American Water Works AWK recently announced that its unit, Illinois American Water, will invest $4 million to replace 8,000 feet of old water main throughout the Streator water system. The upgrade will ensure better water flow for consumers.
Proper maintenance and upgrade of the aging water mains are essential to ensure water quality and system pressures as well as increase system resiliency. Pipeline rehabilitation work will increase water pressure in the pipelines to effectively serve customers' needs and help firefighters control emergency situations.
Pipeline Breaks Causing Wastage
The aging of pipelines results in frequent pipeline breaks, which is a concern for the U.S. water and wastewater industry. Timely repair and replacement of the aging pipelines can stop the wastage of valuable potable water.
Per the findings of the American Society of Civil Engineers (“ASCE”), water main breaks occur every two minutes in the United States due to the aging of the existing water infrastructure. Per the ASCE finding, a delay in essential pipeline repairs and maintenance results in the loss of 2.1 trillion gallons of treated water every year in the United States.
Systematic Investment Need of the Hour
Per the U.S. Environmental Protection Agency, an investment of $473 billion is necessary to maintain and expand drinking water pipelines and $271 billion for wastewater pipelines to meet demand over the next 20 years. Frequent pipeline breaks result in the wastage of potable water and increase the risk of contamination. Hence, it is quite essential to make systematic investments in the repair and maintenance of the old infrastructure.
Huge investment is required to upgrade the quality of water and wastewater infrastructure, and water utilities are making systematic investments to replace and upgrade the same.
American Water plans to invest in the $13-$14 billion range during 2022-2026 and around $28-$32 billion between 2022 and 2031 to upgrade as well as strengthen the existing water and wastewater infrastructure. Water utilities like California Water Service Group CWT, Essential Utilities WTRG and Middlesex Water MSEX have well-chalked-out capital investment plans to strengthen their infrastructure.
California Water Service has a more than $1 billion capital expenditure planned for the 2022-2024 time period. The current dividend yield of California Water Service is nearly 2%.
Essential Utilities aims at investing $3 billion through 2024 to strengthen water and natural gas operations. The Zacks Consensus Estimate for WTRG’s 2022 earnings indicates year-over-year growth of 7.2%. The long-term (three to five years) earnings growth of WTRG is currently pegged at 6.1%.
Middlesex Water plans to invest $229 million during the 2022-2024 period to strengthen its water and wastewater infrastructure for providing services to customers in a safe, reliable and efficient manner. The Zacks Consensus Estimate for MSEX’s 2022 earnings has moved up 7.7% in the past 60 days.
Shares of AWK have lost 14.5% in the past month compared with the industry’s 14.7% decline.
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American Water currently has a Zacks Rank #3 (Hold).
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American Water Works Company, Inc. (AWK) : Free Stock Analysis Report
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