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American International Group

Insurance Company Acquires Privately Owned Water Utility

New York City-based American International Group (AIG) is one of the largest insurance and financial services companies in the world, with revenues of $100 billion in 2004 alone. On May 18, 2005 the company announced that it will control through purchase the water and wastewater services of small communities throughout 17 states.

The company has been plagued with allegations of widespread scandals and fraud, including:

  • The SEC and the Justice Department are investigating an AIG practice of providing “loss mitigation insurance” to companies. It appears as though AIG sells this service to help distressed corporations hide their losses from federal regulators. In November 2004, AIG paid $126 million to settle allegations it provided these illegal services to two companies, PNC and Brightpoint.
  • New York Attorney General Eliot Spitzer sued the insurance company Marsh & McLennan on charges of widespread bid-rigging; AIG is named as a co-conspirator.
  • Both Spitzer and the SEC are investigating allegations that AIG cooked its own books by hiding transactions and debt with other large insurance companies.

AIG has contributed over $3 million to federal election campaigns since 2001, with 60% of that total going to Republicans.

In recent years, AIG—like other large financial firms—has been purchasing energy assets, inexpensively, from energy companies in financial distress. In just the last couple of years, AIG has acquired ownership stakes in 2,535 megawatts (MW) of power plants in the United States, and 100% ownership of the Southern Star Central natural gas pipeline, which runs from Texas to Wyoming.

In May 2005, AIG announced the purchase of a water utility, Utilities, Inc., whose customer base is primarily spread throughout small rural and suburban communities in 17 states. Though small by comparison to water industry giants such as Veolia, United Water, American Water or Aqua America, Utilities, Inc. claims it is the largest privately held water utility in the country. With AIG’s acquisition, water and wastewater service in the small communities served by Utilities, Inc. will no longer be owned by a privately held company but by a publicly traded corporation under market performance pressures.

Utilities, Inc. has roughly 300,000 customers:

  • Arizona: Bermuda Water Co.; 5,450 customers.
  • Florida: Alafaya Utilities; Bayside Utility Services; Cypress Lakes Utilities; Eastlake Water Service; Lake Groves Utilities; Lake Placid Utilities; Lake Utility Services; Mid-County Services; Miles Grant Water & Sewer; Pebble Creek Utilities; Sandy Creek Utility Service; Sanlando Utilities; South Gate Utilities; Tierra Verde Utilities; Utilities, Inc. of Florida; Wedgefield Utilities; 81,000 customers.
  • Georgia: Utilities, Inc. of Georgia; 11,200 customers.
  • Illinois: Camelot Utilities; Cedar Bluff Utilities; Charmar Water Co; Cherry Hill Water Co; Clarendon Water Co; Del Mar Water Co; Ferson Creek Utilities; Galena Territory Utilities; Great Northern Utilities; Harbor Ridge Utilities; Holiday Hills Utilities; Killarney Water Co; Lake Holiday Utilities; Lake Marian Water Corp; Lake Wildwood Utilities; Medina Utilities; Northern Hills Water & Sewer; Valentine Water Service; Walk Up Woods Water Co; Westlake Utilities; Whispering Hills Water Co; Wildwood Water Service Co.; 17,400 customers.
  • Indiana: Twin Lakes Utilities; Water Service Co. of Indiana.; 8,300 customers.
  • Kentucky: Water Service Corp. of Kentucky, 7,000 customers.
  • Louisiana: Louisiana Water Service; Utilities, Inc. of Louisiana; 17,100 customers.
  • Maryland: Green Ridge Utilities; Maryland Water Services; Provinces Utilities; Utilities, Inc. of Maryland.; 7,000 customers.
  • Mississippi: Charleston Utilities; 1,800 customers.
  • Nevada: Sky Ranch Water Service Corp; Spring Creek Utilities; Utilities, Inc. of Nevada; 12,800 customers.
  • New Jersey: Montague Water & Sewer Co.; 1,100 customers.
  • North Carolina: Bradfield Farms Water Co; CWS Systems, Inc; Carolina Water Service.; 61,100 customers.
  • Ohio: Holiday Service Corp.; 1,100 customers.
  • Pennsylvania: Penn Estates Utilities; Utilities, Inc. of Pennsylvania; 5,500 customers.
  • Tennessee: Tennessee Water Service.; 500 customers.
  • South Carolina: Carolina Water Service; Salem Church Road Utilities; South Carolina Utilities; Southland Utilities; Tega Cay Water Service; United Utility Companies.; 31,900 customers.
  • Virginia: Utilities, Inc. of Virginia; 5,200 customers.

Below are the details of AIG’s current energy assets.

POWER PLANTS:

1. Dartmouth, Massachusetts 68 MW natural gas power plant. AIG owns 100%.

2. Front Range, a 480 MW natural gas plant outside Colorado Springs, Colorado. It’s a 50/50 venture with AIG and Colorado Springs Utilities.

3. Vandolah, a 680 MW natural gas power plant located in Hardee County, Florida. AIG is the sole owner.

4. MassPower 258 MW natural gas power plant in Springfield, Massachusetts. AIG owns 33.7%, John Hancock Insurance owns 17.5%, ArcLight (an affiliate of John Hancock) owns 17.5%, Goldman Sachs owns 14.7%, United States Power Fund owns 12.5% and El Paso Corp. owns 4.1%.

5. Cambria 98 MW coal power plant in Edensburg, Pennsylvania. AIG is the sole owner.

6. Gilberton 82 MW coal power plant in Frackville, Pennsylvania. AIG owns 25%, Goldman Sachs owns 19.6%, , FPL owns 5.4% and RI-CORP owns 50%.

7.    Panther Creek 83 MW coal power plant in Carbon County, Pennsylvania, a joint venture of Goldman Sachs and AIG.

8. Mt. Poso 58 MW coal power plant in Bakersfield, California. AIG owns 16%.

9. ACE 102 MW coal power plant in Trona, California. AIG owns 13%.

10. Orlando, Florida 114.5 MW natural gas power plant. A joint venture between AIG and ArcLight.

11. Colver, Pennsylvania 106 MW power plant. AIG owns 27.5%.

12. Bonneville 85 MW power plant in Las Vegas. AIG owns half.

13. Orange 104 MW natural gas power plant in Bartow, Florida. The power plant is a 50/50 partnership between AIG and the Wall Street investment bank Bear Sterns.

14. Mulberry 120 MW natural gas power plant in Bartow, Florida. AIG owns 46.75%, General Electric owns 7.5% and Bear Stearns owns 45.75%.

15. AIG owns 22.4% of SEMASS, a 78 MW waste-to-energy plant in Rochester, Massachusetts. DLJ Merchant Banking Partners is the other stakeholder.

16. AIG owns 24.9% of American Ref-Fuel Company of Southeastern Connecticut, which operates an 18 MW waste-to-energy power facility in Preston, Connecticut. DLJ Merchant Banking Partners is the other stakeholder.

NATURAL GAS

  • AIG owns 100% of the Southern Star Central natural gas pipeline, running through Texas, Oklahoma, Kansas, Missouri, Colorado, Nebraska, and Wyoming.

    » cmep | Water | general | majorwater | aig


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