American Water Works Company, Inc. (AWK) has been on an acquisition spree and the latest include the purchase of Tri-States Utility, Inc. by its operating wing Missouri American Water. The Tri-States Utility serves customers in the south and southwest region of Branson, Mo.
American Water received regulatory approval from the Missouri Public Service Commission (MoPSC) regarding the takeover on Aug 21, 2013 and the purchase deal was subsequently closed on Aug 30.
The acquisition will expand the company’s customer base by roughly 3,500, thereby amplifying its presence in the state of Missouri. The company expects the current asset addition to boost its water service quality. Earlier, American Water had invested in the Branson area by acquiring assets of Aqua America Inc. (WTR) in 2011.
The Tri-States asset brings the overall acquisition count to eight for American Water this year. The company very recently purchased the City of Grafton water system in Illinois for $1.8 million, augmenting its customer base by 400.
The string of buyouts is a part of the company’s long-term growth-by-acquisition strategy. American Water has set aside a capital investment goal of $0.8 billion to $1.0 billion per year.
These initiatives indicate the company’s intention to gradually expand its operational footprint across the U.S. and capture a wide customer base, which will boost its sales potential.
We believe low-risk water utilities like American Water through asset consolidations will be able to keep themselves well positioned against more popular conventional utility operators.
In addition, its continued focus on rate-based investments in terms of upgrading age-old infrastructure will bode well for its future growth objectives. It is already progressing on the installation work of its newly acquired water system of the City of Dixon.
American Water Works currently has a Zacks Rank #3 (Hold). However, other water utilities that are worth considering include Zacks Ranked #1 (Strong Buy) Connecticut Water Service Inc. (CTWS) and Zacks Ranked #2 (Buy) Consolidated Water Co. Ltd. (CWCO).
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