Many suitors as Aquarion looks for a buyer
Sale will affect 236,000 customers in 72 municipalities across three states
“Considering the amount that Eversource paid in 2017, the sale would be one of the largest water deals in the last decade. While Aquarion’s list of suitors is likely to be long, history indicates that some well-heeled PE (private equity) firms and pension funds are already poised to pounce.”
Excerpt from a report by Boston-based Bluefield Research
As Eversource Energy continues to explore the sale of its Aquarion Water subsidiary, it’s unclear exactly how many companies may be interested in buying it. The purchase, however, will have a ripple effect across Connecticut with more than 236,000 customers in 72 municipalities across three states.
Financial analysts have said the California-based corporate parent of Connecticut Water Co. is one of the likely suitors for the Bridgeportbased utility.
SJW Group acquired the Clintonbased water utility in 2019 and analysts in interviews said SJW’s existing presence in the state make it a logical acquirer of Aquarion.
“SJW was the first name that came to mind when we heard this,” said Charlie Suse, a senior analyst with Boston-based Bluefield Research.
Richie Rathsack, a spokesman for Connecticut Water, said neither company officials nor anyone with the company’s corporate parent would have any comment on whether they had any interest in making a bid for Aquarion. Connecticut Water has more than 107,000 customers in 60 Connecticut towns.
Since announcing the intention to explore the sale of Aquarion in midFebruary, Eversource officials have repeatedly declined further comment on a timetable for determining a buyer for the Bridgeport-based water company. Eversource acquired Aquarion for $1.675 billion in 2017.
The bulk of Aquarion’s customers are here in Connecticut. where it provides water in 59 communities, although it also serves some customers in Massachusetts and New Hampshire.
Eversource announced its plans to find a buyer for Aquarion almost 11 months after the Connecticut Public Utilities Regulatory
Authority rejected the water company's rate hike request and instead approved a decrease of its current revenue requirements by approximately 0.99 percent. Aquarion subsequently appealed the decision and the case is still tied up in the courts.
When Eversource announced plans to seek a buyer for Aquarion, company officials said “the water business is likely of substantial value to another owner as part of a larger strategic water business or infrastructure platform.”
In a research report provided to customers in late February, Bluefield described Aquarion being put up for sale as “a unique buying opportunity from which to grow.”
“Since 2015, Bluefield has identified only four transactions serving more than 100,000 customers,” the report said in part. “Considering the amount that Eversource paid in 2017, the sale would be one of the largest water deals in the last decade. While Aquarion's list of suitors is likely to be long, history indicates that some wellheeled PE (private equity) firms and pension funds are already poised to pounce.”
As an example, the Bluefield report notes that in 2018, Dutch pension fund service provider PGGM acquired a 20 percent stake in 15 regulated utilities in New England.
Suse said if SJW doesn't make a bid for Aquarion, another potential acquirer might be Liberty Utilities, a subsidiary of the Algonquin Power & Utilities Corp. in Canada. Liberty acquired American Water Company's New York American Water Co. at the start of 2022 and Suse said Liberty officials “have said they are doubling down” on acquisitions going forward.
Officials with Algonquin Power & Utilities Corp. did not respond to requests for comment from CT Insider.
Travis Miller, an energy and utilities strategist for Morningstar Securities Research, said other potential acquirers of Aquarion are New Jersey-based American Water Works or Essential Utilities, the Bryn Mawr, Pa.-based corporate parent of Aqua America and Peoples Natural Gas.
But neither American Water Works nor Essential Utilities has a presence in New England.
Officials with American Water Works were not available for comment on whether the company has any interest in acquiring Aquarion. A spokesman with Essential Utilities said Thursday the company does not comment on potential merger and acquisition targets.
John Griffith, American Water Works chief financial officer, told investors in December that the company's “outlook for future acquisitions remains very strong.”
“The work to build and refill the acquisition pipeline is continuous,” Griffith said.
Another possibility is that Aquarion could be acquired by a private equity firm or a company that does infrastructure investment, according to Miller.
“We've seen several deals done by infrastructure investors that are seeking long-term reliable returns on their investments,” he said.
One other scenario of Aquarion Water being acquired could involve the state of Connecticut.
There is precedent in the state's history for the creation of a quasi-public utility. That's what happened in 1977 when the Connecticut legislature created the South Central Connecticut Regional Water Authority, which three years later acquired the assets of the forprofit New Haven Water Co., which had fallen into financial difficulties.
The Regional Water Authority, which is based in New Haven, now serves 15 communities and has 117,000 customers.
Could history repeat itself ? Suse said while it is not unheard of for government entities to acquire investor owned water utilities, it usually involves companies that are underperforming, which is not the case with Aquarion.
State Sen. Norman Needleman, D-Essex, who is co-chairman of the General Assembly's Energy and Technology Committee, said he is not aware of any interest in creating a quasipublic authority to acquire Aquarion.
“While I'm anxious to see the details of any deal for Aquarion, I think the price (for a quasi-public authority to acquire it) would be a real problem,” Needleman said.