RWE issued a press release yesterday announcing they’ve decided not to sell American Water Works, the parent company of Illinois American Water Co., but pursue an initial public offering instead:

The Executive Board of RWE AG decided to pursue an initial public offering (IPO) in the U.S. for the shares of American Water as the most attractive option for RWE and the U.S.-based company, its employees and customers. This decision will return American Water to its status as a publicly-traded company. RWE had previously announced on November 4, 2005 its intention to divest American Water either through an IPO or by selling American Water to a group of financial investors.

The IPO will result in a publicly-traded company that is focused on water and wastewater in the U.S. and dedicated to maintaining a high level of service and quality.

The sales process is expected to be initiated shortly through filings for approval with certain state public utility commissions. The IPO will require filing of a registration statement with the U.S. Securities and Exchange Commission (SEC). The transaction will also be subject to the approval of the RWE AG Supervisory Board. The target is to complete the transaction during 2007.

What does this mean for Peoria and its efforts to reacquire their portion of Illinois American Water? I haven’t heard anything from city officials, but I imagine their view will be similar to Lexington’s (KY), a city that is also trying to purchase their city’s water works. The Lexington Herald-Leader reports today:

Former Lexington Mayor Scotty Baesler, chairman of the city [water buyout] committee, said yesterday that RWE’s IPO announcement would not alter his committee’s work.

The city probably would have to try to buy Kentucky American from whoever ends up controlling American Water, Baesler said.

Dealing with a new company could help the city’s efforts because a new owner might be more willing to jettison Kentucky American, he said.

Not a bad strategy. The difference in Lexington, of course, is that a majority of residents are in favor of the city buying the water company. Here in Peoria, about 2/3 of residents are opposed to the city acquiring the water company.

I’m convinced the bottom-line issue in Peoria — the reason so many people are against the city owning the water company — is trust. Frankly, we’re still not convinced they can handle it. They can’t fully staff our fire stations. They throw money away on bike paths, the RiverPlex, and other pork park district boondoggles. They’ve already raised our water bills by adding a “garbage” tax to them.

It took a long time to develop that distrust, and it’s not going to go away overnight. The new council has made some good strides so far, so maybe they’ll be able to overcome our doubts by the time the next opportunity to buy the water company rolls around.

There are other reasons to question the wisdom of the city buying the water company, but trust is the largest hurdle for the council.