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.
Yep, it is ALL about trust. There are plenty of communities out there that have municiple owned water companies. These water companies are run just fine with no mischief about them. You get a water bill each month which is just the water bill. The water bill isn’t paying for anything else other than the water service.
But that is not what we would get from the current council (or the previous one). Instead we see the gleam of gold in their eyes. The ‘hey we could use some of this revenue for….’ I can’t recall anyone on the current city council that would commit to the water bill being just the water bill. No, ‘lets keep it as low as possible’. No, ‘we won’t subsidize contractors or cut deals with some parties with our water company as politcal favors’.
The sad reality is, our city council has a long history of lacking integrity. Yeah some are trying to fix that, but it takes time to heal, and frankly I don’t think you reformers are coming on strong enough. Peoria does not have a culture of good honest civic governance. We don’t trust our city council or the staff. Until we feel otherwise, keep it private.
Reread your own words. It’s more than trust. It’s eccnomics. City-owned Water will cost more. The City wants to make a profit. The City will have to make more money to pay off the acquisition debt. And the City will have to hire a private contractor to manage the water company (did I read “political favors” somewhere?). Even if the bidding is honest, the contractor will have to make a profit too.
The City is not going to have access to the professional resources that a big corporation has. That means hiring expensive outside consultants ($$) when they have to deal with environmental, engineering and other big projects. The other issues you hit the nail on the head with is – Motive. It’s not to provide better water service.
It’s money and politics. Which brings us to the final point. What about water service? Let’s see, City takes over for bad motives; raises rates to make money. How much attention are they going to pay to maintaining the infrastructure? This is an issue with many city-operated water companies that are pounding the drums for a taxpayer bail out. Governments are notorius for not maintianing things because the taxpayer is always there to fleece when things get so bad they can put deplorable picutures on the evening news. Private companies have to worry about visits from the city inspector, and threats of lawsuits or jail.
And BTW, cities are busy down at the legislature trying to pass a law to make condemnation cheaper for them. Remember “due process” and “just compensation” from the Bill of Rights (ya, it still applies here) . They are setting their citizens up for a big financial fall when this law is declared unconstitutional.