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Hingham study lowers water system’s value

A new assessment has clarified the outlines of the impending court fight over Hingham’s effort to buy the local water distribution system from Aquarion Water Co.

According to a study by Duff & Phelps Corp., an independent appraisal firm hired by Hingham, the value of the company’s water infrastructure in Hingham, Hull, and Cohasset is about $58.6 million — less than one-third the value put forward by Aquarion two years ago.

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The new figure, submitted last week into evidence in the Suffolk Superior Court’s Business Litigation Session, could be a key factor in the town’s decision whether to pursue the purchase if it holds up.

Aquarion has not submitted its official assessment to the court, and John Walsh, the privately held company’s vice president of operations, said in an interview that it has until mid-August to supply the figure.

Under the state’s 1879 charter of the water system that is now owned by Aquarion, Hingham has the right to buy the system at any time, with the price based on a formula. The two sides are far apart on the formula’s results.

Hingham last year asked the state’s Supreme Judicial Court to determine the sale price of Aquarion’s water system. The case was referred to Suffolk Superior Court in October, and a trial is expected to begin this fall. In court, the valuation reports will serve as evidence and the consultants as witnesses, and at the end of the trial, the judge will decide what the company should cost.

Hingham officials have said they want to buy the infrastructure and provide water to residents of the three communities, in response to steep rate increases and poor service from Aquarion.

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But the Connecticut-based company, which operates the public water supply for communities in Connecticut, Massachusetts, and New Hampshire, disputes those complaints.

Walsh said Aquarion has raised Hingham’s rates by only 1.8 percent a year since acquiring the infrastructure in 2002, compared with the state average of 5.2 percent.

He also said that local ratepayers’ bills might seem high because the company is still paying off $36 million in capital improvements to a water-treatment plant carried out by its predecessor in 1996.

If Hingham decides to pursue the purchase, Aquarion’s own valuation would make it much more difficult. The 2012 assessment by Aquarion’s consultant, Willamette Management Associates, put the value at $184.5 million, Walsh said.

Hingham Town Manager Ted Alexiades called the company’s assessment “rather steep,” and said the town’s ceiling for purchasing the water system would be around $75 million.

According to Alexiades, Duff & Phelps noted in its report that when Aquarion was acquired by its current parent company, Macquarie Bank, in 2007, the water infrastructure serving Hingham, Hull, and Cohasset had an investment equity of about $19.5 million.

“So you buy an investment for less than $20 million in 2007,’’ he said, “and seven years later it’s worth $184 million? In America, we like success stories; we like people who work hard and take something small and make it big. But that’s not what this is. This is a public monopoly.”

Alexiades said if Hingham operated the service, residents would save between $55 million and $80 million over 20 years, based on the town’s better borrowing rate and not having to provide a return to shareholders.

Jaclyn Reiss can be reached at jaclyn.reiss@globe.com.

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