A board that has received an offer usually has two numbers in front of it: the offer, and the net book value of the system from its own balance sheet. Neither one answers the question it has to decide, and the second is not even a valuation.
What we do
The value, three ways. Reproduction cost new less depreciation, discounted cash flow, and comparable transactions, each run separately with its own assumptions stated, then reconciled. The spread between them is reported rather than averaged away, because a wide spread means the answer rests on an assumption somebody has to own.
The bill path under a sale. Where the state has a fair market value statute, the premium above depreciated original cost enters the acquirer’s rate base and is recovered from customers through the authorised return and depreciation for the rest of the assets’ lives. We model that forward, through the first base rate case after the acquisition, so the board can see the sale price and the bills side by side.
The alternatives, on the same basis. Remaining independent, funding the capital plan from rates and debt. Merging with a neighbouring system, where one exists. Same forecast period, same assumptions, same bill comparison, so the three are actually comparable.
What is not financial. Service levels, staff, local control over capital decisions, and what happens to the obligations already outstanding on the utility’s own bonds. These are set out as questions with the facts attached rather than scored.
What you get
The written review with all three approaches and all three options. The valuation and bill-path model, which is yours. A file supporting every figure. Slides for the board or council, structured so the board can present it to residents without translating it first, and us at that meeting and at the public one if you want us there.
What we will not do
We work for the utility. We do not represent buyers on the same system, and we take no fee contingent on a transaction happening or on the price it happens at. A valuation produced by somebody whose fee depends on the deal is not a valuation.
We will not recommend a course of action. A sale is a decision about a public asset, made by an elected body in public, and our job is to make sure the numbers in front of it are right and complete.
We are not appraisers and this is not an appraisal. A transaction that proceeds needs a licensed appraiser and, in states with a fair market value statute, the specific form of appraisal that statute requires. What we produce is what a board needs before it decides whether to commission one.
We are not lawyers. Whether your board may sell, on what authority, and subject to what approvals is a question for your counsel.
Fit
Best fit: a board that has received an unsolicited offer, or one facing a capital or compliance obligation large enough that someone has raised the question. Also a fit for a state programme office or a regional authority that wants an independent read before a transaction reaches it.
Poor fit: a utility that has decided to sell and needs a document supporting the price. That is a different engagement and a different kind of firm.
Why the price is fixed
Because a fee that moves with the transaction is a fee that has an opinion about the transaction. Flat, paid by the utility, and the same whether the board sells, merges or stays independent.