SJW Group, Connecticut Water, File New Merger Application

ELLINGTON, CT — SJW Group and Connecticut Water Service, Inc. announced Wednesday a new jointly filed application with the Connecticut Public Utilities Regulatory Authority for the approval of a merger.

The new application offers what utility officials termed, "a comprehensive set of commitments and additional supporting evidence that the companies believe are responsive to PURA's previous concerns, demonstrate that their combination is in the public interest and show that the combination will deliver immediate, quantifiable and significant benefits to all of Connecticut Water’s stakeholders."

Said Eric Thornburg, the chairman, president and chief executive officer of SJW Group, "As a leading water utility, the combined company will have the financial strength, scale, resources and sharing of best practices to ensure families and communities will continue to have safe and reliable water service across all of our operations and that we deliver the significant benefits of the transaction to our constituents in our local service areas in California, Connecticut, Maine and Texas. We believe that the new application demonstrates how our combination with Connecticut Water is in the public interest. The comprehensive commitments in our application will maintain the very best of Connecticut Water while also enhancing local service and delivering customer benefits as part of the SJW Group with increased access to expertise and resources."

Connecticut Water President and CEO David Benoit said, "The new application we have submitted to PURA – with its extensive and binding commitments – ensures that Connecticut Water’s combination with SJW Group will provide immediate and long-term customer benefits, protect jobs, support economic development, advance important environmental goals and serve the interests of our employees, customers and local communities in Connecticut. In addition, the new application has governance provisions that will support continued local control and protect the financial integrity of the Connecticut utilities."

The new application includes a bill credit for customers, including municipalities, for one year, as well as "a general rate case stayout," which means no new base rates will take effect in Connecticut prior to Jan. 1, 2021.

Also, the Connecticut utilities will not seek recovery in rates for the customer rate benefits, the merger premium or other costs incurred in connection with the combination, accordingto the merger proposal.

The new application is available on the SJW Group/Connecticut Water merger website at https://www.sjw-ctws.com/.

The complete application with all of the supporting testimony and exhibits will be available on the PURA website at https://www.ct.gov/pura/site/default.asp once a docket number is assigned by PURA.

Here are a few details:

• There will be no layoffs as a result of the merger, and for at least three years following closing, Connecticut Water’s Connecticut utilities will maintain their current staffing level of 221 employees.
• Continued capital investments supported by constructive recovery mechanisms under the Water Infrastructure and Conservation Adjustment (“WICA”) program will be made with a sustainable replacement cycle of at least 1 percent of pipe per year. Based on an analysis by the Bureau of Economic Analysis, it is expected that the level of investment by the Connecticut utilities will support 67 additional jobs in all sectors in Connecticut from 2019 through 2021.
• Customers in Connecticut will continue to be served by the same employees, management teams and operating centers they know and trust.
• Connecticut Water will maintain its headquarters in Connecticut.
• Connecticut utilities will maintain "responsible water resource management programs," will continue to promote water conservation and will implement technology to reduce the amount of water lost through system leaks.
• in Connecticut Water Company systems. Additionally, the Connecticut utilities will support the State’s energy strategy as they increase the proportion of class I renewable energy, identify measures that could reduce energy consumption and explore development of renewable energy projects in Connecticut.
• Local boards will be set up for each of the Connecticut utilities with each board including a majority of independent directors and a majority of directors who reside in New England.
• SJW Group completed a successful equity raise in early December 2018 to help fund its purchase of Connecticut Water’s shares of common stock. The combined company will employ a conservative financing mix, which should allow it to obtain and maintain an attractive, strong investment grade credit rating of at least A- after the merger.
• The transaction is expected to generate "high single digit" percentage earnings per share accretion in the second full year, post closing. Due principally to the stayout, SJW Group anticipates the transaction will be neutral to slightly dilutive in the first full year, excluding one-time transaction costs.

The regulatory review period in Connecticut is approximately 120 days from the date of filing.