New Jersey American Water Completes Acquisition of Salem City Water and Wastewater Systems

Rhea-AI Summary

New Jersey American Water has completed the acquisition of Salem City’s water and wastewater systems for $18 million. This acquisition adds over 2,300 new water and wastewater customers, and integrates six Salem City utility employees into the company. The acquisition follows a voter referendum in November 2023, where over 60% of voters approved the sale. As part of the agreement, New Jersey American Water will invest over $50 million in infrastructure improvements over the next decade, addressing aging systems and implementing PFNA treatment. The sale also eliminates $11 million in utility debt for Salem City and contributes over $1 million annually to the city budget.

Residents will receive detailed information through mail and a dedicated webpage. The company will host a community open house on July 13. This acquisition marks New Jersey American Water’s sixth acquisition in six years, following the recent acquisition of Egg Harbor City’s systems in 2023.

Positive

• The acquisition adds over 2,300 new water and wastewater customers.
• New Jersey American Water will invest over $50 million in improvements over the next decade.
• The sale eliminates $11 million in utility debt for Salem City.
• The acquisition contributes over $1 million annually to Salem City's budget.
• This acquisition marks New Jersey American Water’s sixth acquisition in six years.

Negative

• The acquisition involves an $18 million expenditure.
• The company will face the challenge of integrating six new employees from Salem City.

Insights

Financial Analyst

The acquisition of Salem City's water and wastewater systems by New Jersey American Water for $18 million is a strategic move that reflects the company’s ongoing expansion within New Jersey. The addition of 2,300 water and 2,300 wastewater customers will contribute positively to the company’s revenue stream. Notably, New Jersey American Water has committed to investing over $50 million in system improvements over the next ten years. Such long-term investments are vital for maintaining infrastructure integrity and ensuring service reliability, which could lead to operational efficiencies and cost savings over time.

From an investor’s standpoint, this acquisition eliminates $11 million in utility debt for Salem City and adds over $1 million back into the city budget annually. This financial relief could bolster New Jersey American Water’s reputation and pave the way for favorable conditions in future municipal acquisitions. However, the company's aggressive expansion strategy also involves significant capital expenditure, which may place temporary strain on cash flows. Investors should monitor how effectively these investments translate into enhanced service delivery and customer satisfaction in the long term.

Infrastructure Expert

This acquisition is significant from an infrastructure perspective. The commitment to invest over $50 million in the first ten years demonstrates a proactive approach to addressing aging infrastructure and integrating advanced treatments like PFNA (Perfluorononanoic Acid) to ensure water safety. PFNA is a type of PFAS (per- and polyfluoroalkyl substances), often referred to as 'forever chemicals' due to their persistence in the environment and potential health risks. Tackling such emerging contaminants is important for maintaining public health standards and aligns with regulatory trends pushing for stricter water quality measures.

By undertaking these upgrades, New Jersey American Water is positioning itself as a leader in water safety and modernization, which can enhance customer trust and regulatory compliance. However, these projects are complex and will require efficient project management to avoid cost overruns and delays. Investors should consider the company’s track record in executing similar projects to gauge the potential impact on timelines and budgets.

Acquisition Adds 2,300 New Customers; Company Welcomes Six Salem Employees

CAMDEN, N.J.--(BUSINESS WIRE)-- New Jersey American Water today completed its acquisition of the water and wastewater systems of the City of Salem, N.J. for $18 million. These former municipally owned systems serve more than 2,300 water and 2,300 wastewater customers. On May 22, 2024, the New Jersey Board of Public Utilities (NJ BPU) approved the municipal consent allowing New Jersey American Water to provide service to Salem City customers as of the closing of the transaction.

Photo Caption: New Jersey American Water’s new Salem Operations Team celebrates the closing of the acquisition. Left to right, back row: Senior Superintendent Mike Gonserkevis, who joined the company from another municipal utility, Senior Supervisor of Operations Jared Bacon, Sewer Operator Mechanic Harron Jefferies and Ivan Porter. Left to right, front row: Operations Specialist Pam Rushing, who transferred from the company’s Southwest Production, Sewer Operator Mechanic William “Curt” Hunter II, Mechanic Juan Stevenson, and Sewer Operator Mechanic Cameron Cagle. Mr. Bacon and the five mechanics join the company from Salem City’s former water and wastewater utility as part of the acquisition. (Photo: Business Wire)

“We are honored and grateful to the residents and elected officials of Salem City, who are entrusting us with the ownership, improvement and operation of their water and wastewater systems, beginning today. We are ready to start delivering on our commitment to making the necessary investments in these systems to help ensure clean, safe, reliable and affordable service for all residents,” said Mark McDonough, president of New Jersey American Water. “We are also excited to have six Salem City utility employees become New Jersey American Water employees today, joining our South Operations team and Water Workers Local 99.”

The agreement to purchase the systems follows a voter referendum that took place on November 7, 2023, which passed with over 60 percent of the voters approving the sale of the systems to New Jersey American Water. As part of the agreement, New Jersey American Water committed to invest over $50 million in improvements in the first 10 years. These investments include a robust capital improvement plan, including critical system upgrades, implementation of PFNA treatment and repairing the City’s aging water and wastewater infrastructure.

“Selling the systems to New Jersey American Water is the right decision for our community because it allows the City’s water and wastewater utilities to be managed by a professional company whose sole purpose is to focus on making appropriate, efficient investments and keeping these critical services safe, reliable, and affordable for our residents,” said Salem City Mayor Jody Veler. “The sale will also eliminate $11 million in utility debt and pay off a portion of the municipal debt, as well as enable us to put over $1 million back into the City budget annually.”

Residents will receive additional information in the mail from New Jersey American Water within the next 3-7 days, and the information is also available now on a new, dedicated webpage on the company’s website at www.newjerseyamwater.com, under Customer Service and Billing, select Salem City.

Additionally, the company will be hosting a community open house on Saturday, July 13 from 12 p.m. to 3 p.m. at the Amy “Hetty” Reckless Center, 116 West Broadway, Salem, NJ. Employees will be there to provide information and answer questions about infrastructure investments, water quality, conservation and other topics, as well as assist customers with enrolling in the company’s MyWater online customer portal and H2O Help to Others bill-paying assistance program. More information on bill-paying assistance program eligibility requirements is available on the website at www.newjerseyamwater.com, under Customer Service & Billing, Customer Assistance Programs.

This is New Jersey American Water’s sixth acquisition in the last six years. In June 2023, New Jersey American Water completed the acquisition of Egg Harbor City’s water and wastewater system via the State’s Water Infrastructure Protection Act, adding more than 1,500 water and 1,500 wastewater customers. The company also completed four wastewater system acquisitions within the company’s water footprint, adding a total of more than 11,300 new wastewater customers. The company acquired the Somerville wastewater system with 3,800 customers in 2023; the Bound Brook wastewater system with 2,800 customers in 2022; the Long Hill Township wastewater system with 2,900 customers in 2020, and the Mount Ephraim wastewater system with 1,800 customers in 2019.

Additionally, New Jersey American Water signed an agreement earlier this year for the purchase of the Manville wastewater system with 3,700 customers, which was approved by voter referendum in November 2023. The company anticipates completing this acquisition in the second half of 2024, pending approval from the NJ BPU.

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 New Jersey American Water

New Jersey American Water, a subsidiary of American Water, is the largest regulated water utility in the state, providing high-quality and reliable water and/or wastewater services to approximately 2.9 million people. For more information, visit www.newjerseyamwater.com and follow New Jersey American Water on LinkedIn, Facebook, X, and Instagram.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240625426402/en/

Media Contact:

Denise Venuti Free

Senior Director of Communications and External Affairs

New Jersey American Water

denise.free@amwater.com

Source: New Jersey American Water

FAQ

What is the value of New Jersey American Water's acquisition of Salem City's water and wastewater systems?

The acquisition was completed for $18 million.

How many new customers will New Jersey American Water gain from the Salem City acquisition?

The acquisition adds over 2,300 new water and wastewater customers.

When did the approval for New Jersey American Water to provide service to Salem City customers take place?

The New Jersey Board of Public Utilities approved the municipal consent on May 22, 2024.

How much is New Jersey American Water planning to invest in improvements following the Salem City acquisition?

The company committed to invest over $50 million in improvements over the next decade.

What financial impact does the acquisition have on Salem City's debt?

The sale eliminates $11 million in utility debt for Salem City.

How will Salem City residents receive information about the acquisition?

Residents will receive information via mail and can access details on a dedicated webpage on New Jersey American Water’s website.

When and where will New Jersey American Water host a community open house for Salem City residents?

The community open house will be held on July 13 from 12 p.m. to 3 p.m. at the Amy "Hetty" Reckless Center, 116 West Broadway, Salem, NJ.

What recent acquisitions has New Jersey American Water completed before Salem City?

New Jersey American Water recently acquired Egg Harbor City’s water and wastewater systems in June 2023.