Essential Utilities, Inc. (WTRG): Business Model Canvas [Dec-2025 Updated]

You're digging into the mechanics of Essential Utilities, Inc., and what you'll find is a utility giant playing a long game centered on regulated infrastructure and massive M&A. Honestly, the headline is that $63 billion merger agreement with American Water Works, but the real story is the disciplined execution: they're pouring between $1.4 and $1.5 billion into capital expenditures just this year to secure future rate base growth. It's a model built on essential service delivery, aiming for that steady, regulated return, which is why their TTM revenue hit roughly $2.38 billion ending Q3 2025. Keep reading; we break down exactly how they structure this complex, essential business below.

Essential Utilities, Inc. (WTRG) - Canvas Business Model: Key Partnerships

You're looking at the core relationships Essential Utilities, Inc. relies on to execute its strategy, especially given the massive merger announcement in late 2025. These partnerships are critical for capital deployment, regulatory stability, and strategic growth.

Merger Agreement with American Water Works (AWK)

The definitive agreement to combine with American Water Works (AWK) is the most significant partnership shaping Essential Utilities, Inc.'s future. This is an all-stock transaction, meaning no cash is changing hands directly between the two entities for the equity portion.

• Enterprise Value of the combined entity: approximately $63 billion, based on October 24, 2025, closing stock prices.
• Exchange Ratio: Essential Utilities shareholders receive 0.305 shares of American Water Works for each Essential share owned.
• Ownership Split: American Water shareholders will own approximately 69%, and Essential Utilities shareholders will own approximately 31% of the combined company on a fully diluted basis.
• Combined Footprint: The merged utility will serve approximately 4.7 million water and wastewater connections across 17 states.
• Combined Rate Base: The pro forma water and wastewater rate base is approximately $29.3 billion.
• Expected Close Date: The transaction is targeted to close by the end of the first quarter of 2027.

Partnership with International Electric Power III, LLC (IEP)

Essential Utilities, through its subsidiaries, is partnering with International Electric Power III, LLC (IEP) to support a major data center development in Greene County, Pennsylvania. This highlights a strategic move into providing essential services for large-scale digital infrastructure.

Essential Utilities announced a $26 million investment in this project on August 27, 2025. The project involves significant capital deployment by Essential's subsidiaries.

The data center facility itself spans 1,400 acres, and the power plant is expected to be operational in the first quarter of 2029.

State and Local Governments

Regulatory relationships with state and local governments are fundamental, as they govern rate recovery and approve system acquisitions. Essential Utilities continues to grow its regulated asset base through these governmental bodies.

• Regulatory Recoveries: Increased revenues from regulatory recoveries were a driver for Q1 2025 earnings compared to Q1 2024.
• Recent Acquisitions: Essential closed on the acquisition of utility assets from the Village of Midvale, OH, in Q1 2025.
• Recent Acquisitions: The company closed on the acquisition of the City of Beaver Falls Wastewater System in Q2 2025.

Financial Institutions for Debt and Equity Financing

While the AWK merger is an all-stock transaction, financing is necessary to fund the substantial ongoing capital expenditure program. You're definitely looking at ongoing relationships with capital markets providers.

For the first six months of 2025, Essential Utilities invested $613 million in its regulated water and natural gas infrastructure systems.

Suppliers and Contractors for Infrastructure Projects

The planned capital investment program dictates the volume of work flowing to suppliers and contractors for materials, construction, and specialized services.

The commitment for 2025 is clear, and it's a big number that keeps the supply chain busy:

• Regulated Infrastructure Investment for 2025: Expected to be between $1.4 to $1.5 billion.
• Five-Year Outlook (2025 through 2029): Total planned regulated infrastructure investment is approximately $7.8 billion.
• PFAS Mitigation: This investment plan includes addressing PFAS with at least $450 million in capital projects through 2029.

Finance: draft 13-week cash view by Friday.

Essential Utilities, Inc. (WTRG) - Canvas Business Model: Key Activities

You're looking at the core engine of Essential Utilities, Inc. (WTRG) as of late 2025. This is where the company puts its time and capital to work to generate returns and serve its customers across regulated water and natural gas platforms.

Regulated water and wastewater treatment, distribution, and collection

This activity involves the physical management of water resources for a significant customer base. Essential Utilities, operating as the Aqua and Peoples brands, serves approximately 5.5 million people across nine states. The company is actively engaged in ensuring water quality, with fewer than 1.5% of its 1,500+ water systems experiencing health-based violations, which compares favorably to the nearly 12.5% rate for all water systems across America. A key operational focus is the replacement of aging water infrastructure.

• Water segment rate base expected to grow at a compounded annual growth rate of approximately 6% through 2029 (excluding DELCORA).
• Water pipeline modernization included replacing over 725 miles of water lines since 2020.
• The company has a multi-year plan to ensure finished water does not exceed the federal maximum contaminant level for the six EPA-regulated PFAS chemicals.

Natural gas distribution and pipeline integrity management

The natural gas distribution side focuses on delivering reliable energy and managing the associated network. For 2025, the regulated natural gas customer base is expected to remain stable. A major part of this activity is pipeline integrity management, which directly impacts safety and reduces environmental impact.

Here's a quick look at the scale of pipeline replacement efforts:

Also, Essential Utilities is committed to reducing its environmental footprint, aiming for a 60% reduction in Scope 1 and Scope 2 greenhouse gas emissions by 2035 from its 2019 baseline.

Executing $1.4 to $1.5 billion in 2025 regulated infrastructure capital expenditures

This is the primary deployment of capital aimed at growing the rate base and maintaining service quality. Essential Utilities reaffirmed its plan to invest between $1.4 billion and $1.5 billion in needed infrastructure investments for 2025. By the end of the third quarter of 2025, the company had already invested $983 million of this target. This spending is part of a larger, multi-year commitment.

• Total planned regulated infrastructure investment from 2025 through 2029 is approximately $7.8 billion.
• This five-year investment includes at least $450 million for capital projects related to PFAS remediation.
• The combined utility rate base is expected to grow at a compounded annual growth rate of 8% through 2029.

Strategic acquisitions of smaller municipal water and wastewater systems

Growth through acquisition is a deliberate strategy to expand the rate base and achieve economies of scale. Year-to-date in 2025, Essential Utilities completed acquisitions of systems serving approximately 10,300 customers for about $58 million. This builds on a history of growth, having added more than 136,000 new customers since 2015 through investments totaling over $548 million in rate base expansion.

The pipeline remains active, with four pending purchase agreements across Pennsylvania and Texas that are expected to serve over 210,000 customers or equivalent dwelling units for a total purchase price of approximately $340 million. The largest pending deal is the $276.5 million agreement to acquire DELCORA, which serves about 198,000 EDUs, though this is currently stalled.

Managing regulatory rate cases to ensure rate base growth and cost recovery

Successfully managing regulatory proceedings is crucial for converting capital investments into allowed returns. As of late 2025, Essential Utilities had several rate cases underway. The company has pending base rate cases in North Carolina, Texas, Ohio, and Virginia for its regulated water and wastewater segment, requesting total incremental annualized revenues of approximately $96.5 million. Additionally, the gas business has a pending surcharge in Kentucky requesting an increase of $2.9 million in annualized revenue.

The company has seen success in securing revenue increases earlier in the year. As of July 31, 2025, the water segment received rate awards and infrastructure surcharges totaling $92.6 million across Pennsylvania, Ohio, North Carolina, and New Jersey, while the gas segment received $8.2 million in Kentucky.

Finance: draft 13-week cash view by Friday.

Essential Utilities, Inc. (WTRG) - Canvas Business Model: Key Resources

You're looking at the hard assets that back Essential Utilities, Inc. (WTRG)'s business, the stuff that makes their regulated revenue predictable. The foundation here is defintely the extensive regulated utility infrastructure spread across nine U.S. states. This physical network is what they are pouring capital into; they are on track to invest between $1.4 billion and $1.5 billion in regulated infrastructure in 2025 alone. This 2025 investment is part of a larger, five-year commitment of approximately $7.8 billion planned through 2029 to modernize both water and natural gas systems.

The company operates under two primary, well-known brands: Aqua for water and wastewater services, and Peoples for natural gas distribution. These brands serve a substantial customer base, providing essential resources to approximately 5.5 million people. The water segment is actively growing through acquisitions, having added systems serving approximately 10,300 customers year-to-date in 2025 for an investment of about $58 million. The regulated water customer base is projected to grow at an average annual rate of between 2% and 3% long-term from acquisitions and organic growth.

Stewardship of natural assets is also a key resource, with Essential Utilities protecting more than 7,600 acres of forests and other habitats throughout its footprint. Furthermore, the company is building out specialized capacity, such as planning to design, build, and operate an 18 million gallons per day (MGD) water treatment plant for a data center project in Western Pennsylvania.

The value of the regulated assets, known as the rate base, is central to financial planning and is projected to expand significantly. Here's how the rate base growth is expected to compound annually through 2029:

The specialized workforce underpins the operation of this vast infrastructure, covering utility operations, engineering, and the complex regulatory compliance required in the utility sector. The natural gas customer base is expected to remain stable for 2025. The company's long-term earnings per share growth target is reaffirmed at 5% to 7% compounded annually through 2027, based on an adjusted 2024 EPS of $1.97 (Non-GAAP).

The scale of the physical and operational resources can be summarized this way:

• Operates across nine U.S. states.
• Protects over 7,600 acres of natural lands.
• Serves approximately 5.5 million people.
• Planned 2025 infrastructure investment: $1.4 to $1.5 billion.
• Total planned investment through 2029: approximately $7.8 billion.

Finance: draft 13-week cash view by Friday.

Essential Utilities, Inc. (WTRG) - Canvas Business Model: Value Propositions

You're looking at the core promises Essential Utilities, Inc. (WTRG) makes to its customers and stakeholders as of late 2025. These aren't just mission statements; they are backed by concrete, multi-year financial commitments and measurable environmental goals.

Safe, clean, and reliable delivery of essential water, wastewater, and natural gas services

The fundamental value is uninterrupted, high-quality service delivery across its Aqua and Peoples brands. Reliability is quantified through compliance metrics and infrastructure investment aimed at system resilience.

• Consistently outperforming United States water quality standards, achieving 99.8% of days in drinking water compliance in 2024.
• Regulated water segment rate base is projected to grow at a compounded annual growth rate of approximately 6% through 2029.
• Regulated natural gas segment rate base is projected to grow at a compounded annual growth rate of approximately 11% through 2029.
• The combined regulated utility rate base is expected to grow at a compounded annual growth rate of over 8% through 2029.

Infrastructure modernization via $7.8 billion planned CapEx through 2029

Essential Utilities is executing a massive capital improvement program to replace aging systems and enhance capacity. This spending is directly tied to future rate base growth and regulatory recovery.

Environmental stewardship, targeting a 60% reduction in GHG emissions by 2035

The company has a science-based commitment to reduce its carbon footprint, primarily through pipeline replacement and renewable energy procurement. They are already showing measurable progress against the baseline.

• Target: 60% reduction in Scope 1 and 2 greenhouse gas emissions by 2035, versus a 2019 baseline.
• Emissions reduced by 25% by the end of 2022 compared to the 2019 baseline.
• The 2019 baseline Scope 1 and 2 emissions were 670,923 metric tons of CO2e (recalculated baseline is 583,408 metric tons of CO2e).
• Water and wastewater operations shifted to nearly 100% renewable electricity procurement in Pennsylvania, New Jersey, Ohio, and Illinois.

Compliance leadership, including proactive PFAS remediation and lead service line replacement

Essential Utilities is investing heavily to meet evolving federal standards, particularly for PFAS and lead service lines, which is a key driver for their capital spending and regulatory filings.

• Planned capital spend through 2029 includes addressing PFAS with at least $450 million in associated projects.
• In 2024, the company invested $27 million for PFAS mitigation and $23 million for lead service line remediation.
• In 2024, replaced over 1,600 lead and galvanized water service lines.
• In 2024, invested $4 million in Chester County, Pennsylvania, to replace 450 customer-owned lead service lines at no direct cost to homeowners.
• Proactively tested for PFAS in drinking water since 2017.

Stable, regulated service pricing approved by state Public Utility Commissions

The regulated nature of the business provides stability, as cost recovery for infrastructure investments is sought through rate cases approved by state commissions. This links CapEx directly to revenue growth.

As of mid-2025, rate activity shows the mechanism for cost recovery in action. For instance, in early 2025, the regulated water segment received rate awards and infrastructure surcharges of $92.6 million across Pennsylvania, Ohio, North Carolina, and New Jersey. The regulated natural gas segment received $8.2 million in surcharges in Kentucky. Furthermore, base rate cases were pending for an estimated $96.5 million in incremental annual water/wastewater revenues. This recovery mechanism supports the projected rate base growth figures.

Essential Utilities, Inc. (WTRG) - Canvas Business Model: Customer Relationships

You're looking at how Essential Utilities, Inc. (WTRG) interacts directly with the millions of people and businesses relying on their water, wastewater, and natural gas services. This relationship is heavily regulated, so the structure is built around compliance and service continuity.

Dedicated customer service centers for billing and outage reporting

Essential Utilities, operating as the Aqua and Peoples brands, serves approximately 5.5 million people across nine states as of late 2025. The Peoples subsidiary alone serves about 740,000 natural gas distribution customers in Pennsylvania and Kentucky. While specific call center volume metrics aren't public, the scale of the customer base necessitates dedicated centers for handling routine billing inquiries and critical outage reports across their regulated utility footprint.

Assisted-service model for customer assistance programs and payment plans

The company maintains programs to help customers manage essential service costs. For instance, Aqua Pennsylvania promotes its Customer Assistance Program (CAP), managed through the Dollar Energy Fund, to offer discounts on water and wastewater bills. The financial impact of these programs is visible in expense reporting; for example, a prior year adjustment related to the Pennsylvania water customer assistance program resulted in a $3.1 million unfavorability in the year-on-year comparison for Q3 2025 operating expenses. Separately, Q1 2025 saw an increase in customer assistance surcharge costs in the regulated natural gas segment amounting to $8.5 million, which was directly offset in revenues.

The company's focus on infrastructure investment, planned at $1.4 to $1.5 billion for 2025, underpins service reliability, which is a core component of the customer relationship. Since 2020, Essential Utilities has invested over $5.4 billion in infrastructure modernization.

Here's a quick look at some key operational and financial data points relevant to customer service and rate recovery:

Automated meter reading and billing systems for routine transactions

While specific deployment statistics for Automated Meter Reading (AMR) or Advanced Metering Infrastructure (AMI) are not detailed in recent earnings reports, the commitment to infrastructure investment, including improvements to information technology through 2029, implies ongoing modernization of routine transaction systems. These investments support the operational efficiency needed to manage the billing for millions of customers.

Regulatory-driven transparency and public communication on rate changes

Customer relationships are heavily influenced by regulatory outcomes, which Essential communicates through earnings results. The impact of rate increases is a key driver of financial performance. For example, Q3 2025 revenues were driven by increases in rates across both business segments. The company has several rate cases pending that will determine future customer bill impacts:

• Water/Wastewater base rate case pending in North Carolina for an estimated $45 million in incremental annual revenues.
• Natural gas base rate case pending in Kentucky for an estimated $10.9 million in incremental annual revenues.
• Q1 2025 results reflected a lower tax repair related credit to customers due to the PNG rate case.

The company reaffirms its long-term earnings per share guidance, which is a form of forward-looking commitment to stakeholders, projecting a 5% to 7% compounded annual growth rate through 2027.

Essential Utilities, Inc. (WTRG) - Canvas Business Model: Channels

The physical distribution network of Essential Utilities, Inc. (WTRG) is the backbone of its service delivery, spanning water mains, sewer lines, and natural gas pipelines across its operating states.

The Regulated Water segment holds over $14.8 billion in assets, which directly supports the delivery of potable water and wastewater collection/treatment services. For the natural gas segment, infrastructure assets totaled over $5.6 billion as of December 31, 2024. This physical network is subject to continuous capital deployment for modernization.

Online customer portals and mobile apps serve as the primary digital interface for billing and service requests, supporting the customer base that includes approximately 3 million people through its water business and over 740,000 gas distribution customers. The five-year capital plan, spanning 2025 through 2029, allocates funds for improving systems through improved information technology.

Essential Utilities, Inc. (WTRG) uses direct mail and email for regulatory notices and service updates to its customer base, which serves approximately 5.5 million people across nine states. This communication is critical given the company's commitment to environmental compliance, including over 300 associated projects dedicated to PFAS remediation planned between 2025 and 2029.

Field service teams execute maintenance, repairs, and meter installation, supported by a workforce that totaled 3,291 employees in 2024. The company's commitment to maintaining and expanding this physical channel is reflected in its capital spending.

• Capital investment planned for the 2025 fiscal year is between $1.4 billion and $1.5 billion.
• Investment through the first nine months of 2025 reached $983 million.
• Investment in the first quarter of 2025 was $270.5 million.
• Investment in the first half of 2025 totaled $613 million.

Essential Utilities, Inc. (WTRG) - Canvas Business Model: Customer Segments

You're looking at the core groups Essential Utilities, Inc. serves, which is a mix of regulated residential accounts and strategic growth targets through acquisition and development support.

The overall footprint of Essential Utilities, Inc. serves approximately 5.5 million people across nine states operating under the Aqua and Peoples brands as of late 2025.

Regulated Residential Customers (Aqua and Peoples Brands)

The regulated utility operations form the stable base of the business, providing water, wastewater, and natural gas services. The regulated water customer base (or equivalent dwelling units) is expected to grow at an average annual growth rate of between 2% and 3% from acquisitions and organic growth over the long term. The regulated natural gas customer base is expected to be stable for 2025.

Here's a breakdown of the customer base by brand and service area:

Aqua Pennsylvania alone provides water and wastewater service to approximately 1.5 million people in 33 counties throughout the Commonwealth of Pennsylvania.

Commercial and Industrial Customers Requiring High-Volume Utility Service

While the primary focus is regulated residential service, the utility segments also serve commercial and industrial users, particularly within the natural gas delivery network and through bulk water/wastewater agreements.

• The regulated natural gas segment serves industrial customers alongside residential users.
• The City of Beaver Falls wastewater system acquisition included providing bulk transmission and treatment service for approximately 3,800 Equivalent Dwelling Units (EDU) in seven nearby municipalities.

Municipalities Seeking to Sell Their Water/Wastewater Systems (Acquisition Targets)

A key growth driver for Essential Utilities, Inc. is the acquisition of smaller, often municipal, water and wastewater systems. This strategy is used to expand the rate base and customer footprint rapidly. The company has a significant pipeline of potential targets.

The pipeline of potential water and wastewater municipal acquisitions the company is actively pursuing represents approximately 400,000 total customers.

Here are the 2025 acquisition metrics as of late 2025:

• Year-to-date 2025 acquisitions served approximately 10,300 customers for a total investment of approximately $58 million.
• The company has four signed purchase agreements pending closing expected to serve over 200,000 customers or EDUs totaling approximately $301 million in purchase price.
• Since 2015, Essential has added more than 136,000 new customers or equivalent dwelling units through acquisitions.

The largest pending deal mentioned is the agreement to acquire the Delaware County Regional Water Quality Control Authority (DELCORA), a Pennsylvania sewer authority, which serves approximately 198,000 equivalent dwelling units for approximately $276.5 million. That's a big one. If onboarding takes 14+ days, churn risk rises.

Large-Scale Development Projects, Such as the New Data Center in Pennsylvania

Essential Utilities, Inc. is actively engaging with large-scale development projects, such as data centers, which require significant and reliable utility service. This represents a specific, high-profile customer segment opportunity.

The company announced a $26 million investment in a major data center located in Western Pennsylvania. To help finance this specific data center investment, the company expects to raise approximately $25 million in equity in 2025.

Finance: draft 13-week cash view by Friday.

Essential Utilities, Inc. (WTRG) - Canvas Business Model: Cost Structure

The cost structure for Essential Utilities, Inc. (WTRG) is heavily weighted toward capital-intensive infrastructure maintenance and growth, alongside standard utility operating costs. You see this reflected in the significant planned capital outlays necessary to maintain and expand regulated assets.

Capital expenditures for regulated infrastructure are a major driver. Essential Utilities planned to invest between $1.4 to $1.5 billion in infrastructure for 2025 alone. This commitment is part of a larger, multi-year plan, targeting approximately $7.8 billion in regulated infrastructure investments from 2025 through 2029.

For the first nine months of 2025, Operations and maintenance (O&M) expenses totaled $439.4 million, up from $423.8 million in the same period of 2024. This increase was driven by higher employee-related costs and production expenses across the segments.

Financing these assets requires debt, making interest expense a key component. As of mid-2025, specifically June 30, 2025, Essential Utilities reported that its weighted average cost of fixed-rate long-term debt was 4.03%. This cost, along with rising depreciation, partially offset revenue gains in the third quarter.

The regulated natural gas segment has costs tied directly to commodity prices. For the third quarter of 2025, the year-over-year increase in purchased gas costs, which represents the cost of the natural gas sold, was $3.4 million, attributed to higher commodity prices. This cost component is recovered through rates, but fluctuations impact near-term cash flows.

Finally, depreciation and amortization expenses reflect the growing asset base from continuous capital investment and acquisitions. While the specific 2025 year-to-date figure isn't explicitly listed in the required format, the full-year 2024 expense for Depreciation and Amortization was $363,906 thousand (or $363.9 million). You know this expense increased in 2025, partially offsetting earnings growth.

Here's a look at some of the key cost metrics we have for the 2025 period:

The cost structure is also influenced by specific segment expenses:

• Regulated Water Segment O&M (Q3 2025): $105.7 million
• Regulated Natural Gas Segment O&M (Q3 2025): $47.5 million
• Interest Expense Increase (Q3 2025 YoY): $82.3 million compared to $76.8 million in Q3 2024
• Equity Raised via ATM in 2025 (Year-to-Date as of Nov 2025): Approximately $300 million

The company is actively managing these costs while funding growth. Finance: draft 13-week cash view by Friday.

Essential Utilities, Inc. (WTRG) - Canvas Business Model: Revenue Streams

The revenue streams for Essential Utilities, Inc. (WTRG) are fundamentally derived from its two regulated utility segments: water/wastewater and natural gas distribution. The total Trailing Twelve Months (TTM) revenue ending Q3 2025 was approximately $2.38 billion.

The core service charges for the third quarter of 2025 are detailed below, showing the relative contribution of each regulated business:

Rate case outcomes and infrastructure recovery mechanisms are a critical component of the revenue recognition process for Essential Utilities, Inc. (WTRG).

• Revenue from regulatory rate increases and infrastructure surcharges for the regulated water segment received as of July 31, 2025, totaled $92.6 million.
• The regulated natural gas segment received rate awards and infrastructure surcharges of $8.2 million as of July 31, 2025.
• Rate increases and surcharges contributed approximately $34.2 million to the total Q3 2025 operating revenues.
• As of November 4, 2025, new water and gas rate approvals are expected to increase annual revenues by $96.5 million and $2.9 million, respectively.
• In total, the company secured $101.5 million in annualized revenue increases through completed rate cases and surcharges in 2025.

Growth is also fueled by strategic expansion through the acquisition of smaller utility systems. Revenue from these acquired systems contributes to the overall top line. Year to date in 2025, Essential Utilities, Inc. (WTRG) completed system acquisitions that served approximately 10,300 new customers. The total investment for these YTD 2025 acquisitions was approximately $58 million.