SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
(Mark One)
[X]           QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                 For the quarterly period ended September 30, 1998

                                    OR
[ ]
            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                For the transition period from ________ to ________

                        Commission file number 1-11023
                              E'town CORPORATION
             (Exact name of registrant as specified in its charter)
       New Jersey                                         22-2596330
(State of incorporation)                    (I.R.S. Employer Identification No.)
    600 South Avenue
  Westfield, New Jersey                                     07090
(Address of principal executive offices)                  (Zip Code)

         Registrant's telephone number, including area code:    (908) 654-1234

 Title of each class                  Name of each exchange on which registered
Common Stock, without par value                 New York Stock Exchange

                        Commission file number 0-628
                         ELIZABETHTOWN WATER COMPANY
            (Exact name of registrant as specified in its charter)
   New Jersey                                              22-1683171
(State of incorporation)                    (I.R.S. Employer Identification No.)
  600 South Avenue
 Westfield, New Jersey                                      07090
(Address of principal executive offices)                  (Zip Code)

         Registrant's telephone number, including area code:     (908) 654-1234

Title of each class                   Name of each exchange on which registered
     None                                                 None    

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes __X__ No_____
  
Indicate the number of shares outstanding of each of the Registrant's classes of
Common Stock as of the latest practicable date
                                              Outstanding at
 Class of Common Stock:                       September 30, 1998
 E'town Corporation (without par value)            8,407,507
 Elizabethtown Water Company (without par value)*  1,974,902

 * All shares are owned by E'town Corporation

<PAGE>

                    E'TOWN CORPORATION AND SUBSIDIARIES
               ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY

                                  INDEX


-------------------------------------------------------------------------------

PART I - FINANCIAL INFORMATION                                       PAGE

Item 1. Financial Statements

 E'TOWN CORPORATION AND SUBSIDIARIES

    - Statements of Consolidated Income                                1
    - Consolidated Balance Sheets                                     2-3
    - Statements of Consolidated Capitalization                        4
    - Statements of Consolidated Shareholders' Equity                  5
    - Statements of Consolidated Cash Flows                            6

 ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY

    - Statements of Consolidated Income                                7
    - Consolidated Balance Sheets                                     8-9
    - Statements of Consolidated Capitalization                        10
    - Statements of Consolidated Shareholder's Equity                  11
    - Statements of Consolidated Cash Flows                            12

  E'TOWN CORPORATION AND SUBSIDIARIES AND
  ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY

    - Notes to Consolidated Financial Statements                       13

      Item 2. Management's Discussion and Analysis of Consolidated
              Financial Condition and Results of Operations            18

PART II - OTHER INFORMATION                                            24

      Items 1 - 5

      Item 6 (a) - Exhibits                                            24
             (b) - Reports on Form 8-K                                 24

      SIGNATURES                                                       25

<PAGE>
<TABLE>
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(In Thousands Except Per Share Amounts)
         (Unaudited)
<CAPTION>
                                          Three Months Ended  Nine Months Ended Twelve Months Ended
                                             September 30,      September 30,      September 30,
                                             1998     1997     1998      1997     1998      1997
---------------------------------------------------------------------------------------------------
<S>                                         <C>      <C>     <C>       <C>      <C>       <C>

Operating Revenues                          $43,907  $38,643 $108,783  $101,227 $141,382  $130,439 
---------------------------------------------------------------------------------------------------
Operating Expenses:
  Operation                                  16,171   12,627   39,192    35,399   51,775    47,101
  Maintenance                                 1,647    1,521    4,881     4,744    6,743     6,222
  Depreciation                                3,204    3,118    9,537     9,175   12,758    11,972
  Revenue taxes                               4,887    4,794   12,815    12,637   16,728    16,233
  Real estate, payroll and other taxes          599      773    2,215     2,430    2,937     2,955
  Federal income taxes                        4,482    4,034    9,395     8,270   11,612     9,997
---------------------------------------------------------------------------------------------------
        Total operating expenses             30,990   26,867   78,035    72,655  102,553    94,480
---------------------------------------------------------------------------------------------------
Operating Income                             12,917   11,776   30,748    28,572   38,829    35,959
---------------------------------------------------------------------------------------------------
Other Income (Expense):
  Allowance for equity funds used during
    construction                                239       65      518       163      570       518
  Federal income taxes                         (191)     (44)    (427)     (176)    (659)     (398)
  Other - net                                   306       60      697       342    1,308       621
---------------------------------------------------------------------------------------------------
        Total other income (expense)            354       81      788       329    1,219       741
---------------------------------------------------------------------------------------------------
Total Operating and Other Income             13,271   11,857   31,536    28,901   40,048    36,700
---------------------------------------------------------------------------------------------------
Interest Charges:
  Interest on long-term debt                  4,049    3,861   12,082    10,896   15,993    14,342
  Other interest expense - net                  538      372    1,038     2,144    1,453     3,069
  Capitalized interest                         (181)    (131)    (397)     (371)    (464)     (778)
  Amortization of debt discount and expense-net 107       98      324       294      441       399
---------------------------------------------------------------------------------------------------
        Total interest charges                4,513    4,200   13,047    12,963   17,423    17,032
---------------------------------------------------------------------------------------------------
Income Before Preferred Stock Dividends
   of Subsidiary                              8,758    7,657   18,489    15,938   22,625    19,668
Preferred Stock Dividends                       203      203      609       609      813       813
---------------------------------------------------------------------------------------------------
Net Income                                  $ 8,555  $ 7,454 $ 17,880  $ 15,329 $ 21,812  $ 18,855
===================================================================================================

Earnings Per Share of Common Stock:
---------------------------------------------------------------------------------------------------
      Basic                                 $  1.02  $  0.94 $   2.18  $   1.95 $   2.68  $   2.41
      Diluted                               $  1.00  $  0.92 $   2.15  $   1.92 $   2.64  $   2.37
--------------------------------------------------------------------------------------------------

Average Number of Shares Outstanding for
   the Calculation of Earnings Per Share:
---------------------------------------------------------------------------------------------------
      Basic                                   8,381    7,945    8,201     7,854    8,151     7,831
      Diluted                                 8,690    8,267    8,508     8,195    8,458     8,161
---------------------------------------------------------------------------------------------------

Dividends Paid Per Common Share            $   0.51  $  0.51 $   1.53  $   1.53 $   2.04  $   2.04
===================================================================================================

</FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>

                                              -1-

<PAGE>
<TABLE>
E'TOWN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
       (In Thousands)
<CAPTION>
                                                         September 30,                December 31,
                                                             1998                          1997
Assets                                                    (Unaudited)
---------------------------------------------------------------------------------------------------

<S>                                                        <C>                           <C> 
Utility Plant-At Original Cost:
   Utility plant in service                                $  683,209                    $ 678,590
   Construction work in progress                               36,196                        9,336
---------------------------------------------------------------------------------------------------
         Total utility plant                                  719,405                      687,926
   Less accumulated depreciation and amortization             124,095                      114,587
---------------------------------------------------------------------------------------------------
         Utility plant-net                                    595,310                      573,339
---------------------------------------------------------------------------------------------------


Non-utility Property and Other
   Investments - Net                                           74,726                       20,016
---------------------------------------------------------------------------------------------------


Current Assets:
   Cash and cash equivalents                                    5,717                        6,233
   Short-term investments                                          39                           31
   Customer and other accounts receivable
    (less reserve: 1998, $670, 1997, $612)                     21,286                       17,539
   Unbilled revenues                                           16,705                       10,412
   Materials and supplies-at average cost                       2,708                        1,966
   Prepaid insurance, taxes, other                              1,900                        3,733
---------------------------------------------------------------------------------------------------
         Total current assets                                  48,355                       39,914
---------------------------------------------------------------------------------------------------


Deferred Charges:
   Waste residual management                                      573                          936
   Unamortized debt and preferred stock expenses                9,890                       10,263
   Taxes recoverable through future rates                      21,439                       21,439
   Postretirement benefit expense                               3,473                        3,738
   Other unamortized expenses                                   4,133                        1,259
---------------------------------------------------------------------------------------------------
         Total deferred charges                                39,508                       37,635
---------------------------------------------------------------------------------------------------
             Total                                         $  757,899                    $ 670,904
===================================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>




                                              -2-

<PAGE>
<TABLE>
E'TOWN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
      (In Thousands)                                                                   
<CAPTION>
                                                          September 30,                
                                                              1998                     December 31,
                                                           (Unaudited)                    1997
Capitalization and Liabilities
---------------------------------------------------------------------------------------------------

<S>                                                         <C>                          <C>
Capitalization (Notes 3 and 7):
      Common shareholders' equity                           $ 212,850                    $ 193,923
      Cumulative preferred stock                               12,000                       12,000
      Redeemable preferred stock                                  227
      Long-term debt - net                                    274,295                      247,298
---------------------------------------------------------------------------------------------------
            Total capitalization                              499,372                      453,221
---------------------------------------------------------------------------------------------------


Current Liabilities:
      Notes payable - banks (Note 5)                           40,694                       23,000
      Long-term debt - current portion (Note 7)                12,030                           30
      Accounts payable and other liabilities                   16,395                       11,569
      Customers' deposits                                         253                          272
      Municipal and state taxes accrued                        12,407                       16,817
      Federal income taxes accrued                              1,210
      Interest accrued                                          5,387                        3,456
      Preferred stock dividends accrued                            59                           59
---------------------------------------------------------------------------------------------------
            Total current liabilities                          88,435                       55,203
---------------------------------------------------------------------------------------------------


Deferred Credits:
      Customers' advances for construction                     42,099                       39,131
      Federal income taxes                                     72,098                       69,916
      State income taxes                                          196                          196
      Unamortized investment tax credits                        8,008                        8,042
      Accumulated postretirement benefits                       4,475                        4,332
---------------------------------------------------------------------------------------------------
            Total deferred credits                            126,876                      121,617
---------------------------------------------------------------------------------------------------


Contributions in Aid of Construction                           43,216                       40,863
---------------------------------------------------------------------------------------------------


Commitments and Contingent Liabilities
---------------------------------------------------------------------------------------------------
                Total                                       $ 757,899                    $ 670,904
===================================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>




                                              -3-


<PAGE>
<TABLE>
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CAPITALIZATION
   (In Thousands Except Share Amounts)
<CAPTION>
                                                          September 30,                December 31,
                                                              1998                        1997
                                                           (Unaudited)
---------------------------------------------------------------------------------------------------
<S>                                                         <C>                          <C>
Common Shareholders' Equity:
      E'town Corporation:
        Common stock without par value, authorized,
        15,000,000 shares, issued 1998, 8,440,061 
        shares; 1997, 8,054,461 shares                      $ 166,762                    $ 153,162
        Paid-in capital                                         1,397                        1,315
        Capital stock expense                                  (5,160)                      (5,160)
        Retained earnings                                      50,819                       45,560
        Less cost of treasury stock; 1998, 32,554 shares;
         1997, 32,208 shares                                     (968)                        (954)
---------------------------------------------------------------------------------------------------
            Total common shareholders' equity                 212,850                      193,923
---------------------------------------------------------------------------------------------------
Preferred Shareholders' Equity
      Elizabethtown Water Company:
        Cumulative Preferred Stock
          $100 par value, authorized, 200,000 shares; $5.90
          series, issued and outstanding, 120,000 shares       12,000                       12,000

       Cumulative Preferred Stock:
           $25 par value, authorized, 500,000 shares; none issued

       Applied Wastewater Management, Inc:
           Redeemable Preferred Stock (Note 7):
           No par value, non-cumulative, issued and
            outstanding, 227 shares                               227
---------------------------------------------------------------------------------------------------
 Long-Term Debt (Notes 4 and 7):
      E'town Corporation:
        6 3/4% Convertible Subordinated Debentures, due 2012   11,124                       11,354
        6.79% Senior Notes, due 2007                           12,000                        4,000

      Liberty Water Company, Inc:
        Contract Obligations Payable                           19,000

      Applied Wastewater Management, Inc:
        Notes Payable                                             216

      Elizabethtown Water Company:
          7.20% Debentures, due 2019                           10,000                       10,000
          7 1/2% Debentures, due 2020                          15,000                       15,000
          6.60% Debentures, due 2021                           10,500                       10,500
          6.70% Debentures, due 2021                           15,000                       15,000
          8 3/4% Debentures, due 2021                          27,500                       27,500
          8% Debentures, due 2022                              15,000                       15,000
          5.60% Debentures, due 2025                           40,000                       40,000
          7 1/4% Debentures, due 2028                          50,000                       50,000
          Variable Rate Debentures, due 2027                   50,000                       50,000

      The Mount Holly Water Company:
          Notes Payable (due serially through 2000)                38                           57
---------------------------------------------------------------------------------------------------
              Total long-term debt                            275,378                      248,411
          Unamortized discount-net                             (1,083)                      (1,113)
---------------------------------------------------------------------------------------------------
              Total long-term debt-net                        274,295                      247,298
---------------------------------------------------------------------------------------------------
                 Total Capitalization                       $ 499,372                    $ 453,221
===================================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
                                              -4-



<PAGE>
<TABLE>
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
   (In Thousands Except Share Amounts)                                                      YeareEndedhs Ended
<CAPTION>
                                                             September 30,                    December 31,
                                                                 1998                                   1997
                                                              (Unaudited)

---------------------------------------------------------------------------------------------------
<S>                                                         <C>                          <C>
Common Stock:
       Balance at Beginning of Period                       $ 153,162                    $ 145,661
       Common stock issued under Dividend Reinvestment
        and Stock Purchase Plan (1998, 167,849 shares;
        1997, 227,992 shares                                    6,003                        6,980
       Redemption of Convertible Debentures                       137
       Issuance of restricted stock under compensation programs
        (1998, 9,579 shares; 1997, 4,033 shares)                  333                          123
       Issuance of restricted stock for purchase of acquisitions
        (1998, 186,310 shares) (Note 7)                         6,654
       Exercise of stock options (1998, 17,815 shares;
         1997, 14,685 shares)                                     473                          398
---------------------------------------------------------------------------------------------------
       Balance at End of Period                               166,762                      153,162
---------------------------------------------------------------------------------------------------

Paid-in Capital:                                                1,397                        1,315
---------------------------------------------------------------------------------------------------

Capital Stock Expense:                                         (5,160)                      (5,160)
---------------------------------------------------------------------------------------------------

Retained Earnings:
       Balance at Beginning of Period                          45,560                       42,434
       Net Income                                              17,880                       19,260
       Dividends on common stock (1998, $1.53, 1997, $2.04)   (12,621)                     (16,134)
---------------------------------------------------------------------------------------------------
       Balance at End of Period                                50,819                       45,560
---------------------------------------------------------------------------------------------------

Treasury Stock:
       Balance at Beginning of Period                            (954)                        (737)
       Cost of shares redeemed to exercise stock
        options (1998, 346 shares; 1997, 6,332 shares)            (14)                        (217)
---------------------------------------------------------------------------------------------------
       Balance at End of Period                                  (968)                        (954)
---------------------------------------------------------------------------------------------------

          Total Common Shareholders' Equity                 $ 212,850                    $ 193,923
===================================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>




                                              -5-

<PAGE>
<TABLE>
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
          (In Thousands)                                                      
            (Unaudited)                                                       
<CAPTION>
                                                                                 Nine Months Ended
                                                                                   September 30, 
                                                                                   1998      1997
---------------------------------------------------------------------------------------------------
<S>                                                                             <C>       <C>
Cash Flows from Operating Activities:
   Net Income                                                                   $ 17,880  $ 15,329
   Adjustments to reconcile net income to net
     cash provided by operating activities:
       Depreciation                                                                9,537     9,175
       Increase in deferred charges                                               (2,486)   (1,007)
       Deferred income taxes and investment tax
         credits-net                                                               2,148     1,884
       Capitalized interest and AFUDC                                               (915)     (534)
       Other operating activities-net                                              1,665       473
   Change in current assets and current liabilities
      excluding cash, short-term investments and
      current portion of debt:
         Customer and other accounts receivable                                   (7,309)   (4,155)
         Unbilled revenues                                                          (349)   (2,739)
         Accounts payable and other liabilities                                    8,343    (3,987)
         Accrued/prepaid interest and taxes                                           85     2,362
         Other                                                                      (742)      104
---------------------------------------------------------------------------------------------------
         Net cash provided by operating activities                                27,857    16,905
---------------------------------------------------------------------------------------------------
Cash Flows Provided by Financing Activities:
    Proceeds from issuance of common stock                                         6,464     5,388
    Proceed from issuance of debentures                                                     50,000
    Debt and preferred stock issuance and
      amortization costs                                                             373      (700)
    Issuance of long-term debt                                                     8,000
    Repayment of long-term debt                                                     (708)     (213)
    Contributions and advances for construction-net                                  343     2,857
    Net increase (decrease) in notes payable - banks                              17,584   (41,000)
    Dividends paid on common stock                                               (12,621)  (12,053)
---------------------------------------------------------------------------------------------------
          Net cash provided by financing activities                               19,435     4,279
---------------------------------------------------------------------------------------------------
Cash Flows Used for Investing Activities:
    Utility plant and other capital expenditures (excluding
     allowance for funds used during construction)                               (29,643)  (15,825)
    Purchase of privatization contracts                                          (19,865)   (5,701)
    Proceeds from sale of land                                                     1,700       461
    Development costs of land (excluding
      capitalized interest)                                                                   (201)
---------------------------------------------------------------------------------------------------
         Cash used for investing activities                                      (47,808)  (21,266)
---------------------------------------------------------------------------------------------------
Net Decrease in Cash and
  Cash Equivalents                                                                  (516)      (82)
Cash and Cash Equivalents at
  Beginning of Period                                                              6,233     3,228
---------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period                                      $  5,717  $  3,146  
===================================================================================================
<FN>
Supplemental Disclosures of Cash
  Flow Information:
    Cash paid during the year for:
       Interest (net of amount capitalized)                                     $ 10,505  $ 11,639
       Income taxes                                                             $  5,250  $  2,825
       Preferred stock dividends                                                $    531  $    531
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
                                              -6-
<PAGE>
<TABLE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED INCOME
         (In Thousands)
           (Unaudited)
<CAPTION>
                                          Three Months Ended  Nine Months Ended  Twelve Months Ended
                                              September 30,     September 30,      September 30,
                                             1998     1997     1998      1997     1998      1997

---------------------------------------------------------------------------------------------------
<S>                                         <C>      <C>     <C>       <C>      <C>       <C>      
Operating Revenues                          $38,821  $37,815 $102,067  $100,161 $133,694  $129,324 
---------------------------------------------------------------------------------------------------
Operating Expenses:
  Operation                                  12,161   11,575   33,690    33,589   45,402    44,944
  Maintenance                                 1,446    1,498    4,305     4,721    6,132     6,199
  Depreciation                                3,158    3,046    9,474     9,103   12,604    11,900
  Revenue taxes                               4,872    4,794   12,800    12,637   16,713    16,233
  Real estate, payroll and other taxes          465      756    2,038     2,373    2,729     2,867
  Federal income taxes                        4,493    4,220    9,798     8,739   12,085    10,619
---------------------------------------------------------------------------------------------------
        Total operating expenses             26,595   25,889   72,105    71,162   95,665    92,762
---------------------------------------------------------------------------------------------------
Operating Income                             12,226   11,926   29,962    28,999   38,029    36,562
---------------------------------------------------------------------------------------------------
Other Income (Expense):
  Allowance for equity funds used during
    construction                                239       65      518       163      570       518
  Federal income taxes                         (140)     (33)    (308)     (134)    (422)     (281)
  Other - net                                   161       27      360       219      635       284
---------------------------------------------------------------------------------------------------
        Total other income (expense)            260       59      570       248      783       521
---------------------------------------------------------------------------------------------------
Total Operating and Other Income             12,486   11,985   30,532    29,247   38,812    37,083
---------------------------------------------------------------------------------------------------
Interest Charges:
  Interest on long-term debt                  3,651    3,671   10,988    10,318   14,700    13,570
  Other interest expense - net                  229      293      627     2,060      949     2,986
  Allowance for funds used during construction (181)     (50)    (397)     (127)    (436)     (452)
  Amortization of debt discount and expense-net  98       89      293       267      402       365
---------------------------------------------------------------------------------------------------
        Total interest charges                3,797    4,003   11,511    12,518   15,615    16,469
---------------------------------------------------------------------------------------------------
Income Before Preferred Stock Dividends       8,689    7,982   19,021    16,729   23,197    20,614
Preferred Stock Dividends                       203      203      609       609      813       813
---------------------------------------------------------------------------------------------------
Earnings Applicable To Common Stock         $ 8,486  $ 7,779 $ 18,412  $16,120  $ 22,384  $ 19,801
===================================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>



                                              -7-


<PAGE>
<TABLE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
        (In Thousands)
<CAPTION>
                                                            September 30,               December 31,
                                                                1998                       1997 
Assets                                                      (Unaudited)
---------------------------------------------------------------------------------------------------
<S>                                                         <C>                          <C>
Utility Plant-At Original Cost:
   Utility plant in service                                 $ 681,232                    $ 677,909
   Construction work in progress                               34,631                        9,300
---------------------------------------------------------------------------------------------------
         Total utility plant                                  715,863                      687,209
   Less accumulated depreciation and amortization             124,012                      114,424
---------------------------------------------------------------------------------------------------
         Utility plant-net                                    591,851                      572,785
---------------------------------------------------------------------------------------------------


Non-utility Property                                               80                           79
---------------------------------------------------------------------------------------------------


Current Assets:
   Cash and cash equivalents                                    3,560                        4,226
   Customer and other accounts receivable
    (less reserve: 1998, $670, 1997, $612)                     17,973                       17,283
   Unbilled revenues                                           12,313                        9,663
   Materials and supplies-at average cost                       2,708                        1,966
   Prepaid insurance, taxes, other                                983                        3,461
---------------------------------------------------------------------------------------------------
         Total current assets                                  37,537                       36,599
---------------------------------------------------------------------------------------------------


Deferred Charges:
   Waste residual management                                      573                          936
   Unamortized debt and preferred stock expenses                9,317                        9,656
   Taxes recoverable through future rates                      21,439                       21,439
   Postretirement benefit expense                               3,473                        3,738
   Other unamortized expenses                                   3,663                        1,086
---------------------------------------------------------------------------------------------------
         Total deferred charges                                38,465                       36,855
---------------------------------------------------------------------------------------------------
             Total                                          $ 667,933                    $ 646,318   
===================================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>




                                              -8-



<PAGE>
<TABLE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
        (In Thousands)
<CAPTION>
                                                            September 30,              December 31,
                                                                1998                       1997
                                                            (Unaudited)
Capitalization and Liabilities
---------------------------------------------------------------------------------------------------
<S>                                                         <C>                          <C>
Capitalization (Note 3):
      Common shareholder's equity                           $ 205,360                    $ 193,354
      Cumulative preferred stock                               12,000                       12,000
      Long-term debt - net                                    231,955                      231,944
---------------------------------------------------------------------------------------------------
            Total capitalization                              449,315                      437,298
---------------------------------------------------------------------------------------------------


Current Liabilities:
      Notes payable - banks                                    21,000                       18,000
      Long-term debt - current portion                             30                           30
      Accounts payable and other liabilities                   11,777                       10,626
      Customers' deposits                                         253                          272
      Municipal and state taxes accrued                        12,422                       16,817
      Federal income taxes accrued                                884
      Interest accrued                                          4,883                        3,120
      Preferred stock dividends accrued                            59                           59
---------------------------------------------------------------------------------------------------
            Total current liabilities                          51,308                       48,924
---------------------------------------------------------------------------------------------------


Deferred Credits:
      Customers' advances for construction                     41,741                       39,131
      Federal income taxes                                     69,994                       67,851
      Unamortized investment tax credits                        8,008                        8,042
      Accumulated postretirement benefits                       4,351                        4,209
---------------------------------------------------------------------------------------------------
            Total deferred credits                            124,094                      119,233
---------------------------------------------------------------------------------------------------


Contributions in Aid of Construction                           43,216                       40,863
---------------------------------------------------------------------------------------------------


Commitments and Contingent Liabilities
---------------------------------------------------------------------------------------------------
                Total                                       $ 667,933                    $ 646,318
===================================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>



                                              -9-



<PAGE>
<TABLE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED CAPITALIZATION
            (In Thousands)
<CAPTION>
                                                             September 30,              December 31,
                                                                 1998                       1997
                                                              (Unaudited)
---------------------------------------------------------------------------------------------------
<S>                                                          <C>                         <C>
 Common Shareholder's Equity:
        Common stock without par value, authorized,
          15,000,000 shares, issued 1998 and 1997,
          1,974,902 shares                                   $ 15,741                    $  15,741 
        Paid-in capital                                       130,776                      124,560
        Capital stock expense                                    (485)                        (485)
        Retained earnings                                      59,328                       53,538
---------------------------------------------------------------------------------------------------
            Total common shareholder's equity                 205,360                      193,354
---------------------------------------------------------------------------------------------------

 Preferred Shareholders' Equity:
     Cumulative Preferred Stock
        $100 par value, authorized, 200,000 shares; $5.90 series,
         issued and outstanding, 120,000 shares                12,000                       12,000

     Cumulative Preferred Stock:
        $25 par value, authorized, 500,000 shares; none issued
---------------------------------------------------------------------------------------------------

 Long-Term Debt:
     Elizabethtown Water Company:
          7.20% Debentures, due 2019                           10,000                       10,000
          7 1/2% Debentures, due 2020                          15,000                       15,000
          6.60% Debentures, due 2021                           10,500                       10,500
          6.70% Debentures, due 2021                           15,000                       15,000
          8 3/4% Debentures, due 2021                          27,500                       27,500
          8% Debentures, due 2022                              15,000                       15,000
          5.60% Debentures, due 2025                           40,000                       40,000
          7 1/4% Debentures, due 2028                          50,000                       50,000
         Variable Rate Debentures, due 2027                    50,000                       50,000

    The Mount Holly Water Company:
          Notes Payable (due serially through 2000)                38                           57
---------------------------------------------------------------------------------------------------
              Total long-term debt                            233,038                      233,057
          Unamortized discount-net                             (1,083)                      (1,113)
---------------------------------------------------------------------------------------------------
              Total long-term debt-net                        231,955                      231,944
---------------------------------------------------------------------------------------------------
                 Total Capitalization                        $449,315                    $ 437,298
===================================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>



                                             -10-


<PAGE>
<TABLE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
             (In Thousands)
<CAPTION>
                                                         Nine Months Ended                Year Ended    
                                                           September 30,                   December 31,
                                                               1998                          1997
                                                            (Unaudited)
---------------------------------------------------------------------------------------------------
<S>                                                          <C>                          <C>      
Common Stock:                                                $ 15,741                     $ 15,741 
---------------------------------------------------------------------------------------------------

Paid-in Capital:
       Balance at Beginning of Period                         124,560                      117,457
       Capital contributed by parent company                    6,216                        7,103
---------------------------------------------------------------------------------------------------
       Balance at End of Period                               130,776                      124,560
---------------------------------------------------------------------------------------------------

Capital Stock Expense:                                           (485)                        (485)
---------------------------------------------------------------------------------------------------

Retained Earnings:
       Balance at Beginning of Period                          53,538                       49,580
       Income before preferred stock dividends                 19,021                       20,905
       Dividends on common stock                              (12,621)                     (16,134)
       Dividends on preferred stock                              (610)                        (813)
---------------------------------------------------------------------------------------------------
       Balance at End of Period                                59,328                       53,538
---------------------------------------------------------------------------------------------------

          Total Common Shareholder's Equity                  $205,360                     $193,354
===================================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>


                                             -11-


<PAGE>
<TABLE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED CASH FLOWS
            (In Thousands)
<CAPTION>
                                                                               Nine Months Ended
                                                                                   September 30,
                                                                                  1998      1997
---------------------------------------------------------------------------------------------------
<S>                                                                             <C>       <C>
Cash Flows from Operating Activities:
   Income before preferred stock dividends                                      $ 19,021  $ 16,729
   Adjustments to reconcile net income to net
     cash provided by operating activities:
       Depreciation                                                                9,474     9,103
       Increase in deferred charges                                               (2,214)   (1,087)
       Deferred income taxes and investment tax
         credits-net                                                               2,109     1,890
       Allowance for funds used during construction                                 (915)     (290)
       Other operating activities-net                                                688       248
   Change in current assets and current liabilities
      excluding cash, short-term investments and
      current portion of debt:
         Customer and other accounts receivable                                     (690)   (2,511)
         Unbilled revenues                                                        (2,650)   (1,868)
         Accounts payable and other liabilities                                    5,762    (5,849)
         Accrued/prepaid interest and taxes                                          730     2,925
         Other                                                                      (742)      104
---------------------------------------------------------------------------------------------------
         Net cash provided by operating activities                                30,573    19,394
---------------------------------------------------------------------------------------------------

Cash Flows Used by Financing Activities:
    Capital contributed by parent company                                          5,884     1,323
    Proceed from issuance of debentures                                                     50,000
    Debt and preferred stock issuance and
      amortization costs                                                             339      (726)
    Repayment of long-term debt                                                      (19)      (19)
    Contributions and advances for construction-net                                  333     2,857
    Net decrease in notes payable - banks                                          3,000   (46,000)
    Dividends paid on common stock and preferred stock                           (13,151)  (12,584)
---------------------------------------------------------------------------------------------------
          Net cash used by financing activities                                   (3,614)   (5,149)
---------------------------------------------------------------------------------------------------

Cash Flows Used for Investing Activities:
    Utility plant expenditures (excluding allowance
     for funds used during construction)                                         (27,625)  (15,501)
---------------------------------------------------------------------------------------------------
         Cash used for investing activities                                      (27,625)  (15,501)
---------------------------------------------------------------------------------------------------
Net Decrease in Cash and
  Cash Equivalents                                                                  (666)   (1,256)
Cash and Cash Equivalents at
  Beginning of Period                                                              4,226     3,122
---------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period                                      $  3,560  $  1,866
===================================================================================================
<FN>
Supplemental Disclosures of Cash
  Flow Information:
    Cash paid during the year for:
       Interest (net of amount capitalized)                                     $  9,177 $  11,038
       Income taxes                                                             $  5,250 $   2,825
       Preferred stock dividends                                                $    531 $     531
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
                                             -12-



<PAGE>
                      E'TOWN CORPORATION AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   ORGANIZATION
     E'town Corporation (E'town or Corporation), a New Jersey holding company,
     is the parent company of Elizabethtown Water Company (Elizabethtown),
     E'town Properties, Inc. (Properties), Edison Water Company (Edison),
     Liberty Water Company, (Liberty), Applied Water Management, Inc. (AWM) and
     Applied Wastewater Management, Inc. (AWWM). The Mount Holly Water Company
     (Mount Holly) is a wholly owned subsidiary of Elizabethtown.

2.   INTERIM FINANCIAL STATEMENTS
     The financial statements reflect all adjustments which, in the opinion of
     management, are necessary for a fair presentation.  The Notes to
     Consolidated Financial Statements accompanying the 1997 Annual Report to
     Shareholders and the 1997 Form 10-K should be read in conjunction with
     this report.

     The preparation of financial statements in conformity with generally
     accepted accounting principles requires management to make estimates and
     assumptions that affect the reported amounts of assets and liabilities
     and disclosure of contingent assets and liabilities at the date of the
     financial statements and the reported amounts of revenues and expenses
     during the reporting period.

    New Accounting Pronouncements
    The Financial Accounting Standards Board (FASB) has issued Statement of
    Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments
    of an Enterprise and Related Information," which is effective for fiscal
    years beginning after December 15, 1997. The pronouncement requires
    disclosure of selected information about operating segments in interim
    financial reports. Based upon the immateriality of the Corporatio's
    business segments at the present time, no additional disclosures are
    currently required.

    In February 1998, the FASB issued SFAS No. 132 "Employers' Disclosures
    about Pensions and Other Postretirement Benefits," effective for fiscal
    years beginning after December 15, 1997. The pronouncement revises certain
    disclosure requirements for pension and other postretirement plans but
    does not change the measurement or recognition of expenses under those
    plans. The pronouncement standardizes the disclosure requirements for
    pensions and other postretirement benefit obligations to the extent
    practicable, requires additional information on changes in the benefit
    obligations and fair values of plan assets that will facilitate financial
    analysis, and eliminates disclosures that are no longer useful. E'town
    will adopt these new disclosure requirements for the year ended December
    31, 1998.

    In March 1998, the American Institute of Certified Public Accountants
    (AICPA) issued Statement of Position (SOP) 98-1, "Accounting for the Costs
    of Computer Software Developed or Obtained for Internal Use." The SOP is
    effective for fiscal years beginning after December 15, 1998 and
    establishes criteria for capitalizing certain internal use software costs.
    Adoption of the SOP will not have an effect on the Corporation's financial
    statements.

    In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
    Start-Up Activities" which is effective for fiscal years beginning after
    December 15, 1998 and provides guidance on the expensing of costs of
    start-up activities as these costs are incurred. E'town has elected to
    adopt this change in 1998 and has recognized start-up expenses of
    $.2 million in these financial statements.

                                   -13-                                     
<PAGE>

    In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
    Instruments and Hedging Activity". This Statement must be adopted by the
    for the quarter ended March 31, 2000. The Corporation does not believe
    this Statement will have a significant impact on its financial condition
    and results of operations.
 
3.  CAPITALIZATION
    E'town routinely makes equity contributions to Elizabethtown which
    represent a portion of the proceeds of common stock issued under E'town's
    Dividend Reinvestment and Stock Purchase Plan (DRP).  E'town contributed
    $6.0 million from the DRP proceeds to Elizabethtown for the nine months
    ended September 30, 1998. E'town also issued $6.7 million (186,310 shares)
    of common stock for the purchase of Applied Wastewater General Partnership
    (see Note 7).

4.  LONG-TERM DEBT
    In October 1998, E'town filed a registration statement on Form S-3 with
    the Securities and Exchange Commission to issue up to $75 million of
    unsecured medium-term notes. E'town plans to issue approximately $20
    million of these notes later in 1998 to repay short-term debt incurred to
    finance the acquisition of the contract to operate the water system of the
    City of Elizabeth. The contract is being administered by Liberty Water
    Company (see Note 7).

    On November 5, 1998 Mount Holly closed on a loan agreement that will make
    available up to $13.6 million proceeds from the issuance of unsecured
    notes through the New Jersey Environmental Infrastructure Trust Financing
    Program. This program provides financing through two loans. The first
    loan, in the amount of $7.3 million, is through the New Jersey
    Environmental Infrastructure Trust (Trust), which issued tax-exempt bonds
    with interest rates ranging from 4.25% to 4.63%. The second loan, in the
    amount of $6.0 million, is from the State of New Jersey, acting through the
    New Jersey Department of Environmental Protection. The State is
    participating in the Drinking Water State Revolving Fund authorized by the
    Safe Drinking Water Act amendments of 1996 whereby the federal government
    is funding the state loan at no interest cost. The effective interest rate
    for the combined notes is approximately 2.59%. The proceeds of the loans
    will finance the construction of the Mansfield Project.

    In December 1997, E'town signed an agreement to issue $12 million of 6.79%
    Senior Notes due December 15, 2007. E'town issued $4 million of these
    notes in December 1997, $6 million in January 1998 and $2 million in May
    1998. The proceeds were used to finance capital additions for Edison as
    well as to meet working capital needs. The Note Agreement requires the
    maintenance of a consolidated fixed charges coverage ratio of at least 1.5
    to 1 and a debt to total capitalization ratio not to exceed .65 to 1. As
    of September 30, 1998, the fixed charges coverage ratio was 2.8  to 1 and
    the debt to total capitalization ratio was .61 to 1, calculated in
    accordance with the Note Agreement.

5.  LINES OF CREDIT
    E'town has $105 million of uncommitted lines of credit with several banks,
    of which up to $40 million is available to Etown for use by the
    Corporation or its unregulated subsidiaries as of September 30, 1998.
    Elizabethtown has access to up to $90 million of the total. These lines,
    together with internal funds and proceeds of future issuances of debt and
    preferred stock by Elizabethtown and sales of common stock and issuances
    of short- and long-term debt by E'town, are expected to be sufficient to
    finance the Corporation's capital needs.

                                   -14-
<PAGE>

6.  EARNINGS PER SHARE
    Basic earnings per share are computed on the basis of the weighted average
    number of shares outstanding. Diluted earnings per share assume both the
    conversion of the 6 3/4% Convertible Subordinated Debentures and common
    stock equivalents, which assume that all stock options whose option price
    is lower than the current market value of the stock are exercised.
    Reference is made to Exhibit 11 for the computations of earnings per
    share.

7.  NON-UTILITY PROPERTY AND OTHER INVESTMENTS
    Included in Non-utililty Property and Other Investments at September 30,
    1998 is an investment of $1.33 million ($.30 million net of related
    deferred taxes) in a limited partnership that owns Solar Electric
    Generating System V (SEGS), located in California.

    Also included in Non-utility Property and Other Investments at September
    30, 1998 is $11.3 million of investments in various  parcels of
    undeveloped land in New Jersey. The carrying value of each parcel includes
    the original cost plus any real estate taxes, interest and, where
    applicable, direct costs capitalized while rezoning or governmental
    approvals were being sought. Such costs are capitalized until the property
    is offered for sale, after which time such costs are expensed. Based upon
    independent appraisals received at various times prior to 1997, the
    estimated net realizable value of each property exceeds its respective
    carrying value as of September 30, 1998. No information has come to the
    attention of management since these appraisals were last performed that
    would indicate the aggregate carrying value of these parcels has been
    impaired.

    One of the real estate parcels was sold in 1997 for $.4 million, resulting
    in a gain of less than $.1 million. Two other parcels were sold in 1998
    for $1.7 million resulting in minimal gains. Properties is proceeding with
    plans to sell the remaining properties and plans to invest the sale
    proceeds into water and wastewater utility investments that produce a
    current return. Properties has either entered into contracts for sale or
    has received letters of intent for all but one of its remaining parcels.

    In 1995, Properties entered into an agreement to sell a parcel of land to
    a developer. The parties intended that the transaction would close prior
    to December 31, 1996. The developer had been unable to obtain approval
    from the municipality for an appropriate number of buildable units. All of
    the material issues have now been resolved and a sale is expected to be
    consummated prior to the end of 1998.

    The Corporation will continue to monitor the relationship between the
    carrying and net realizable values of its properties, either through
    updated appraisals or letters of intent from prospective purchasers, or
    for its investment in SEGS, based upon information provided by SEGS
    management as well as through cash flow analyses.

    E'town has entered into a contract with the City of Elizabeth, New Jersey
    to operate its water system under a 40-year contract. E'town has formed a
    wholly owned subsidiary, Liberty Water Company (Liberty) to administer the
    contract. Under the contract Liberty made a payment to the City of
    Elizabeth of $19.6 million in June 1998 and will make additional
    installment payments of $12 million in June 1999 and $19 million in June
    2000. The full amount of the installment payment obligations have been
    recorded in the financial statements and the total of all the contract
    costs ($50.6 million) is being amortized as an operating cost, ratably,
    over the life of the contract, which became effective July 1998.

    Under the contract, Liberty is receiving all revenues generated as a
    result of operating the system and is incurring all operating expenses.
    Liberty will be responsible for replacing meters within the water system
    over a 40-year period at an estimated cost of $7 million. Other capital
    improvements will be the responsibility of the City of Elizabeth.
    Performance by Liberty of the contract provisions is guaranteed by E'town.

                                   -15-
<PAGE>

    Edison continues to receive all revenues generated as a result of
    operating the water system  of the Township of Edison, New Jersey under a
    contract signed in 1997. Edison expects to make expenditures of
    approximately $25 million during the 20-year life of the contract. These
    expenditures include capital improvements to the water system as well as
    contract payments to the Township of Edison. Of the total, approximately
    $14 million is expected to be expended in the first three years of the
    contract. An initial payment of $5.7 million was made upon the closing in
    June 1997.

    In 1995, the Corporation entered into a three-year joint venture agreement
    with Applied Wastewater Group (AWG) to form a New Jersey limited liability
    company, Applied Watershed Management, LLC. AWG was a unit of several
    privately held and affiliated companies providing design, engineering,
    construction and operating services for water and wastewater facilities.
    E'town exercised an option to purchase the operations of AWG to provide a
    full complement of water and wastewater services and consequently, closed
    on the transaction on June 12, 1998.  The adjusted purchase price was $6.7
    million (185,005 shares) for the three companies that now comprise AWM and
    $.1 million (1,305 shares) for AWWM, a regulated wastewater utility, in a
    stock-for-stock transaction accounted for as a purchase. Also included in
    Non-utility Property and Other Investments at September 30, 1998 is $5.5
    million of goodwill associated with the purchase of AWG. This goodwill is
    being amortized ratably over a 40-year period. Had the acquisition been
    consummated as of January 1, 1997, the pro-forma effect on earnings per
    share for the nine months ended September 30, 1998 and twelve months ended
    December 31, 1997 would be immaterial.

    A calculation of the net assets acquired as of June 12, 1998 is as
    follows (in thousands):

                Working capital                                  $1,006
                Goodwill                                          5,355
                Utility plant in service                            989
                Long-term notes receivable                          148
                Other property and investments                      533
                Long-term debt                                   (1,150)
                Preferred equity                                   (227)
                                                                 ------
                Net assets acquired                              $6,654 
                                                                 ======
8.  REGULATORY MATTERS
    Rates

    In December 1997, the BPU adopted an Order for rate increases for
    Elizabethtown and Mount Holly, effective January 1, 1998, for the full
    recovery of costs associated with SFAS No. 106 on an accrual basis less
    the costs associated with SFAS No. 106 expenses previously recovered in
    rates. The total increases in annual operating revenues resulting from
    these Orders are $.39 million for Elizabethtown and $.02 million for Mount
    Holly.

    On October 6, 1998, the BPU issued an Order adopting a Stipulation signed
    by the parties to Mount Holly's proceeding for a review of the prudence of
    constructing the Mansfield Project. The Stipulation indicated that the
    project provides the most cost-effective alternative available to Mount
    Holly customers for meeting the requirements for an alternative source of
    supply for the Mount Holly system. Effective in March 1998, Mount Holly
    began purchasing 1.0 million gallons per day from another water purveyor
    and will continue to purchase this water until the latter of January 1,
    2000 or the date the Mansfield Project is placed into service.
 
                                   -16-    
<PAGE>

    In September 1997, Mount Holly filed a petition with the BPU to establish
    a Purchased Water Adjustment Clause (PWAC) to reflect the cost of water
    purchased from the other purveyor under the agreement discussed above. On
    May 27, 1998 the BPU adopted a Stipulation signed by the parties to the
    PWAC case for an increase in annual revenues under Mount Holly's PWAC of
    $1.3 million or 38.9%. Mount Holly has deferred the increase in purchased
    water cost between March 19 and May 27 as Other Unamortized Expenses.
    Recovery of this amount will be addressed in the next PWAC petition
    expected in 1999. As of September 30, 1998, Mount Holly has deferred $.2
    million of these costs.
 
    In the fourth quarter of 1998, Mount Holly expects to file a petition with
    the BPU for a significant rate increase, which will reflect additional
    construction and financing costs, as well as increases in operating costs
    since rates were last established in January 1996. This rate case will
    also include the cost for a portion of the Mansfield Project that has now
    been placed in service in the third quarter of 1998. A decision is
    expected before the summer of 1999. Mount Holly expects to file an
    additional rate case next year for the remaining cost of the Mansfield
    Project to coincide with the completion of the project and the expiration
    of the agreement to purchase water from the other purveyor and the
    cancellation of the PWAC.

                                   -17-
<PAGE>


           MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS

E'town Corporation (E'town or Corporation), a New Jersey holding company, is
the parent company of Elizabethtown Water Company (Elizabethtown or Company),
E'town Properties, Inc. (Properties), Edison Water Company (Edison), Liberty
Water Company, (Liberty), Applied Water Management, Inc. (AWM) and Applied
Wastewater management, Inc. (AWWM). The Mount Holly Water Company (Mount
Holly) is a wholly owned subsidiary of Elizabethtown. The assets and
operating results of Elizabethtown constitute the predominant portions of
E'town's assets and operating results.

The following analysis sets forth significant events affecting the financial
condition of E'town and Elizabethtown at September 30, 1998, and the results
of operations for the three, nine and twelve months ended September 30, 1998.

LIQUIDITY AND CAPITAL RESOURCES

Capital Expenditures Program
Capital expenditures were $49.2 million for the first nine months of 1998. Of
this amount, $19.6 million was for the purchase of the City of Elizabeth
contract and $29.6 million was for water utility plant.

For the three years ending December 31, 2000, capital and investment
requirements for E'town are estimated to be $191.7 million, consisting of (i)
expenditures for water utility plant ($111.8 million for Elizabethtown and
$21.9 million for Mount Holly), and (ii) investments in non-regulated water
and wastewater operations including systems operated by E'town or its
subsidiaries under privatization contracts. The predominant portion of these
investments in non-regulated operations are expected to be $52.1 million for
Liberty, of which $19.6 million was expended through September 1998, and $4.7
million for Edison.

Elizabethtown
While Elizabethtown's projected capital outlays have dropped from recent
years now that the Canal Road Water Treatment Plant (Plant) is completed,
Elizabethtown's facilities will continue to be upgraded and expanded to
handle customer growth. Elizabethtown's three-year capital program includes
$62.0 million for routine projects (services, hydrants and main extensions
not funded by developers) and $50.7 million for transmission system upgrades,
a new operations center and other projects. Elizabethtown expects to file for
rate relief periodically to ensure that such costs are adequately reflected
in rates. (See Economic Outlook.)

Mount Holly
During the next three years, Mount Holly expects to spend $21.9 million,
primarily for an additional supply source (the Mansfield Project) to comply
with state regulations designed to prevent further depletion of a local
aquifer. On October 6, 1998, the BPU issued an Order adopting a Stipulation
signed by the parties to Mount Holl's proceeding for a review of the
prudence of constructing the Mansfield Project. The Stipulation indicated
that the project provides the most cost-effective alternative available to
Mount Holly customers for meeting the requirements for an alternative source
of supply for the Mount Holly system. The Stipulation also limits the amount
of a rate increase that may be received from the rate proceeding that will be
filed later in 1998 to $1.8 million. The Stipulation further limits the
amount of a rate increase for the initial phase of the Mansfield Project to
$.9 million, which reflects the estimated cost of the construction of the
initial phase and the related financing, operating and depreciation costs.
Effective in March 1998, Mount Holly began purchasing 1.0 million gallons per
day from another water purveyor and will continue to purchase this water for
a period to include the latter of January 1, 2000 or the date the Mansfield
Project is placed into service.

In September 1997, Mount Holly filed a petition with the BPU to establish a
Purchased Water Adjustment Clause (PWAC) to reflect the cost of water
purchased from the other purveyor under the agreement discussed above. On May
27, 1998 the BPU adopted a Stipulation signed by the parties to the PWAC case

                                   -18-
<PAGE>

for an increase in annual revenues under Mount Holly's PWAC of $1.3 million
or 38.9%. Mount Holly has deferred the increase in purchased water cost
between March 19 and May 27 as Other Unamortized Expenses. Recovery of this
amount will be addressed in the next PWAC petition expected in 1999. As of
September 30, 1998, Mount Holly has deferred $.2 million of these costs.
 
In the fourth quarter of 1998, Mount Holly expects to file a petition with
the BPU for a significant rate increase, which will reflect additional
construction and financing costs, as well as increases in operating costs
since rates were last established in January 1996. This rate case will also
include the cost for a portion of the Mansfield Project that has now been
placed in service in the third quarter of 1998. A decision is expected before
the summer of 1999. Mount Holly expects to file an additional rate case next
year for the remaining cost of the Mansfield Project to coincide with the
completion of the project and the expiration of the agreement to purchase
water from the other purveyor and the cancellation of the PWAC.

Capital Resources
For the three-year period ending December 31, 2000, E'town estimates that
approximately 42.2% of its currently projected consolidated capital
expenditures and investments will be financed with internally generated funds
(after payment of common stock dividends). The balance will be financed with
a combination of proceeds from the sale of E'town common stock, long-term
debt, medium-term unsecured notes, proceeds of tax-exempt New Jersey Economic
Development Authority (NJEDA) bonds, borrowings through the New Jersey
Environmental Infrastructure Trust and short-term borrowings. Additional
external financing will be required for any future acquisitions or
investments in the three-year period. The NJEDA has granted preliminary
approval for the financing of almost all of Elizabethtown's major projects
during the next three years and the Mansfield Project. In addition,
Elizabethtown expects to pursue future tax-exempt financing for future
projects to the extent that final allocations are granted by the NJEDA.

On November 5, 1998 Mount Holly closed on a loan agreement that will make
available up to $13.6 million proceeds from the issuance of unsecured notes
through the New Jersey Environmental Infrastructure Trust Financing Program.
This program provides financing through two loans. The first loan, in the
amount of $7.3 million, is through the New Jersey Environmental
Infrastructure Trust (Trust), which issued tax-exempt bonds with interest
rates ranging from 4.25% to 4.63%. The second loan, in the amount of $6.0
million, is from the State of New Jersey, acting through the New Jersey
Department of Environmental Protection. The State is participating in the
Drinking Water State Revolving Fund authorized by the Safe Drinking Water Act
amendments of 1996 whereby the federal government is funding the state loan
at no interest cost. The effective interest rate for the combined notes is
approximately 2.59%. The proceeds of the loans will finance the construction
of the Mansfield Project.

E'town has also filed a registration statement on Form S-3 with the
Securities and Exchange Commission to issue up to $75 million of  unsecured
medium-term notes. E'town plans to draw $20 million against these notes later
in 1998 to repay E'town's short-term debt, incurred to finance the
acquisition of the contract to operate the water system of the City of
Elizabeth. The contract is being administered by Liberty Water Company, as
discussed below.

E'town has entered into a contract with the City of Elizabeth, New Jersey to
operate its water system under a 40-year contract. E'town has formed  Liberty
Water Company  to administer the contract. Under the contract Liberty made a
payment to the City of $19.6 million on June 1, 1998 and will make additional
payments of $12 million on July 1, 1999 and $19 million on July 1, 2000.
Under the contract Liberty is receiving all revenues generated as a resulted
of operating the system and is incurring all operating expenses. Liberty will
be responsible for replacing meters within the water system over a 40-year
period at an estimated cost of $7 million. Other capital improvements will be
the responsibility of the City of Elizabeth. Performance by Liberty of the
contract provisions is guaranteed by E'town.

In 1995, the Corporation entered into a three-year joint venture agreement
with Applied Wastewater Group (AWG) to form a New Jersey limited liability
company, Applied Watershed Management, LLC. AWG was a unit of several
privately held and affiliated companies providing design, engineering,

                                   -19-
<PAGE>

construction and operating services for water and wastewater facilities.
E'town exercised an option to purchase the operations of AWG to provide a full
complement of water and wastewater services and consequently, closed on the
transaction on June 12, 1998.  The adjusted purchase price was $6.6 million
(185,005 shares) for the three companies that now comprise AWM and $.1
million (1,305 shares) for AWWM, a regulated wastewater utility, in a
stock-for-stock transaction accounted for as a purchase.

Year 2000
The Corporation has assessed its various automated information systems for
compliance with the Year 2000. The assessment consisted of an investigation
of the degree to which the Corporation's significant business systems, as
well as peripheral support systems, are year 2000 compliant. The assessment
concluded that all significant business systems i.e.. customer billing and
service, financial, water treatment operating and control, water quality
laboratory information and telemetric data acquisition systems are year 2000
compliant. Therefore, the Corporation expects no disruption in the quality of
services it provides to its customers or its ability to process financial
transactions and measure financial results due to the year 2000. The
assessment did identify certain peripheral support systems that do need to be
addressed in connection with the year 2000. An implementation plan to address
these issues has been developed and is being implemented. The cost to resolve
these issues is not expected to be material to the financial statements.

RESULTS OF OPERATIONS
 
Net Income for the three months ended September 30, 1998 was $8.6 million or
$1.02 per share as compared to $7.5 million or $.94 per share for the same
period in 1997. Net income for the nine months ended September 30, 1998 was
$17.9 million or $2.18 per share as compared to $15.3 million or $1.95 per
share for the same period in 1997. Net income for the twelve months ended
September 30, 1998 was $21.8 million or $2.68 per share as compared to $18.9
million or $2.41 per share for the same period in 1997. Net income increased
for the three, nine and twelve month periods primarily due to higher revenues
from additional water consumption by Elizabethtown customers during the third
quarter of 1998 in addition to the results of ongoing cost control efforts.
Net income for Mount Holly also increased as a result of additional water
consumption in the third quarter. We estimate the third quarter weather
conditions accounted for an increase in earnings per share of $.03 over the
same quarter last year. In addition, the operations of Liberty  and AWM
produced a positive contribution to net income for the third quarter.

Operating Revenues increased $5.3 million or 13.6%, $7.6 million or 7.5% and
$10.9 million or 8.4% for the three, nine  and twelve months ended September
30, 1998, respectively, compared to the same periods in 1997. The increases
for the three, nine and twelve month periods resulted primarily from revenues
of Liberty Water Company and Applied Water Management  which began operations
in July and June 1998, respectively. These new operations contributed $4.2
million, net of $1.3 million of, as part of E'town, intercompany sales, for
the quarter. Revenues in the third quarter were $.5 million higher due to the
hotter, drier weather conditions.

Operation Expenses increased $3.5 million or 28.1%, $3.8 million or 10.7% and
$4.7 million or 9.9% for the three, nine and twelve months ended September
30, 1998, respectively, compared to the same periods in 1997. The increases
for the three, nine and twelve month periods are primarily due to the
inclusion of the financial results of Liberty Water Company and Applied Water
Management in E'town's consolidated financial results and, on a twelve
month-to-date basis, reflect a full year's expenses for Edison Water Company
which began operation in July 1997. All other E'town companies combined
experienced only moderate increases in operation expenses of 1% or less for
the three, nine and twelve month periods due to ongoing cost control efforts.

Maintenance Expenses increased $.1 million or 8.3%, $.1 million or 2.9% and
$.5 million or 8.4% for the three, nine and twelve months ended September 30,
1998, respectively over the comparable periods in 1997. These increases are
due to the operations of Liberty and Edison Water Companies. Elizabethtown
Water Company experienced decreases in maintenance expenses for the three,
nine and twelve month periods due to continued cost control efforts as well
as mild weather in the winter of 1998.

                                   -20-
<PAGE>

Depreciation Expense increased $.1 million or 2.8%, $.4 million or 3.9% and
$.8 million or 6.6% for the three, nine and twelve months ended September 30,
1998, respectively, over the comparable 1997 amounts. The increases were due
primarily to a higher level of depreciable plant in service.

Revenue Taxes increased $.1 million or 1.9%, $.2 million or 1.4% and $.5
million or 3.0% for the three, nine and twelve month periods ended September
30, 1998, respectively, compared to the same periods in 1997 due to the
increases in operating revenues discussed above, upon which these taxes are
calculated.

Real Estate, Payroll and Other Taxes Expenses decreased $.2 million or 22.5%,
$.2 million or 8.8% and less than $.1 million or .6% for the three, nine and
twelve month periods, respectively. These decreases are due primarily to a
final assessment in September 1998 for property taxes on the Canal Road Water
Treatment Plant. The estimated increased assessment had been accrued since
October 1998, the date the Plant went into service, and the final result was
less than anticipated.

Federal Income Taxes as a component of operating expenses increased $.5
million or 11.7%, $1.1 million or 13.9% and $1.6 million or 16.4% for the
three, nine and twelve months ended September 30, 1998, respectively, over
the comparable 1997 amounts due to the changes in the components of taxable
income discussed herein.

Other Income (Expense) increased $.3 million or 364.2%, $.5 million or 146.2%
and $.5 million or 67.5% for the three, nine and twelve month periods ended
September 30, 1998, respectively, compared to the same periods in 1997. These
increases are due primarily to an increase in AFUDC in connection with
Elizabethtown Water Company's ongoing capital program. In addition, E'town
Corporation sold a real estate parcel in the third quarter that produced a
gain of $.1 million. These increases were offset by the increases in
associated federal income taxes.

Total Interest Charges increased $.3 million or 7.5%, $.1 million or .6% and
$.4 million or 2.3% for the three, nine and twelve month periods ended
September 30, 1998, respectively, compared to the same periods in 1997. These
increases are due to additional financing costs associated with the
operations of Liberty and Edison Water Companies as well as Elizabethtown
Water Company's ongoing capital program.

ECONOMIC OUTLOOK

Forward Looking Information
Information in this report includes certain forward looking statements within
the meaning of the Federal securities laws. Any forward looking statements
are based upon information currently available and are subject to future
events, risks and uncertainties that could cause actual results to differ
materially from those expressed in the statements. Such events, risks and
uncertainties include, without limitation, actions of regulators, the effects
of weather on water consumption, changes in historical patterns of water
consumption and demand, including changes through increased use of
water-conserving devices, conditions in capital and real estate markets,
increases in operating expenses due to factors beyond the Corporation's
control, changes in environmental regulation and associated costs of
compliance and additional investments or acquisitions which may be made by
the Corporation.

E'town Corporation and Subsidiaries
Consolidated earnings for E'town for the next several years will be
determined by related but different strategies for the regulated and
non-regulated businesses. For Elizabethtown and Mount Holly, management will
continue to focus on expansion efforts to increase sales, as well as on
controlling costs through productivity improvements so that realized returns
remain comparable to authorized levels. For the non-regulated businesses,
management seeks to invest in water and wastewater assets (including
municipal privatization contracts and wastewater assets as a result of the
AWG acquisition) which produce a current return. Capital to finance
investments in both the regulated and non-regulated businesses will be raised
from external sources, from the sale of real estate parcels owned by
Properties and from internal cash generation.

                                   -21-
<PAGE>

E'town expects earnings from the regulated operations to exceed those of 1997
due to hot, dry weather in July and August of 1998 and cost control efforts.
Also, consistent with E'town's strategy to sell its real estate properties
(discussed below) management expects to realize a gain from a property sale
later in 1998.  Based upon these factors, management currently expects
earnings per share to exceed those reported for 1997.

Elizabethtown and Subsidiary - Regulated Utilities
Elizabethtown's authorized rate of return on common equity is currently
11.25%. In 1997, Elizabethtown achieved an actual return on common equity of
11.0%. Mount Holly earned a rate of return on common equity of 2.8% in 1997,
compared to an authorized rate of return of 11.25% established in its most
recent rate proceeding. Mount Holly contributed $.02 to E'town's consolidated
earnings per share in 1997. Management expects Mount Holly to increase its
contribution to E'town's earnings per share beginning later in 1999 upon
receipt of additional rate relief so that Mount Holly can realize rates of
return comparable to authorized levels.

E'town and Unregulated Subsidiaries
The activities of E'town, Properties, Edison Water Company, Liberty Water
Company and Applied Water Management are not regulated by the BPU.

The contracts for the operation of the water systems of the Township of
Edison, New Jersey and the City of Elizabeth, New Jersey as well as E'town's
investment in Applied Water Management are expected to yield marginal
contributions to earnings per share in the first several years of these
operations.

Properties
Included in Non-utility Property and Other Investments at September 30, 1998
is $11.3 million of investments in various  parcels of undeveloped land in
New Jersey. Properties is proceeding with plans to sell such properties, and
E'town plans to invest the sale proceeds into water and wastewater utility
investments that produce a current return.

Properties had previously entered into a contract to sell another parcel to a
developer. The parties expected that the contract would close in 1996, but
the developer was unable to obtain the required municipal approvals. The
contract has been extended and all the material issues appear to have been
resolved.  Properties expects to close on this parcel later in 1998. If
consummated, this sale would result in a gain.
Properties closed on two parcels during the third quarter of 1998. These
sales produced only a minimal gain. Properties has either entered into
contracts for sale or has received letters of intent for all but one of its
remaining parcels.

The carrying value of each parcel includes the original cost plus any real
estate taxes, interest and, where applicable, direct costs capitalized while
rezoning or governmental approvals are or were being sought. Such costs are
capitalized until the property is offered for sale, after which time such
costs are expensed. Based on independent appraisals received at various times
prior to 1997, the estimated net realizable value of each property exceeds
its respective carrying value as of September 30, 1998.

Included in Non-utililty Property and Other Investments at September 30, 1998
is an investment of $1.33 million ($.30 million net of related deferred
taxes) in a limited partnership that owns Solar Electric Generating System V
(SEGS), located in California.

The Corporation will continue to monitor the relationship between the
carrying and net realizable values of its properties, either through updated
appraisals or letters of intent from prospective purchasers, or for its
investment in SEGS, based upon information provided by SEGS management as
well as through cash flow analyses.

                                   -22-

<PAGE>

New Accounting Pronouncements
The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of
an Enterprise and Related Information," which is effective for fiscal years
beginning after December 15, 1997. The pronouncement requires disclosure of
selected information about operating segments in interim financial reports.
Based upon the immateriality of the Corporation's business segments at the
present time, no additional disclosures are currently required.

In February 1998, the FASB issued SFAS No. 132 "Employers' Disclosures about
Pensions and Other Postretirement Benefits," effective for fiscal years
beginning after December 15, 1997. The pronouncement revises certain
disclosure requirements for pension and other postretirement plans but does
not change the measurement or recognition of expenses under those plans. The
pronouncement standardizes the disclosure requirements for pensions and other
postretirement benefit obligations to the extent practicable, requires
additional information on changes in the benefit obligations and fair values
of plan assets that will facilitate financial analysis, and eliminates
disclosures that are no longer useful.

In March 1998, the American Institute of Certified Public Accountants (AICPA)
issued Statement of Position (SOP) 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." The SOP is
effective for fiscal years beginning after December 15, 1998 and establishes
criteria for capitalizing certain internal use software costs. Adoption of
the SOP will not have an effect on the Corporation's financial statements.

In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of Start-Up
Activities" which is effective for fiscal years beginning after December 15,
1998 and provides guidance on the expensing of costs of start-up activities
as these costs are incurred. E'town has elected to adopt this change in 1998
and has recognized start-up expenses of $.2 million in these financial
statements.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activity". This Statement must be adopted by the for
the quarter ended March 31, 2000. The Corporation does not believe this
Statement will have a significant impact on its financial condition and
results of operations.


                                   -23-
<PAGE>


PART II - OTHER INFORMATION

Items 1 - 5:

      Nothing to Report.

Item 6(a) - Exhibits

   Exhibits to Part I:

      Exhibit 10(m) -  Contract with the City of Elizabeth, New Jersey
                       for the Operation by E'town Corporation of the
                       City's Water System
 
      Exhibit 10(n) -  Employment Agreement between Applied Water Management,
                       Inc. and Edward A. Clerico
 
      Exhibit 11  -    E'town Corporation and Subsidiaries - Statement Regarding
                       Computation of Per Share Earnings

      Exhibit 12  -    Elizabethtown Water Company - Computation of Ratio of
                       Earnings to Fixed Charges and Preferred Dividends and
                       Computation of Ratio of Earnings to Fixed Charges

      Exhibit 27  -    E'town Corporation and Subsidiaries and Elizabethtown
                       Water Company and Subsidiary - Financial Data Schedules

Item 6(b) - Reports on Form 8-K


                None


                                   -24-
<PAGE>


 
                            E'TOWN CORPORATION
                       ELIZABETHTOWN WATER COMPANY

                               SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


Date: November 13, 1998

                                    E'TOWN CORPORATION
                                    ELIZABETHTOWN WATER COMPANY

 
 
                                    /s/ Gail P. Brady
                                    ________________________________
                                    Gail P. Brady
                                    Treasurer

 
                                    /s/ Dennis W. Doll
                                    ________________________________
                                    Dennis W. Doll
                                    Controller


                                   

               








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