Archive for December 28th, 2010

By Ross

I think many of us saw the Missoulian’s story on the 23rd of December.  For those of you that missed the story (I suspect that was the intent of announcing two days before Christmas) here it is.  Park Water Co., which owns Mountain Water Co. (Missoula’s water utility), is to be sold to the Carlyle Group.  Yes, that Carlyle Group, the second largest private equity fund in the world which manges around $90 billion in assets, and possibly soon your local water company.

Park Water Co., is a small family run business based in California that manages two other private water utilities similar in size to Missoula with a lot of management (more on that in a later post).  We do not really have a sense of what the deal is worth, but I would guess that Carlyle is assuming all of Park’s liabilities and probably paying $75-100 million (the fund typically does not touch anything less than $100 million).

Who is Park Water Co. and why do they own our water utility?  According to Mountain Water Co.’s website, they purchased the wells, pipes and other infrastructure in 1979 from the Montana Power Co.  Which had purchased them from the Missoula Light & Water Company in 1930.

Now, I do not have a problem with private companies owning utilities, or doing any number of things that the public sector has traditionally done (except maybe defense contracting).  But I have to ask the question, what value did Mountain Water Co. bring, and what value will the Carlyle Group bring to Missoula?  This question, which will be examined in detail by the MT PSC over the coming months as it decides whether to approve the sale, is in my opinion fairly easy to answer (put your guesses in the comments).  This also means that the deal is not done, and that we have a say and possibly other options as to whose hands our water utility ends up in.

Here are some observations to consider:

  1. The Mountain Water Co. charges Missoulians some of the highest rates in Montana. Average rates in Missoula (before the latest rate increase) were $416 annually, compared to $396 for Billings and $301 for Great Falls.
  2. Missoula is the only municipality that does not own their water company in Montana.  Citizens from Absarokee to Virgina City some how manage to get by without the global expertise of private equity.
  3. Mountain Water Co’s pipes leak really bad.  Recent estimates (p.3) show that 40% of the water Mountain Water Co. puts into their pipes leaks out, which as one public service commissioner put it is “unprecedented”.
  4. Mountain Water Company is currently requesting a $1.8 million annual rate increase, $600,000 more than the Montana Consumer Council thinks they need to cover normal cost increases over the last two years, from their 2008 rate increase.

Over the coming months I will try to do my part to keep you informed about about the progress of the deal, financial details on the Carlyle Group, and how to get involved.  I look forward to your input and observations.

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