Pennsylvania American Water acquires New Cumberland Wastewater System
The total value of the transaction is approximately $23 million.
HERSHEY, PA, May 5, 2016 -- Pennsylvania American Water, a subsidiary of American Water (NYSE: AWK), announced today that it has signed an agreement to acquire the wastewater assets of the Borough of New Cumberland in Cumberland County. The total value of the transaction is approximately $23 million.
Pennsylvania American Water and the Borough will seek approval of the acquisition from the Pennsylvania Public Utility Commission and other necessary approvals from the Pennsylvania Department of Environmental Protection. The signing of the purchase agreement is the culmination of negotiations between Pennsylvania American Water and Borough officials since the Borough Council unanimously voted in March to accept the company’s proposal. The Borough initially issued a request for bids in January 2016, for the potential acquisition of its wastewater system.
"Our company and our employees have been the water service provider for this community for many, many years, and we are excited for the opportunity to be the future provider of wastewater service to our New Cumberland customers," said Pennsylvania American Water President Kathy L. Pape. "We look forward to providing the technical expertise and financial resources needed to ensure the system meets all the environmental compliance challenges it will face in the future.”
The New Cumberland wastewater system serves approximately 3,100 customers.
Pape said long-term rate stability is one of the most important benefits for wastewater customers, who faced significant rate increases if the Borough continued to operate the system. Under the purchase agreement, Pennsylvania American Water will not change wastewater rates any earlier than January 1, 2018, with a maximum 2.5 percent increase in both 2018 and 2019. The company’s rates are regulated by the Public Utility Commission and future rate changes would have to be reviewed and approved by the PUC.
Pennsylvania American Water’s purchase of the sewer system will enable the Borough to eliminate all debt, which is approximately $16 million, by retiring outstanding bonds within the next three years.
Pennsylvania American Water has also committed to invest $2 million in wastewater and/or water improvements within New Cumberland over the next five years. The company will partner with the Borough to identify areas where aging wastewater and water facilities can be replaced in conjunction with street and sidewalk improvements.
Pape said upon closing the acquisition that “we look forward to welcoming the Borough’s five wastewater employees to the Pennsylvania American Water team.” All active employees will be offered jobs, subject to standard pre-employment screening.
The company expects to close the transaction by the end of 2016, pending regulatory approvals.
Pennsylvania American Water, a subsidiary of American Water (NYSE: AWK), is the largest investor-owned water utility in Pennsylvania, providing high-quality and reliable water and/or wastewater services to approximately 2.3 million people. Founded in 1886, American Water is the largest publicly traded U.S. water and wastewater utility company. Marking its 130th anniversary this year, the company employs more than 6,700 dedicated professionals who provide regulated and market-based drinking water, wastewater and other related services to an estimated 15 million people in 47 states and Ontario, Canada. More information can be found at www.amwater.com.