3. Discussion
CalWater has previously issued debt and equity securities authorized by this Commission. In D.04-09-002, September 2, 2004, the Commission authorized $250,000,000 of stock or debt securities, and in D.09-03-038, March 26, 2009, the Commission authorized issuance of $100,000,000 of First Mortgage Bonds.
A. Issuance of Equity Securities
CalWater proposes to issue equity in the form of shares of its common stock, which will be issued solely to its parent company, CalWater Service Group (Group). Group is CalWater's only shareholder and owns all of CalWater's outstanding common and preferred shares.
CalWater proposes to use the proceeds from the sale of equity securities in order to fund the retirement of all or a portion of CalWater's then outstanding short-term bank loans, and the balance, if any, for any or all purposes as may be allowed under Section 817. These purposes include:
(1) Water utility plant construction, completion, replacement, extension or improvements of its existing facilities,
(2) Acquisition of property and/or water systems,
(3) Retirement of maturing long-term debt,
(4) Satisfying First Mortgage Bond sinking fund requirements, and
(5) Reimbursement of moneys previously expended from income for which CalWater's treasury has not been reimbursed.
B. Issuance of Debt Securities
If CalWater issues debt securities, it shall not exceed in the aggregate $350,000,000 when combined with its proposed equity financing. Because of the possibility of changing market conditions over the period covered by this application,7 CalWater desires to retain the maximum degree of flexibility for its decision as to the timing, size, and terms of the debt offering(s). Therefore, debt issues may include one of more types of financial obligations: First Mortgage Bonds, Secured Notes, Unsecured Senior Notes, or Tax-Free Bonds to the extent available under the state volume cap. CalWater seeks authority at this time to issue debt securities rather than waiting until all terms and conditions are known so as to have authority in a fluctuating money market to secure longer-term indebtedness expeditiously, at the lowest possible cost, and with the most favorable terms.
We make no finding regarding the reasonableness of the rates, terms, and conditions of debt issued by CalWater pursuant to the exemptions and modifications granted herein. CalWater's capital structure, interest rates, and associated fees will be reviewed for reasonableness in its next general rate case (GRC) or cost of capital proceeding.
7 CalWater proposes to issue the requested $350,000,000 of New Securities through 2014.
