Connecticut Water Service, Inc. Reports Six Month and Second Quarter Earnings

Connecticut Water Service, Inc. Reports Six Month and Second Quarter Earnings

Earnings Total $0.64 Per Share Through Six Months

CLINTON, Conn., Aug. 12, 2013 (GLOBE NEWSWIRE) -- Connecticut Water Service,
Inc. (Nasdaq:CTWS) announced net income of $6.9 million, or earnings per basic
average share (EPS) of $0.64, on revenues of $45.8 million in the Water
Activities and Service and Rentals segments through the first six months of
2013. In the same six month period of 2012, the Water Activities and Services
and Rentals segments produced net income of $5.1 million, or $0.59 EPS, on
revenues of $43.3 million.

In the first six months of 2013, there was no activity in the Company's third
business segment – the Real Estate segment. In 2012, the Real Estate segment
generated net income of approximately $1.0 million, or $0.11 EPS, through an
open space land sale to the Town of Plymouth, Connecticut, completed in the
second quarter of 2012.

Including all three business segments, in the first six months of 2013, the
Company had earnings of $6.9 million, or $0.64 EPS, on total revenues of $45.8
million. In the same period of 2012, the Company reported earnings of $6.1
million, or $0.70 EPS, on total revenues of $44.7 million.

In the first six months of 2013, there were approximately 10.8 million
weighted average basic common shares outstanding, which is approximately 25%
more than in the same period in 2012 due to a successful equity offering of
approximately 1.7 million shares and the issuance of 380,254 shares in the
Biddeford & Saco Water Company (BSWC) acquisition in December 2012. A portion
of the proceeds from the equity offering was used to repay approximately $21
million of bank lines of credit and $18 million in debt related to the 2012
acquisition of Maine Water Company. These repayments will lower interest and
debt expense more than $700,000 this year.

Acquisition

On December 10, 2012, the Company acquired BSWC through a stock-for-stock
merger transaction valued at approximately $12.0 million. BSWC serves about
15,000 customers, or 35,000 people, in four southern Maine communities. BSWC
was not a part of Connecticut Water in the first six months of 2012 and its
results of operations are not included in 2012 income statement information.

Six Month Operating Results

In the first six months of 2013, income in the Company's core business, the
Water Activities segment, was $6.2 million, or $0.57 EPS, on total revenues of
$43 million. In the same period of 2012, income from the segment totaled $4.4
million, or $0.51 EPS. The increase in revenues for the Water Activities
segment was largely attributable to the acquisition of BSWC and an increase in
the Water Infrastructure and Conservation Adjustment (WICA) surcharge in
Connecticut.

The Company saw consistent performance from its Services and Rentals segment
in the first six months of 2013 that contributed income of $762,000 compared
to $683,000 in the first half of 2012. There was no activity in the Real
Estate segment in the first half of 2013. In 2012, there was an open space
land sale to the Town of Plymouth, Connecticut, that contributed income of
approximately $1.0 million.

Operating and Maintenance Expenses (O&M) increased approximately $1 million,
or approximately 5.2%, to $20.7 million in the first six months of 2013. The
increasewas largely attributable to BSWC operating expenses that were not
included in the 2012 six month results. There were also increases in expenses
related to taxes, due to higher earnings, and depreciation associated with the
acquisition of BSWC. Excluding $1.6 million of BSWC O&M expenses, the Company
reduced O&M costs by $574,000 in the first six months of 2013.

Interest and debt expense for the first six months declined 34% to $2.8
million, from $4.2 million for the same period of 2012. The decrease was
related to reduced interest expense associated with the refinancing of $55
million in long-term debt in the fourth quarter of 2012 and an additional $15
million in the first quarter of 2013, the repayment of $18 million in debt
used to acquire Maine Water, and an increase in the patronage refund from a
bank cooperative that reduced interest expense.

Second Quarter Operating Results

In the second quarter of 2013, net income in the Company's core business, the
Water Activities segment, was $3.9 million, or EPS of $0.36, on total revenues
of $22.9 million. In the same period of 2012, net income from the segment
totaled $2.8 million, or EPS of $0.33, on total revenues of $21.7 million. The
increase in revenues for the Water Activities segment was largely attributable
to the acquisition of BSWC and an increase in WICA in Connecticut.

In the second quarter of 2013, there was no activity in the Real Estate
segment. In the same period of 2012, the Real Estate segment generated EPS of
$0.11 through a sale of protected open space land to the Town of Plymouth,
Connecticut.

The Company saw consistent performance from its Services and Rentals segment
in the second quarter of 2013, which contributed income of $376,000 compared
to $333,000 in the second quarter of 2012.

O&M expenses increased $281,000, or 2.8%, to $10.4 million in the second
quarter of 2013. As with the six month results, there were also increases in
expenses related to taxes, due to higher earnings, and depreciation associated
with the acquisition of BSWC. Excluding $764,000 of BSWC O&M expenses, the
Company reduced O&M costs by $483,000 in the second quarter of 2013.

Interest and debt expense for the second quarter declined 31% to $1.5 million,
from $2.1 million for the same period of 2012. The decrease in interest and
debt expense was related to the refinancing of long-term debt in December 2012
and in March 2013 and the repayment of Maine Water debt used to acquire Maine
Water.

Regulatory Developments

In the second quarter of 2013, the State of Connecticut enacted laws that
provide for a revenue adjustment mechanism (RAM), expansion of WICA eligible
conservation related projects, and an increase in the WICA cap from 7.5% to
10%.

The RAM allows water utilities to recover the difference between the actual
revenues billed in a calendar year and the revenues that the Public Utilities
Regulatory Authority (PURA) approved at the time of their last rate general
rate proceeding through an adjustment on customer bills. Revenues billed in
excess of what was allowed in the last rate case would be returned to
customers through a credit on bills. The RAM removes the financial
disincentive for water utilities to develop and implement effective water
conservation programs.

In addition, the Company is planning to take advantage of a recent
clarification in the Federal Internal Revenue Service (IRS) Code that allows
utilities to take an immediate deduction of qualified capital spending that
otherwise would have been deducted in small increments over many years. The
new IRS interpretation of the Repair Tax Deduction Credit (RTDC) has provided
Connecticut Water, which has made significant capital expenditures in recent
years for its infrastructure replacement program, the opportunity to file for
a refund of federal tax payments going back to 2010. The Company estimates the
tax refund it will receive as a result of the RTDC will be approximately $10
million.

On June 28, 2013, the Connecticut Office of Consumer Counsel and the Attorney
General of the State of Connecticut signed on to Connecticut Water's proposal
to use the unique and unprecedented opportunity afforded by the Connecticut
regulatory developments and the RTDC to benefit customers and the Company. The
result is a Settlement Agreement (Agreement) between the three parties that
calls for temporarily reducing customers' rates fortwo years, not
implementing new rates from a general rate case until October 2015 at the
earliest, folding the WICA surcharge into base rates that resets WICA to zero,
and delaying for six months the next WICA surcharge filing. A news release was
issued on the Agreement on July 1, 2013, and a Form 8-K regarding the
Agreement was filed with the SEC on July 2, 2013.

According to Eric Thornburg, President and CEO of Connecticut Water, the
Agreement benefits customers and the Company. "Customers would enjoy a
two-year rate reduction and the Company would benefit from the timely
implementation of the RAM and resetting the WICA surcharge to zero without
having to file a general rate case application."

The Agreement provides that if PURA does not fully approve the Agreement in
its entirety, it shall be deemed withdrawn. Accordingly, the Agreement is not
effective unless and until it is approved by PURA. The Company has requested
PURA to issue a decision on the Agreement by August 31, 2013.

In Maine, the regulations regarding Water Infrastructure Charge (WISC) have
been finalized. WISC allows for eligible infrastructure investments to be
recovered between rate cases and is similar to Connecticut's WICA. Maine Water
and BSWC expect to first take advantage of WISC in late 2013 or 2014.

In July 2013, the Maine Public Utilities Commission (MPUC) approved
stipulations that settled rate case applications for three of Maine Water's
systems. In June 2013, Maine Water also filed rate case applications with MPUC
for three additional water systems.

Connecticut Water Service, Inc. is the largest publicly traded water company
based in New England. Through its wholly-owned public water utility
subsidiaries, The Connecticut Water Company, The Maine Water Company, and the
Biddeford & Saco Water Company, the Company provides drinking water to 122,000
customers, or about 400,000 people, throughout the states of Connecticut and
Maine.

This news release may contain certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 regarding the
Company's results of operation, financial position and long-term strategy.
These forward-looking statements are based on current information and
expectations, and are subject to risks and uncertainties discussed in our
filings with the Securities and Exchange Commission, which could cause the
Company's actual results to differ materially from expected results. We
undertake no obligation to update or revise forward-looking statements,
whether as a result of new information, future events, or otherwise.

Connecticut Water Service, Inc. & Subsidiaries

Selected Income Statement Information (unaudited)

                                          Three Months Ended Six Months Ended
                                          June 30,           June 30,
(In thousands except per share amounts)    2013      2012     2013     2012
                                                                   
Operating Revenues                         $22,545   $21,348  $42,274  $39,888
Other Water Activities Revenues            309       324      708      673
Real Estate Revenues                       --        1,450    --       1,450
Service and Rentals Revenues               1,477     1,366    2,866    2,701
Total Revenues                             $24,331   $24,488  $45,848  $44,712
                                                                   
Operating Expenses                         $17,286   $16,337  $33,656  $31,326
Other Utility Income, Net of Taxes         $179      $188     $385     $364
Total Utility Operating Income             $5,438    $5,199   $9,003   $8,926
Gain on Property Transactions, Net of      $--       $982     $--      $982
Taxes
Non-Water Sales Earnings (Services and     $376      $333     $762     $683
Rentals), Net of Taxes
Net Income                                 $4,310    $4,163   $6,923   $6,073
Net Income Applicable to Common            $4,300    $4,153   $6,904   $6,054
Shareholders
Basic Earnings Per Average Common Share    $0.40     $0.48    $0.64    $0.70
Diluted Earnings Per Average Common Share  $0.39     $0.47    $0.63    $0.69
Basic Weighted Average Common Shares       10,819    8,667    10,811   8,659
Outstanding
Diluted Weighted Average Common Shares     10,989    8,805    10,977   8,793
Outstanding
Book Value Per Share                       $17.11    $13.75   $17.11   $13.75

Condensed Consolidated Balance Sheets (unaudited)

(In thousands)                         June 30, 2013 June 30, 2012
                                                   
ASSETS                                              
Net Utility Plant                      $455,439      $419,002
Current Assets                         33,082        26,415
Other Assets                           97,575        108,038
                                                   
Total Assets                          $586,096      $553,455

CAPITALIZATION AND LIABILITIES                      
Shareholders' Equity                   $188,193      $121,208
Preferred Stock                        772           772
Long-Term Debt                         178,731       187,841
Current Liabilities                    11,862        36,890
Other Liabilities and Deferred Credits 206,538       206,744
Total Capitalization and Liabilities   $586,096      $553,455

CONTACT: News media contact:
        
         Daniel J Meaney, APR,
         Director of Corporate Communications
         Connecticut Water Service, Inc.
         93 West Main Street, Clinton, CT 06413-1600
         (860) 664-6016

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