Water Industry News

Charleston W. Virginia explores buying WV American Water Co.

Wednesday December 28, 2005

The city of Charleston has hired a consultant to evaluate West Virginia-American Water Co., with the idea of possibly buying the utility, because its parent company, American Water Works, is up for sale.

City Council members agreed Dec. 19 to hire a consultant, a retired water company employee, to write an evaluation study of the water company. In addition, the city has hired lawyers from Spilman Thomas & Battle to study the legal aspects of the situation, Mayor Danny Jones said Tuesday.

The combined cost of hiring the consultant and lawyers is about $20,000.

But water company officials say the company isn't interested in selling off parts of its North American assets.

The company wants either to sell American Water in its entirety to a group of investors or spin it off through an initial public offering, West Virginia-American President Deborah Herndon said.

Jones said he's aware of the company's position, but wants to see what the city might be able to do anyway. He raised the issue while running for mayor, but has done little since.

"We would be interested in buying the whole water company to keep it in West Virginia hands, but apparently the law will not allow us, as a municipality, to make a profit," Jones said.

"But it may make sense to condemn our part of it, and this is what we've hired a consultant for and we've hired a lawyer for."

The consulting firm, Trimble & Associates, is the same firm the city hired several years ago while fighting a proposed rate increase by the water company.

Jones said the firm will analyze the city's situation. Lawyers Lee Feinberg and Andy Cox will analyze it from a legal perspective.

City officials may have a tough fight ahead of them. American Water and its subsidiaries historically have fought takeover attempts by other cities, such as a current battle in Lexington, Ky.

"We try to defend ourselves the best we can," said Dan Kelleher, senior vice president for external affairs at American Water's home office in Vorhees, N.J.

"The underlying question in my mind is why would the city choose to go down this route," Kelleher said. "What is the driver?

"It just seems curious that the city would spend time and attention looking at taking over things that are working well," he said.

"They'll find out how long it takes and how expensive it is.

"Based on previous situations we would feel the obligation to defend ourselves, for example, using Lexington as background."