Epcor completes U.S. purchase

City-owned utility buys private water companies, looks for joint venture with City of Phoenix

City-owned Epcor Utilities completed its $470-million acquisition of private water companies in Arizona and New Mexico on Tuesday, and now hopes to do joint ventures with the City of Phoenix’s own water utility.

Epcor Water (USA) Inc., a wholly owned subsidiary, announced it planned to buy the companies one year ago and had to obtain regulatory approval in both states.

“We are now the largest private water utility in the U.S. Southwest area of Arizona and New Mexico, and 85 per cent of our customers are in greater Phoenix,” said Joe Gysel, Epcor Water USA’S president.

“We have talked to Phoenix about joint venture opportunities and an exchange of technologies.”

The Southwest is very dry, but water is also scarce in southern Alberta. And the oilsands — an area where Epcor is already active with water and waste-water operations — is always looking for ways to use less water, he said.

“Epcor has developed technologies and practices to address water scarcity, with water recycling and reuse. We’ll also have some good technologies with the company we bought because the industry down here is very focused on water,” said Gysel.

“Coming to Arizona is like going to school if you want to talk about water scarcity.”

Epcor has been operating a small water utility with 13,000 customers since June in Chaparral, an area just east of Phoenix. It was Epcor’s first purchase in the U.S. The latest acquisition from the American Water Co. holdings in the two states added 106,000 water customers and 51,000 waste water customers in 11 Arizona municipalities in Maricopa, Mohave and Santa Cruz counties in areas east and north of Phoenix, plus some near the California border.

Epcor also added 17,000 customers in New Mexico, in the Edgewood area near Albuquerque and the city of Clovis. A total of 220 staff are also part of the deal.

Along with the major urban utilities in cities like Phoenix and Tucson, there are more than 400 independent utilities across the state, and some may be next on the shopping list.

“There is good potential for growth in this region once we have established a solid business hub. We are pretty happy where we are today,” said Gysel.

There are several medium-sized private water firms with between 50,000 and 100,000 customers.

“These are run very professionally, so we would have to be sure we could add value if we did an acquisition,” he added.

Many of the small utilities would probably consider selling, but they might require a larger investment to upgrade their infrastructure.

“Usually these small ones start out to service a new area, but for the developer this is not a core business. You start to see some of these being under capitalized, and they don’t have the expertise and resources of a company like Epcor, which prides itself in being a leader in technology, operations and investment.”

However, there may be an opportunity to “tuck” some into Epcor’s other larger operations over time.

And being a city-owned utility has proven helpful for Epcor.

“The City of Phoenix recognizes our history, and when we look at entering new communities, our municipal ownership is welcomed as opposed to a private company.

As for Arizona’s economy, Gysel rates it as “fragile,” but he remains fairly bullish.

“Things should start to trend upwards in three to five years.”