Demonstrates the Combination is in the Public
Interest and Delivers Immediate, Quantifiable and Significant
Benefits for All Stakeholders
Responsive to PURA’s Previous Concerns,
Provides Binding Commitments to Meet the Regulatory Standard for
Approval
Establishes Optimal Structure to Ensure
Fulfillment of Commitments
Combined Company will be a Leading Water
Utility with Financial Strength, Local Operations, Resources and
Scale to Deliver Significant Benefits to Stakeholders Across Entire
Company
SJW Group (NYSE: SJW) (“SJW Group”) and Connecticut Water
Service, Inc. (NASDAQ: CTWS) (“Connecticut Water”) today announced
that they have jointly filed a new application with the Connecticut
Public Utilities Regulatory Authority (“PURA”) for approval of the
merger of SJW Group and Connecticut Water. The new application
offers a comprehensive set of commitments and additional supporting
evidence that the companies believe are responsive to PURA’s
previous concerns, demonstrate that their combination is in the
public interest and show that the combination will deliver
immediate, quantifiable and significant benefits to all of
Connecticut Water’s stakeholders.
“As a leading water utility, the combined company will have the
financial strength, scale, resources and sharing of best practices
to ensure families and communities will continue to have safe and
reliable water service across all of our operations and that we
deliver the significant benefits of the transaction to our
constituents in our local service areas in California, Connecticut,
Maine and Texas,” said Eric Thornburg, Chairman, President and
Chief Executive Officer of SJW Group. “We believe that the new
application demonstrates how our combination with Connecticut Water
is in the public interest. The comprehensive commitments in our
application will maintain the very best of Connecticut Water while
also enhancing local service and delivering customer benefits as
part of the SJW Group with increased access to expertise and
resources.”
“The new application we have submitted to PURA – with its
extensive and binding commitments – ensures that Connecticut
Water’s combination with SJW Group will provide immediate and
long-term customer benefits, protect jobs, support economic
development, advance important environmental goals and serve the
interests of our employees, customers and local communities in
Connecticut,” said David Benoit, President and Chief Executive
Officer of Connecticut Water. “In addition, the new application has
governance provisions that will support continued local control and
protect the financial integrity of the Connecticut utilities.”
The new application includes immediate customer benefits in the
form of a bill credit for customers, including municipalities, for
one year, as well as a general rate case stayout, which means no
new base rates will take effect in Connecticut prior to January 1,
2021. Also, the Connecticut utilities will not seek recovery in
rates for these customer rate benefits, the merger premium or other
costs incurred in connection with the combination.
The new application, with details of the 72 binding commitments,
is publicly available on the SJW Group/Connecticut Water merger
website at https://www.sjw-ctws.com/. The complete application with
all of the supporting testimony and exhibits will be available on
the PURA website at https://www.ct.gov/pura/site/default.asp once a
docket number is assigned by PURA.
Public Interest and Local Benefits
The new application contains commitments and benefits that
exceed those provided in prior Connecticut proceedings, as detailed
in testimony filed by a leading industry expert with the new
application. Examples of these commitments and benefits
include:
- Job protection and creation in
Connecticut: There will be no layoffs as a result of the
merger, and for at least three years following closing, Connecticut
Water’s Connecticut utilities will maintain their current staffing
level of 221 employees. Continued capital investments supported by
constructive recovery mechanisms under the Water Infrastructure and
Conservation Adjustment (“WICA”) program will be made with a
sustainable replacement cycle of at least 1% of pipe per year.
Based on an analysis by the Bureau of Economic Analysis, it is
expected that the level of investment by the Connecticut utilities
will support 67 additional jobs in all sectors in the State of
Connecticut from 2019 through 2021.
- Local leadership to manage
Connecticut Water’s operations in Connecticut: Customers and
communities in Connecticut will continue to be served by the
employees, management teams and operating centers they know and
trust. Connecticut Water will maintain its headquarters in
Connecticut, and its management team will continue to establish
local priorities and respond to local conditions. The leadership of
each local utility also will maintain its full authority to develop
and implement the annual capital budgets to support local needs.
There will be annual customer surveys to ensure the Connecticut
utilities continue to maintain a high level of service for their
customers with the results shared with PURA.
- Continued focus on environmental
stewardship and leadership, furthering the State of Connecticut’s
water resource planning efforts and increasing energy
efficiency: The Connecticut utilities will maintain responsible
water resource management programs, will continue to promote water
conservation for their customers and will implement technology to
reduce the amount of water lost through water system leaks in
Connecticut Water Company systems. Additionally, the Connecticut
utilities will support the State’s energy strategy as they increase
the proportion of class I renewable energy, identify measures that
could reduce energy consumption and explore development of
renewable energy projects in Connecticut.
Optimal Structure
The new application filed with PURA also outlines the structure
the combined company will employ to safeguard its local operations,
management teams and customers. This structure provides for:
- Local boards for each of the
Connecticut utilities with each board including a majority of
independent directors and a majority of directors who reside in New
England.
- Financial and governance
provisions for the utilities to ensure the continued financial
strength and autonomy of the Connecticut utilities.
Additionally, SJW Group is confident that the combined company’s
financial strength and capacity will enable continued investments
in the infrastructure, operations and customer service of all of
its utilities. SJW Group completed a successful equity raise in
early December 2018 to help fund its purchase of Connecticut
Water’s shares of common stock. The combined company will employ a
conservative financing mix, which should allow it to obtain and
maintain an attractive, strong investment grade credit rating of at
least “A-” post-transaction completion.
Accountability
The commitments outlined in the new application filed with PURA,
and the controls intended to implement them, are subject to PURA
approval and will be binding and will not be modified without prior
approval from PURA. Importantly, the combined company will
establish rigorous reporting structures and protocols to ensure
timely implementation and compliance with the commitments.
Financial Impact
The transaction is expected to generate high single digit
percentage earnings per share accretion in the second full year
post closing. This is based on estimated cost savings, current
market conditions for the remaining debt issuance, and costs
associated with the commitments detailed above, primarily the rate
case stayout until 2021. Due principally to the stayout, SJW Group
anticipates the transaction will be neutral to slightly dilutive in
the first full year, excluding one-time transaction costs.
Regulatory Process
The regulatory review period in Connecticut is approximately 120
days from the date of filing. The companies plan to file a merger
approval application with the Maine Public Utilities Commission
(“MPUC”) in the second quarter of 2019. SJW Group will continue to
work with the California Public Utilities Commission (“CPUC”) in
response to the CPUC’s Order Instituting Investigation (“OII”) of
the combination. The CPUC recently suspended its OII pending a
final decision by PURA.
Advisors
West Group Law PLLC and Brown Rudnick LLP are serving as local
regulatory counsel to SJW Group and Murtha Cullina LLP is serving
as local regulatory counsel to Connecticut Water. J.P. Morgan
Securities LLC is serving as financial advisor to SJW Group, and
Skadden, Arps, Slate, Meagher & Flom LLP is legal counsel.
Wells Fargo Securities, LLC is serving as Connecticut Water’s
financial advisor and Sullivan & Cromwell LLP as its legal
counsel.
About SJW Group
SJW Group is a publicly traded holding company headquartered in
San Jose, California. SJW Group is the parent company of San Jose
Water Company, SJWTX, Inc. and SJW Land Company. Together, San Jose
Water Company and SJWTX, Inc. provide water service to more than
one million people in San Jose and nearby communities in
California, and in Canyon Lake and nearby communities in Texas. SJW
Land Company owns and manages commercial real estate
investments.
About Connecticut Water Service, Inc.
Connecticut Water Service, Inc. is a publicly traded holding
company headquartered in Clinton, Connecticut. CTWS is the parent
company of The Connecticut Water Company, The Maine Water Company,
The Avon Water Company, and The Heritage Village Water Company.
Together, these subsidiaries provide water service to more than
450,000 people in Connecticut and Maine, and wastewater service to
more than 10,000 people in Connecticut.
Forward-Looking Statements
This document contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, as
amended. Some of these forward-looking statements can be identified
by the use of forward-looking words such as “believes,” “expects,”
“may,” “will,” “should,” “seeks,” “approximately,” “intends,”
“plans,” “estimates,” “projects,” “strategy,” or “anticipates,” or
the negative of those words or other comparable terminology.
The accuracy of such statements is subject to a number of risks,
uncertainties and assumptions including, but not limited to, the
following factors: (1) the risk that the conditions to the closing
of the proposed transaction between SJW Group and Connecticut Water
(the “Merger”) are not satisfied; (2) the risk that the regulatory
approvals required for the Merger are not obtained at all, or if
obtained, on the terms expected or on the anticipated schedule; (3)
the risk that the California Public Utilities Commission’s (“CPUC”)
investigation may cause delays in or otherwise adversely affect the
Merger and that SJW Group may be required to consummate the Merger
prior to the CPUC’s issuance of an order with respect to its
investigation; (4) the effect of water, utility, environmental and
other governmental policies and regulations; (5) litigation
relating to the Merger; (6) the ability of each party to meet
expectations regarding timing, completion and accounting and tax
treatments of the Merger; (7) the occurrence of any event, change
or other circumstance that could give rise to the termination of
the merger agreement between the parties to the Merger; (8) changes
in demand for water and other products and services; (9)
unanticipated weather conditions; (10) catastrophic events such as
fires, earthquakes, explosions, floods, ice storms, tornadoes,
terrorist acts, physical attacks, cyber-attacks, or other similar
occurrences that could adversely affect the facilities, operations,
financial condition, results of operations and reputation of SJW
Group or Connecticut Water; (11) risks that the Merger disrupts the
current plans and operations of SJW Group or Connecticut Water;
(12) potential difficulties by SJW Group or Connecticut Water in
employee retention as a result of the Merger; (13) unexpected
costs, charges or expenses resulting from the Merger; (14) the
effect of the pendency of the Merger on business relationships,
operating results, and business generally, including, without
limitation, competitive responses to the Merger; (15) risks related
to diverting management’s attention from ongoing business
operations of Connecticut Water or SJW Group; and (16) legislative
and economic developments.
In addition, actual results are subject to other risks and
uncertainties that relate more broadly to SJW Group’s overall
business, including those more fully described in its filings with
the SEC, including, without limitation, its Annual Report on Form
10-K for the fiscal year ended December 31, 2018, and to
Connecticut Water’s overall business, including those more fully
described in its filings with the SEC, including, without
limitation, its Annual Report on Form 10-K for the fiscal year
ended December 31, 2018. Forward-looking statements are not
guarantees of performance, and speak only as of the date made, and
none of SJW Group, its management, Connecticut Water or its
management undertakes any obligation to update or revise any
forward-looking statements except as required by law.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190403005801/en/
SJW Group
InvestorsAndrew WaltersChief Administrative Officer, SJW
Group408-279-7818, andrew.walters@sjwater.com
MediaJayme AckemannDirector of Corporate Communications, SJW
Group408-918-7247, Jayme.Ackemann@sjwater.com
Abernathy MacGregorChuck Dohrenwend, 212-371-5999,
cod@abmac.comNazan Riahei, 213-630-6550, nkr@abmac.com
Connecticut Water
Daniel J. Meaney, APRDirector, Corporate
Communications860-664-6016dmeaney@ctwater.com
Joele Frank, Wilkinson Brimmer KatcherBarrett Golden / Joseph
Sala212-355-4449
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