Middlesex Water Net Income Dips Amid PFAS Costs, Seeks Rate Hike

TL;DR

**Middlesex Water is navigating rising environmental compliance costs and needs that 19.3% rate hike to keep its head above water and maintain investor confidence.**

AI Summary

MIDDLESEX WATER CO (MSEX) reported a slight decrease in net income for the three months ended September 30, 2025, falling to $13.958 million from $14.319 million in the prior year, a 2.52% decline. For the nine-month period, net income also decreased to $34.217 million from $35.547 million, a 3.74% reduction. Operating revenues for the quarter were $54.091 million, down from $55.100 million, a 1.83% decrease, while nine-month revenues increased to $147.715 million from $144.770 million, a 2.03% rise. The company completed the acquisition of the water utility assets of the Town of Ocean View, Delaware, for approximately $4.6 million in April 2025, serving 900 customers. MSEX also received an initial PFAS litigation settlement payment of $0.4 million in Q3 2025, with an additional $0.7 million in October 2025, which is recorded as a regulatory liability for customer benefit. The company is actively addressing new USEPA PFAS regulations, with compliance required by April 2029, and has begun preliminary design for PFAS treatment at its largest New Jersey facility. MSEX and its subsidiaries filed a joint petition in June 2025 with the NJBPU seeking a 19.3% increase in annual base revenues, or approximately $24.9 million, to recover investments and meet regulatory requirements.

Why It Matters

Middlesex Water's slight dip in net income and operating revenues for the quarter, coupled with increased operating expenses and interest charges, signals potential margin pressure for investors. The proactive acquisition of Ocean View's water assets for $4.6 million demonstrates strategic growth, but the significant capital outlays for PFAS treatment, driven by new USEPA regulations, will be a major financial undertaking. The proposed 19.3% rate increase request to the NJBPU is critical for cost recovery and future profitability, directly impacting customer bills and the company's competitive position against other utilities facing similar environmental compliance costs. Investors should monitor regulatory decisions closely, as they will dictate MSEX's ability to fund necessary infrastructure upgrades and maintain dividend growth.

Risk Assessment

Risk Level: medium — The company faces medium risk due to significant capital expenditures required for PFAS treatment to comply with new USEPA regulations by April 2029, which could strain finances if rate increases are not approved. Additionally, net income decreased by 2.52% for the three months ended September 30, 2025, and by 3.74% for the nine-month period, indicating potential profitability challenges.

Analyst Insight

Investors should closely monitor the outcome of MIDDLESEX WATER CO's $24.9 million rate increase petition with the NJBPU, as its approval is crucial for offsetting rising operational costs and funding mandated PFAS treatment. Consider holding existing positions, but new investments should await clarity on regulatory approvals and the long-term financial impact of environmental compliance.

Financial Highlights

debt To Equity

0.73

revenue

$147.715M

operating Margin

29.2%

total Assets

$1.341B

total Debt

$357.796M

net Income

$34.217M

eps

$1.90

gross Margin

63.7%

cash Position

$3.384M

revenue Growth

+2.03%

Revenue Breakdown

Key Numbers

• $13.958M — Net Income (Q3 2025) (Decreased from $14.319M in Q3 2024, a 2.52% decline.)
• $34.217M — Net Income (YTD Sep 2025) (Decreased from $35.547M in YTD Sep 2024, a 3.74% decline.)
• $54.091M — Operating Revenues (Q3 2025) (Decreased from $55.100M in Q3 2024, a 1.83% decline.)
• $147.715M — Operating Revenues (YTD Sep 2025) (Increased from $144.770M in YTD Sep 2024, a 2.03% rise.)
• $4.6M — Acquisition Cost (Cost to acquire water utility assets of the Town of Ocean View, Delaware.)
• $0.4M — Initial PFAS Settlement Payment (Received from 3M Company in Q3 2025, net of fees.)
• $0.7M — Additional PFAS Settlement Payment (Received in October 2025.)
• 19.3% — Requested Rate Increase (Percentage increase in annual base revenues requested from NJBPU.)
• $3.8M — RESIC Surcharge Limit (Maximum semi-annual recovery for qualifying capital investments under the Resiliency and Environmental System Improvement Charge program.)
• 18,337,819 — Common Shares Outstanding (As of October 30, 2025.)

Key Players & Entities

• MIDDLESEX WATER CO (company) — parent company and registrant
• Tidewater Utilities, Inc. (company) — wholly-owned subsidiary of Middlesex Water Company
• Town of Ocean View, Delaware (company) — entity whose water utility assets were acquired by Tidewater
• 3M Company (company) — defendant in PFAS multi-district litigation settlement
• DuPont de Nemours, Inc. (company) — defendant in PFAS multi-district litigation settlement
• Tyco Fire Products LP (company) — defendant in PFAS multi-district litigation settlement
• BASF Corporation (company) — defendant in PFAS multi-district litigation settlement
• New Jersey Board of Public Utilities (regulator) — regulatory body for rate increase and consolidation petitions
• United States Environmental Protection Agency (regulator) — agency issuing final PFAS regulations
• $24.9 million (dollar_amount) — requested annual base revenue increase

FAQ

Risk Factors

• PFAS Regulation Compliance [high — regulatory]: The company faces significant costs and operational challenges to comply with new USEPA PFAS regulations by April 2029. Preliminary design for treatment at its largest New Jersey facility has begun, indicating proactive but potentially expensive measures.
• Rate Increase Approval [high — regulatory]: Middlesex Water Co. and its subsidiaries are seeking a 19.3% ($24.9 million) annual base revenue increase from the NJBPU. The outcome of this petition is critical for recovering investments and meeting regulatory requirements.
• PFAS Litigation Settlements [medium — legal]: The company received initial PFAS litigation settlement payments totaling $1.1 million ($0.4M in Q3 2025, $0.7M in Oct 2025). While providing some financial relief, these settlements are recorded as regulatory liabilities for customer benefit, not direct income.
• Capital Investment and Infrastructure [medium — operational]: Ongoing investments in utility plant, including construction work in progress ($37.4M), are substantial. The company utilizes programs like the RESIC surcharge, with a $3.8M semi-annual limit, to recover qualifying capital investments.
• Interest Rate Sensitivity [medium — market]: Interest charges increased to $10.535 million for the nine months ended September 30, 2025, from $10.721 million in the prior year, indicating a slight decrease but still a significant expense. Fluctuations in interest rates can impact borrowing costs.
• Acquisition Integration [low — operational]: The acquisition of the Town of Ocean View, Delaware water utility assets for $4.6 million in April 2025 adds approximately 900 customers. Successful integration and operational synergy are key to realizing the value of this expansion.

Industry Context

The water utility sector is characterized by stable demand but faces increasing regulatory scrutiny and capital expenditure requirements. Companies like Middlesex Water Co. must balance essential service provision with significant investments in infrastructure upgrades and environmental compliance, particularly concerning emerging contaminants like PFAS. The industry is also subject to rate-setting by regulatory bodies, influencing profitability and investment capacity.

Regulatory Implications

Middlesex Water Co. is navigating a complex regulatory landscape, notably with the upcoming USEPA PFAS regulations and the ongoing NJBPU rate case. Compliance with environmental standards will necessitate substantial capital investment, while the success of the rate increase petition is crucial for financial recovery and future investment. The treatment of PFAS settlement funds as a regulatory liability highlights the direct pass-through of benefits to customers.

What Investors Should Do

1. Monitor NJBPU rate case outcome
2. Track PFAS compliance costs and timelines
3. Analyze operating expense trends
4. Evaluate debt levels and interest expense

Key Dates

• 2025-04-XX: Acquisition of Town of Ocean View water utility assets — Expands customer base by approximately 900 customers and geographic reach in Delaware.
• 2025-06-XX: Joint petition filed with NJBPU for rate increase — Seeking a 19.3% ($24.9 million) increase in annual base revenues to recover investments and meet regulatory needs.
• 2025-09-30: End of Q3 2025 — Reporting period for the 10-Q, showing a slight decrease in net income and revenues compared to Q3 2024.
• 2025-10-XX: Received additional PFAS settlement payment — An additional $0.7 million received, contributing to the regulatory liability for customer benefit.
• 2025-10-30: Common Shares Outstanding reported — 18,337,819 shares outstanding, a key figure for per-share calculations and market capitalization.
• 2029-04-XX: USEPA PFAS regulation compliance deadline — Critical deadline for implementing necessary treatment technologies and processes, likely involving significant capital expenditure.

Glossary

Allowance for Funds Used During Construction (AFUDC)

A non-cash income item representing the cost of borrowed funds and equity used to finance construction of new utility plant during the construction period. (Increases reported income during construction phases, reflecting the cost of capital tied up in new assets.)

Regulatory Assets

Costs that have been incurred by the company but are expected to be recovered from customers in the future through approved rates. (Represents significant future revenue potential, but also depends on regulatory approval for recovery.)

RESIC Surcharge

Resiliency and Environmental System Improvement Charge, a program allowing recovery of qualifying capital investments. (Mechanism for recovering specific infrastructure investments, with a defined semi-annual limit of $3.8 million.)

PFAS

Per- and polyfluoroalkyl substances, a group of man-made chemicals found in products and the environment. (Subject to new USEPA regulations and litigation, posing significant compliance costs and potential liabilities for water utilities.)

NJBPU

New Jersey Board of Public Utilities, the state agency that regulates public utilities in New Jersey. (Key regulatory body for Middlesex Water Co.'s primary operations, responsible for approving rate increases and other significant financial matters.)

Year-Over-Year Comparison

Compared to the prior year, Middlesex Water Co. reported a slight decrease in net income for both the third quarter (2.52%) and year-to-date (3.74%). Operating revenues saw a minor dip in Q3 (1.83%) but a modest increase year-to-date (2.03%). Key changes include the acquisition of Ocean View water assets and the receipt of PFAS litigation settlement payments, which are treated as regulatory liabilities. The company is also actively pursuing a significant rate increase from the NJBPU, indicating a proactive approach to managing rising costs and regulatory demands.

Filing Documents

• msex-20250930.htm (10-Q) — 1151KB
• a1017etidewater_cobankrx00.htm (EX-10.17(E)) — 19KB
• a1027fboaamendmentno5toloa.htm (EX-10.27(F)) — 34KB
• a1062-bondpurchaseagreemen.htm (EX-10.62) — 605KB
• msex-20250930xex311.htm (EX-31.1) — 9KB
• msex-20250930xex312.htm (EX-31.2) — 9KB
• msex-20250930xex321.htm (EX-32.1) — 3KB
• msex-20250930xex322.htm (EX-32.2) — 3KB
• image_0a.jpg (GRAPHIC) — 5KB
• image_0b.jpg (GRAPHIC) — 8KB
• 0001628280-25-047821.txt ( ) — 7339KB
• msex-20250930.xsd (EX-101.SCH) — 45KB
• msex-20250930_cal.xml (EX-101.CAL) — 75KB
• msex-20250930_def.xml (EX-101.DEF) — 193KB
• msex-20250930_lab.xml (EX-101.LAB) — 579KB
• msex-20250930_pre.xml (EX-101.PRE) — 397KB
• msex-20250930_htm.xml (XML) — 994KB

Financial Statements (Unaudited)

Financial Statements (Unaudited): Condensed Consolidated Statements of Income 1 Condensed Consolidated Balance Sheets 2 Condensed Consolidated Statements of Cash Flows 3 Condensed Consolidated Statements of Capital Stock and Long-Term Debt 4 Condensed Consolidated Statements of Common Stockholders' Equity 5 Notes to Unaudited Condensed Consolidated Financial Statements 6 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 20 Item 3.

Quantitative and Qualitative Disclosures of Market Risk

Quantitative and Qualitative Disclosures of Market Risk 27 Item 4.

Controls and Procedures

Controls and Procedures 28 PART II. OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 29 Item 1A.

Risk Factors

Risk Factors 29 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 29 Item 3. Defaults upon Senior Securities 29 Item 4. Mine Safety Disclosures 29 Item 5. Other Information 29 Item 6. Exhibits 30

SIGNATURES

SIGNATURES 31 Table of Contents

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements (Unaudited)

Item 1. Financial Statements (Unaudited): MIDDLESEX WATER COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands except per share amounts) Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Operating Revenues $ 54,091 $ 55,100 $ 147,715 $ 144,770 Operating Expenses: Operations and Maintenance 23,738 25,359 67,913 67,649 Depreciation 6,941 6,309 20,171 18,010 Other Taxes 5,709 5,931 16,460 16,430 Total Operating Expenses 36,388 37,599 104,544 102,089 Operating Income 17,703 17,501 43,171 42,681 Other Income (Expense): Allowance for Funds Used During Construction 432 354 1,218 787 Other Income (Expense), net 1,454 1,614 4,364 9,202 Total Other Income, net 1,886 1,968 5,582 9,989 Interest Charges 4,200 3,411 10,535 10,721 Income before Income Taxes 15,389 16,058 38,218 41,949 Income Taxes 1,431 1,739 4,001 6,402 Net Income 13,958 14,319 34,217 35,547 Preferred Stock Dividend Requirements 18 29 59 89 Earnings Applicable to Common Stock $ 13,940 $ 14,290 $ 34,158 $ 35,458 Earnings per share of Common Stock: Basic $ 0.77 $ 0.80 $ 1.90 $ 1.99 Diluted $ 0.77 $ 0.80 $ 1.90 $ 1.98 Average Number of Common Shares Outstanding : Basic 18,123 17,838 17,992 17,828 Diluted 18,154 17,952 18,023 17,943 See Accompanying Notes to Condensed Consolidated Financial Statements. 1 Table of Contents MIDDLESEX WATER COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands) September 30, 2025 December 31, 2024 ASSETS UTILITY PLANT: Water Production $ 325,756 $ 314,924 Transmission and Distribution 918,455 855,497 General 108,142 105,167 Construction Work in Progress 37,444 34,209 TOTAL 1,389,797 1,309,797 Less Accumulated Depreciation 270,445 254,425 UTILITY PLANT - NET 1,119,352 1,055,372 CURRENT ASSETS: Cash and Cash Equivalents 3,384 4,226 Accounts Receivable, net of allowance for credit losses of $ 2,055 and $ 2,326 in 2025 and 2024, respectively 22,

Financial Statements

Financial Statements Accounting Standards Update ("ASU") ASU 2024-03 "Disaggregation of Income Statement Expenses" The ASU enhances disclosures related to income statement expenses to further disaggregate expenses in the footnotes to the financial statements. The standard requires disaggregation of any relevant expense caption presented on the face of the income statement that contains the following expense categories: purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depletion. Further, the standard requires disclosure of the total amount and the entity's definition of selling expenses. The ASU is effective for the Company beginning with its annual financial statements for the year ending December 31, 2027. Early adoption is permitted. Prospective, with retrospective application also permitted. The Company is currently evaluating the requirements of ASU 2024-03. ASU 2023-09 "Improvements to Income Tax Disclosures" The ASU amends certain income tax disclosure requirements, including adding requirements to present the reconciliation of income tax expense computed at the statutory rate to actual income tax expense using both percentages and amounts and providing a disaggregation of income taxes paid. Further, certain disclosures are eliminated, including the current requirement to disclose information on changes in unrecognized tax benefits in the next 12 months. The ASU is effective for the Company beginning with its annual financial statements for the year ending December 31, 2025. Early adoption is permitted. Prospective, with retrospective application also permitted. The Company is currently evaluating the requirements of ASU 2023-09, but does not expect adoption of this ASU to have a material impact on its financial statements. ASU 2025-06 "Internal-Use Software" This ASU removes all reference to prescriptive and sequential software development stages, requiring an entity to start capitalizing software costs when

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