Council presses staff on vendor payment terms, surety bond, maintenance costs and rate impacts

Councilors used the workshop to scrutinize procurement risks, long‑term service agreements and financing assumptions behind the Ames Municipal Energy Center proposal. Members focused on three interlocking concerns: the upfront payment schedule required by the preferred vendor, the size and purpose of a potential surety bond, and projected ongoing maintenance and fuel costs tied to vendor heat rates.

Staff said Wartsila's contract includes a standard payment schedule that demands 25% down on signing and another 25% within eight months. To mitigate vendor default risk associated with large up‑front payments, staff discussed a surety bond option quoted around $1.5 million — staff said the bond would be a pass‑through cost and that council could choose whether to require it. "That surety bond would be $1,500,000... and when we were looking to determine what the value of something like that would be for us, we looked at Wartsila's track record," Presenter (Speaker 12) said. Staff had begun reviewing Wartsila's North American operations and corporate finances.

Council also pressed on long‑term service and fuel costs. Staff noted differences in the vendors' LTSA proposals (Wartsila: ~$5.5M per five years; Everlance: ~$13.2M per five years) and that Everlance's engine offered roughly 8% better heat‑rate efficiency — which could lower fuel expense if the units run extensively. On rates and financing, PFM modeling presented by staff suggested the project could be funded with a conservative scenario of a 2.5% annual electric rate increase beginning in 2027 for about 18 years (with ~1% for debt service and 1.5% inflation assumption), but staff emphasized assumptions and noted modeling includes capital plans and potential revenues from selling capacity from retained assets.