A year after paying $1.68 billion for Aquarion Water Co., Eversource is in the hunt for another water utility.
The electric and gas utility disclosed April 19 that it made a $750 million offer for Connecticut Water Service Inc., a Clinton-based company that serves 450,000 customers in Connecticut and Maine. It was rebuffed, but has not given up.
“A lot of communities we serve from the electric and gas perspective are Connecticut Water towns as well,” Eversource spokeswoman Caroline Pretyman said. “Knowing the communities, knowing the regulatory environment, we have a strong track record for the regulatory process.”
Bloomberg analysts cite another reason Eversource is looking to move into new territory: its rebuke by Massachusetts regulators over its Northern Pass transmission line in northern New England.
The utility’s bid for Connecticut Water would have helped Eversource reach its goal of increasing profit, diversifying operations and putting to use money that had been earmarked for the Northern Pass line, said Bloomberg analysts Nikki Hsu and Kit Konolige.
In late March, the Massachusetts Office of Energy and Environmental Affairs announced its termination of an earlier selection of Eversource’s Northern Pass project. The state will instead move toward an agreement with New England Clean Energy Connect, a hydropower project. Both projects would get hydropower from Canada.
The Connecticut Water Board unanimously reaffirms its recommendation for the merger of equals with SJW Group. Read more https://t.co/H5EwU6JeAw
— Connecticut Water (@CTWater) April 20, 2018
The decision by Massachusetts officials to end the Northern Pass line may not threaten Eversource’s annual profit growth target of 5 percent to 7 percent a year through 2021, the Bloomberg analysts said. Its acquisition of Aquarion, investments to upgrade New England pipelines to relieve supply constraints and new investment opportunities will more than offset the potential profit from Northern Pass, they said.
Connecticut Water announced in March a merger with SJW Group, a San Jose, Calif., company. It dismissed the Eversource offer as “not a superior proposal or reasonably likely to lead to a superior proposal.”
Eversource has not given up on the acquisition, saying it would be a good fit.
“We’re evaluating all options available to us,” Pretyman said.
Late Friday, Eversource said it filed preliminary proxy materials with the U.S. Securities and Exchange Commission urging shareholders of Connecticut Water Service to vote against the SJW Group merger plan.
“We believe that our proposal to acquire Connecticut Water is a compelling offer that is in the best interest of both companies’ shareholders, employees, customers and local communities,” said James Judge, chief executive officer of Eversource.
On Thursday, a fourth water company joined the fray. California Water Service Group said it’s seeking to buy SJW Group for $68.25 a share in a cash transaction valued at about $1.9 billion.
Adding Connecticut Water to its Aquarion water assets would give Eversource “critical mass in water distribution and enhance the municipal roll-up strategy, while still keeping water a small overall contributor to the bottom line,” UBS analysts Daniel Ford and Rose-Lynn Armstrong said in a client note.
Eversource, citing its market value of about $19 billion, a “long track record” of earnings and dividend growth, a strong credit rating and a growing dividend, said financing contingency would not be part of the Connecticut Water transaction.
“The proposed transaction would combine two highly complementary local businesses, and would enable cost effective regional investment and support economic growth,” the utility said.
Eversource says it expects to boost capital investment at Aquarion to $114 million a year to 2022, from about $68 million a year from 2013 to 2017.
Eversource was created in 2012 with a $5 billion purchase by Northeast Utilities of Boston-based NStar. The utility transmits and delivers electricity and natural gas to 3.7 million customers in Connecticut, Massachusetts and New Hampshire.