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Established in 1883, UND is the state’s oldest university. Its sprawling campus includes 240 buildings across 550 acres serving 13,000 students. As the first university in the coun-try to offer a degree in unmanned aircraft systems, it is best known for the John D. Odegard School of Aerospace Scienc-es (UND Aerospace), which houses a majority of its fleet at the nearby Grand Forks International Airport. Powering the bustling and growing campus is a coal-burning steam plant, which dates back to 1909.
In 2016, the university calculated the steam plant’s Facility Condition Needs Index (FCNI), which compares the total fa-cility deficiencies to the total replacement costs. The lower the score, the better the facility’s condition. Typically, a score over 0.10 classifies as a poor rating. The steam plant’s score was 0.55. It was a glaring issue that needed attention. Five of the seven boilers were past design life and the other two needed immediate repairs. In 2018, the plant’s FCNI score increased to 0.72, requiring nearly $50 million for repairs.
Associate Vice President for Facilities,
University of North Dakota.
Pieper grew up on a family-owned dairy farm in Minnesota. Having been raised by parents who worked as mathemati-cians, he had a high aptitude for the subject and a keen eye for solving problems. When faced with challenges on the farm, his approach to solving problems started at the root cause, developing long-term solutions to prevent problems from re-occurring. This same approach served him well throughout his entire career.
He received his bachelor’s degree in General Management and his master’s degree in School Business Management from the University of Wisconsin-Whitewater. From 2007 to 2014, he served as the Vice President of Finance and Operations for Western Technical College in La Crosse, Wisconsin, where he served as a member of the college’s senior leadership team.
In 2014, Pieper joined Winona State University’s Facility Services department as Assistant Vice President. At Wino-na, he championed the university’s master facility planning, reorganized the facility department, oversaw the installation of two federally funded sub-grade pedestrian railroad cross-ings and managed the relocation of the College of Education (Education Village).
When Mike stepped into his new role at UND, it was clear that the first problem that needed to be addressed was the steam plant.
Pieper, along with his peers, immediately began preparations for proposing a P3 to build a new natural-gas-powered steam plant. UND had two things working in its favor: data and knowledgeable people.
In 2018, UND announced its partnership with Johnson Con-trols. Energy Services Media (ESM) recently sat down with Pieper to gain an inside look into the unique P3 model.
ESM: After learning the state law allows a private operator agreement, what were the next steps?
Pieper: We needed to identify a source to accomplish the ultimate goal of building a new plant that wasn’t going to take away funding from our academic mission and existing projects.
Below: UND’s new steam plant is 12,000 GSF smaller than original.
(Photo by Mike Hess, UND)
(Left to Right):
- Jake Terzo, Business Development Manager;
- Jenn Abbott, Business Development Director, P3;
- Justin Gibb, Area Operations Leader;
- Lon Bannister; Solutions Development Leader
- Edward Allen, Energy Solutions Development Engineer;
- Lyle Schumann, Director of Business Development North America;
- Chuck McGinnis, Vice President of Sales, Performance Infrastructure;
- Mark Reinbold, Vice President and General Manager, Performance Infrastructure;
- Bradford Estadt,Project Executive, Performance Infrastructure;
- Sean Maher, Business Development Director;
- Doug Maust, Market Team Engineering Manager;
- Steve Williams, Project Development;
- Steve Page (subcontractor), Project Manager at SC Page & Assoc.
One thing we had in our favor was a lot of due diligence over a five year period. We had very knowledgeable people
with Grand Forks Mayor Michael Brown and State Sen. Ray Holmberg,
throw the ceremonial dirt on a new steam plant project that will replace the
century-old plant now located in the heart of campus. (Photo by Jackie Lorentz, UND)
We both agreed that the solution was there and we could hit our target. We created a pre-development agreement where we shared the cost to dig deeper. I call it audit grade research, meaning we want to come out of that pre-development agreement with all the information we need to populate a multi-year long-term agreement.
We anticipated that the pre-development stage would not take long. However, we had to consider the needs of external university and government partners. That process took about six months.
From there, we were off and rolling and entered into a development agreement. We were proactive and started to pre-order materials.
We moved rather quickly. We are ahead of schedule and the budgets are holding well, so we are delighted with the outcome.
Below: UND High Performance Center after LED retrofit. (Photo by Johnson Controls)
Pieper: Enwave, Burns & McDonnell and Johnson Controls.
When we created the RFP, we asked for a couple of specific things. We wanted a firm to be the lead for the project. Many people wanted to build it, some wanted to design it, but we wanted to hire somebody to take the lead.
We were very upfront when informing interested firms what we were looking for in a lead firm. We made it clear that this project only gets done if it is legal and receives political acceptance.
We needed to be politically sensitive and actively engage stakeholders.
Pieper: Johnson Controls really took being the lead to heart.
They brought the communication and the political re-lations people to the table. In addition, they saw the value of bringing the legal expertise upfront in the interview process.
Pieper: One of our priorities was “certainty.” We understand the inputs, costs and revenues we have to extract from the steam plant to keep it operational. We also know that, like any other capital project, investments are going to be required over time. We wanted to avoid the start-stop mentality of a traditional construction project, continually questioning if we had the budget or approval to fund the project.
We embedded over the full life of the project a require-ment for maintenance and scheduled capital invest-ments. This made us feel comfortable that we would be getting back a valuable asset at the end of the con-tract. This further allows us options at the end of the agreement to extend the contract or return the plant to university operations.
It was important to us that the asset was going to be in good shape for the long run. We wanted Johnson Con-trols to be able to take the risk of making sure it’s prop-erly staffed and operates with maximum efficiency.
Pieper: We issued debt to fund the project. Johnson Controls is committed to paying for that debt. Johnson Controls recoups the money to pay for the debt through selling steam to the university. We have a contracted rate in place. Inflationary factors were built into the agreement. But in general, that’s how the money’s going to flow.
Since we were anticipating entering into a 40-year con-tract, we saw this as an opportunity to look at the cam-pus holistically. We wanted to capture savings where we could and reduce the amount of deferred maintenance. The length of the contract provides additional opportunities that we typically wouldn’t see under a traditional performance contract.
The energy savings projects throughout campus were included as part of the steam plant project, which provided cost-saving efficiencies to help improve the financial profile. A portion of the revenue generated by the sale of steam will offset the debt. These revenues will also pay for the operations, capital improvements and life cycle management of the plant.
Pieper: One of the attractive things about a P3 is that it provides a lot of capital upfront. Some institutions may be a little bit more leveraged than others, even in terms of things like tuition rates.
UND is one of the best institutions in higher education in terms of being very under leveraged and our tuition is way below the market. Our quality of education far exceeds many in our regional market who are charging double.
It was not a necessity to raise a bunch of capital. We had little to no debt. Without debt being a key driver, I think the investment model just wasn’t attractive.
Pieper closes the interview with a sense of reassurance.
Pieper: In the past, we’ve suffered through some devastating floods and some huge business continuity issues.
If we lose our steam plant in the middle of winter, we’re sending students home. We’re going to have a great amount of damage done internally within our buildings. To have that partner be there to troubleshoot is very comforting to the university and me.
I feel a little bit more comfortable having Johnson Con-trols available if I notice we’re getting a little low on diesel fuel. They will be there to pull some levers and make sure we have the backup that we need. At the end of the day, I sleep a lot better knowing that my phone’s not the first to ring.