AWK Acquires Another Water System

Zacks

American Water Works Company, Inc. (AWK) continues to follow steady acquisition route to expand its asset base. The company’s subsidiary Illinois American Water has acquired the City of Grafton water system. The company invested $1.8 million for the acquisition.

The City of Grafton water system is located near Alton in Southern Illinois. In Dec 2012, Illinois American Water and the City of Grafton entered into an agreement to acquire the city’s water system. Subsequently, the agreement was approved by the Illinois Commerce Commission.

Illinois American Water and the City of Grafton water system have a longstanding relationship. Previously, Illinois American Water supplied water on a sale-for-resale (wholesale) basis to the customers of the city.

For more than 135 years, Illinois American Water has supplied water to the customers in the Alton district, which was served by the City of Grafton water system.

The acquisitions will enable Illinois American Water to enrich its customer base with approximately 400 customers in the Alton District and serve a population of roughly 600 residents. Post acquisition, the company will directly provide water to the customers. The inclusion of the water systems will help the company to reap benefits from its existing facilities in the region.

We note that American Water Works is continuously acquiring new assets. The company expects to incur $0.8 billion to $1 billion per year under capital expenditure program, out of which a part is set aside for strategic acquisitions.

Last week, American Water Works’ another subsidiary Pennsylvania American Water bought three water and wastewater systems - Clean Treatment Sewage Company, a private water system and the assets of the Franklin Township Municipal Sewer Authority. The company spent nearly $6.9 million for these transactions.

American Water Works’ continuous effort towards addition of new infrastructure and improvement of the existing assets will enable the company to provide uninterrupted utility services to its customers while strengthening system capability. These factors will subsequently boost reliability and public safety, while maintaining government’s water quality standard.

American Water Works currently has a Zacks Rank # 3 (Hold). However, other water utilities that are worth considering include Connecticut Water Service Inc. (CTWS) with a Zacks Rank #1 (Strong Buy), and Consolidated Water Co. Ltd. (CWCO) and SJW Corp. (SJW), each with a Zacks Rank #2 (Buy).

Voorhees, N.J.-based American Water Works was founded in 1886. The company serves around 14 million people with water and water-related services.

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