Pennsylvania American Water, a subsidiary of American Water, has signed an agreement to acquire the wastewater assets of Royersford Borough in Montgomery County. The value for the sale is approximately $13.0 million for the Borough’s wastewater system which serves nearly 1,600 customers.
“As Royersford Borough’s water provider, we are glad to be able to add wastewater service for our current customers in this area," said Pennsylvania American Water President Mike Doran. “This transaction is a natural fit, because when we expand our wastewater customer base within our current water service footprint, we not only can achieve economies of scale and provide greater efficiencies for our customers, but also we are already established in the community as a trusted local service provider, a good corporate citizen and a reliable community partner.”
Pennsylvania American Water will seek approval of the acquisition from the Pennsylvania Public Utility Commission (PUC) and other necessary approvals from the Pennsylvania Department of Environmental Protection.
Earlier this year, the Borough issued a request for proposals for the potential sale of the wastewater system. The signing of the purchase agreement between Pennsylvania American Water and the Borough is the culmination of the request for bid process. The company expects to close the transaction in late 2020 or early 2021, pending regulatory approvals.
Approval for the pending transaction will be sought under Pennsylvania’s Act 12 statute, which allows municipalities in Pennsylvania 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.
“This statute now provides municipalities the opportunity to receive a fair purchase price that is more reflective of the current value of their system’s assets,” Doran explained. “This allows municipalities to secure important resources for their community while relieving them of the financial burden of upgrading aging wastewater systems to meet more rigorous state and federal regulations. We understand from our negotiations with the Borough that the proceeds of the sale will support local economic priorities and fund the long-term needs of the Borough.”
In 2019, Pennsylvania American Water acquired the wastewater and/or water assets of Exeter Township, Berks County; Steelton Borough Authority, Dauphin County; Sadsbury Township, Chester County and the Borough of Turbotville, Northumberland County, adding a total of 10,300 new wastewater customers and 2,700 water customers to the company’s customer base. The company has also recently signed purchase agreements with Valley Township, Chester County (1,700 water customers and 3,100 wastewater customers) and the Borough of Kane Authority, McKean County (2,100 wastewater customers).