Aqua America, Inc. (NYSE: WTR) Chairman Nicholas DeBenedictis said that
investor-owned water and wastewater companies like Aqua could be the
answer to the nation’s crumbling water and wastewater systems. The
remarks were made during a panel discussion at the 4th Annual
Water Finance Conference sponsored by Financial Research Associates, in
Washington, DC.
Putting the need in context, DeBenedictis pointed to the U.S.
Environmental Protection Agency (EPA) Drinking Water Infrastructure
Needs Survey and Assessment, which estimates a 20-year capital
investment need of $334.8 billion for public water systems. He also
referenced a January 2009 news release issued by the American Society of
Civil Engineers (ASCE) titled Failing Infrastructure Cannot
Support A Healthy Economy in which the organization graded the
nation’s drinking water and wastewater systems a D- and estimated an
annual shortfall of at least $11 billion to replace aging facilities
that are near the end of their useful life and to comply with existing
and future federal water regulations.
Citing Aqua America as an example of how private water and wastewater
utilities can address the issue, DeBenedictis said the company has used
its A+ Standard & Poor’s corporate credit rating at Aqua Pennsylvania,
its largest subsidiary to secure the financing necessary to maintain its
capital program. Aqua has invested $1.2 billion on capital improvements
during the 5-year period 2004 - 2008, and will have completed another
$300 million by year-end 2009. The vast majority of water utilities are
rated A- or better by Standard & Poor’s while nearly three of four
electric utilities are BBB+ or worse.
"We are continuing to fuel our capital programs and make these needed
investments by using our strong credit position and balance sheet, to
access the capital markets at low interest rates—even throughout the
financial crisis,” said DeBenedictis. "As municipalities juggle multiple
priorities including social programs, police, education and underfunded
pensions, private water and wastewater utilities are solely focused on
water quality and service reliability. By making these needed
investments we are delivering a return to both our customers—who benefit
from a quality product and reliable service—as well as our shareholders,
who benefit from the return on our prudent capital investments. There is
also a benefit to the economy by providing businesses with the sound
water and wastewater infrastructure necessary for their businesses to
thrive.”
DeBenedictis added that the company is also benefiting from the current
market in the form of low interest rates and low pricing on bids for its
construction work (on average 18 percent below original estimates) as
well as better pricing on some materials. For example, in July, Aqua
announced that Aqua Pennsylvania Inc., issued $58 million in tax-exempt
First Mortgage bonds with a coupon rate of 5.0 percent and a yield of
5.23 percent maturing in 2039. The low cost of debt, a direct result of
the company’s strong credit rating and better pricing has allowed Aqua
to build and replace more water and wastewater infrastructure within its
capital budget than utilities with weaker balance sheets.
"We are basically creating our own economic stimulus,” said
DeBenedictis. "Many people think because we are a water and wastewater
utility that we are getting free money like the municipal systems. In
all of our 13 operations, there is only one project in Maine that used
the government’s Economic Stimulus money. Otherwise, we have the benefit
of accelerated tax depreciation, which has provided Aqua $30 million in
cash in 2008 and is projected to provide $38 million in 2009, to help
advance our capital program. If well-capitalized private companies like
Aqua America are allowed to compete on a level playing field with the
municipal water market segment by continuing to qualify for low-interest
and tax-free financing, we can make a significant difference in
advancing the effort to improve our nation’s water and wastewater
infrastructure.”
Aqua America is a publicly traded water and wastewater utility holding
company with operating subsidiaries serving approximately three
million
people in Pennsylvania, Ohio, North Carolina, Illinois, Texas, New
Jersey, New York, Florida, Indiana, Virginia, Maine, Missouri and South
Carolina. Aqua America is listed on the New York Stock Exchange under
the ticker symbol WTR.
This release contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995,
including the Company’s continuation of its strategy for infrastructure
improvements, the impact of infrastructure improvements on customers and
shareholders, the Company’s projected capital expenditures for 2009, the
effect of the Company’s credit position and balance sheet on its access
to capital markets and interest rates, the projected cash benefit from
accelerated depreciation in 2009, and the role of private water
utilities in addressing the nation’s water infrastructure. There are
important factors that could cause the actual results to differ
materially from those expressed or implied by such forward-looking
statements including among others, the company’s ability to access
low-interest and tax-exempt financing programs; the company’s ability to
realize the benefits from low-interest or tax-exempt financing; the
effect of the low-interest financing on the company’s interest expense;
the company’s ability to successfully complete its infrastructure
projects; general economic business conditions; changes in regulations
or regulatory treatment; availability and cost of capital; and other
factors discussed in our Annual Report or Form 10-K for the fiscal year
ended December 31, 2008, which is on file with the SEC. We undertake no
obligation to publicly update or revise any forward-looking statement.
WTRG
