Financing
As a preventive measure to address liquidity concerns related toCOVID-19 and its potential economic and capital markets impacts, the company secured and borrowed an additional $500 million on a364-day term loan in early April 2020. As a conservative measure, the company maintains these cash balances and is evaluating the timing of repayment as the impacts to revenue and bad debt become more apparent in light of challenging business conditions and increased unemployment.
On April 13, the company completed a $1.1 billion public debt offering, with $500 million of10-year notes issued at 2.70 percent and $600 million of30-year notes issued at 3.35 percent, for a weighted-average tenor of 20.9 years and a weighted-average coupon of 3.06 percent. The company used these proceeds to pay down short-term borrowings and credit lines. On April 14, the company priced $175 million of First Mortgage Bonds (“FMB”) for Aqua Pennsylvania. The bonds have three tranches with a weighted-average tenor of 33.5 years and a weighted-average coupon rate of 3.52 percent. Upon closing on May 1, 2020, the proceeds of these bonds were used to pay off short-term borrowings and will be used to fund a pending acquisition. As of May 1, after considering the effects of these financings, the company had $1.1 billion of capacity to borrow on various credit facilities.
“In the face of uncertain economic and capital markets conditions, we took the prudent action of securing the term loan, and then, after the credit markets normalized, issued $1.1 billion of public debt at favorable terms for our customers and shareholders. Next, we’ll select the appropriate steps to repay the term loan, as theCOVID-19 situation develops and its impacts become clearer,” stated Franklin.
Water utility acquisition growth
Essential’s continued acquisition growth allows the company to provide safe and reliable water and wastewater service to an even larger customer base. On Jan. 24, 2020, Essential Utilities closed its acquisition of the water system of Campbell, Ohio, a utility with approximately 3,100 customer connections. For the quarter, customer growth for the company’s water utilities totaled 0.6 percent including organic growth.
Essential also has signed purchase agreements for other municipal water and wastewater acquisitions that are expected to add the equivalent of over 205,000 water and wastewater retail customers and approximately $327 million in expected rate base. This includes the previously announced signed purchase agreement between Essential’s regulated water segment subsidiary, Aqua Pennsylvania Wastewater, and the Delaware County Regional Water Quality Control Authority (DELCORA) to acquire the municipal authority’s wastewater assets for $276.5 million. DELCORA serves a population of approximately 500,000 people in 42 municipalities in Southeast Pennsylvania. This represents the equivalent of 198,000 retail customers.
In April, fair market value legislation was passed in Virginia. The law allows regulated water companies to pay fair market values for the purchase of water and wastewater systems, benefiting local governments and other water utility owners, customers and the environment. This vital legislation has now been enacted in all eight states in which Essential Utilities provides regulated water services.
Capital expenditures
Essential invested $118.7 million in the first three months of the year to improve its regulated water and natural gas infrastructure systems. This does not include an additional $53.5 million that was invested by Peoples,pre-closing, during the period from Jan. 1, 2020 to March 15, 2020. The company remains on
