66004--3/14/2007--MIDDLESEX_WATER

related topics

{condition, economic, financial}

{cost, contract, operation}

{cost, regulation, environmental}

{acquisition, growth, future}

{debt, indebtedness, cash}

{tax, income, asset}

{financial, litigation, operation}

{provision, law, control}

{personnel, key, retain}

{stock, price, share}

{capital, credit, financial}

Our revenue and earnings depend on the rates we charge our customers. We cannot raise utility rates in our regulated businesses without filing a petition with the appropriate governmental agency. If these agencies modify, delay, or deny our petition, our revenues will not increase and our earnings will decline unless we are able to reduce costs. We are subject to environmental laws and regulations, including water quality and wastewater effluent quality regulations, as well as other state and local regulations. Compliance with those laws and regulations requires us to incur costs and we are subject to fines or other sanctions for non-compliance. We are currently appealing a notice of violation and request for corrective action issued by the Delaware Fire Marshal regarding the alleged failure of one of the community water systems operated by Tidewater to meet Delaware fire protection requirements. If our appeal is unsuccessful, our operating results could be materially affected. We depend upon our ability to raise money in the capital markets to finance some of the costs of complying with laws and regulations, including environmental laws and regulations or to pay for some of the costs of improvements to or the expansion of our utility system assets. Our regulated utility companies cannot issue debt or equity securities without regulatory approval. Weather conditions and overuse of underground aquifers may interfere with our sources of water, demand for water services and our ability to supply water to customers. Our business is subject to seasonal fluctuations, which could affect demand for our water service and our revenues. Our water sources may become contaminated by naturally-occurring or man-made compounds and events. This may cause disruption in services and impose costs to restore the water to required levels of quality. We face competition from other water and wastewater utilities and service providers which might hinder our growth and reduce our profitability. We have a long-term contractual obligation for water and wastewater system operation and maintenance under which we may incur costs in excess of payments received. An important element of our growth strategy is the acquisition of water and wastewater assets, operations, contracts or companies. Any pending or future acquisitions we decide to undertake may involve risks. The current concentration of our business in central New Jersey and Delaware makes us susceptible to any adverse development in local regulatory, economic, demographic, competitive and weather conditions. The necessity for increased security has and may continue to result in increased operating costs. Our ability to achieve growth in Delaware is somewhat dependent on the residential building market in the territories we serve. If housing starts decline significantly, our rate of growth may not meet our expectations. We have restrictions on our dividends. There can also be no assurance that we will continue to pay dividends in the future or, if dividends are paid, that they will be in amounts similar to past dividends. If we are unable to pay the principal and interest on our indebtedness as it comes due or we default under certain other provisions of our loan documents, our indebtedness could be accelerated and our results of operations and financial condition could be adversely affected. We depend significantly on the services of the members of our senior management team, and the departure of any of those persons could cause our operating results to suffer. We are subject to anti-takeover measures that may be used by existing management to discourage, delay or prevent changes of control that might benefit non-management shareholders.

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66004--3/14/2007--MIDDLESEX_WATER_CO