RE: Water Utilities
Hi Paul -
This was in our local paper today and got me thinking that there are many local municipalities having budget problems and privatizing their water systems (where possible) might benefit those companies acquiring the municipal franchise. Could be a "Value" opportunity.
San Jose considering privatizing its municipal water system
Updated: 07/05/2010 10:12:19 PM PDT
mercurynews.com
From the article:"...The plan, although still in the early stages, could mean a windfall of $50 million or more for the city, although it almost certainly would result in higher water bills for some San Jose residents.
"I'm trying to be creative about balancing the budget. This is an obvious potential source of money, and I have to look at it seriously," said San Jose Mayor Chuck Reed on Friday...."
I think SJW is the proposed buyer that sent the letter to the major. I have discussed SJW over the years and they remain profitable and own a lot of valuable assets (mostly land). They would make the perfect operator if they could acquire the City's water assets on good terms.
"...A month later, a potential buyer came forward.
The San Jose Water Co. is a privately held company that provides water to 1 million people in Los Gatos, Saratoga, Campbell, Monte Sereno, parts of Cupertino and 80 percent of San Jose., The company's president, Richard Roth, sent a letter of interest to Reed in April offering to pay $54 million to buy the city's water system outright. He also said his company would be willing, as part of a sale, to support a 2 percent "franchise fee" on all San Jose Water customers that would provide the city with $4 million a year...."
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I am not too sure what the exact play would be but city's around the nation may look to San Jose's solution to privatize their water services. This would be a once in a life time opportunity for a few of these mid sized companies to jump in and acquire these "water" franchises and help the selling cities solve their short term financial short falls.
Here are a few possible candidates for review.
finance.yahoo.com
You have studied this space much more than me. What's your take and if I was to buy a basket of the more profitable water companies, which ones do you suggest and which ones might be the value plays?
EKS |
