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They'll buy Valencia Water if ...

• Castaic Lake Water Agency says it's interested

Posted: June 21, 2008 2:14 a.m.
Updated: August 22, 2008 5:04 a.m.
 

Local water officials would consider buying Valencia Water Co. should the water retailer be put up for sale, according to Dan Masnada, general manager of the Castaic Lake Water Agency.

Masnada, who stressed that the agency is not actively pursuing the prospect, answered the question put to him by The Signal Friday.

Would the water agency purchase Valencia Water Co., wholly-owned by the Newhall Land and Farming Co. which is now at the mercy of an East Coast bankruptcy court?

"Yes. We would consider buying it," Masnada said. "It's one of the several things we discussed in a special strategy planning session last month. It was one of the many things we looked at in examining ‘How can we best serve the people of Santa Clarita?'

"It made sense in the long term to consolidate retail operations," he added. "If you have One Valley, One Vision then why not have One Valley, One Retail Water Purveyor?"

Lawyers representing LandSource Communities Development LLC, the company that owns Newhall Land which, in turn, owns the Valencia Water Co., are expected to appear June 30 in a bankruptcy court to learn LandSource's fate.

On June 8, LandSource lawyers filed a voluntary petition for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware in Wilmington.

As a LandSource subsidiary, Valencia-based Newhall Land was included in the filing as one of 21 debtors.

Masnada said he's been monitoring the LandSource case closely.

"We're just kind of on the sidelines. We're paying attention to (the court case) and if the opportunity comes up, we would look into it if, financially, it made sense."

The Valencia Water Co. is one of four water retailers who purchase water from the agency, the other retailers being: Newhall County Water District, the Los Angeles Waterworks District No. 36 and the Santa Clarita Water Company which was purchased by the agency in 1999.

Mainly homeowners
The Valencia Water Co. serves about 94,000 people in the Santa Clarita Valley, including those in Valencia, Stevenson Ranch, and parts of Newhall, Saugus and Castaic.

Its customers, according to the claims made on its Web site, are primarily homeowners making up about 86 percent of its revenue. The rest of its water is sold to growers, businesses and public agencies.

But, because it remains a public utility regulated by the California Public Utilities Commission it cannot be sold, The Signal has learned.

When a similar opportunity presented itself a decade ago, however, the Castaic Lake Water Agency ended up buying the Santa Clarita Water Co.

Despite legal opposition to the move, the agency purchased stock of the Santa Clarita Water Company - specifically, its retail account - on Sept. 3, 1999, having invested $63 million in the company. That investment is being repaid over 30 years at a 5 percent interest rate.

Comparatively, as an ongoing concern, the Valencia Water Co. collects a little less than a dollar a day from every person it serves in Santa Clarita.

A year ago, the California Public Utilities Commission authorized it to increase its rates so that it could collect more than $2.8 million in revenue, allowing it to pay for a water-softening test with the extra money.

Bankruptcy court
On June 21, 2007, a year ago today, when the company was allowed to increase its rates, almost a third of its capital structure went to managing its long term debt.

Specifically, its company profile in terms of capital structure was broken down as: 27.95 percent debt, 69 percent equity and 3 percent in preferred stock.

Bill DiPrimio of the Valencia Water Co. Friday referred all comment about the company to its parent company Newhall Land.

"The water company is wholly owned by Newhall Land," said Marlee Lauffer, spokeswoman for the longstanding local land development firm. "Its assets are not impacted by the Landsource bankruptcy. Because it is a utility, it cannot be sold."

Basically, the bankruptcy judge in Delaware cannot order LandSource to sell its Santa Clarita water interests to pay for any of its debt.

LandSource, which plans and develops master-planned communities and transforms land into ready-to-build home sites and commercial properties in Arizona, California, Florida, New Jersey, Nevada and Texas, had attempted for several months to reach agreement with its lenders to restructure its debt.

LandSource defaulted on loan payments due April 22.

As with the other retailers, Valencia Water Company's water is made up in almost equal parts of groundwater pumped from wells - both shallow wells tapping the Alluvial Aquifer and from water deposits set deep in the earth inside the Saugus Formation - and from state water imported from the San Joaquin Delta through the State Water Project.

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