UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): September 21, 2005
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CALIFORNIA WATER SERVICE GROUP
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(Exact name of registrant as specified in its charter)
Delaware 1-13883 77-0448994
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(State or other jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
1720 North First Street, San Jose, CA. 95112
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 1-408-367-8200
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Not Applicable
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(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement
Effective September 21, 2005, California Water Service Company, a wholly owned
subsidiary of the registrant, entered into an agreement with Kern County Water
Agency to obtain treated water for the Company's operations. The term of the
agreement is to January 1, 2035 or until the repayment of the Agency's bonds
(described below). This agreement supersedes the prior agreement with Kern
County Water Agency, as amended, dated June 13, 1974. The following summary of
the agreement is qualified in its entirety by reference to the text of the
agreement, which is attached as Exhibit 10.1 to this report and incorporated
herein by reference.
The agreement obligates the Company to purchase 20,500 acre feet of treated
water per year, which is an increase from the 11,500 acre feet in the prior
agreement. There are no other parties to the agreement between Cal Water and the
Agency. The Company is obligated to pay the Capital Facilities Charge and the
Treated Water Charge regardless of whether it can use the water in its operation
and is obligated for these charges if the Agency cannot produce an adequate
amount to supply the 20,500 acre feet in the year. Three other parties are also
obligated to purchase a total of 32,500 acre feet per year under separate
agreements with the Agency. These other participating entities are North of the
River Municipal Water District, East Niles Community Services District, and the
City of Bakersfield. Further, the Agency has the right to proportionally reduce
the water supply provided to all of the participants if it cannot produce
adequate supplies. The participation of all parties in the transaction for
expansion of the Agency's facilities, including the Water Purification Plant,
purchase of the water and payment of interest and principal on the bonds being
issued by the Agency to finance the transaction is required as a condition to
the obligation of the Agency to proceed with expansion of the Agency's
facilities. If any of the other parties does not use its allocation, that party
is obligated to pay its contracted amount, but may make arrangements for the
other parties to purchase some or all of its allocation.
The Agency intends to expand its capacity to produce and transmit treated water,
either through expansion of its existing water treatment plant capacity or
building a new water treatment plant. Also, it will be expanding its related
transmission systems. The Agency is planning to issue bonds to fund the project
and will use the payments of the Capital Facilities Charges by California Water
Service Company and the other contracted parties to meet the Agency's
obligations to pay interest and repay principal on the bonds. If any of the
parties were to default on making payments of the Capital Facilities Charge,
then the other parties are obligated to pay for the defaulting party's share on
a pro-rata basis. If there is a payment default by a party and the remaining
parties have to make payments, they also are entitled to a pro-rata share of the
defaulting party's water allocation.
The Company expects to use all its contracted amount of water in its operations
every year. In addition, if the Company were to pay for and receive additional
amounts of water due to a default of another participating party, the Company
believes it could use this additional water in its operations without incurring
substantial incremental cost increases. If additional treated water is
available, all parties have an option to purchase this additional treated water,
subject to the Agency's right to allocate the water among the parties.
Once the project is complete, the Company is obligated to pay a Capital
Facilities Charge and a Treated Water Charge that together total $4,739,000
annually, which equates to $231 per acre foot. Annual payments of $1,951,000 for
the Capital Facilities Charge will begin when the Agency issues bonds to fund
the project. Some of the Treated Water Charge of $2,788,000 is expected to begin
July 1, 2007 when a portion of the planned capacity is expected to be available.
The expanded water treatment plant is expected to be at full capacity by July 1,
2008, and at that time, the full annual payments of $4,739,000 would be made and
continue through the term of the agreement. Once treated water is being
delivered, the Company will also be obligated for its portion of the operating
costs; that portion is currently estimated to be $69 per acre foot. The actual
amount will vary due to variations from estimate, inflation and other changes in
the cost structure. The Company's overall estimated cost of $300 per acre foot
is less than the estimated cost of procuring untreated water (assuming water
rights could be obtained) and then providing treatment.
Item 1.02 Termination of a Material Definitive Agreement
The registrant incorporates by reference the information submitted under Item
1.01 above with respect to entry into the agreement with Kern Country Water
Agency and termination of the prior agreement.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The registrant incorporates by reference the information submitted under Item
1.01 above with respect to entry into the agreement with Kern Country Water
Agency. The initial assessment is that components of the agreement will be
accounted for under FASB Interpretation No. 45, Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others.
Item 9.01 Financial Statements and Exhibits.
The exhibit list is incorporated by reference to the Exhibit Index included with
this report.
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CALIFORNIA WATER SERVICE GROUP
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(Registrant)
Date: September 22, 2005 By: /s/ Calvin L. Breed
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Calvin L. Breed
Controller, Assistant Secretary and
Assistant Treasurer
EXHIBIT INDEX
Exhibit
Number Description of Exhibits
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10.1 Agreement between Kern County Water Agency and the
California Water Service Company dated September 21, 2005