn Straub or someone else buys Revel Casino for the bargain-basement price of $40 million, it will do them no good, because the cost of operating will be $36 million per year. Imagine paying the full price of your home in energy costs each year and tell yourself is such payments are feasible.
It appears that ACR Energy Partners, despite having a monopoly on the energy costs for Revel Casino, will need to come down on its monthly price in order to stay in the gaming market.
