Maryland American Water Receives Commission Approval for Acquisition of Severn Water Company

Rhea-AI Summary

Maryland American Water has received approval from the Maryland Public Service Commission to acquire the drinking water assets of Severn Water Company for $1.6 million. This marks the first acquisition under the fair market value legislation enacted in 2018. The deal will bring 1,685 new customers to Maryland American Water.

Barry Suits, president of Maryland American Water, emphasized the company's commitment to water quality, safety, and infrastructure investment. In 2023, the company invested $3.5 million in improvements for its Bel Air system. Severn Water Company agreed to sell due to the need for additional expertise in water management.

Maryland American Water will provide information to new customers about online services, customer programs, and benefits, including bill paying assistance and conservation tips.

Positive

• Acquisition of Severn Water Company for $1.6 million
• Addition of 1,685 new customers
• $3.5 million invested in system improvements in 2023
• Expansion of service area and customer base

Negative

• None.

Insights

Financial Analyst

The acquisition of Severn Water Company by Maryland American Water for $1.6 million is a strategic move that expands their customer base by 1,685 customers. This deal, approved by the Maryland Public Service Commission, marks the first acquisition under the 2018 fair market value legislation, potentially setting a precedent for future water utility acquisitions in the state.

While the immediate financial impact on American Water Works (AWK) may be minimal given its $28.46 billion market cap, the long-term implications are positive. The acquisition aligns with AWK's growth strategy through consolidation in a fragmented water utility market. It demonstrates the company's ability to leverage regulatory changes to its advantage, potentially leading to more efficient capital deployment and economies of scale.

Investors should note AWK's proactive infrastructure investment approach, exemplified by the $3.5 million invested in Bel Air in 2023. This strategy could lead to improved operational efficiency and customer satisfaction, potentially supporting future rate cases and regulatory outcomes. The acquisition also reinforces AWK's position as a consolidator in the water utility sector, which could drive long-term value creation for shareholders.

Utilities Sector Specialist

This acquisition by Maryland American Water, a subsidiary of American Water Works (AWK), underscores the ongoing consolidation trend in the U.S. water utility sector. The approval under the fair market value legislation is significant, as it potentially streamlines future acquisitions and allows for more accurate valuation of water assets. This could accelerate AWK's growth strategy in Maryland and possibly other states with similar legislation.

The addition of 1,685 customers may seem small, but it's part of a larger pattern of incremental growth through acquisitions of smaller, often less efficient water systems. This strategy allows AWK to expand its footprint, achieve operational synergies and potentially improve water quality and service reliability for acquired systems. The company's emphasis on capital improvements, as evidenced by the $3.5 million investment in Bel Air, indicates a commitment to maintaining and upgrading infrastructure, which is important in the water utility business.

For investors, this acquisition reflects AWK's execution of its growth strategy and its ability to navigate regulatory environments effectively. While the immediate financial impact is minimal, the long-term implications for scalability and market share in Maryland are positive, potentially supporting AWK's position as a leading water utility company.

BEL AIR, Md.--(BUSINESS WIRE)-- Maryland American Water announced today it has received approval from the Maryland Public Service Commission (PSC) to acquire the drinking water assets of the Severn Water Company for approximately $1.6 million. This acquisition is the first to be completed by Maryland American Water under the fair market value legislation enacted by the Maryland General Assembly in 2018.

“We are pleased with the PSC’s order and look forward to welcoming the 1,685 customers previously served by the Severn Water Company to Maryland American Water in the near future. They will benefit from our company’s stellar record of performance in water quality and safety,” said Barry Suits, president of Maryland American Water. “Our commitment to continuously investing in necessary capital improvements is a priority for the experienced team we rely on to deliver water service that is clean, safe, reliable and affordable,” Suits continued.

Severn Water Company signed an agreement to sell to Maryland American Water in November of 2023, based on the need to bring additional experience and expertise in water management to its drinking water system. Maryland America Water takes a proactive approach to maintaining infrastructure and, in 2023 alone, invested $3.5 million in improvements for its system serving the Town of Bel Air.

“Selling to Maryland American Water is the right decision for the Severn Water Company. Maryland American Water has a long history in the state, providing drinking water to the town of Bel Air since the 1930s. As a partner, we know they have the expertise needed to continue operating this system,” said Stephanie Metz, a representative for Severn Water Company.

Maryland American Water will be sending information to customers served by Severn Water Company, including how to enroll in MyWater, the company’s online customer portal, as well as other customer service programs and benefits. The company also provides bill paying assistance programs, conservation tips and more.

About American Water

American Water (NYSE: AWK) is the largest regulated water and wastewater utility company in the United States. With a history dating back to 1886, We Keep Life Flowing® by providing safe, clean, reliable, and affordable drinking water and wastewater services to more than 14 million people with regulated operations in 14 states and on 18 military installations. American Water’s 6,500 talented professionals leverage their significant expertise and the company’s national size and scale to achieve excellent outcomes for the benefit of customers, employees, investors and other stakeholders. For more information, visit amwater.com and join American Water on LinkedIn, Facebook, X and Instagram.

About Maryland American Water

Maryland American Water, a subsidiary of American Water, provides high-quality and reliable water services to approximately 21,000 people. For more information, visit www.marylandamwater.com and follow Maryland American Water on X and Facebook.

View source version on businesswire.com: https://www.businesswire.com/news/home/20241002231399/en/

Media:

Marybeth Leongini

External Affairs Manager

marybeth.leongini@amwater.com

Source: Maryland American Water

FAQ

What is the value of Maryland American Water's acquisition of Severn Water Company?

Maryland American Water is acquiring Severn Water Company for approximately $1.6 million.

How many new customers will Maryland American Water gain from this acquisition?

Maryland American Water will gain 1,685 new customers from the acquisition of Severn Water Company.

What legislation enabled this acquisition by Maryland American Water (AWK)?

The acquisition was enabled by the fair market value legislation enacted by the Maryland General Assembly in 2018.

How much did Maryland American Water invest in system improvements in 2023?

In 2023, Maryland American Water invested $3.5 million in improvements for its system serving the Town of Bel Air.