A Carlyle Christmas

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.

  1. lizard19

    welcome to 4&20 Ross! and thanks for the info. i didn’t know this sale is still pending approval. that’s very interesting.

    now tell me, have we recently played pool together?

  2. kp

    I think this is interesting and would like to know more about the issues, so thank you to Ross for posting and for future updates. I’m wondering if Ross would let readers know the factual source for his enumerated observations. I’m particularly interested in the sources for the observations he posted at 1 and 3 – annual water rates for missoula vs. other MT cities and a source for the 40% leak flow. Thanks in advance.

    • rosspkeogh

      I will be happy to, once the MT PSC’s website starts working again and i can download the report… The figures in 1 are from a table that was estimated by a friend and are based on 2008 data (which i can email to you, or post when i figure out how). I hope to get more recent, and more accurate data, as this moves on.

  3. interesting. could this be the early warning signs of a corporatized world where governments and politicians become less and less relevant to our every day survival? where instead of living in a country where people control their own destiny through elected representatives we become subservient and dependent on massive entities who elect their leaders by proxy vote of those who hold the most stock certificates? entities who are too big to fail and so big they have no competition?

    one world; one market to rule them all, without end. amen.

  4. My guess is that what you’ll get is fluoridation, and that, boys, will eliminate your objections over time by eliminating the brain cells responsible for argument. It won’t mean anything to me, though, I got a real degree from MSU when it was still possible to get one, and was smart enough to get out of Montana when the getting was good. By the way, for the woman from Bozeman who claimed her tooth decay couldn’t have been caused by fluoridation, Bozeman’s water is fluoridated, or was then. Missoula has held out, but it won’t last long given the direction of public education.

  5. mr benson

    Water treatment plants and water distribution infrastructure is expensive. Water, itself, is a scarce commodity.

    When it comes to adequate supplies of water, god bless the child, or the city, that’s got its own. But that blessing will come at a high price. The cost of water will go up regardless of whether it’s owned by a city utility or a private entity. It’s the control of the water and the water rights that is the real issue.

  6. Binky Griptight

    Water is a scare resource, and you can be sure that the guys and gals with the money will control it any chance they can get.

    The issue is whether Missoulians are comfortable with a private investment bank owning their water supply. And, more importantly, whether there is anything we can do about it.

    • mr benson

      Binky I think you and I see the same issue: what if the Carlyle (spelling?) group decides it can get a better price for water from California? Sort of like…power?

  7. petetalbot

    Late to this conversation, Ross, but thanks for the info. Please keep us posted.

    There’s no question in my mind as to why Carlyle wants to buy Mountain Water. More important than weapons or oil is food and water. Control those and you control the world. That’s why private equity funds and multi-national corporations are buying up water rights and arable land throughout the world. It isn’t a pretty trend.

    Carlyle made billions from the defense (weapons) industry and currently 24% of its portfolio is in energy. So why not water? It just makes sense. I imagine it will start snapping up ag. lands in the not too distant future.

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