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American Water (AWK) Arm to Invest $2M for Pipeline Upgrade

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American Water Works AWK has announced that its subsidiary, Missouri American Water, will invest $2 million to upgrade nearly 3,700 feet of aging water mains in its service territories. The company will replace the old 20 inch water lines, originally installed in the 1920s, with a larger 24-inch ductile. The upgrading process will continue through the fall of 2021.

The pipeline upgrade will advance water service reliability and increase water flows for customers and fire protection. Last year, the company invested more than $100 million to replace nearly 90 miles of aging water pipe in Missouri. Missouri American Water provides high quality water and wastewater services to more than 1.5 million people in the region.

Water Industry Needs Investment

Water is an essential element for our daily lives and we need 24x7 water and wastewater services to ensure a healthy and hygienic living. To complete this task, water utilities are utilizing millions of miles of pipelines, storage tanks, pumps, desalination plants, and water refineries work together to deliver clean and potable water. However, a substantial portion of water infrastructure — primarily the water pipelines — is gradually approaching toward the end of effective life. As a consequence, pipeline breakage is causing wastage of potable water, thereby increasing the possibility of contamination.

So, replacing the aging water mains with new pipelines has become quite essential to ensure the safety of water quality, and avoid interruption of water as well as wastewater services due to breakage. The increasing demand for water also requires addition, and expansion of the existing water and wastewater infrastructure.

Per the Water and Wastewater Equipment Manufacturers Association, an estimated $750 billion investment is necessary to maintain and expand the drinking water and wastewater service to meet demand over the next 20 years. American Water continues to make investments in its infrastructure to upgrade, enhance and maintain the same. The company has plans to invest $10.4 billion in the 2021-2025 time period and $22-$25 billion in the next decade.

In addition to American Water, another water utility California Water Service Group CWT has plans to invest in the range of $270-$300 million in its water infrastructure in 2021 and expect its annual capital expenditure to increase during the next five years due to rising needs to replace and maintain infrastructure. Essential Utilities WTRG is also making regular investments to upgrade the existing water and wastewater systems. Its long-term plan is to invest nearly $3 billion through 2023 to rehabilitate and strengthen water as well as natural gas pipeline systems.

Another water utility, Global Water Resources GWRS is making acquisitions and necessary investments to expand as well as strengthen operations, and upgrade the acquired assets for providing efficient services to customers.

Price Performance and Zacks Rank

Shares of American Water have outperformed the industry in the past 12 months.

American Water currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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American Water Works Company, Inc. (AWK) : Free Stock Analysis Report

California Water Service Group (CWT) : Free Stock Analysis Report

Global Water Resources, Inc. (GWRS) : Free Stock Analysis Report

Essential Utilities Inc. (WTRG) : Free Stock Analysis Report

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