Carlyle Group says it doesn't own Montana water company because it owns the companies that own it
Source: Missoulian
The Carlyle Group claims it does not own Missoula’s water system and therefore cannot be named as a defendant in the city’s condemnation lawsuit, according to court documents filed by Carlyle’s lawyers on Tuesday.
... Carlyle’s claim that it doesn’t own the water system would seemingly contradicts that it would have to approve any sale of Mountain Water, as well as a 2013 letter from Carlyle Infrastructure managing director Robert Dove to Missoula Mayor John Engen indicating a willingness to listen to offers to buy Mountain Water. In the letter, Dove stated that “Carlyle Infrastructure is honored to be the ultimate owner of Mountain Water.” Carlyle ultimately rejected two city offers to buy Mountain Water in the past.
Carlyle’s argument to the court is based on the fact that Missoula’s water system falls under a tangled web of corporate ownership. Mountain Water owns and operates the water system, and is itself owned by California-based Park Water Co. Park Water and two California water utilities are owned by Western Water Holdings, and Carlyle Infrastructure Partners LP is the managing member of Western Water Holdings. Carlyle Infrastructure is a division of the global firm The Carlyle Group, which invests in public and private infrastructure projects and businesses.
In short, the essence of Carlyle’s argument is that although it owns the companies that own Mountain Water, it does not own the water system. And that means the city of Missoula has the right to sue only the direct owner of the water system, Mountain Water.
Read more: http://missoulian.com/news/local/carlyle-says-it-isn-t-owner-of-mountain-water-can/article_82fd9576-e6b1-11e3-9f2d-001a4bcf887a.html
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I've been in the electric power business for more than 30 years and I would expect that water companies, like electric companies, are subject to regulation by the state Public Service Commission ("PSC"
. That means that Mountain Water can only charge what the PSC approves in their tariff. That regulation also means that their returns on equity are approved by the PSC. I have to assume that Carlyle was happy with those regulated returns or they would not have purchased Mountain Water. Carlyle would be entitled to earn that same regulated return on additional capital expenditures made by Mountain Water which would include the cost of upgrading and expanding the system to meet future needs. For that reason, it seems illogical to me that they wouldn't be willing to invest additional capital into Mountain Water - they'd make money on that investment. In fact, private equity companies, like Carlyle, look at expansion opportunities as a potential upside when they evaluate a potential investment. This whole situation makes no sense to me.
In my experience, it's unusual for a regulated utility not to make capital investments when they needed. The only reasons I can think of are 1.) they don't like the returns they're getting; 2.) They don't think the PSC will approve the expenditure and allow them to earn a return on it; or 3.) they can't raise the money. I'd be surprised if any of these applied here.
As far as public ownership goes, why should that be an issue? Electricity is just as much of a necessity as water and most people in the country are reliably served by investor owned power companies.
Of course, heaven forbid we have any degree of parity between actual people and, you know, highly-moneyed corporations. What crazy ideas will we dare think up after that? Income equality that isn't measured in multiples of thousands?! 
