Essential Utilities Announces Sale of Allegheny County Microgrid to Cordia

Source: 10/3/2023, Location: North America

Essential Utilities, Inc. (NYSE: WTRG) today announced a binding agreement to sell its three non-utility microgrid and district energy properties in Allegheny County to Cordia, a sustainability-driven energy solutions provider. The agreement is valued at $165 million.

The agreement covers innovative microgrids and district energy systems developed by Peoples, Essential’s gas operations subsidiary based in Pittsburgh, where the assets are located.

- The Pittsburgh International Airport microgrid is the first of its kind, allowing the airport to operate independent of the electric grid thanks to a 21.25 MW natural gas power plant supported by on-site gas production, making PIT one of the most resilient airports in the world.

- The district energy system at Allegheny Health Network (AHN) – Wexford Hospital provides the 160-bed hospital with all heating, cooling and primary power needs via steam boilers, hot water boilers, chillers, and a 2.0 MW natural gas generator, along with emergency backup power.

- The Allegheny County District Energy system provides efficient and resilient steam and hot water services to six government buildings including the Allegheny County Courthouse and City-County Building, using seven state-of-the-art steam boilers and one domestic water heater.

“I thank our Peoples and Essential teams for their work in creating a clean, safe, reliable future through developing these innovative energy systems,” said Essential Utilities CEO Chris Franklin. “Selling these unregulated assets to a skilled and experienced operator in Cordia allows us to focus more fully on our core business as a regulated utility, while continuing to support projects that create a more resilient, sustainable energy grid.”

Essential selected Cordia as the buyer for the three systems in part because of their expertise in microgrids and district energy systems, along with their established footprint in Pittsburgh. Cordia currently operates energy systems in Pittsburgh’s Uptown and North Shore neighborhoods, as well as the on-campus energy system for Duquesne University. The company’s presence in the region dates back to the 1960s.

"We are honored to have the opportunity to acquire the cutting-edge microgrid and district energy systems from Essential Utilities,” said Cordia CEO Earl Collins. “Our decades of experience owning, managing, and operating energy systems will allow our new customers to focus on their core businesses. Cordia’s comprehensive expertise in district energy and microgrids aligns this acquisition with our commitment to safety, service, and innovation. We will ensure the seamless continuation of service while building on our strong ties with the Pittsburgh community and supporting our new customers.”

The sale of these unregulated assets, along with the recently closed West Virginia traction, demonstrate Essential’s efforts to strategically focus on its core businesses. The company will continue to prioritize investments in infrastructure to improve safety and reliability, and to reduce emissions.

“Ensuring our customers remained in good hands has been a top priority throughout this process,” said Peoples President Mike Huwar. “We are confident Cordia will provide that for each of these crucial assets, and look forward to working together by providing clean, safe, reliable and affordable natural gas service to all three projects for years to come.”

TD Securities (USA) LLC acted as financial advisor to Essential, while Gibson, Dunn & Crutcher LLP acted as legal advisor.

Closing Timeline

The transaction is subject to various closing conditions and regulatory approvals, and is expected to close in late 2023 or early 2024.

Use of Proceeds

Essential will use the $165 million in transaction proceeds to finance its capital expenditures and water and wastewater acquisitions, in place of external funding from equity and debt issuances.

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