Thursday, June 23, 2011

Carlyle's Montana Infrastruction

Private equity underwriters (PEU's) claim they're the answer to America's crumbing infrastructure.  The Obama administration feels likewise.  Deals range from roads, bridges, ports, water, sewer, airports,

The Carlyle Group's bid for Missoula, Montana's city water company provides valuable lessons, as did Chicago's parking deals.  How high will water rates soar?

Billings Gazette reported:

The Public Service Commission, which regulates utilities in Montana, also said the Carlyle Group should discuss its plans to become publicly traded and how those plans might affect future operation of Missoula’s Mountain Water Co.

PSC staff has asked the Carlyle group what investment returns it expects and receives on five other companies within its infrastructure fund, which plans to buy Mountain Water’s parent company.
Carlyle's response is at least twofold.  It had Mountain Water challenge the Public Service Commission's authority to review and approve the sale.  Then it asked that any information it shared be held confidential.

The PSC voted to issue a “protective order” that will prevent public disclosure of sensitive financial information that Carlyle is providing to the PSC while the agency reviews the purchase of Mountain Water.

Commissioners and their staff said the information is a legitimate trade secret, is needed to evaluate the purchase, and won’t be provided to the PSC without the protective order.
Carlyle's target is happy to sell water to government clients.
During the fall of 2000, Mountain Water acquired the system at Fort Missoula, serving businesses such as the Forest Service, Historical Museum, Army Reserve, National Guard, and Bureau of Land Management.
Carlyle wants the government to kick in cheap financing to make deals doable.  Also, it expects regulators to carve out monopoly zones for infrastructure projects.
Yet, financial information is a trade secret?  Only in a PEU world.  Does that mean Carlyle's looming S-1 will self destruct after reading?

Update 6-30-11:  Mountain Water lost its challenge.  The Public Service Commission will hold a hearing on the sale in late September.

Update 10-20-13:  Carlyle purchased Mountain Water and pulls $2 million in management fees and overhead cost from locals on an annual basis.