A Positive Outlook on Regulated Water Utilities: A Wall Street Transcript Interview with Timothy Winter, Vice President at Gabelli & Company, Inc.

Wall Street Transcript

67 WALL STREET, New York - August 26, 2013 - The Wall Street Transcript has just published its Water Services Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs and Equity Analysts. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Water Infrastructure Development - Irrigation and Metering Technology - Water Industry Consolidation - Regulatory Headwinds for U.S. Utilities

Companies include: American States Water Company (AWR), Aqua America Inc. (WTR), American Water Works Company, (AWK), California Water Service Group (CWT) and many more.

In the following excerpt from the Water Services Report, an expert analyst discusses the outlook for the sector for investors:

TWST: Are the water utilities doing pretty well, overall?

Mr. Winter: Yes. There are only nine or 10 publicly traded water companies, and the group is up an average of 21% year-to-date price change. The median is 18%. American States Water (AWR) out of Southern California is up 33%; Aqua America (WTR), located in the suburbs of Philadelphia, up 35%.

TWST: Why are they doing so well?

Mr. Winter: The market is up, and utility stocks in general have been up. Water utilities offer a somewhat unique total-return potential. They provide dividend income, which is attractive. They are extremely low-risk; you can see that with their balance sheets and credit ratings.

Most of the publicly traded water utilities have Standard & Poor's credit ratings that are A or higher. That is higher than the gas and electric industry, so there's lower risk with water than other utilities.

The earnings growth model is somewhat similar to the regulated electric and gas utilities in that they invest in the business, they can earn a return on that investment. Return on equity is generally 9.5% to 10%, which is very good, relative 2.5% 10-year treasury yields and their own cost of capital.

As such, investing in rate base grows earnings. They also can grow earnings by acquiring smaller systems and creating economies of scale and cost savings. There are over 50,000 water systems that serve customer bases of 3,000 or under. Finally, they can enter arrangement to run the municipal systems, which represent about 80% of the U.S., large industrial customers...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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