United Water and KKR win contract to manage water system of Middletown, US

The Borough Authority of Middletown in Pennsylvania, US, has signed a deal with utility company United Water and investment firm KKR for management and operation of its water and wastewater system.

The joint venture (JV) between United Water, a subsidiary of France based Suez Environnement and KKR, will have a 50-year water and wastewater concession in Middletown on from 1 January 2015. The concession by the public-private partnership is likely to generate revenues of more than $285m over the 50 years term.

With 90% stake in the JV, KKR will make the investments through its infrastructure fund, while United Water will offer the remaining 10% of the capital.

The JV has paid an initial capital of $43m to the Middletown Borough Authority, which will be used to improve the borough’s finances and eliminate its existing debt and pension liabilities.

Another $83m will be invested by the JV for improving the system infrastructure over the term of the contract.

Under a separate operations and maintenance agreement with the JV, United Water will be responsible for six groundwater sources, 36 miles of water main, one wastewater treatment plant and 25 miles of sewer main in the borough. It will also manage and deliver capital upgrades.

However, the borough authority will retain ownership of the water and wastewater system and ensure about its quality and performance. It will also control the charges for the 9,400 users in Middletown area, which is expected to increase over the agreement duration.

United Water CEO Bertrand Camus said: "This partnership marks a growing trend in the US for delivering infrastructure renewal projects for essential public services by drawing upon the strengths and balancing the needs of multiple sectors; both public and private."

"This model is a blend of United Water’s operations expertise and KKR’s long-term vision, which brings credibility to address America’s water challenges. Our commitment to funding improvements in the water and wastewater system is critical to keeping rates stable and under the Middletown Borough Authority’s control.

"KKR has a history of making infrastructure investments, as shown in our successful Bayonne, NJ operation, and a proven commitment to improving the operational and environmental performance of the companies in its portfolio, making it an ideal partner for this investment."

KKR energy and infrastructure team director Brandon Freiman said: "The operational and environmental stewardship of United Water, combined with our commitment to invest in the system, creates a sustainable model that we believe produces tangible benefits for the Borough and its residents for a very long time."