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application, and the entities that did protest were not concerned
about the harm to the basin, but rather were afraid the approval
would lead to many future transfers. We do not find respondent’s
argument persuasive because as of the valuation date, petitioner
had not yet filed its application for approval of the Corpus
Christi transaction. The record shows that at that time, the
LCRA and others intended to oppose the transfer to Corpus
Christi, and petitioner could not predict whether its application
would be approved.
Mr. Scheig assumed regulatory approval would be obtained 2
years after the valuation date and that petitioner would receive
the monthly payments over this 2-year period, with the balance at
closing. He discounted that amount using an 8-percent cost of
capital discount and a 15-percent lack of marketability discount,
to reflect the restrictions in the regulatory approval process
involved in transfers of petitioner’s water.
Mr. Lloyd assumed regulatory approval would be obtained 3
years after the valuation date. He discounted the total monthly
payments made to that date by a 12-percent cost of capital. He
then discounted the balance due at closing ($13,810,000) by 30
percent, to reflect the rate of return a private equity buyer
would require given the risks involved.
We recognize the regulatory risks and time delays that
threatened the Corpus Christi transaction. Mr. Scheig testified
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