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American Water (AWK) Arm to Invest $1.6M to Replace Water Mains

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Zacks Equity Research
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American Water Works AWK announced that its subsidiary, New Jersey American Water is going to invest $1.63 million for replacing more than 2,680 feet of aging water mains in Asbury Park and 2,100 feet water mains in Hillside.

In Asbury Park, the company will invest $965,000 to replace three fire hydrants and 60 utility-owned service lines along the pipeline route. The old mains in this region will be replaced with new ductile iron mains. The Hillside project will replace six fire hydrants and 68 utility-owned service lines along the pipeline route. New Jersey American will upgrade the aging 6-inch cast iron water lines with new, 8-inch ductile iron mains.

These upgrades are part of the company’s multimillion-dollar initiative to upgrade the existing old water and wastewater pipelines. The replacement of old mains with new ones will increase resilience of operations and increase water flow for customers in the region.

Why Investment is Needed in Water Space?

Millions of miles of pipelines that include water mains and distribution pipelines are buried under the soil, and play an active role in providing 24x7 water as well as sewer services. However, the water infrastructure 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. The pipelines breaks result in the wastage of millions of gallons of potable water each day and add to the loss of water utility operators.  

So, replacing the aging water mains with new pipelines has become quite essential to ensure the safety of water quality, and avoid the interruption of water as well as wastewater services due to breakage. 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 $8.8-$9.4 billion in the 2020-2024 time period and $20-$22 billion in the next decade.

In addition to American Water, another water utility California Water Service Group CWT has plans to invest $839 million in its water infrastructure in the 2019-2021 time period. Essential Utilities WTRG is also making regular investments to upgrade the existing water and wastewater systems. Its long-term plan is to invest $2.8 billion in the 2020-2022 time period to rehabilitate, and strengthen water as well as natural gas pipeline systems. Another water utility, Global Water Resources GWRS is making acquisitions and the necessary investments to expand as well as strengthen operations, and upgrade the acquired assets for providing efficient services to customers.

Price Performance

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