Monday, June 23, 2008

Cash Is King In SSJID-PG&E Fight

As the South San Joaquin Irrigation District prepares to head back for another round of hearings before the Local Agency Formation Commission in its fight to take over the PG&E distribution system, it has a new secret weapon: deep pockets.

Experts peg the purchase price for the PG&E assets around $80 million. Through a combination of $10 million in annual royalty payments from the Tri-Dam system and a new round of municipal bond revenues to be applied to recent capital improvements made by the District, the SSJID should have more than enough to pay cash on the barrel head.

Using the Tri-Dam bond offering as an example of how smooth this kind of financing can be, and because the cost of capital associated with a bond offering is far less than it would be if the District were to borrow the money in the traditional sense, the SSJID can likely avoid any popular backlash against new public debt. None of this is good news for PG&E which strongly oppposes the takeover.

Power pay: SSJID may buy PG&E with 100% cash [Manteca Bulleting via the Local Clean Energy Alliance]