Water Utility Companies Get Creative in How They Manage Expenses and Generate Earnings Growth: Heike Doerr, Senior Research Associate, Shares Her Outlook on the Sector with The Wall Street Transcript

Wall Street Transcript

67 WALL STREET, New York - August 28, 2013 - The Wall Street Transcript has just published its Water Services Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs and Equity Analysts. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Water Infrastructure Development - Irrigation and Metering Technology - Water Industry Consolidation - Regulatory Headwinds for U.S. Utilities

Companies include: Aqua America Inc. (WTR), Connecticut Water Service Inc. (CTWS), Middlesex Water Co. (MSEX), American Water Works Company, (AWK) and many more.

In the following excerpt from the Water Services Report, an expert analyst discusses the outlook for the sector for investors:

TWST: What are the most important trends you are seeing in the water utility space right now?

Ms. Doerr: In the last six months, we have seen water companies get more creative in how they manage expenses and generate earnings growth while managing customer rates. We have seen both Aqua America (WTR) and Connecticut Water (CTWS) announce repair tax accounting changes, which relate to how capital investments are taxed.

The utilities will generate earnings growth through lower tax rates, and customers will see a credit on their bills. Middlesex (MSEX) revised its postretirement medical plan as a way to offset revenue lost from a large industrial customer who shut down in February 2013.

In 2012, we saw Aqua and America (AWK) engage in portfolio optimization - asset swapping - as means of improving margins and stimulating earnings growth. Each company exited states where they had not been as impactful, and increased their customer count in states where they had better regulatory relationships and additional growth opportunities.

Aqua sold New York and Missouri assets to American Water in exchange for systems in Ohio and Texas. Additionally, Aqua America has exited Maine and is in the process of existing Florida, a state where it was not earning a fair return.

TWST: Is the age of the infrastructure an issue for these companies right now?

Ms. Doerr: The investment driver for water utilities has not changed much in the last decade. The water utility industry is in need of massive capital spending to address aging infrastructure and necessary repairs/upgrades to maintain system reliability. Much of the country's water system infrastructure was installed soon after World War II, and the industry is facing...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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