Eversource Energy to acquire Aquarion Water Co.
Updated 5:32 pm, Friday, June 2, 2017
Eversource Energy’s announcement on Friday that it would acquire Bridgeport-based Aquarion Water Co. for nearly $1.7 billion may have surprised analysts, but the deal is expected to bode well for the future of both companies.
Contingent on approvals from public utility agencies in the three states in which they operate, Eversource, which has headquarters in Hartford and Boston, said it expected to close on its $1.675 billion acquisition deal — comprised of $880 million in cash and $795 million of assumed Aquarion debt — by Dec. 31.
Caroline Pretyman, a spokeswoman for Eversource, called it an “excellent strategic fit for both companies.
“We plan to run Aquarion as a subsidiary, so it will maintain its own brand and we anticipate customers will continue to experience the same high level of service they have come to expect,” she said, in an email. “The same can be said for employees — we are not planning any changes in current staffing levels or existing operations or facilities.”
Elin Swanson Katz, the state’s consumer counsel, said her office is cautiously optimistic that the companies’ statements indicate the consumer experience could remain the same. “The devil’s always in the details, but we’re keeping an open mind,” she said. “We’re pleased it’s going to remain a Connecticut company.”
1853: The Bridgeport Water Company incorporated. Builds a system using wrought-iron pipe to carry water from a reservoir formed by an earthen dam on the Pequonnock River.
1854: The dam collapsed in a storm.
1855: Water company defaults on bonds and falls into foreclosure.
1857: Remains of the company incorporated as Bridgeport Hydraulic Company.
1873: Phineas T. Barnum offers $300,000 for the water company; runs it for 9 years.
1875: Barnum elected mayor of Bridgeport.
1877: Bridgeport fire takes11 lives, underscoring city’s need for reliable water supply.
1900: Company now has 14 reservoirs, two tanks for total of 3 billion gallons.
1914-16: War contracts boost industry. Bridgeport population explodes by 60,000.
1926: The 5.8-billion gallon Easton Lake Reservoir constructed.
1930s: More land acquired in area that will be 11.9-billion gallon Saugatuck Reservoir.
1942: World War II; factories need more water for war production.
1940s-50s: Bridgeport metro area grows to more than 200,000. Suburbs grow along with demand for water.
1991: Hydraulic Company changes its name to Aquarion Company.
2000: Aquarion acquired by the Kelda Group in England for $596 million.
2007: Kelda sells Aquarion to Australia's Macquarie Bank for $860 million.
2010-11: Aquarion purchases Topstone Water Co., which served customers in Danbury and Ridgefield. Water Systems Solutions and Design, of Watertown, with customers in Brookfield, Danbury, New Fairfield, Newtown and Washington. Rural Water Co. of Bethel, with customers in Brookfield, New Fairfield, Danbury and Ridgefield. Brookfield Water Co, with customers in Brookfield.
2017: June 2, Eversource Energy announces purchase of Aquarion for $1.675 billion.
Richard Sobolewski, supervisor of technical analysis in the consumer counsel office, said having Eversource acquire Aquarion could provide a more stable outcome than if the water company had been taken over by a larger water supplier who “squeezed” it dry.
Travis Miller, an equity strategist in the energy and utilities sector at Morningstar, said the announcement was unexpected because Eversource had not previously expressed interest in owning a water company.
“It’s a relatively small transaction so I don’t see it having a huge impact on the value of the company or on the operations for their electric and gas utilities,” said Miller, who notes in his latest report on Eversource that it invested $2.4 billion in electric transmission between 2014 and 2016 and plans another $4 billion of transmission investments by 2020. “We still expect to learn more about potential synergies because it’s not immediately apparent that there would be synergies.”
He said billing and customer service are two areas where the companies may find they can integrate their operations. “There are some back-end functions that could be shared,” he said.
With nearly 230,000 customers in Connecticut, Massachusetts and New Hampshire, Aquarion — which was once run by P.T. Barnum — is the largest private water company in the region. It has been owned by a partnership led by Macquarie Infrastructure Partners since 2007.
“Eversource has such strong local ties to New England, and a commitment to operational excellence, customer service, and support for the communities we serve,” said Chuck Firlotte, Aquarion president and chief executive officer, in a release. “These are qualities we share and will serve us well as we join with Eversource’s incredible team of employees.”
The company’s 300 employees will join Eversource’s 8,000-person workforce. The energy company serves 3.7 million electric and natural gas customers in the same three states where Aquarion operates.
“This transaction combines two companies that are leaders in providing the critical infrastructure New England residents and businesses need to grow and thrive,” said Jim Judge, chairman, president and chief executive officer of Eversource, in a release. “Both companies’ dedicated employees work relentlessly to put customers first, and that commitment to reliability and customer service will remain paramount.”
Miller said he finds that Eversource’s acquisition of Aquarion seems to be in keeping with its sustainability goals.
“Water is a critical resource that can contribute positively to the environment if it’s managed well, through water conservation, for example,” he said. “To the extent Eversource can bring public awareness of water and energy conservation to the Northeast, the deal could be a positive for all residents.”
Andy Pusateri, an analyst with Edward Jones, said he also did not think the acquisition was a bad deal for Eversource because it diversifies its business and the water utility industry has been seen as “fairly positive” by analysts.
Since most water companies are more often than not, small, they can lack the capital needed to invest in and update their systems, Pusateri said, in an email. “Larger companies with capital can make investments to improve the system and then earn a regulated return on that investment,” he added.
The acquisition still requires approval from the Connecticut Public Utilities Regulatory Authority, the Massachusetts Department of Public Utilities and the New Hampshire Public Utilities Commission. It also must be reviewed by the U.S. Justice Department.
Although not common, there have been other instances of electric companies buying water companies in the U.S. In 2001, German utility RWE bought American Water Works based in New Jersey for $7.5 billion.
Just several years later, RWE sold the large water company through an IPO.