Monthly Archives: November 2005

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Why RWE is selling

RWE AG of Germany is selling not only its American Water Works subsidiary, but also its British water company, RWE Thames Water.  But why?
 
Reuters reports the reason is to “allow RWE to focus on its more profitable electricity and gas businesses.”  Specifically (emphasis mine below):
“The concept of a global water player has not really worked,” [RWE Chief Executive Harry] Roels said, pointing to limited synergies between North American, UK water and European energy business.
 
But the firm said Thames Water’s continental European activities, excluding Pridesa in Spain, would be integrated into its energy unit because they offered cost-efficiency synergies.
 
“Scale and synergy effects in the water business are regional not global,” Roels said.
 
He said the sale of its water business would make the company less capital intensive and provide more financial flexibility with substantially improved free cash flows.
 
RWE Thames Water’s operating profit dipped 4.8 percent to 619 million euros in the six months to June. The unit accounted for about 18 percent of RWE’s group operating profit, and about a quarter of RWE’s estimated enterprise value.
 
Thames Water and American Water, its U.S. water unit, face high infrastructure investments in the coming years, but the ability to raise prices to pay for it are limited by regulators.
These statements raise questions for Peoria as its next opportunity to purchase the water company approaches in a few years.  How much of the “high infrastructure investment” is needed in Peoria?  And will water bills be lower under public ownership by a cash-strapped city in such circumstances or under ownership of a large private company that has the leverage to make up for those costs in other, more profitable communities?  Roels said that “scale and synergy effects in the water business are regional not global,” and, we could add, not local either.  For Peoria to afford the purchase price and infrastructure investments, will not rates be prohibitively high?  And will that be one more reason families and businesses will choose not to live or locate in Peoria?

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Water company takeover attempt not unique

The [city] council’s vote to abandon takeover [of the water company] should have settled the issue. [V]oters went to the polls and changed the makeup of the city council. That new council said no to local ownership.  Even so, local ownership advocates continued to push for a city takeover.
The story sounds so familiar, but that quote isn’t from any Peoria publication.  It’s from the Kentucky Kernel in Lexington, Ky.  The water company in Lexington is Kentucky American Water, owned by the same German company that owns Illinois American Water, RWE AG.  A lot of the same arguments are made there as here.  Proponents of public ownership label RWE “as some German army massed to sack Lexington and take away the water entirely,” while opponents point out that “city governments are not subject to [commission] rate checks, and so a city government determined to use water revenue to enrich government coffers for other programs . . . would be unchecked.”
 
The big difference is the way each community is trying to take over the company.  In Peoria, there’s a contract that gives the city the right to repurchase the water company.  In Lexington, they’re trying to take over the utility using eminent domain.  That means they’ll have to condemn the water works in order to take it over.
 
Now that RWE has decided to put its American subsidiaries up for sale, Peoria and Lexington are thinking along similar lines.  “Maybe we can get this at a cheaper price,” third district councilman Bob Manning said in yesterday’s Journal Star article.  According to the Louisville Courier Journal, Lexington Urban County Councilwoman Linda Gorton said, “If they would be willing to sell by pieces, it would be a golden opportunity.”
 
And that is the question: will RWE sell all 83 water systems to a single owner, or will they sell some or all of them separately?  That decision will have a big impact on the next step Peoria and Lexington make.  Reuters reports, “In a statement RWE said options for the water business include an initial public offering and a sale to financial investors.”

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Water Company For Sale (or as they say in Weaver Ridge: “available”)

The Journal Star reports that Illinois American Water Company is for sale.  Bill Dennis, still upset over the city council’s wise decision not to buy the company, is predicting it will sell for more than $220 million.  Unlikely.  Remember, that inflated price was just for public buyers of the water company.  A private buyer will undoubtedly get a better deal.
 
And speaking of private buyers, Merle Widmer has an excellent post on this topic, as usual.  He suggests that the Peoria Area Advancement Group (PAAG), which donated a million dollars to the city to study buyout feasibility, take advantage of this golden opportunity to purchase the company and make all those profits for themselves.  There are so many advantages, as Merle deftly points out:  exorbitant profits, a lapdog ICC to give you all the rate increases you want just for the asking, a guaranteed revenue stream, the opportunity to make enormous profit when the City buys it out in a few years.  Plus, ownership would be local, which should give Chuck Grayeb some temporary relief.  He about pops an artery every time he talks about them dirty Germans owning our water. 
 
Yes sir, when I think of what a financial boon the water company is, I wonder why the Germans would want to sell it off.  I, like Merle, expect to see PAAG and other buyout proponents jumping on the opportunity to purchase this little gem.

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More Twinkies for Peoria

According to WHBF-TV in the Quad Cities, the Hostess factory in Davenport, Iowa, is closing down, and its production load will “shift to other bakeries in the region, mainly to Peoria, Illinois.”  The report doesn’t say that Peoria will be gaining any jobs due to the closing of Davenport’s factory, just more work.

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Ag lab creation to become commercial product

Scientists at the USDA Ag Lab on the corner of Nebraska and University have developed a sunscreen from soybean oil that is natural and bio-degradable.  The new product is called SoyScreen and is patented by the Agrigultural Research Service (ARS).  ARS recently granted an exclusive license to iSoy Technology Corporation in Cary, Illinois, a suburb of Chicago, to produce SoyScreen as a commercial product.  According to the USDA website:
SoyScreen owes its sunburn-preventing properties to ferulic acid, an antioxidant in rice, oats and other plants. To keep the antioxidant from dissolving in water, the Peoria researchers chemically bound it to soy oil using lipase enzymes and heat in an environmentally friendly process called biocatalysis. The resulting lotion won’t wash off from swimming or sweat, and is non-polluting, according to Laszlo, in the ARS center’s New Crops and Processing Technology Research Unit.
Here’s my question:  other than bragging rights that it was developed in Peoria, is this product (and others developed at the Ag Lab) benefitting Peoria?  Is there increased demand for soybeans from Peoria farmers?  Is the promise of the “MedTech District” (or “Renaissance Park” or whatever they’re calling it these days) the possibility that products like SoyScreen could be developed into commercial products locally?  I hope so, because it seems a shame that products created here are being developed in Chicago.

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Welcome to The Peoria Chronicle

Taking a page from the Bill Dennis playbook (imitation is the sincerest form of flattery, isn’t it?), I’ve turned my blog into an online magazine as well.  And that necessitated a name change.  “Summers in Peoria” was the name of my blog.  “The Peoria Chronicle” is “Your Ezine for Peoria News and Comment.”  I’ll probably change my URL eventually, but that seems fraught with problems, so I’m holding off on that one.  I’ve also (as you can tell) changed the template just to shake things up a little.  I even added a picture of myself, but I suppose I’ll have to get rid of it if traffic starts falling off because of it.  Ha ha!

Kellar Branch, Port District

Rail Service important for Peoria to be “hub of shipping”

 

I took Bill Dennis’s advice and took a look at WCBU’s new website.  Right on the front page is this story (reprinted here in its entirety because it’s short and I couldn’t find a permalink):
PORT DISTRICT STUDIED
Peoria – 11/3/05
The effort to make the Peoria region a hub of shipping has identified thirteen possible locations for development. A study from the Tri-County Regional Planning Commission looks at everything from the strength of air, water, rail, and highway transportation in the area to the kinds of goods that would likely come through a port. The study suggests 13 places in the six county region that could be developed into a port. It also looks at the constraints that could hamper such development efforts. They include having a limited number of interstate highways, and secondary roads that may not be adequate for major shipping corridors. It also includes restrictions on developing wetlands, flood plains, and other federally protected land. The study also points out limited rail capacity in the region. The Heart of Illinois Port District, now called TRANSport, will use the study to analyze the market, and eventually create a business plan for port developments. Leaders of the effort project if successful, the port district could create thousands of jobs in the area in the next ten to twenty years.
I would like to see this study, but I can’t find it anywhere on the web.  Specifically, I’m intrigued by the “limited rail capacity in the region.”  I wonder how they arrived at that conclusion.  And I wonder what impact closing down the Kellar Branch to make it a walking trail has on that conclusion.  As regular readers of this blog know, severing the Kellar Branch’s connection to the riverfront means Pioneer Park loses access to seven major rail lines — it will only have access to Union Pacific once the tracks are removed. Granted, it’s only one area, but what does it say about Peoria’s commitment to bringing in higher-paying jobs when it won’t even maintain existing competitive rail service in one of its prime growth areas?
What this study does, among other things, is show that rail service is not some antiquated, 19th-century mode of transportation.  It’s not only viable, but essential to cities that want to attract business and be a “hub for shipping.”  And if our capacity is limited, it’s only because the city has not made it a priority.  There’s not a whole lot Peoria can do about lack of highways or restrictions on developing federally-protected land.  But rail capacity we have, and should be exploiting. 

 

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Lyn Howard Costanza

Reading about former Pekin mayor Lyn Howard’s defense reminded me of the Seinfeld episode where George had sex with the cleaning lady in his office.  When confronted by his boss, he feigned ignorance:  “Was that wrong?  Because if I had had any idea that that was against the rules….”

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The Constitution, abortion, and wet t-shirt contests

I just love hearing the U. S. Constitution invoked to protect a whole litany of questionable activities.

There’s the most onerous — abortion on demand — which is in the news again because of the nomination of Judge Alito to the Supreme Court. One would think, from listening to the talk shows or reading the paper, that there is no issue more important to the nation than protecting abortion rights. In fact, one would think there is only one qualification for sitting on the high court: whether one agrees to uphold Roe v. Wade. But I digress. Abortion only became a “right” after a 1973 Supreme Court invented its protection in the Constitution, overruling the legislatures of all 50 states. Whether you think abortion is right or not, the idea that the Constitution protects your right to get one is the fabrication of an activist court. As one dissenter in that decision noted: “To reach its result, the Court necessarily has had to find within the scope of the Fourteenth Amendment a right that was apparently completely unknown to the drafters of the Amendment.”

And now, in an unrelated case except for its appeal to the Constitution, comes Mulligan’s tavern which sued the city of Peoria for their “right” to hold wet t-shirt contests. According to the Journal Star article on the case, the ordinance itself says, “It is neither the intent nor effect of this ordinance to restrict or deny access by adults to semi-nude conduct protected by the First Amendment.” The article further reports:

Mulligan’s, located across Sterling Avenue from Northwoods Mall, sued the city in 2003, after being told it couldn’t hold the contests or have male dancers because it didn’t have an adult business license. In the suit, Mulligan’s officials maintained the liquor ordinance impinged on their right to free speech and expression.

Free speech! Ah yes, this is exactly what James Madison had in mind when he penned those words, “Congress shall make no law . . . abridging the freedom of speech.” He had been trying for years to get a wet-corset contest going down at the Indian King Tavern, but was stymied by the insidious New Jersey decency laws. And who could forget Patrick Henry’s famous speech in which he defiantly proclaimed, “Give me nudity or give me death!” Ha ha ha.

Seriously, though, is running around half naked in a public establishment really what free speech is all about? Is this all that freedom means to Americans today? Is this the kind of freedom our soldiers in Iraq and Afganistan are fighting to protect? I think it’s kind of insulting to the people who died for this country over the last 230 years or so that we think we’re oppressed when we have to get a license to have nude (or “semi-nude”) girls compete in a boob contest. Don’t you think that demeans the Constitution a bit?

There is so much good that can be done with our liberty. In fact, that used to be the understanding of liberty — the freedom to be the best people we could be, the freedom to act in accordance with the better angels of our nature. Not as a justification for prurience. And I can’t help but think of the person who really needs justice who had to wait another day or week while this frivolous case was being heard.

Mulligan’s will get its wet t-shirt contests and, according to the paper, “in the neighborhood of $200,000” from the city (read: us taxpayers) for supposed lost revenues. It’s a lucrative victory for Mulligan’s, but a dubious one for the First Amendment.