Press Release on Ground Breaking for Plant

FOR IMMEDIATE RELEASE
January 16, 2008

PALM VIEW, TEXAS, Mr. Pablo Vela, Jr., C.P.A., the Receiver of La Joya Water Supply Corporation (“La Joya WSC”) announced that construction has begun on a new water treatment plant that will more than double the water treatment capacity of the utility. On Wednesday, January 9, 2008 the Receiver issued a Notice to Proceed to RP Constructors, the firm selected to build the new plant which will produce 6 million gallons per day (MGD) of treated water for use in the La Joya WSC system. The construction plans developed for the Receiver by Melden & Hunt Engineers of Edinburg, Texas, call for the plant to be completed by early 2009. The new plant will be constructed at the utility’s headquarters on Abram Road just North of Palm View, Texas. A ground breaking ceremony will be held by the Receiver at the construction site on Wednesday, January 16, 2008 at 11:00 a.m.

The 6 MGD water treatment plant is the last of three major projects organized by the Receiver of La Joya WSC to bring the company into compliance with state utility regulations. The new water treatment plant will cost approximately $10 million and was financed by the Texas Water Development Board (“TWDB”) through loans obtained by the Receiver over the last two and a half years. The other two projects were previously contracted out and are under construction at this time.

Mr. Frank Flores, the General Manager of the La Joya WSC stated “I am extremely pleased to have this plant under construction. The additional water treatment capacity that the new plant will provide will allow us to meet state regulations for our customer base and allows for some limited growth. There has been a strong demand for new service in the area since the TWDB authorized us to accept applications for several new subdivisions and in the last year, we have approved new residential developments that will add over 1000 connections to the system. We continue to receive new applications and I anticipate that this strong level of demand will continue.”

Mr. Vela and Mr. Flores also indicated that the strong demand in the area will present challenges to the utility for the foreseeable future. “While the new plant will get us back into compliance it provides only a limited cushion of excess rated capacity for new growth. We must continue to work on ways to expand the utility’s service capacity. Texas Commission on Environmental Quality (“TCEQ”) has re-rated the water treatment capacity of our Havana Plant and we are adding additional capacity with well water which increases our rated service capacity under current state regulations, but we need more capacity, at least on paper” stated Mr. Vela.

TCEQ requires a utility to maintain water treatment capacity levels based on the number of connections. The TCEQ also rates each plant in a system for the quantity of water that it is allowed to produce. A utility can obtain a higher rating for a plant if it can demonstrate that its plant can safely process additional water. The rated capacity is substantially higher than the actual demand placed on the system by customers. So, although the utility is required by the state regulations to maintain capacity at certain levels, the actual amount of water processed and sold to customers is substantially less than the rated capacity.

La Joya WSC currently has 13,300 connections and has facilities and is constructing facilities that allow it to be rated for approximately 15,400 connections. To remain in good standing with state regulations, the utility must stay within the rated limits regardless of the actual water usage levels unless it can obtain a waiver from the state regulations. TCEQ has notified the Receiver that until the new plant is completed, La Joya WSC is not eligible for such a waiver of the rating standards.

The La Joya WSC Receivership is pursuing multiple strategies to make sure it stays in compliance with state rating requirements over the near term. Over the last year, the Receiver has obtained commitments for additional funding from the TWDB at favorable rates to finance additional wells and water treatment facilities for the company which are available to the utility for the next two years and which will provide for some capacity increases. At the same time, the Receiver is applying to TCEQ to re-rate additional facilities in the system and anticipates that he can obtain an additional 800,000 gallons per day of capacity from the re-rating of remaining facilities. The Receiver will re-apply to TCEQ for alternative water usage calculations (ACR) as soon as the new plant is completed and brought on line. The ACR, if allowed, would increase the utilities service capacity by approximately 3,300 connections.

Ultimately, however, the growth in the area will compel the La Joya WSC to construct a new water treatment plant and to secure additional raw water to process through this plant.

In 2007 the Legislature authorized the creation of the Agua Special Utility District (Agua SUD) and the Receiver is working to organize the Agua SUD so that he can transfer the assets of the receivership to the new political subdivision. Among the responsibilities that the new Agua SUD will inherit will be the challenge of designing and funding the next water treatment plant for the system.

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For More Information Contact: Mr. Frank Flores
General Manager
La Joya Water Supply Corporation
(956) 585-2459


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