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October 9, 2019

SJW closes $1.1B deal to acquire CT Water

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

A California company has closed its $1.1 billion acquisition of Connecticut Water, a Clinton-based utility that provides water services to more than 136,000 customers in Connecticut and Maine.

The buyer, San Jose-based SJW Group, now claims 1.5 million customers across California, Connecticut, Maine and Texas.

“This transaction brings together employees from two companies who share a passion for water and wastewater service, for being good corporate citizens and for preserving natural resources to sustainably serve current and future customers,” David Benoit, president of Connecticut Water, said in an announcement Wednesday. “We will have the benefits of national scale while maintaining the experienced local leadership teams and employees to meet our customers’ needs.” 

Since it’s now a subsidiary, shares of CTWS’ common stock have ceased trading on Nasdaq. SJW remains a publicly listed company. 

SJW’s shares have gained value over the past year, rising from about $60.50.

Connecticut’s Public Utilities Regulatory Authority (PURA) approved the acquisition in early September, attaching conditions that included keeping Connecticut employee counts level at a minimum headcount of 221 for the next three years. CTWS must also keep its regional headquarters and management team here, and has pledged customer bill credits and a rate freeze until 2021.

PURA’s approval bars CTWS from drawing on its water stores to supply any systems or customers outside of Connecticut without prior approval from the regulator.

For the past month, the two companies had been awaiting approval from utility regulators in Maine, where CTWS subsidiary Maine Water Co. serves approximately 32,000 customers.

That approval came on Oct. 4, according to the Maine Public Utilities Commission’s website.

The Maine PUC attached some similar conditions as Connecticut to its own approval. 

The closing wraps a 20-month saga, during which the deal seemed, at times, to face an uncertain fate.

Late last year, PURA signaled that it could block the transaction, arguing the deal (which was originally proposed as a merger of equals rather than an acquisition) would leave Connecticut Water in worse condition both “financially and managerially.”

SJW and CTWS withdrew their application and returned months later with a revised deal structure and additional commitments to sweeten the offer for Connecticut ratepayers.

Another challenge along the way for SJW was that Connecticut’s largest utility operator, Eversource, wanted to acquire CTWS. Eversource cast several competing bids last year, and opposed the SJW deal before PURA commissioners.

Eversource, which has stepped into the water business in recent years, argued the SJW-CTWS combo as originally proposed contained “fatal defects.”

In Maine, Eversource continued its opposition, regulatory filings show. The company sought to convince Maine regulators that the SJW acquisition of Maine Water wouldn’t provide a net benefit to Maine customers. Eversource also argued that an investigation launched into SJW overbilling practices in 2018 in its home state of California could ultimately result in conditions that impact Maine consumers.

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