American Water's (AWK) Pennsylvania Arm Acquires Assets
American Water Works Company AWK announced that its unit Pennsylvania American Water has completed the acquisition of the water system assets of the Creekside Development in New Providence, Lancaster County. With nearly 85 homes currently being served, this acquisition aligns with American Water Works' growth strategy as the development is expected to expand to accommodate 285 homes. The move demonstrates the company's commitment to providing safe and reliable water services to communities across Pennsylvania.
The $151,572 purchase was approved by the Pennsylvania Public Utility Commission (PUC) on May 18, 2023. The PUC plays a vital role in regulating American Water Works' rates, rules and service standards. American Water’s unit offers multiple customer assistance programs, including the H2O Help to Others Program. Through this program, eligible water customers can receive grants of up to $500 per year, along with discounts on service fees and volumetric charges.
Fragmented Industry Creates Bottlenecks
A primary headwind in the U.S. water industry is that there are too many small operators with limited financial capabilities. Due to financial constraints, the essential upgrades are at times deferred, causing infrastructure failure, resulting in the wastage of precious potable water.
Per the American Society of Civil Engineers ("ASCE"), more than 50,000 community water systems and 16,000 community wastewater systems in the United States are currently providing water solutions to customers.
Per the ASCE findings, due to the delay in essential pipeline repairs and maintenance, 6 billion gallons of treated water is lost every day in the United States. Owing to many small operators in the industry and a lack of adequate funds, essential infrastructural upgrades and repairs get delayed at times.
It is evident that the consolidation of smaller operators under the large players will ensure proper maintenance and upgrade of water and wastewater infrastructure. American Water Works is quite active in acquiring small units in its service territories as well as expanding operations. As of Mar 31, 2023, the company completed five acquisitions in two states, which added 1,400 new customers.
Systematic Investment is Essential for Water Space
Per the U.S. Environmental Protection Agency, an estimated $744 billion in investment is necessary to maintain and expand drinking water and wastewater services to meet demand over the next 20 years. Water utilities are gradually consolidating and investing in essential upgrades to their aging assets.
AWK is making regular investments in maintaining its infrastructure. It aims to invest in the range of $14-$15 billion in the 2023-2027 period and $30-$34 billion for 10 years from 2023 to 2032.
Other water utilities like Essential Utilities WTRG, California Water Service Group CWT and Middlesex Water MSEX have well-chalked-out capital investment plans to strengthen their infrastructure.
Essential Utilities plans to invest $1.1 billion in 2023 and $3.3 billion through 2025 to improve water and natural gas systems and better serve customers using improved information technology. California Water Service plans to invest more than $725 million in capital expenditures through 2024. Middlesex Water plans to invest $266 million during 2023-2025 to strengthen its water and wastewater infrastructure and provide services to customers in a safe, reliable and efficient manner.
Price Performance
Over the past month, American Water Works’ stock gained 1.6% compared to no change for the industry.
Image Source: Zacks Investment Research
Zacks Rank
American Water Works currently has a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.
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American Water Works Company, Inc. (AWK) : Free Stock Analysis Report
California Water Service Group (CWT) : Free Stock Analysis Report
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Essential Utilities Inc. (WTRG) : Free Stock Analysis Report
