Published Saturday, October 30, 1999, in the San Jose Mercury News

San Jose Water is sold to American Water Works


BY DONNA KATO

San Jose Water Co., which supplies water to 1 million people in the San Jose area, has been sold to American Water Works Co., the largest investor-owned water utility in the United States.

Based in Voorhees, N.J., American Water Works will pay $390 million in cash and assume $90 million in debt for SJW Corp., the holding company for San Jose Water Co. and SJW Land Co., SJW officials said. San Jose Water serves 216,000 homes and businesses in much of San Jose and several West Valley cities such as Cupertino.

SJW Land Co. owns several undeveloped real estate parcels in San Jose and owns and operates a parking facility next to the San Jose Arena.
``Long term, this bodes well for our customers,'' said Richard Baloccco, SJW's vice president of corporate communications, noting that the bigger company is well prepared to deal with escalating costs of water treatment and research.

There is ``nothing on the horizon'' that any of the 290 San Jose employees will lose their jobs, he said. Employees were notified of the sale late Thursday afternoon.

The transfer of ownership must be approved by the California Public Utilities Commission, which oversees such acquisitions and regulates rates. SJW Corp. will control the company until the PUC signs off on the deal, which could take six months to a year.

``Customers won't see changes, if any, for years,'' said Fred Curry, chief of the water advisory branch of the PUC. ``We're seeing a large, well-run company that's being bought by a larger well-run company.''

Curry and SJW Corp. spokesmen say service and rates for customers will remain the same. Rate increases, if any, usually aren't passed to customers for two or three years when such acquisitions happen, Curry said.
``One of the reasons we sought SJW was the quality of service and quality of water it provides to its customers,'' said Ellen Wolf, chief financial officer for American Water Works. ``We, too, are customer-focused and intend to make things better, not worse, for those we'll be providing water for.''

San Jose Water Co. is the largest water system regulated by the California PUC. It is one of three water utilities that operate in San Jose. Privately held Great Oaks Water Co. serves the southern part of San Jose; the city's municipal water company provides water to the Alviso and Evergreen areas.

American Water Works was founded in the East in 1886. By 1914, it owned unrelated electric, gas and water companies, as well as California real estate. It broadened its geographic base in the 1990s and began scouting for acquisitions last year. Its $700 million purchase this year of National Enterprises, which serves customers in the Midwest and New York, was the largest acquisition in the U.S. water utility industry.
The company is chaired by the granddaughter of the founder, Marilyn Ware Lewis, and pipes water to 10 million people in 23 states through its subsidiaries and affiliates. In California, it owns California American Water Co. in Chula Vista and foresees running a similar, locally focused operation in San Jose, Wolf said.

American Water last week agreed to buy Citizens Utilities Co.'s water and sewer business for $835 million in cash and assumed debt. That business provides services to about 1 million people in California, Arizona, Illinois, Indiana, Ohio and Pennsylvania.

``SJW Corp. is a premier regional water company,'' said J. James Barr, American Water Works president and chief executive, in a statement. The San Jose and Citizens acquisitions will greatly expand the company's business in the western U.S., he added.

``We will now have about 516,000 customers, or 17 percent of our total customer base, located in California, Arizona and New Mexico,'' Barr said.