Peoples Gas to be bought for $4.3 billion by Philly-area Aqua America
A Philadelphia-area water and sewer company announced plans Tuesday to acquire Pittsburgh-based Peoples Gas for $4.3 billion.
Aqua America Inc., headquartered in Bryn Mawr, said it would purchase the Pittsburgh-based gas company in an “all-cash transaction” and assume about $1.3 billion in Peoples’ debt.
The transaction is not expected to have any impact on rates, according to Aqua America.
Peoples Gas customers will continue to receive natural gas bills from Peoples, not from Aqua America, the company said. Peoples various sponsorships around Pittsburgh, including entrances to Heinz Field, PNC Park and PPG Paints Arena, will likely not change to Aqua either.
The sale is subject to the approval of regulators, including public utility commissions in Pennsylvania, Kentucky and West Virginia. The transaction is expected to close in mid-2019.
The combined companies would represent one of the largest publicly traded water utilities and natural gas local distribution companies in the country and provide service to about five million people, according to Aqua America. Aqua America projects the new company would have about $10.8 billion in assets next year and a regulated rate base of over $7.2 billion.
“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,” Aqua Chairman and CEO Christopher Franklin said in a statement.
Franklin said Aqua America would maintain a corporate headquarters in Bryn Mawr. Offices for and employees of Peoples would remain in Pittsburgh. Franklin will oversee both businesses. Morgan O’Brien, president and CEO of Peoples, will continue to head the gas company.
“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,” O’Brien said.
In July, O’Brien announced an ambitious plan to develop a public private-partnership with the Pittsburgh Water and Sewer Authority. O’Brien created Peoples Water, a subsidiary of Peoples Gas, and pledged to spend more than $1 billion to improve water quality in the Pittsburgh area.
Pittsburgh Mayor Bill Peduto has been adamant about maintaining PWSA as a publicly owned system, but he’s open to suggestions from private enterprise on a partnership that would generate additional revenue for the beleaguered authority. Peduto maintained his position on the future of PWSA hours after the Aqua and Peoples deal was announced. PWSA supplies water to about 300,000 people in Pittsburgh and the surrounding area.
“This obviously would make them a very large utility player within Western Pennsylvania,” Peduto said, adding that he never heard of Aqua America until Tuesday morning. “I don’t have enough information to be able to even have an idea of whether it will change any of the discussions that Peoples Gas was having. Obviously they are in the water business. They probably have a great understanding of the needs within our water system. Whether or not they will be a company that will potentially bid on (PWSA) work is yet to be seen.”
Franklin said Aqua acquisition of Peoples strengthens the company’s opportunity to help with Pittsburgh’s water. During the call announcing the deal, Franklin said Aqua was interested in continuing to explore how the company could work with the city. Franklin said Aqua has a had success helping turnaround water systems in similar situations as Pittsburgh.
“There is an acute issue in the city of Pittsburgh with the water supply and really the public’s confidence in the drinking water supply, and so a lot of people are working real hard to turn that around,” Franklin said. “To the extent that we and Peoples together can be a solution or part of solution for that issue in Pittsburgh, we stand ready.”
Peduto said the city would consider a plan that PWSA submitted to the Pennsylvania PUC outlining its goals and cost estimates for improving the system, including removal of all lead water lines, replacement of aging pipes and pumps and the production of safe water.
“At that point we will open it up to the world to see if anybody can do it better,” Peduto said. “If not, then we’ll proceed with continued work with PWSA, who is hired basically to run the operations and management of the Pittsburgh water system. If there are other options that can provide quality water for the long term at a lower price then we’ll look at that as well. This company has the ability to be a part of that process or not be a part of that process.”
Peoples Gas is the largest natural gas provider in Pennsylvania, O’Brien said during a call announcing the deal Tuesday. The company serves more than 740,000 customers in Pennsylvania, West Virginia and Kentucky. Peoples employs more than 1,500 people.
O’Brien said the Pennsylvania Public Utilities Commission has approved plans to replace 3,100 miles of steel and cast iron gas pipe at a rate of about 150 miles per year.