Bankrupt Geneva Steel hit pay dirt earlier this year when it sold its core steel-making equipment to a Chinese firm for $40 million.

But that deal pales in comparison to a projected $90 million the steelmaker's water rights will capture.

In arid Utah, water is the lifeblood of development. And Vineyard-based Geneva holds rights to roughly 48,500 acre-feet of water, according to Jim Riley, regional engineer for the Utah Division of Water Rights.

"This 48,500 acre-feet of water is approximately half of the amount that is delivered annually out of Deer Creek Reservoir," Riley said. "It's a sizable amount of water."

It should be enough water for the thousands of homes, businesses and light industrial facilities envisioned for the 1,700-acre Vineyard site.

The pending water sale will be "one of the biggest transfers of water in our lifetimes," said J. Thomas Beckett, an attorney for the unsecured creditors committee, in an interview after a Geneva bankruptcy hearing Monday.

Geneva Steel attorney Stephen Garcia on Monday said that he expects a purchase contract to be in place by late January.

Although the name of the purchaser was not disclosed, one possible buyer could be the Central Utah Water Conservancy District, a political subdivision of the state and a wholesaler of water to other cities.

A spokeswoman for the district declined to comment on the issue.

Garcia said $14.5 million of the $90 million transaction could include water sold to Denver-based Summit Energy, which is building a $330 million natural gas-fired power plant on 62 acres at the Vineyard site.

A change application for 11,000 acre-feet of water from Geneva to Summit is filed with the Utah Division of Water Rights, Riley said.

However, should Summit back out of the deal, Garcia said, all the water would be sold to a single party.

The water sale, combined with $40 million already in the bank, should satisfy Geneva's secured creditors, which are owed roughly $128 million.

That leaves Geneva's unsecured creditors, which are owed $80 million, with revenues from the sale of scrap metal, emission credits and real property, which combined could bring in roughly $75 million.

"It's not often unsecured creditors receive a substantial dividend in a steel bankruptcy case," Beckett said. "They have just been such disasters."

And as the payoff to unsecured creditors becomes more certain, outside groups that buy and sell bankruptcy claims have raised their offers.

Beckett said he receives daily calls from those interested in buying unsecured claims. A few months ago, offers were 12 cents on the dollar.

"Now they're in the 30-cent range," Beckett said, "and we're expecting them to go higher."

The only decision left for unsecured creditors, he said, is whether to wait three or four years to get the maximum benefit or sell their claims now to somebody willing to take the risk and presumably make a good profit.

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E-mail: danderton@desnews.com