SouthWest Water Company (NASDAQ:SWWC), a leading provider of water, wastewater and public works services, today said it has filed a Form 12b-25 with the Securities and Exchange Commission indicating that it will not be able to file its Form 10-K by March 31, 2009, the extended due date of the filing.

As announced on November 10, 2008, the company said that it would restate prior period financial statements after management discovered errors relating to establishing the rate of depreciation of acquired assets along with accounting for revenues and related costs associated with the installation of water and sewer taps. PricewaterhouseCoopers (PwC), which had previously been appointed as the company�s independent public accountant for the period beginning January 1, 2008, was also engaged to re-audit the company�s financial statements for the two years ended December 31, 2007.

In connection with the ongoing comprehensive financial review, management has identified deficiencies in its internal controls over financial reporting during and prior to the restatement periods. Although management has not completed its assessment, it is expected that the assessment of the control deficiencies, either individually or in combination, is likely to result in a conclusion that material weaknesses existed. As such, management has expanded the review to include additional procedures and analysis to compensate for insufficient controls. The company believes that the extra time and expense associated with these additional procedures will aid in assuring that no further issues are present and an appropriate remediation plan is in place.

The expanded review has resulted in the identification of additional matters that will require restatement of previously reported results. These matters include errors related to the company�s accounting for acquisitions and the capitalization of certain utility assets. Additional errors will likely cause the range of the restatement to exceed the previously disclosed range of a cumulative reduction in net income of $4.0 million to $8.0 million from 2000 through 2008. The company is unable to estimate a range at this time because of the complexity of the mutually dependent nature of some of the items, but anticipates it will be able to provide more clarity within the next few weeks.

SouthWest Water also noted that its debt agreements require it to maintain specified financial ratios and to comply with other restrictive covenants. Management believes that as a result of balance sheet impacts identified in the restatement, its total capitalization ratio may exceed its covenant limit of 60% for a period of time. As of March 31, 2009, the company will also be out of compliance with its previously announced extension of its reporting deadline from its banking syndicate. The company is in discussions regarding obtaining an amendment to its current agreement. In the unlikely event that the company is unable to obtain the amendment prior to filing its 2008 Form 10-K, its outstanding long-term indebtedness would be required to be classified as a current liability. While the company is confident that it will be able to obtain the amendment, if it is unable to do so or unable to obtain alternative financing arrangements, there would be a material adverse impact to the business.

The company continues to work diligently to complete the restatement of prior period statements. As soon as practical the company will file a Form 10-K for the year ended December 31, 2008; amended Form 10-Qs for the quarterly periods ended March 31, 2008 and June 30, 2008, and its Form 10-Q for the third quarter ended September 30, 2008.

SouthWest Water Company provides a broad range of operations, maintenance and management services, including water production, treatment and distribution; wastewater collection and treatment; customer service; and utility infrastructure construction management. The company owns regulated public utilities and also serves cities, utility districts and private companies under contract. More than two million people in 10 states depend on SouthWest Water for high-quality, reliable service. Additional information may be found on the company�s website: www.swwc.com.

This document contains �forward-looking statements� within the meaning of the Private Securities Litigation Reform Act of 1995. These statements, including expectations relating to the anticipated timing of further clarity on the range and amounts of restatement issues, and its ability to obtain an amendment from its banking syndicate, involve risks and uncertainties, as well as assumptions that, if they prove incorrect or never materialize, could cause the results of the company to differ materially from those expressed or implied by such forward-looking statements. Actual results may differ materially from these expectations due to unexpected developments discovered in the process of the expanded review of the financial statements and other factors. The company assumes no obligation to update these forward-looking statements to reflect any change in future events.

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