The Good, The Bad & The Ugly<br />ALEC 2010 Annual Meeting<br />Bob Patton, Sr. Principal for Education<br />robert.patton...
Overview<br />Good News*	<br />Touchstone Energy Co-ops providing 	superior service.<br />Building the value of membership...
Top Ratings<br />Easy to understand bills		9.2<br /> Provides reliable service*		9.0<br /> Treats members fairly			8.9<br ...
Good Ratings<br /> Good Value for the money*		8.4<br /> Looks out for you				8.3<br /> Communicates about costs		8.2<br />...
ACSI Satisfaction & Retention Scores (Independent Report by ACSI--3rd Quarter 2008<br />
Members  Respond to Values of  Co-op Model<br />Locally-owned and operated<br />Because consumers own, co-ops are more res...
The Membership Advantage<br />Those with some member identity are more satisfied AND Loyalthan those who self-identify as ...
Keeping Co-ops as Co-ops<br />Since inception 93 co-ops presented formal offers to “sell out”.<br />Seventy-two (73) offer...
Overview<br />Bad News<br />20 co-ops have voted to be purchased<br />Few know much about electric co-ops<br />View non-pr...
The BAD News Co-ops<br />Jordan ID	1945<br />Donnelly ID	1946<br />Phelan CA	1947<br />Bossier LA	1947<br />Vale OR		1949<...
The Equity Issue “Sells”<br />1998—Cap Rock, TX (Member Equity Conversion to stock)*<br />Member Options: <br />“Earn more...
 Dissolve Rather Than “Sell”<br />2010—Valley EC, LA (7,351 members out of 33,000 vote to “dissolve” the co-op and allow B...
The Equity “Sells” Difference<br />1995—Teche EC, LA Takes CLECO’s Second-time Offer<br />Members get $1,000 checks<br />2...
Overview<br />Ugly News<br />Current litigation  against some co-op’s cause. members to question trust in  co-op model.<br...
The UGLY News!<br />The Buyers Test & Attack<br />Poll co-op members<br />Talk to community & political leaders<br />Recru...
More UGLY News<br />The Buyer Promises<br />Checks to members<br />Lower rates<br />“Because equity is high, you’re paying...
New Players Making Inquires<br /> Third party entities soliciting some<br />    co-ops’ interest in selling to   “interest...
Handwriting on the Wall?<br />AEP’s stated vision:<br />“To maintain our leadership as the largest generation and transmis...
Even UGLIER News<br />Buyers Attack Boards That Refuse Offers<br />Accuse Board of blocking rate cuts<br />Protecting thei...
Common Traits in Successful ‘Takeovers’/Sellouts<br />Bad perception of co-op 	(poor/unresponsive service)<br />Little val...
Show me the money!<br />
Other Common Traits in Successful ‘Takeovers’/Sellouts<br /><ul><li>Bad perception of co-op 	(poor/unresponsive service)
Little value for what they pay </li></ul>(rates too high compared to others) <br /><ul><li>Capital Credits issues </li></u...
Vulnerability Check-up Exercise<br /> Aggressor Analysis Worksheet (AAW)<br />Risk Analysis Worksheet (RAW)<br />
Evaluating Your Co-op Score<br />Score of 30+ = CAUTION<br />Score of 40+ = WARNING<br />Score of 50+ = DANGER<br />
Anti-Takeover “To Do List”<br /><ul><li>Develop a strategic plan
 Assess competitive threats.
 Coordinate with your power supplier/statewide/others.
 Communicate value (what members get from their rates)
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  1. 1. The Good, The Bad & The Ugly<br />ALEC 2010 Annual Meeting<br />Bob Patton, Sr. Principal for Education<br />robert.patton@nreca.coop<br />July 26, 2010<br />
  2. 2. Overview<br />Good News* <br />Touchstone Energy Co-ops providing superior service.<br />Building the value of membership yields dividends.<br />Co-ops get strong marks for reliability.<br />Co-ops are a name you can trust.<br />*Touchstone Energy 2008 National Survey on “The Cooperative Difference”<br />
  3. 3. Top Ratings<br />Easy to understand bills 9.2<br /> Provides reliable service* 9.0<br /> Treats members fairly 8.9<br /> A name that can be trusted* 8.8<br /> Outage restoration 8.7<br /> Delivers on promises* 8.7<br /> Handles problems promptly 8.6<br /> Provides information on safety 8.5<br />* Key attributes for member loyalty<br />
  4. 4. Good Ratings<br /> Good Value for the money* 8.4<br /> Looks out for you 8.3<br /> Communicates about costs 8.2<br /> Gives money back* 8.2<br /> Helps manage energy 8.0<br />* Key attributes for member loyalty <br />
  5. 5. ACSI Satisfaction & Retention Scores (Independent Report by ACSI--3rd Quarter 2008<br />
  6. 6. Members Respond to Values of Co-op Model<br />Locally-owned and operated<br />Because consumers own, co-ops are more responsive <br />Co-ops are working to manage costs<br />Provide reliable service <br />
  7. 7. The Membership Advantage<br />Those with some member identity are more satisfied AND Loyalthan those who self-identify as “customers only”.<br />“Those who limit their relationship to “customer” rate their satisfaction with the cooperative 6% lower than members who acknowledge some level of member or owner identity.”<br />Touchstone Energy 2008 National Survey<br />
  8. 8. Keeping Co-ops as Co-ops<br />Since inception 93 co-ops presented formal offers to “sell out”.<br />Seventy-two (73) offers have been rejected by the membership <br />
  9. 9. Overview<br />Bad News<br />20 co-ops have voted to be purchased<br />Few know much about electric co-ops<br />View non-profit status as “inefficient”<br />Don’t want to “own” the thing<br />Little loyalty to co-op model<br />
  10. 10. The BAD News Co-ops<br />Jordan ID 1945<br />Donnelly ID 1946<br />Phelan CA 1947<br />Bossier LA 1947<br />Vale OR 1949<br />Beaver OR 1952<br />Sandy OR 1956<br />Freehold NJ 1958<br />Cotton AZ 1959<br />Palms CA 1965<br />Camp CA 1970<br />Clinton MS 1973<br />Cody WY 1986<br />Auke AK 1988<br />Fairfield ID 1992<br />Bossier C LA 1993<br />Jeanerette LA1995<br />Aurora ME 1995<br />Cap Rock TX 1998*<br />Valley , LA 2010*<br />
  11. 11. The Equity Issue “Sells”<br />1998—Cap Rock, TX (Member Equity Conversion to stock)*<br />Member Options: <br />“Earn more with your money” or credit on your bill. <br />Director Options: <br />Incentive Plan provides for granting options to purchase common stock & certain related rights to eligible officers and directors.<br />Employee Options: <br />Employee stock purchase plan to purchase common stock through payroll deductions. <br />
  12. 12. Dissolve Rather Than “Sell”<br />2010—Valley EC, LA (7,351 members out of 33,000 vote to “dissolve” the co-op and allow Board to accept sale offer-avoiding majority of all members voting required by law)*<br />Members Offered:<br />More than 20 percent lower rates & their equity interests<br />Board Offered:<br />Advisory role<br />Employees Offered:<br />Employees keep jobs<br />
  13. 13. The Equity “Sells” Difference<br />1995—Teche EC, LA Takes CLECO’s Second-time Offer<br />Members get $1,000 checks<br />20% lower rates<br />Hire board as consultants<br />Million dollar scholarship fund<br />Keep and promote employees<br />
  14. 14. Overview<br />Ugly News<br />Current litigation against some co-op’s cause. members to question trust in co-op model.<br />Some co-ops are being targeted for “takeover” and purchase inquiries offered.<br />Buyers will make lots of promises.<br />In “takeovers” Boards come under attack.<br />Buyouts occur where members are “in the dark” about the business they are selling.<br />
  15. 15. The UGLY News!<br />The Buyers Test & Attack<br />Poll co-op members<br />Talk to community & political leaders<br />Recruit “concerned” members<br />Open fire in the media<br />Demand a meeting with Board<br />Send in the poor<br />
  16. 16. More UGLY News<br />The Buyer Promises<br />Checks to members<br />Lower rates<br />“Because equity is high, you’re paying too much”<br />Employees will get jobs <br />“We’ll share equity in form of employee raises”<br />Service from “the pros”<br />“Because we’re bigger our service is better. Co-op employees have more opportunities to advance”<br />Keep “advisory board”<br />
  17. 17. New Players Making Inquires<br /> Third party entities soliciting some<br /> co-ops’ interest in selling to “interested buyers.”<br />Quentin Capital <br />ABP International, Inc.<br />
  18. 18. Handwriting on the Wall?<br />AEP’s stated vision:<br />“To maintain our leadership as the largest generation and transmission company in the United States.<br />“To maintain our leadership as the largest electric distribution business throughout the regions we serve.”<br /> 2008 AEP Annual Report<br />
  19. 19. Even UGLIER News<br />Buyers Attack Boards That Refuse Offers<br />Accuse Board of blocking rate cuts<br />Protecting their “free vacations”<br />Private investigator reports on Board members<br />Top IOU execs join the co-op<br />Spend over $1-million to elect sympathizers to board of directors<br />Promote amending laws and force sale vote<br />
  20. 20. Common Traits in Successful ‘Takeovers’/Sellouts<br />Bad perception of co-op (poor/unresponsive service)<br />Little value for what they pay <br />(rates too high compared to others) <br />Capital Credits issues <br />(members get all their money back)<br />Little trust in co-op model <br /> (board not fulfilling fiduciary duty)<br />
  21. 21. Show me the money!<br />
  22. 22. Other Common Traits in Successful ‘Takeovers’/Sellouts<br /><ul><li>Bad perception of co-op (poor/unresponsive service)
  23. 23. Little value for what they pay </li></ul>(rates too high compared to others) <br /><ul><li>Capital Credits issues </li></ul>(members get all their money back)<br /><ul><li>Little trust in co-op model </li></ul> (board not fulfilling fiduciary duty)<br />
  24. 24. Vulnerability Check-up Exercise<br /> Aggressor Analysis Worksheet (AAW)<br />Risk Analysis Worksheet (RAW)<br />
  25. 25. Evaluating Your Co-op Score<br />Score of 30+ = CAUTION<br />Score of 40+ = WARNING<br />Score of 50+ = DANGER<br />
  26. 26. Anti-Takeover “To Do List”<br /><ul><li>Develop a strategic plan
  27. 27. Assess competitive threats.
  28. 28. Coordinate with your power supplier/statewide/others.
  29. 29. Communicate value (what members get from their rates)
  30. 30. Review capital credit policies & practices
  31. 31. Update member phone & e-mail list
  32. 32. Survey your membership
  33. 33. Communicate Opportunities & Solutions</li></ul> Identify co-op supporters.<br /> (Re)sell co-op members on co-op values and advantages.<br />
  34. 34. Anti-Takeover “To Do List”<br /><ul><li>Adopt Law, Bylaw and Policy changes
  35. 35. “No Sale” Resolution .
  36. 36. Takeover policy.
  37. 37. Right of First Refusal Agreement.
  38. 38. Build relationships with community leaders
  39. 39. Educate your employees & use them!
  40. 40. Board and management decisions and reasons.
  41. 41. Don’t let buyers & others divide them.</li></li></ul><li>Anti-Takeover “To Do List”<br /><ul><li>Be prepared to respond to any offer
  42. 42. Rehearse how you’ll respond & who will respond
  43. 43. Know what you’re really worth
  44. 44. Organize
  45. 45. Media relations training for managers/others.
  46. 46. National & Statewide support funds.
  47. 47. Conduct a “simulation” exercise</li></li></ul><li>The Bottom Line<br /><ul><li>Know your co-op’s vulnerabilities
  48. 48. Know what your co-op is worth
  49. 49. Communicate the co-op values
  50. 50. Practice what you preach
  51. 51. Be Prepared</li></li></ul><li>“You can’t go home again”<br />Thomas Wolfe<br />

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