BRYN MAWR, PA, OCT 23, 2018 -- Aqua America Inc., a regulated water and wastewater utility, today announced it will acquire Peoples in an all-cash transaction that reflects an enterprise value of $4.275 billion, which includes the assumption of approximately $1.3 billion of debt. This acquisition marks the creation of a new infrastructure company that will be uniquely positioned to have a powerful impact on improving the nation's infrastructure reliability, quality of life and economic prosperity.
Peoples consists of Peoples Natural Gas Company LLC, Peoples Gas Company LLC and Delta Natural Gas Company Inc. The multi-platform entity brings together the second-largest U.S. water utility and fifth-largest U.S. stand-alone natural gas local distribution company (based on customers), and will serve 1.74 million customer connections, which represent approximately 5 million people. In 2019, the new company will have approximately $10.8 billion in assets and a projected U.S. regulated rate base of over $7.2 billion. The transaction is not expected to have any impact on rates.
The combined enterprise will be among the largest publicly traded water utilities and natural gas local distribution companies in the U.S., uniquely positioned to meaningfully contribute to the nation's natural gas and water infrastructure reliability. The transaction will bring together two companies that each have more than 130 years of service and proven track records of operational efficiency, complementary service territories and strong regulatory compliance.
Aqua will acquire Peoples from infrastructure funds managed by Sausalito, California-based SteelRiver Infrastructure Partners. The resulting company will be well positioned to grow and generate shareholder value through increased scale, a balanced portfolio and stable capital structure.
"The acquisition of Peoples is a great strategic fit and aligns directly with our growth strategy and core competencies of building and rehabilitating infrastructure, timely regulatory recovery, and operational excellence," said Aqua Chairman and CEO Christopher Franklin. "Both Aqua and Peoples place customers at the center of all we do. We care deeply for employees and their safety, have expertise in pipe replacement, and prioritize stewardship of the environment. Both companies have worked hard to earn credibility with regulators and respect of other stakeholders, and to employ advanced operational efficiencies, all of which create long-term value for customers, communities, employees and shareholders."
The combined company will operate regulated utilities over a 10-state footprint and will have its largest concentration in Pennsylvania, which will account for more than 77 percent of the company's total rate base. Aqua's rate base is growing annually at approximately 7 percent (2019-2021) and Peoples' rate base is growing annually at 8 to 10 percent (2019-2021), creating a strong combined growth trajectory.
"By bringing together water and natural gas distribution utility companies that share a core mission of providing essential services to customers, the resulting company will be positioned to grow and drive value, as well as make a long-term, positive contribution to our nation's infrastructure challenges and ensure service reliability for generations to come," Franklin said. "The new leadership team will take an integrated management approach to cooperatively running the utilities. We plan to leverage the combined breadth of experience from both companies to lead our new combined company."
Morgan O'Brien, who will continue to lead the natural gas company, said, "The planned combination with Aqua creates a larger strategic utility committed to growing our region's economic future using the most responsible and innovative tools in our long-term infrastructure replacement programs in Pennsylvania, West Virginia and Kentucky. Our resulting company is deeply rooted in the long-established regulatory environments where partnership opportunities will support growth and safety. We are focused on strongly encouraging infrastructure replacement and expansion to better serve customers and fuel growth opportunities. In addition, this larger entity will provide employees with enhanced opportunities for career development.
"For example, the Pennsylvania Public Utility Commission has demonstrated its support for our infrastructure investment program, through which we will replace more than 3,100 miles of bare steel and cast-iron pipe in the coming years at a current rate of about 150 miles per year," said O'Brien.
Post-transaction close, the combined businesses will be led by Franklin. The company's corporate headquarters will be in Bryn Mawr, Pennsylvania, and Aqua's water and wastewater operations will remain headquartered in Bryn Mawr. Peoples, the natural gas operating subsidiary, and its employees will remain headquartered in Pittsburgh and other operating locations will remain unchanged.
