American Water subsidiary Pennsylvania American Water has agreed to acquire the water assets of the Steelton Borough Authority (Authority) in Dauphin County.
The total value of the transaction is about $22.5m for the water system, which serves nearly 2,400 metered residential, commercial and large industrial connections.
Pennsylvania American Water and the Steelton Borough Authority will seek approval of the acquisition from the Pennsylvania Public Utility Commission (PUC) 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 Authority officials after the Authority voted on 27th August, this year, to accept the company’s proposal. Earlier this year, the Authority issued a request for proposals for the potential sale of the water system.
Pennsylvania American Water President Jeffrey L. McIntyre said: “We look forward to the opportunity to provide quality, reliable water service to Steelton’s homes and businesses.
“We are well-prepared to bring both the technical expertise and financial resources needed to ensure the system addresses all the regulatory challenges it faces now and in the future.”
McIntyre said: “we will welcome the existing Authority employees to Pennsylvania American Water to help us operate the system.” All active employees will be offered jobs, subject to standard pre-employment hiring practices.
Pennsylvania American Water has also committed to invest approximately $36 million in improvements to Steelton’s water system over the next 10 years.
McIntyre stated the pending transaction will be executed under Pennsylvania’s Act 12 statute, which allows municipalities to sell water and wastewater systems for a price based on the fair market value of the facilities. Prior to the passage of Act 12, the valuation process was based on assessing the system’s original cost at the time of construction – which may be 50 years old or more – less depreciation and contributed property.
He said: “The law enacted in 2016 now provides municipalities the opportunity to receive a purchase price that is more reflective of the current value of the system assets.”
The company expects to close the transaction in the third quarter of 2019, pending regulatory approvals.
Source: Company Press Release