alerts & publications
Water Industry Deals and News - July 2016
7月 8, 2016The O'Melveny Water Report includes select transactions and other items of interest that occurred during May and June 2016. Please contact any member of the O'Melveny Water Practice for additional information on any of these items or related matters.
Venture Capital & Private Financings
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Ambient Water, Inc. Ambient Water, a developer of atmospheric water-generation technology for extracting water from humidity in the air, registered the resale of up to 90 million shares of common stock with a current value of $153,000 to River North Equity, LLC. In April 2016, River North agreed to purchase up to an aggregate of $5 million worth of shares of Ambient Water common stock from time to time until April 7, 2018. |
Sway Water, Inc. Austin, Texas-based Sway Water, Inc., secured venture financing of $260,000 from two unnamed investors. Sway sells bottled water infused with organic flavors. |
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HAWAIIAN WATER & PACKAGING LLC Hawaiian Water & Packaging LLC Hawaiian Water & Packaging LLC, owner of Hawai’i Volcanic bottled mineral water, completed a financing comprised of $715,000 of equity and debt. |
Valor Water Analytics Valor Water Analytics, a company that delivers water-loss and efficiency analytics to utilities, announced the close of a $1.6 million funding round, led by Shore Ventures II and including Apsara Capital, Syzygy West, Urban Innovation Fund, and 500 Startups. The San Francisco-based company will use the capital to expand its business across the United States and to deploy its technology for a large channel partnership just signed. It also plans to expand into additional utility verticals and develop its analytics portfolio beyond meter data and into sensor-based technologies. |
Public Offerings
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Global Water Resources, Inc. Global Water Resources, Inc., which owns and operates water and wastewater utilities around Phoenix, Arizona, agreed to issue two series of senior secured notes totaling $115 million with a blended interest rate of 4.55%. Global Water Resources will use proceeds to refinance its existing long-term debt of $107 million and pay associated prepayment penalties of $3.2 million. |
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Mergers & Acquisitions
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Connecticut Water Service, Inc. Connecticut Water Service, Inc. (NASDAQ:CTWS), agreed to acquire Heritage Village Water Company, a private water and wastewater utility serving approximately 4,700 water customers and 3,000 wastewater customers in Connecticut. The acquisition will be executed through a stock-for-stock merger transaction valued at approximately $15.8 million, and remains subject to shareholder and regulatory approval. When this transaction is completed, Connecticut Water will serve more than 127,000 water customers, or nearly 440,000 people in 79 communities across Connecticut and Maine, and more than 3,000 wastewater customers in Southbury, Connecticut. |
American Water Works Company, Inc. New York American Water, a subsidiary of American Water Works Company, Inc. (NYSE:AWK), and the largest investor-owned water utility in New York State, signed an agreement to purchase Beaver Dam Lake Water Company, a water provider to approximately 160 households located in the towns of Cornwall and New Windsor. The water-system acquisition agreement has been forwarded to the New York State Public Service Commission and other regulatory agencies for approval. Financial terms of the sale were not disclosed. |
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United Engineers Ltd United Engineers Ltd., a Singapore-based company, agreed to sell its environmental engineering business, UES Holdings Ptr. Ltd., to Giant Maze Ltd. for approximately $11.6 million. UE’s wholly owned subsidiary, UE UMC, also agreed to sell its operating subsidiaries UE Envirotech, UE Asia Pacific (Beijing) Co., and Hengyang City Songmu Water Co. to Giant Maze for approximately $22.2 million. |
Hikari Tsushin, Inc. Hikari Tsushin, Inc., a Japanese company, will increase its stake in Water Direct Corp., a Japan-based company principally engaged in the manufacture, sale, and home delivery of mineral water, from 17% to 63.4% by acquiring shares and warrants for $190 million. The acquisition is part of a takeover bid. |
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Kolon Water & Energy Co., Ltd. Standard Chartered Private Equity (SCPE), the private equity arm of Standard Chartered Bank, agreed to acquire a controlling interest in Kolon Water & Energy (KWE), one of the largest wastewater-processing service providers in Korea, for an estimated $176 million. KWE manages wastewater treatment facilities of national industrial complexes, social overhead capital projects, and municipalities in Korea. Under the deal, SCPE will acquire all of the secondary shares of KWE held by Kolon Corporation, the KOSPI-listed holding company of Kolon Group and the largest shareholder of KWE. |
Exova Group plc Materials-testing firm Exova Group plc agreed to sell its Irish and UK food, water, and pharmaceuticals testing business to Eurofins Scientific, a Luxembourg-based laboratory analysis firm, for approximately $26.3 million. The sale consists of a portfolio of ten well-established, accredited laboratories across the UK and Ireland that provide a wide range of chemistry and microbiological testing services. Exova’s food, water, and pharmaceuticals business in the UK and Ireland generated revenues of around $29 million in 2015. It is expected that the sale will complete early in the third quarter of 2016. |
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Southern Water Services Ltd. Hermes Investment Management increased its ownership stake in Southern Water, a private water utility supplying water to over 2.4 million people and wastewater services to over 4.6 million people in southern England, from 3.9% to 21%. Financial terms were not disclosed. |
Illinois American Water Company Illinois American Water, a subsidiary of American Water Works Company, Inc., acquired the wastewater system of the City of Grafton, Illinois, for approximately $600,000. The system serves a population of nearly 670 residents. |
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Kardan Water International Group Ltd. Kardan N.V. announced that its indirectly held subsidiary Tahal Group Assets B.V. agreed to sell the remaining 25% of the shares in the Chinese water infrastructure company Kardan Water International Group Ltd. to China Gezhouba Group Investment Holding Co. Ltd. Kardan Water International Group Ltd. plans, invests, develops, and operates in water-related projects in Mainland China, Israel, Hong Kong, and internationally. The sale is expected to be completed by June 30, 2016; however, the parties may extend this date, by mutual consent, until July 31, 2016. The total consideration for the 25% stake is estimated at $ 27.5 million. |
Eco-System Technologies International Inc. Metro Pacific Investments Corporation, through wholly owned subsidiary Metropac Water Investments Corporation, invested approximately $38 million to acquire a 65 percent stake in wastewater treatment company Eco-System Technologies International Inc., which has designed and built more than 500 wastewater treatment and water recovery plants in the Philippines. |
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Schlumberger’s Industrial Water Consultancy Business WSP Global Inc. (TSX:WSP), a Quebec-based engineering consultant, announced that it has entered into an agreement with Schlumberger, a leading global oilfield services company, to acquire Schlumberger’s industrial water consultancy business. WSP provides technical expertise and strategic advice to clients in the Property & Buildings, Transportation & Infrastructure, Environment, Industry, Resources (including Mining and Oil & Gas), and Power & Energy sectors. The 250-employee industrial water consultancy business will enable WSP to provide water consulting services and project solutions to industrial clients worldwide, and will establish a presence for WSP in Chile and Peru and add to WSP’s presence in a number of countries in which it currently operates, including the United States, the United Kingdom, Colombia, and Mexico. The transaction is subject to customary closing conditions and is expected to close in the third quarter of 2016. Financial terms were not disclosed. The deal marks Schlumberger’s effective exit from the water business following the disposal of Schlumberger’s water technologies business to Nova Metrix last year, which included a number of groundwater monitoring and modelling solutions that had been acquired individually to form part of the Schlumberger Water Services division. |
Bankruptcy
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Armada Water Assets, Inc. Oilfield services company Armada Water Assets, Inc., filled for a chapter 11 reorganization of its approximately $25 million in liabilities as demand for its services declined. Armada operates in Texas, Utah, and Colorado, and treats, transports, and disposes of water utilized by the oil industry. |
Contract Announcements
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Koastel Eco Industries Pte. Ltd. Koastel Eco Industries Pte. Ltd., a subsidiary of EMS Energy, a Singapore-based holding company, announced that it will design and build a wastewater plant in Bac Nihn Province, Vietnam. The cost of the project is expected to be approximately $3.25 million. |
China Everbright Water Limited China Everbright Water Limited won a bid to upgrade a wastewater treatment plant near Qingdao, China, to reduce chemical oxygen demand and pollutants in the wastewater. The cost of the upgrade is expected to be approximately $31.6 million. |
Legal & Regulatory
May 17, 2016
United States Senate Bill 2533 Senate Bill 2533, introduced by Senator Dianne Feinstein in February, had its first hearing before the Water and Power Subcommittee of the Senate Committee on Energy and Natural Resources. The proposed bill would allocate millions of dollars to construct water infrastructure in California—in particular, storage and treatment projects. The bill would temporarily modify how government agencies treat biological opinions under the Endangered Species Act by allowing increased pumping during high-rainfall periods.
May 31, 2016
United States Army Corps of Engineers v. Hawkes Co., Inc., No. 15-290 In a 8–0 decision, Chief Justice John Roberts, writing for the full Supreme Court, issued a ruling that will have far-reaching effects on landowners, real estate developers, farmers, oil and gas and mineral extraction companies, golf course owners, and government agencies. In Hawkes, the Court ruled that preliminary “jurisdictional determinations” regarding whether a particular property contains “waters of the United States” may be appealed to federal district court without first having to wind through a lengthy and expensive administrative process. This ruling is important because the U.S. Army Corps of Engineers and U.S. Environmental Protection Agency have long held that preliminary jurisdictional determinations were not appealable. The decision will be far-reaching, and will have a lasting and significant impact. Also interesting but overlooked was a concurrence by Justice Kennedy, joined by Justices Thomas and Alito. Kennedy expressed that “the reach and systemic consequences of the Clean Water Act remain a cause for concern.” The Act’s reach is “notoriously unclear,” and “the consequences to landowners even for inadvertent violations can be crushing.” In the absence of the jurisdictional-determination process—which exists as a result of a memorandum of agreement between the Army Corps and the EPA—the opinion suggests the law might not “comport[ ] with due process.” The Act “continues to raise troubling questions regarding the Government’s power to cast doubt on the full use and enjoyment of private property throughout the Nation.”
June 2, 2016
California State Assembly Bill 2480 The California State Assembly passed AB 2480 with a vote of 50 in favor, 25 against, and 5 abstaining, passing the legislation on to the state Senate. The bill, introduced by Assembly member Richard Bloom, would modify the state Water Code to recognize the Shasta and Oroville watersheds as state infrastructure, making the areas eligible for financing for maintenance and repair activities. The watersheds feed critical dams, and provide water for 80% of California’s reservoir capacity, irrigation for eight million acres, and drinking water for over 25 million people.
June 7, 2016
County of San Joaquin et al. v. Metropolitan Water District of Southern California The Third District Court of Appeal in California temporarily blocked Metropolitan Water District of Southern California from purchasing more than 20,000 acres of land in the delta, one day before the escrow on the $175 million land purchase was set to close. The two-sentence statement from the court halts the deal until further written arguments are filed. The land purchase is related to the $15.7 billion tunnel project to send water to southern California, known as the California WaterFix. The plaintiffs had argued that the purchase is a “project” under the California Environmental Quality Act, therefore requiring more study before advancing, an argument that the lower court rejected.
State Water Resources Control Board The State Water Resources Control Board dismissed charges that the Byron-Bethany Irrigation District illegally diverted river water during the summer of 2015, finding that its prosecutors had failed to carry their burden of proof. The Byron-Bethany Irrigation District had faced a $1.4 million fine. The issue of water diversion, also involving the West Side Irrigation District, will likely be revisited in a suit filed by the irrigation districts in Santa Clara County Superior Court challenging the State Water Resources Control Board’s legal standing to alter water rights. The State Water Resources Control Board also issued a clarification of the upcoming deadlines pursuant to its May 18 emergency urban conservation regulation set to go into effect in June 2016. The clarification gives details on the timing and content of information that water wholesalers and urban water retailers must submit to the control board.
California Ballot Measure AA Voters approved Measure AA, a $12 annual parcel tax in nine Bay Area counties that is projected to raise approximately $500 million over the next 20 years for habitat restoration and wildlife protection projects in the Bay Area.
June 24, 2016
National Infrastructure Advisory Council Report on Water Resilience. The National Infrastructure Advisory Council will issue a final report assessing the security and resilience of the water sector to cyber threats. The initial findings released in March 2016 indicated that water services are undervalued by the public and decision-makers, and that water infrastructure is not given appropriately high priority as a critical sector. Greater investment will be required to prepare the 52,000 public water systems in the United States for inevitable cybersecurity threats. The initial findings also note that tools, analysis, and data are available but not broadly used across the sector, and regional collaboration would be very highly valuable.
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