Sunday, October 26, 2014

Behemoth Carlyle Loses Taste for Public Water

While our Goliath federal government caters to private equity underwriters (PEU's) at numerous turns, two small municipalities have taken on The Carlyle Group's Park Water.  Missoula, Montana and Apple Valley, California loaded an eminent domain stone in their sling. 

Missoula's stone has considerable velocity and is ready to launch at Carlyle's three eyed monster, which has an eye for each Carlyle Group co-founder.  The Missoulian reported:
The city of Missoula can afford to bond for as much as $102.63 million to buy Mountain Water Co. based on current rates, according to Barclays Capital. 
Note that $103 million is what Carlyle paid for Park Water and its three divisions in 2011.  Barclays suggests that Carlyle get its money back from the sale of one division, Mountain Water.  Rest assured, Carlyle had four years to pull management fees and dividends from Park and its three subsidiaries.  From numbers released in the Mountain Water case this will amount to $15 million, $10 million in management fees and $5 million in dividends by year end.

One of the other two divisions of Park Water appears ready to give Carlyle another headache. Victorville, California's Daily Press wrote:

A study commissioned to explore various financing options for the town’s purchase of Apple Valley Ranchos Water Company was released last week. 

The Apple Valley Town Council authorized the release of its “Financial Feasibility Analysis for the Acquisition of the Apple Valley Ranchos Water System. 

The town is pursuing the purchase of AVR in order to gain local control over the town’s water resource and stabilize the ever-rising rates the town has experienced over the last decade, according to a news release.
Here's a hint as to how complex Park Water's corporate structure actually is.  This comes from the Apple Valley press release:

The Carlyle Group, an investment firm based in Washington, D.C. and the current owner of AVR, has said Park Water Company, of which AVR is a part, is on the market and for sale. An announcement of a potential sale came in late September from Algonquin Power & Utilities Corp., a Canadian company, which said its regulated utility business, Liberty Utilities, agreed to acquire Western Water Holdings LLC — the holding company of Park Water under the Carlyle Group. Park Water Company also includes the Mountain Water Company in Missoula, Montana and Park Water Company in southeast Los Angeles. 
Two of Park Water's three divisions are challenging The Carlyle Group.

Carlyle is used to being catered to by local, state and the federal government.  Each is to bring government business for affiliates, preferred taxation for PEU profits or millions in economic development incentives.  How dare they try to buy Carlyle assets for less than a three, four or five bagger!

The Carlyle Group found this so distasteful it will exit public infrastructure.  WaPo reported:

Seemingly tired of the back and forth, Carlyle is exiting business of bridges, water and highway stops after eight years. It’s going into energy infrastructure instead.
I hope a stone lands in at least one the Carlyle monster's three eyes before it packs up its weapons and moves to territory where it's easier to crush local opposition.  Energy fits the PEU bill.

Update 7-12-18:  Carlyle faces a bad faith lawsuit from the City of Missoula.  Might the PEU boys offer another puffery defense?

Update 7-21-19:  Our hot summer finds Carlyle thirsty for more water deals via a joint venture with VICO Infrastructure

Update 6-16-20:   Missoula's bad faith lawsuit against Carlyle has been delayed due to the coronavirus pandemic.  The city's attorneys say they have evidence of Carlyle Grouo fraud and malice.  If so, Carlyle will not want a public trial.