11. Assignment of Proceeding

John A. Bohn is the assigned Commissioner and Michael J. Galvin is the assigned ALJ in this proceeding.

1. Applicants seek authority for Newhall Holding, Newhall Intermediary, and LandSource Holding to acquire an indirect ownership interest and control of Valencia pursuant to a Chapter 11 Reorganization Plan.

2. Under the revised ownership structure, Lennar Corporation's ownership interest in Newhall Development is reduced from 25% to approximately 17% and the ownership interests in Newhall Development of LNR Property Corporation and MW Housing Partners III LP, are eliminated.

3. Under the revised ownership structure, Newhall Holding has a controlling interest in Newhall Intermediary and Newhall Intermediary has a controlling interest in Newhall Development.

4. Newhall Development, LandSource Holding, and NWHL GP LLC will continue to have the same indirect ownership interests in Valencia as they do at present.

5. Although the 2007 application sought authority for LandSource Holding to acquire indirect control over Valencia, the 2007 Decision did not specifically authorize LandSource Holding to acquire such control.

6. According to applicants, LandSource Holding has been part of the ownership structure since the transaction authorized in the 2007 Decision was consummated.

7. Valencia will continue to be wholly owned by Newhall Land and Farming and will continue to provide its authorized services.

8. Protests to the application were filed by SCOPE and The Friends.

9. Protestants did not request hearings be held in this matter.

10. After the transfer of indirect control is completed, Valencia will continue to be the operating public utility providing water utility service under the Commission's jurisdiction in the areas where it is authorized to do so.

11. Customers will not notice the indirect change of control of Valencia.

12. Valencia will continue to operate as it has in the past using the same name, operating authority, and existing tariffs.

13. Valencia will continue to possess the technical, managerial, and financial resources necessary to provide its authorized services.

14. The Plan of Reorganization approved by the Bankruptcy Court provides that, if the Commission determines that the effectiveness of the Plan is an acquisition or change in control subject to its approval under § 854(a), Newhall Holding and Newhall Intermediary are precluded from asserting operational control of Valencia until an application pursuant to § 854(a) has been filed and the Commission has issued a final decision on the application.

15. Applicants state that the two new entities created under the Plan, Newhall Intermediary and Newhall Holding, have in fact refrained from exercising operational control over Valencia pending this decision.

16. No new construction is being proposed in this application.

1. This is a ratesetting proceeding.

2. Pursuant to § 854, the Commission has broad authority to approve or deny applications for transfers of utility ownership or control. Implicit in this authority is the right to place reasonable conditions upon the transferor or transferee, should the need for conditions arise.

3. The primary standard used by the Commission to determine if a transaction should be authorized under § 854(a) is whether the transaction will adversely affect the public interest.

4. A hearing is not necessary in this proceeding.

5. The additional ownership information sought by protestants is not needed to decide this application, as previously determined in D.05-08-017 and the 2007 Decision.

6. A change of control over Valencia has yet to occur.

7. The Commission has complete authority over any and all Valencia service territory expansions.

8. All Conditions of Approval of Transfer of Control and Affiliated Interest Transaction Rules imposed on Valencia and its affiliates by D.07-09-026 should continue to apply.

9. To further ensure compliance with these Conditions of Approval of Transfer of Control and Affiliated Interest Transaction Rules, the entities authorized to exercise indirect control over Valencia by this decision should expressly agree to these Conditions and Rules before the transfer of control authorized by this decision becomes effective.

10. The Conditions of Approval of Transfer of Control contain provisions sufficient to address the issue of financial where withal, including the condition that the owners, direct and indirect, of Newhall Land and Farming shall ensure that Valencia has adequate capital to fulfill all of its public utility service obligations.

11. The protests to this application do not provide sufficient reason to deny the application.

12. The requested acquisition and transfer of control is a project that qualifies for an exemption from CEQA pursuant to § 15061(b)(3) of the CEQA Guidelines.

13. This application should be approved because it is not adverse to the public interest.

ORDER

IT IS ORDERED that:

1. Newhall Holding Company, LLC, Newhall Intermediary Holding Company, LLC, and LandSource Holding Company, LLC are authorized to acquire indirect ownership and control over Valencia Water Company subject to the conditions set forth in the Conditions of Approval of Transfer of Control and the Affiliated Interest Transaction Rules set forth in Appendices B and C to this decision, respectively and subject to the condition contained in Ordering Paragraph 2.

2. The authority granted by Ordering Paragraph 1 shall not be effective until Newhall Holding Company, LLC, Newhall Intermediary Holding Company, LLC, LandSource Holding Company, LLC, and Valencia Water Company each file written notice of their agreement, evidenced by a duly authenticated resolution of their respective Boards of Directors, Board of Managers, or the equivalent authority, to the Conditions of Approval of Transfer of Control and the Affiliated Interest Transaction Rules set forth in Appendices B and C to this decision, respectively.

3. Within 30 days after the change of control authorized herein has taken place, Valencia Water Company shall file a compliance Advice Letter pursuant to General Order 96-B demonstrating that the change of control has occurred in the manner authorized. A copy of that advice letter shall be placed in the formal file of Application 09-10-024.

4. The corporate identification number U342W assigned to Valencia Water Company shall continue to be used by Valencia Water Company in all future filings with the Commission and in the titles of other pleadings filed in existing and future proceedings.

5. The application is granted as set forth above and the authority granted shall expire if not exercised within one year of the effective date of this order.

6. Application 09-10-024 is closed.

This order is effective today.

Dated February 25, 2010, at San Francisco, California.

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