Weather Helps East Coast Water Companies

Feb. 11, 2002
While California's water companies saw fourth-quarter earnings hurt by milder-than-normal weather which cut consumption and revenues, the impact of a warm and dry East Coast winter will not be felt by companies on the East Coast until this summer's peak consumption season.

American Water Works Co., currently the largest publicly owned water company in the United States, is expected to post slightly higher earnings than it did in last year's fourth quarter.

Voorhees, N.J.-based American Water Works, soon to be acquired by diversified German utility RWE AGRWEG.DE in a $4.6 billion deal, is expected to see earnings rise on an increased customer base from acquisitions during the quarter, including the purchase of Azurix, once Enron's water subsidiary.

Philadelphia Suburban Corp., which is 17 percent owned by French Vivendi, also is expected to earn more than it did last year, again from a series of acquisitions which increase its customer base.

However, drought warnings in several northeastern U.S. states brought on by warm and dry weather, while unlikely to affect fourth-quarter earnings, could be a factor in peak summer usage periods, possibly leading to water restrictions, experts said.

While it is too soon to tell what the reservoir levels will be this summer, not enough rain in October and November -- when it normally the rains the most to fill up the reservoirs -- have kept many Northeast and Mid-Atlantic reservoirs less than half full and could result in water restrictions during the peak water usage months in the spring and summer.

"There is concern because there is not a significant snowfall this year, the kind of runoff that traditionally fed streams, lakes and reservoirs. But most companies here have a pretty good supply," said David Schanzer, a water utility analyst with Pennsylvania-based Janney Montgomery Scott Inc.

For now, warmer-than-normal weather has a silver lining for water companies -- fewer underground pipes freezing and cracking and needing repairs.

Source: Reuters