The nonprofit entity poised to acquire Connecticut’s largest water utility is preparing to issue nearly $2.4 billion in bonds to finance the purchase, and S&P Global Ratings says future rate increases will be key to maintaining the debt’s investment-grade status.
S&P on June 16 assigned an ‘A-’ rating to three series of senior-lien bonds totaling about $1.83 billion that will be issued by the Aquarion Water Authority, the quasi-public entity created by the General Assembly to acquire Aquarion Water Co. from Eversource Energy.
The agency assigned a ‘BBB+’ rating to an additional $547 million in subordinate-lien bonds. The outlook on both is stable.
S&P said in its rating summary that “projected rate increases are integral to maintaining the rating.”
S&P cited AWA’s ability to set rates without PURA approval as a credit strength, saying it views “positively the willingness of the representative policy board to apolitically approve raising rates when necessary, compared to existing limitations from PURA.”
That independence was among the most controversial elements of the sale. Critics, including the Office of Consumer Counsel and Attorney General William Tong, argued it would reduce public oversight of future rate increases.
PURA initially rejected the transaction in November 2025, citing governance concerns, including an overlapping 11-member board that would oversee both AWA and the New Haven-based Regional Water Authority, which will share management and resources with the new authority.
The agency reversed course in March after a Superior Court judge ordered it to reconsider the decision. No party appealed PURA’s revised approval, and the final legal challenge ended last week when Fairfield, New Canaan, Ridgefield and Westport, along with two regional councils of governments, withdrew their appeal in state Appellate Court. Eversource expects the sale to close before year-end.
S&P said it could lower the ratings if AWA fails to maintain at least 200 days cash on hand or an all-in debt service coverage ratio of 1.2 times after the transaction closes.
S&P said customer rates remain affordable, with the average residential water bill accounting for 0.8% of area income.
The financing package is among the largest infrastructure bond offerings in Connecticut history. Following the $2.4 billion sale, AWA will serve Aquarion’s 735,000 customers in 60 municipalities.
