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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsCarlyle Group says it doesn't own Montana water company because it owns the companies that own it
Source: Missoulian
The Carlyle Group claims it does not own Missoulas water system and therefore cannot be named as a defendant in the citys condemnation lawsuit, according to court documents filed by Carlyles lawyers on Tuesday.
... Carlyles claim that it doesnt own the water system would seemingly contradicts that it would have to approve any sale of Mountain Water, as well as a 2013 letter from Carlyle Infrastructure managing director Robert Dove to Missoula Mayor John Engen indicating a willingness to listen to offers to buy Mountain Water. In the letter, Dove stated that Carlyle Infrastructure is honored to be the ultimate owner of Mountain Water. Carlyle ultimately rejected two city offers to buy Mountain Water in the past.
Carlyles argument to the court is based on the fact that Missoulas water system falls under a tangled web of corporate ownership. Mountain Water owns and operates the water system, and is itself owned by California-based Park Water Co. Park Water and two California water utilities are owned by Western Water Holdings, and Carlyle Infrastructure Partners LP is the managing member of Western Water Holdings. Carlyle Infrastructure is a division of the global firm The Carlyle Group, which invests in public and private infrastructure projects and businesses.
In short, the essence of Carlyles argument is that although it owns the companies that own Mountain Water, it does not own the water system. And that means the city of Missoula has the right to sue only the direct owner of the water system, Mountain Water.
Read more: http://missoulian.com/news/local/carlyle-says-it-isn-t-owner-of-mountain-water-can/article_82fd9576-e6b1-11e3-9f2d-001a4bcf887a.html
L0oniX
(31,493 posts)badtoworse
(5,957 posts)The standard for an eminent domain proceeding should be very high. Missoula should have to prove that there is no reasonable alternative to the taking and I haven't seen any argument that substantiates it.
pnwmom
(108,980 posts)related to water should be very low.
badtoworse
(5,957 posts)Precedents have consequences and I think you should consider whether you want the government to be able to take things when there are other alternatives or there is no demonstrable need.
pnwmom
(108,980 posts)deteriorate, disregarding the region's long term needs in favor of short-term profits for its shareholders. Missoula shouldn't be the only municipality in Montana without a public water system. This should have happened long ago.
badtoworse
(5,957 posts)I've been in the electric power business for more than 30 years and I would expect that water companies, like electric companies, are subject to regulation by the state Public Service Commission ("PSC" . That means that Mountain Water can only charge what the PSC approves in their tariff. That regulation also means that their returns on equity are approved by the PSC. I have to assume that Carlyle was happy with those regulated returns or they would not have purchased Mountain Water. Carlyle would be entitled to earn that same regulated return on additional capital expenditures made by Mountain Water which would include the cost of upgrading and expanding the system to meet future needs. For that reason, it seems illogical to me that they wouldn't be willing to invest additional capital into Mountain Water - they'd make money on that investment. In fact, private equity companies, like Carlyle, look at expansion opportunities as a potential upside when they evaluate a potential investment. This whole situation makes no sense to me.
In my experience, it's unusual for a regulated utility not to make capital investments when they needed. The only reasons I can think of are 1.) they don't like the returns they're getting; 2.) They don't think the PSC will approve the expenditure and allow them to earn a return on it; or 3.) they can't raise the money. I'd be surprised if any of these applied here.
As far as public ownership goes, why should that be an issue? Electricity is just as much of a necessity as water and most people in the country are reliably served by investor owned power companies.
pnwmom
(108,980 posts)In 2011, the global investment firm The Carlyle Group acquired Mountain Water Co. and its parent company, Park Water in California. Missoula remains the only major city in the state of Montana that does not own its water utility.
As part of its complaint, the city argues that Mountain Water ratepayers under private ownership are lining the pocketbooks of faraway investors. In the 2013 fiscal year, the Carlyle Groups three founders earned $750 million, or roughly more than $133,000 each per hour, and they had use of a private airplane valued at $1.1 million.
SNIP
Defendants unwillingness to make improvements to the Citys Water System is evidenced by the decaying and leaking condition of the Systems Infrastructure and Defendants notable decrease in spending on necessary maintenance and repairs.
The City understands that Missoulas Water System operated by Defendants incurs and pays approximately $2 million per year to Mountain Waters parent company for administrative support. Upon acquiring the Water System, the City will be able to operate it at cost.
badtoworse
(5,957 posts)I think this will hinge on whether the city can convince the judge that Carlyle is putting the city at risk by its operation of the water system.
The case could well get complicated because the PSC should be involved. It's fair for the judge to ask if the city complained to the PSC about Carlyle not using good practice in operating and maintaining their system. That would be the proper venue for the city to seek relief if a public utility is providing poor service. Assuming that happened, the PSC's action be very relevant. If the PSC was OK with how the system is being operated, the city's case becomes very weak. If the PSC had a problem with how the system was being operated, they would almost certainly have done something about it, but the article did not say that. I would guess, that the city never went to the PSC. If that's the case, then the judge might throw the case out and tell the city to complain to the PSC.
That stuff about Carlyle making money and what they are doing with it is mostly irrelevant. It's intended to sway public opinion, not the judge. There is nothing wrong with an investor making money by owning a regulated utility and the PSC approves the water rates. What Carlyle does with the money is their business.
I think the city is going to lose.
Shandris
(3,447 posts)It owns companies that own companies that break into subsidiaries that own other subsidiaries, and by the time you reach the end of the chain when something horrible happens, there really isn't much you can do to get to the head of the snake.
tech3149
(4,452 posts)why should they be allowed to "own" other people? Wouldn't that be a form of slavery? Can't have it both ways unless you dismiss the idea of hypocrisy.
Shandris
(3,447 posts)Of course, heaven forbid we have any degree of parity between actual people and, you know, highly-moneyed corporations. What crazy ideas will we dare think up after that? Income equality that isn't measured in multiples of thousands?!
TeamPooka
(24,229 posts)gollygee
(22,336 posts)If you own A that owns B, you own both A and B. Morons.
If I hold in my hand a rock that contains a gem, I hold both the rock and gem in my hand.