SJW Group / Connecticut Water Service (CTWS) Merger
ADDED 9/15/18 - The CPUC heard us. They have opened an investigation (OII) into the proposed merger. WRATES believes that the appropriate procedural approach is for the OII to rule that SJWC should file an Application with the Commission initiating an adjudicatory proceeding to determine if the merger is in the public interest.
ATTEND THE PUBLIC PARTICIPATION HEARING ON MONDAY, OCTOBER 8, 2018 Contribute your thoughts on this takeover. We need to convince the CPUC that this takeover is bad for the ratepayers and California. It is the responsibility of the CPUC to prevent opportunistic deals from Maine-Connecticut and Texas, and elsewhere, coming into Silicon Valley to soak off hundreds of millions of dollars by manipulating availability and cost of a life-sustaining, scarce resource. This happened before with the Energy Crisis in 2000-2001 with Enron et al. These are the same moves that went on then. 9/7/18 - SCOPING MEMO AND RULING OF ASSIGNED COMMISSIONER AND JOINT RULING WITH ADMINISTRATIVE LAW JUDGE - The Second Amended Agreement is the one that is before the Commission today. It converts the proposed transaction from a “merger of equals” effectuated through an exchange of common stock into a cash purchase by SJW Group of all the outstanding shares of CWSI at a price of $70 per share. As in the original transaction, SJW Group will become the parent of both SJWC and CWSI but, unlike the original transaction, the number of new shares of SJW Group issued in connection with the transaction will be small, the ownership percentage of the Moss Family will be only slightly diluted, and two, rather than five, members of the CWSI Board will become members of the SJW Group Board. The cash required to purchase the CWSI shares will be obtained through a combination of borrowing and issuance of additional equity.
7/20/18 - ORDER INSTITUTING INVESTIGATION - This acquisition, commonly referred to as a merger, will result in dilution of the share ownership of long-time San Jose Water owners; installation of or continuation of new executive leadership, including the Chief Executive Officer (CEO), from Connecticut Water; and other possible effects not yet discovered. As the regulators responsible for the oversight of California utilities, we believe it is appropriate for us to examine a transaction with the potential to produce these changes in ownership and management. We seek to review and understand the impact of the merger on rates, service quality, and employment in California, among other matters that are within our responsibilities. I. 18-07-007 COM/CAP/mal - 2 - The purpose of this Investigation is to investigate, gather, and analyze information relevant to the proposed merger to determine the extent to which the ownership and control of SJW Group may change and how any such changes may impact a California jurisdictional utility. This Order Instituting Investigation (OII) will analyze whether the Commission should review the merger; if so, what, if any, conditions related to California-specific effects of the merger may be appropriate; and whether additional Commission action is warranted. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 7/20/19 UPDATE - CPUC HAS TAKEN THE FIRST STEP TO REVIEW THE MERGER ADDED 5/19/18 - CALL TO ACTION Send an email to the CPUC commissioners asking them why they are not reviewing this merger. This merger will affect the customers of SJWC. It is the statutory obligation for the CPUC to protect the ratepayers. Include as much or as little as you like of the following points. Send emails to your local and state elected officials asking them to contact CPUC to review merger: For local city officials view CONTACTS/EMAILS [email protected] [email protected] [email protected] [email protected] Send emails to CPUC Commissioners and their assistants: [email protected] [email protected] [email protected] shannon.o'[email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] |
SJW Group claims that this "merger of equals" will provide long-term benefits for ratepayers, employees and shareholders alike. We, the ratepayers, do NOT believe, this will benefit the ratepayers and believe that our rates will continue to increase for the following reasons:
It is our opinion on all of the following that: 1. The California PUC needs to review this merger. In SJW’s Q1, 2018 Earnings Call, new CEO Eric Thornburg stated, “…our regulatory approval process for the merger of equals involves the states of Connecticut and Maine only because there is not an effect of changing control in California or in Texas because SJW Group would remain and retain 60% ownership of the new combined organization.” He then goes on to state, “…our shareholders will own 60% of the combined company. “ Does this mean that SJWC is only 60% owned by SJW and 40% owned by CTWS? If the configuration of ownership has changed for SJWC, why is the California PUC not reviewing this merger? This is not a merger of equals and the California PUC needs to get involved and review this merger/acquisition. 2. This is NOT a merger of equals.
3. This merger will make it even more difficult for PUC regulation. The California PUC already has a difficult time regulating San Jose Water Company (SJWC) as revenues earned from customer payments are funneled out of SJWC and into other subsidiaries or the holding/parent company. 4. Connecticut Water Service valuations are dangerously high. https://www.suredividend.com/wp-content/uploads/2018/04/CTWS-2018-04-26.pdf SJW Group is investing in an overvalued company where stock is expected to provide negative returns. With the May 7, 2018 closing price of $68.31 and a P/E (price to earnings ratio) of around 32, the stock is significantly overvalued and should be around $46. Besides the added cost of some very old infrastructure, who is going to make up for these negative returns to shareholders? Will it again be the SJWC ratepayers who currently provide 92% of the revenue for SJW Group? Will rates be substantially raised for the newly acquired ratepayers of Conn Water should the deal be approved? The revenue for shareholders will have to come from somewhere? 5. SJW Group is shareholder focused and NOT customer centric. SJW Group’s focus is shareholder returns at consumer/ratepayer expense. SJW Group stated that the combined company will have the scale, geographic diversity, and financial strength to deliver what we believe will be immediate and long-term value to our stockholders. No mention of customers. Customers of SJWC are not happy with SJWC. Comments and reviews SJWC can be viewed at Online Petition: https://www.change.org/p/outrageous-water-bills-let-cpuc-know-that-sjwc-s-unfair-billing-practices-need-to-stop?recruiter=45774845&utm_source=share_petition&utm_medium=copylink&utm_campaign=share_petition and YELP: https://www.yelp.com/biz/san-jose-water-san-jose-2 In 2012, SJWC requested a rate increase of 44% for years 2013, 2014 & 2015, but, today, with CPUC’s approval of the MANY additional surcharges and rate increases, SJWC is now charging over 70% more than in 2013 while customer usage has been reduced upwards of 65%. In other words, ratepayers are paying substantially more for substantially less. During the drought, the CPUC allowed SJWC to collect ~$37 million in drought surcharges from only 60% of it’s customers - single family residents ONLY. The money was then used to subsidize water rates for ALL customers. SJW Group purchased Canyon Lake Water Supply Corp. (SJWTX) in Texas in 2005/2006 and the their customers are unhappy, frustrated and dissatisfied with SJWTX. https://www.mysanantonio.com/news/local/article/Canyon-Lake-water-rates-settled-but-maybe-not-4863542.php AND https://www.prlog.org/11543761-clwsc-water-not-so-transparent.html 6. SJW Group’s Texas operation, SJWTX, was acquired in 2005/2006 for $3.2 million cash and SJW Group assumed debt and bond obligations of $20 million for 7000 meter connections. In 2010, SJWTX sought a rate increase that would have resulted in a 71% jump in its total revenue. The customers formed a group known as the Coalition for Equitable Water Rates and spent about $150,000 contesting the rate increase. https://www.mysanantonio.com/search/?action=search&channel=news%2Flocal&inlineLink=1&searchindex=solr&query=%22Coalition+for+Equitable+Water+Rates%22 Rates for SJWC customers have escalated substantially since 2005 and rapidly since 2010 with the SJW Texas operation performing 7 acquisitions (11 total from 2006). Once again with SJWC ratepayers contributing 99% down to 92% of the Corporation revenue, money was advanced out of SJWC, a subsidiary, to SJW Group, the holding company, to make the acquisition purchases. Ratepayers are left holding the bag! 7. This merger has the potential to harm customers and should be scrutinized by the federal government. The federal government should never have allowed for early termination of the Hart Scott Rodino Act. A Quote regarding the Act referenced in the link below: Enacted by Congress in 1976, the Hart Scott Rodino Act gives the federal government the opportunity to investigate and challenge mergers that are likely to harm consumers before injury occurs. The Commission vote to issue the report was 2-0. (FTC File No. P110014; the staff contact is Sam Sheinberg, Bureau of Competition, 202-326-2308.) The Federal Trade Commission works to promote competition, and protect and educate consumers. https://www.businesswire.com/news/home/20180430005419/en/SJW-Group-Connecticut-Water-Announce-Early-Termination |