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that a sale within the basin would likely take about 6 months to
complete, while a contested interbasin transfer could take 5
years. We believe that an estimate of 3 years is reasonable in
predicting the closing date for the Corpus Christi transaction,
especially given the intent of the 1997 legislature to deal with
water rights.
The experts agreed that the expected payments petitioner
would receive from the Corpus Christi transaction (both the
monthly payments and the balance at closing) should be
discounted. The monthly payments were contractually guaranteed
to generate income for petitioner until the sale closed or the
option agreement ended. We conclude above that it was
foreseeable that the sale would be completed 3 years after the
valuation date, which would require Corpus Christi to pay $25,000
per month for 36 months. The value of the monthly payments is
$25,000 multiplied by 36 months, or $900,000. When this income
stream is discounted using our 8-percent cost of capital
discount, the value of the monthly payments is $773,129.
The payment of the balance at closing should be discounted
by a higher rate than the cost of capital. We disagree with Mr.
Lloyd’s assertion that a buyer of water rights would require the
same rate of return as a private equity or venture capital
investor. The risk that regulatory hurdles would impede a sale
of petitioner’s water right is mitigated by the fact that
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