AWK Unit Completes Three Acquisitions

Zacks

American Water Works Company, Inc. (AWK) continues to follow steady inorganic growth strategy to expand its operations. The company’s subsidiary Pennsylvania American Water has acquired three water and wastewater systems - Clean Treatment Sewage Company, a private water system and the assets of the Franklin Township Municipal Sewer Authority. Pennsylvania American invested nearly $6.9 million for the acquisitions.

Pike County-based Clean Treatment Sewage Company engages in wastewater operations and serves nearly 1,000 people. Previously, the Pennsylvania Public Utility Commission ordered Pennsylvania American Water to buy this property for boosting Clean Treatment Sewage Company’s existing operations. Currently, the company will utilize its technical expertise to improve the damaged wastewater systems.

Pennsylvania American Water purchased a private water system in Delaware Township, Pike County, which serves approximately 300 residents.

Adams County-based Franklin Township Municipal Sewer Authority possesses waste water systems with a capacity to serve 800 residents, and approximately 24 commercial as well as municipal customers.

The acquisitions will enable Pennsylvania American Water to add approximately 2,100 customers. The company will provide wastewater collection and treatment services to the customers. The inclusion of the wastewater systems will help the company to reap benefits from its existing facilities in the county.

American Water Works continues to strengthen its footprint in the state of Pennsylvania. Year to date, Pennsylvania American Water alone completed six acquisitions. In Jun 2013, the company acquired a municipal wastewater system in Beaver County with a transaction value of $1.8 million.

In 2012, American Water Works generated approximately 21.7% of total revenues from Pennsylvania. We believe that this factor propels the company to invest more in the region to improve and expand its operations.

We note that American Water Works strongly follows inorganic growth program and expects to incur $0.8 billion to $1 billion per year under capital expenditure program, out of which a slice is set aside for strategic acquisitions. On Aug 16, 2013, the company’s subsidiary Iowa American Water acquired City of Dixon water system.

American Water Works’ continuous effort toward infrastructure addition and upgrade the existing assets will enable the company to provide uninterrupted water to its customers while strengthening system competence. These factors will subsequently improve reliability and public safety, while maintaining government water quality regulations.

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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