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Eversource's (ES) Unit to Buy The Torrington Water Company
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Eversource Energy (ES - Free Report) announced that its unit Aquarion Company has entered into an agreement to acquire The Torrington Water Company (TWC), a water distribution company providing services in Connecticut. This stock-for-stock deal was approved by the board of directors of both the companies. In connection with the exchange, Eversource will issue between 885,000 and 925,000 common shares at closing.
The acquisition of TWC will expand Aquarion Company’s operation in Connecticut and add nearly 10,100 customers to its customer base. TWC's service area will complement Aquarion's existing footprint in the northwestern part of Connecticut. Aquarion Company will make the necessary investments to upgrade the existing infrastructure of TWC and ensure high-quality services to customers.
Fragmented Water Industry
Currently, more than 51,000 community water systems and 16,000 community wastewater systems in the United States are providing water solutions to customers. Since a major portion of water and wastewater infrastructure has aged, the fragmented water industry creates operational challenges. Per the findings of the American Society of Civil Engineers, water main breaks occur every two minutes in the United States due to the aging of the existing water infrastructure. Pipeline breaks result in the wastage of 6 billion gallons of potable water each day and add to the loss of water utility operators.
Per Environment Protection Agency, U.S water and wastewater infrastructure need $473 billion and $271 billion, respectively, in the next 20 years to upgrade and maintain high-quality services. This huge investment should come jointly from the government and utility operators. The acquisition of smaller utilities brings in much-needed investments in the water space from financially strong large operators.
Consolidation in Water Industry
Given impressive prospects in the water industry, Eversource is trying to expand the water business through inorganic ways. Eversource earlier made an attempt to acquire Connecticut Water Service, Inc. but the offers were not successful.
However, a few water utilities like American Water Works (AWK - Free Report) , Essential Utilities (WTRG - Free Report) , and California Water Service Group (CWT - Free Report) have been making acquisitions and the necessary investments to upgrade infrastructure.
American Water Works has plans to invest $13-$14 billion in the 2022-2026 time period and $28-$32 billion in the 2022-2031 time frame. In 2021, AWK expanded the customer base by 20,000 through 23 closed acquisitions in six states. American Water Works’ pending acquisitions (as of Dec 31), when completed, will add another 73,750 customers to the customer base.
Essential Utilities is going to invest $3 billion from 2022 through 2024 to fortify operations and efficiently serve the expanding customer base. In 2021, the company closed two acquisitions, which added 7,700 new customers. At present, there are eight pending acquisition deals, which, when completed, will add 234,815 new customers to the existing customer base.
California Water Service is expected to continue with capital investment in the 2022-2024 time frame. The midpoint of the planned capital expenditure for 2022, 2023, and 2024 is $355 million, $360 million, and $365 million, respectively. CWT’s six acquisitions are pending and awaiting regulatory approvals, which can add up to 2,238 and 3,650 water and wastewater connections, respectively.
Price Performance
Shares of Eversource Energy have gained 4.2% compared with the industry’s 8.5% growth in the past year.
Image: Bigstock
Eversource's (ES) Unit to Buy The Torrington Water Company
Eversource Energy (ES - Free Report) announced that its unit Aquarion Company has entered into an agreement to acquire The Torrington Water Company (TWC), a water distribution company providing services in Connecticut. This stock-for-stock deal was approved by the board of directors of both the companies. In connection with the exchange, Eversource will issue between 885,000 and 925,000 common shares at closing.
The acquisition of TWC will expand Aquarion Company’s operation in Connecticut and add nearly 10,100 customers to its customer base. TWC's service area will complement Aquarion's existing footprint in the northwestern part of Connecticut. Aquarion Company will make the necessary investments to upgrade the existing infrastructure of TWC and ensure high-quality services to customers.
Fragmented Water Industry
Currently, more than 51,000 community water systems and 16,000 community wastewater systems in the United States are providing water solutions to customers. Since a major portion of water and wastewater infrastructure has aged, the fragmented water industry creates operational challenges. Per the findings of the American Society of Civil Engineers, water main breaks occur every two minutes in the United States due to the aging of the existing water infrastructure. Pipeline breaks result in the wastage of 6 billion gallons of potable water each day and add to the loss of water utility operators.
Per Environment Protection Agency, U.S water and wastewater infrastructure need $473 billion and $271 billion, respectively, in the next 20 years to upgrade and maintain high-quality services. This huge investment should come jointly from the government and utility operators. The acquisition of smaller utilities brings in much-needed investments in the water space from financially strong large operators.
Consolidation in Water Industry
Given impressive prospects in the water industry, Eversource is trying to expand the water business through inorganic ways. Eversource earlier made an attempt to acquire Connecticut Water Service, Inc. but the offers were not successful.
However, a few water utilities like American Water Works (AWK - Free Report) , Essential Utilities (WTRG - Free Report) , and California Water Service Group (CWT - Free Report) have been making acquisitions and the necessary investments to upgrade infrastructure.
American Water Works has plans to invest $13-$14 billion in the 2022-2026 time period and $28-$32 billion in the 2022-2031 time frame. In 2021, AWK expanded the customer base by 20,000 through 23 closed acquisitions in six states. American Water Works’ pending acquisitions (as of Dec 31), when completed, will add another 73,750 customers to the customer base.
Essential Utilities is going to invest $3 billion from 2022 through 2024 to fortify operations and efficiently serve the expanding customer base. In 2021, the company closed two acquisitions, which added 7,700 new customers. At present, there are eight pending acquisition deals, which, when completed, will add 234,815 new customers to the existing customer base.
California Water Service is expected to continue with capital investment in the 2022-2024 time frame. The midpoint of the planned capital expenditure for 2022, 2023, and 2024 is $355 million, $360 million, and $365 million, respectively. CWT’s six acquisitions are pending and awaiting regulatory approvals, which can add up to 2,238 and 3,650 water and wastewater connections, respectively.
Price Performance
Shares of Eversource Energy have gained 4.2% compared with the industry’s 8.5% growth in the past year.
Image Source: Zacks Investment Research
Zacks Rank
Eversource Energy currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.