Essential Utilities Completes Sale of Allegheny County Microgrid and District Energy Projects to Cordia

Rhea-AI Summary

Essential Utilities, Inc. (NYSE: WTRG) has closed the sale of its three non-utility microgrid and district energy properties in Allegheny County to Cordia for $165 million. The agreement covers innovative microgrids and district energy systems developed by Peoples, Essential’s gas operations subsidiary based in Pittsburgh. These systems include the Pittsburgh International Airport microgrid, the district energy system at Allegheny Health Network (AHN) – Wexford Hospital, and the Allegheny County District Energy system. Essential selected Cordia as the buyer due to their expertise in microgrids and district energy systems, along with their established footprint in Pittsburgh. The sale allows Essential to focus on its core business as a regulated utility while continuing to support projects that provide resilient, sustainable energy.

Insights

Energy Sector Analyst

The sale of Essential Utilities' non-utility microgrid and district energy properties represents a strategic refocusing on their core operations as a regulated utility. The valuation of the deal at $165 million indicates a significant transaction within the utility sector, likely to have an impact on Essential's financial position and capital allocation strategies. Microgrids and district energy systems are increasingly relevant in the energy industry due to their potential for reliability, sustainability and independence from traditional power grids.

From a sector perspective, this transaction highlights a trend where utility companies divest non-core assets to streamline their business models and concentrate on regulated operations, which typically offer more stable revenue streams. For Essential Utilities, this could mean an improved balance sheet and potential to enhance shareholder value through focused investments and possibly reduced operational complexity. For Cordia, acquiring these assets bolsters its footprint in the Pittsburgh area, enhancing its competitive position in the microgrid and district energy market.

Financial Analyst

The financial implications of this transaction are multifaceted. Essential Utilities' divestiture of these assets for $165 million will likely result in a one-time boost to the company's cash reserves, which could be used for debt reduction, share buybacks, or reinvestment into core utility infrastructure. This capital inflow must be evaluated against the potential loss of future revenue streams from the sold properties, although these may have been less predictable or outside the company's strategic focus.

Investors should monitor how this influx of capital is allocated, as it could influence Essential's financial health and credit ratings. Additionally, the market may react to this divestiture as a sign of Essential's commitment to its regulated business, potentially affecting the stock's valuation. It is crucial to analyze the transaction's impact on Essential's earnings before interest, taxes, depreciation and amortization (EBITDA) margins, as well as any potential tax implications associated with the sale.

Sustainability Expert

The mention of sustainable energy in the context of this sale is noteworthy. Microgrids, like the one at Pittsburgh International Airport, are at the forefront of sustainable energy solutions due to their ability to provide energy independence and resilience. The sale of these assets to Cordia, a company with a sustainability focus, suggests an endorsement of the continued expansion and innovation in this sector.

For stakeholders concerned with environmental impact, this deal may be seen as a positive development. It could signal Essential Utilities' intent to support sustainable projects indirectly while concentrating on their primary regulated utility services. Cordia's commitment to safer and more resilient energy aligns with global sustainability goals, potentially enhancing its reputation and business prospects in an industry where consumers and regulators are increasingly valuing green initiatives.

Essential and subsidiary Peoples to focus on core mission as regulated utility, continue supporting local innovations that provide region with safe, reliable, sustainable energy

PITTSBURGH--(BUSINESS WIRE)-- Essential Utilities, Inc. (NYSE: WTRG) today closed the sale of its three non-utility microgrid and district energy properties in Allegheny County to Cordia, a sustainability-driven energy solutions provider. The agreement is valued at $165 million.

The agreement covers innovative microgrids and district energy systems developed by Peoples, Essential’s gas operations subsidiary based in Pittsburgh, where the assets are located.

• The Pittsburgh International Airport microgrid is the first of its kind, allowing the airport to operate independent of the electric grid thanks to a 21.25 MW natural gas power plant supported by on-site gas production, making PIT one of the most resilient airports in the world.
• The district energy system at Allegheny Health Network (AHN) – Wexford Hospital provides the 160-bed hospital with all heating, cooling and primary power needs via steam boilers, hot water boilers, chillers, and a 2.0 MW natural gas generator, along with emergency backup power.
• The Allegheny County District Energy system provides efficient and resilient steam and hot water services to six government buildings including the Allegheny County Courthouse and City-County Building, using seven state-of-the-art steam boilers and one domestic water heater.

Essential selected Cordia as the buyer for the three systems in part because of their expertise in microgrids and district energy systems, along with their established footprint in Pittsburgh. Cordia currently operates energy systems in Pittsburgh’s Uptown and North Shore neighborhoods, as well as the on-campus energy system for Duquesne University. The company’s presence in the region dates back to the 1960s.

“These microgrid projects demonstrated the ability of natural gas to meet all the energy needs of major institutions, like the groundbreaking microgrid at Pittsburgh International Airport,” said Essential Utilities CEO Chris Franklin. “I’m incredibly proud of the work by our Peoples team in developing this project. By transitioning these assets to Cordia, an energy solutions leader with a strong presence in the region, our teams will focus more fully on our core business as a regulated utility, while continuing to support projects that provide resilient, sustainable energy.”

“I want to extend my gratitude to Essential Utilities and Peoples for their role in developing these state-of-the-art energy systems,” said Cordia CEO Earl Collins. “Cordia remains committed to providing safer, more reliable, and more resilient energy to our community. We are enthusiastic about the positive impact these systems will have on the region and are confident in our ability to continue delivering exceptional energy solutions for years to come."

The sale of these unregulated assets demonstrate Essential’s efforts to strategically focus on its core businesses. The company will continue to prioritize investments in infrastructure to improve safety and reliability, and to reduce emissions.

TD Securities (USA) LLC acted as financial advisor to Essential, while Gibson, Dunn & Crutcher LLP acted as legal advisor.

Use of Proceeds 
Essential will use the $165 million in transaction proceeds to finance its capital expenditures and water and wastewater acquisitions, in place of external funding from equity and debt issuances.

About Essential 
Essential Utilities, Inc. (NYSE:WTRG) delivers safe, clean, reliable services that improve quality of life for individuals, families, and entire communities. With a focus on water, wastewater and natural gas, Essential is committed to sustainable growth, operational excellence, a superior customer experience, and premier employer status. We are advocates for the communities we serve and are dedicated stewards of natural lands, protecting more than 7,600 acres of forests and other habitats throughout our footprint.

Operating as the Aqua and Peoples brands, Essential serves approximately 5.5 million people across 9 states. Essential is one of the most significant publicly traded water, wastewater service and natural gas providers in the U.S. Learn more at www.essential.co.

About Peoples 
Peoples provides clean, safe, affordable and reliable natural gas service to approximately 740,000 homes and businesses in Western Pennsylvania and Kentucky. Peoples is committed to its customers, its employees, the environment, and to the regions it serves.

About Cordia 
Cordia is a leading provider of safe, reliable, and sustainable energy solutions. Headquartered in Phoenix, AZ, Cordia serves over 700 customers with heating, cooling, and electricity throughout the U.S. Cordia is committed to driving change toward a more resilient, sustainable energy future and empowering people and communities to reach their full potential. Learn more at www.cordiaenergy.com.

Forward-Looking Statements

This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, among others: the company’s ability to successfully close the transaction. There are important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements including: the receipt of governmental approvals and other closing conditions; the successful closing of the acquisition; and other factors discussed in our Annual Report on Form 10-K, which is on file with the Securities and Exchange Commission. For more information regarding risks and uncertainties associated with Essential Utilities business, please refer to Essential Utilities annual, quarterly and other SEC filings. Essential Utilities is not under any obligation — and expressly disclaims any such obligation — to update or alter its forward-looking statements whether as a result of new information, future events or otherwise.

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View source version on businesswire.com: https://www.businesswire.com/news/home/20240116319850/en/

Essential/Peoples Media Contact:

Nick Paradise

External Communications Manager

Media Hotline: 1.877.325.3477

Media@Essential.co

Investor Contact:

Brian Dingerdissen

Vice President, IR and Treasurer

O: 610.645.1191

BJDingerdissen@Essential.co

Cordia Media Contact:

Jenny Disbrow

External Communications Manager

480.209.9727

Jenny.Disbrow@CordiaEnergy.com

Source: Essential Utilities, Inc.

FAQ

What is the ticker symbol for Essential Utilities, Inc.?

The ticker symbol for Essential Utilities, Inc. is WTRG.

What was the value of the agreement for the sale?

The agreement for the sale of the three non-utility microgrid and district energy properties in Allegheny County to Cordia was valued at $165 million.

What are the innovative microgrids and district energy systems developed by Peoples?

The innovative microgrids and district energy systems developed by Peoples include the Pittsburgh International Airport microgrid, the district energy system at Allegheny Health Network (AHN) – Wexford Hospital, and the Allegheny County District Energy system.

Why did Essential select Cordia as the buyer for the three systems?

Essential selected Cordia as the buyer due to their expertise in microgrids and district energy systems, along with their established footprint in Pittsburgh.

What is the focus of Essential Utilities after the sale?

After the sale, Essential Utilities will focus on its core business as a regulated utility while continuing to support projects that provide resilient, sustainable energy.