GWR Global Water Resources (TSX:GWR, StockForum), a Phoenix Arizona-based provider of resource management services and owner/operator of water, waste water and recycled water utilities, announced today that the company had been given the Recommend Opinion and Order (“ROO”) from the Arizona Corporate Commission (“ACC”) Administrative Law Judge (“ALJ”) regarding a rate case involving seven Global Water regulated utility subsidiaries.
Receiving the ROO is considered the last hurdle before Global can submit the rate case to ACC Commissioners who must give the final stamp of approval before any settlement may go into effect.
The arrangement exists between the company, ACC staff, the Residential Utility Consumers Office (“RUCO”), the City of Maricopa and any others named in the August 13, 2013 announcement.
According to the news release, major terms of the agreement include a 14% cumulative revenue increase of $4.3 million for the company's utilities based on 2011 test year connections, with most of it to arrive during the two years following January 2015's initial increase.
Under the deal, Global will be granted a full reversal of the imputation it currently endures with Contributions in Aid of Construction (“CIAC”) being classified with monies previously held through Infrastructure Coordination and Financing Agreements (“ICFAs”). The reversal of this imputation, a stipulation of Global's last rate case, would bring back $60.0 million to rate base and future rate base, pumping shareholder balance sheet equity significantly.
According to the news release, Global will not participate in any more ICFAs, but current ICFAs will remain intact with a part of future payments under the ICFAs routed to support Hook-Up Fees. The company has also made it known that it will implement a 9.5% return on common equity.
ACC Commissioners are scheduled to review the case, examining the ROO and the intended settlement for approval in an open meeting on February 6th and 7th, 2014. However, even though the ROO gives weight to the settlement proposal, the ACC may approve it whole, with modifications or reject it outright.
Chairman of the Board, Trevor Hill, commented on the milestone, “The Judge's recommendation for approval of the settlement is a crucial step towards a favorable conclusion of the rate case.”
Hill then summed up, “Approval of the settlement by the Commissioners will bring this case and related matters to a close including the treatment of ICFA funds, providing clarity and stability for our regulated utilities, customers, partners, and investors alike.”
Global also intends to revisit its dividend policy during February 2014, once the rate case decision has been handed down by the ACC.
Global was in the news recently when the company reported third quarter results in the middle of November.
Shares popped 10.80% on the news to $4.00 per share.
Currently there are 8.8m outstanding shares with a market cap of $35.0 million.