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September 4, 2019

PURA OKs $1.1B CT Water acquisition

Photo | Contributed Killingworth Reservoir is among 253 in-state reservoirs and wells tapped to provide potable water.

A California water purveyor’s long-delayed acquisition of Connecticut Water Service Inc. was pushed forward Wednesday after state regulators blessed the $1.1 billion deal.

The Connecticut Public Utilities Regulatory Authority (PURA) on Wednesday approved SJW Group’s application to purchase the Clinton-based water utility after it issued a preliminary decision in Dec. 2018 to block the merger, which was first announced in March 2018. PURA at the time argued the deal would leave Connecticut Water in worse condition both “financially and managerially.”

The companies months later revised and refiled their application with PURA, guaranteeing a slew of legally binding commitments, including Connecticut Water’s promise to preserve a Connecticut headquarters, not make any layoffs for three years, and freeze base rates until Jan. 2021, among others.

Despite PURA’s approval, and the additional pledges by the companies, the agency in its decision said it remains concerned that “ratepayers will bear certain financial risks.” 

PURA said its approval hinges on the companies filing a revised settlement agreement with several new conditions, one of which states that Connecticut Water supplies may not be used by the companies to serve SJW systems or customers outside of Connecticut without its approval. 

In a joint statement Wednesday afternoon, Connecticut Water and SJW Group said they are “pleased” with PURA’s decision, adding that it still needs approval from Maine regulators before it officially completes the merger. Maine’s approval is needed because Connecticut Water operates a northern subsidiary, Maine Water Co.

According to terms of the deal, Connecticut Water shareholders will receive $70 for each share of common stock. SJW will finance the acquisition through a combination of equity (49 percent) and debt (51 percent).

PURA said it received 54 letters and emails regarding the SJW-Connecticut Water tie-up, with most of the correspondence supporting the proposed acquisition.

SJW’s quest to acquire Connecticut Water took several turns since the original deal was announced more than a year ago.

The companies originally announced a $750 million merger in March 2018, but SJW raised its offer in Aug. 2018 to stave off competing bids last year from Eversource Energy and another California suitor.

Eversource opposed the SJW-Connecticut Water combination arguing the deal’s alleged benefits to customers are outweighed by the costs customers will pay in higher rates.

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