Case Study

York County Solid Waste Authority

Its plant operator notified the Authority, that the operator's parent company, Westinghouse Electric Corporation, had decided to exit the trash burning business and would like to reassign the operating agreement. Westinghouse proposed Montenay International as its successor. Currently the Authority is considering this request and is negotiating a possible new operating agreement with Montenay. The Authority's goals are to maintain the financial support provided by the Westinghouse's parent guarantee, to have a competent and financially stable operator, and to structure a new operating agreement that will eliminate some of the areas of disagreement in the current agreement.

PFM has been involved from the beginning of this process. We have provided a credit review of Montenay and its parents to assess the suitability as a substitute for Westinghouse. We have developed a series of requirements for Montenay to meet in order to provide the Authority sufficient comfort for them to be an acceptable credit substitute for Westinghouse.

PFM assisted in the rewriting of the operating agreement. Our focus has been on the fee structure, payment terms, liquidated damages, termination clauses and the additional credit requirements. PFM modeled the Authority's cash flow and will model the impact of the changes made to the service agreement to ensure that economic viability of the plant is not impaired.

In the end, PFM valued the Westinghouse contract and the Montenay contract to determine the economic differential, if any to be included in any termination settlement. In addition to the economic differential, the termination settlement addressed the ongoing liabilities and performance obligations.