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PICO Holdings, Inc. announced that the Lincoln County Water District and PICO's wholly-owned subsidiary, Vidler Water Company, Inc., have closed a previously announced transaction to sell water to a developer in Lincoln County, Nev.
Under the agreement, Lincoln/Vidler sold to the developer an initial
amount of 2,100 ac-ft of water for $15,750,000, which represents a price of $7,500 per ac-ft. Lincoln/Vidler received a deposit of $3.15 million in June 2005, and the balance of $12.6 million was received at the close. After deducting costs advanced and incurred to date by Vidler of $5.8 million, the net proceeds have been shared equally between Lincoln/Vidler. As a result, Lincoln County has received funds of approximately $5 million from this transaction.
It is expected that this transaction will generate revenues of
approximately $10 million and contribute approximately $9 million to income before taxes to PICO's consolidated financial results in the fourth quarter of 2005. In addition, the developer has up to 10 years to purchase an additional 7,240 ac-ft of water, as and when supplies are permitted from existing applications.
The initial price of $7,500 per acre-foot will increase at 10% each year. In addition, the developer will pay a commitment fee equal to 10% of the outstanding balance of unpurchased water each year, beginning August 9, 2006, which will be applied to the purchase of water.
Under the agreement between the Lincoln County Water District and Vidler Water Company, the proceeds from the sale of water will be shared equally after Vidler is reimbursed for expenses to develop the water resources.