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American Water Works AWK announced that its unit New Jersey American Water has installed more than 200 feet of new water main in Maplewood to replace old water mains that are more than a century old. The company will invest $1.5 million for the replacement, which will improve the reliability of customers, reduce service disruptions and increase water flows for firefighting.
Replacement of the aging water mains is quite essential to ensure water quality and system pressures as well as increase system resiliency. New Jersey American Water regularly invests to upgrade, maintain, and expand the existing water and wastewater infrastructure. It provides high-quality and reliable water and wastewater services to nearly 2.8 million people.
In 2020, New Jersey American Water invested $464 million to strengthen its infrastructure, and we expect the company to keep systematic investments going to upgrade as well as maintain its infrastructure. Typically, the company invests in the range of $350-$375 million annually to upgrade its infrastructure. Last year, the higher investment was in response to the COVID-19 public health emergency. We expect the company to maintain its annual average capital expenditure in 2021.
Aging Infrastructure a Concern
Water and wastewater pipelines used by service providers have become old and are rapidly reaching the end of effective service life. As a consequence, pipeline breaks occur and result in the wastage of 6 billion gallons of potable water each day, adding to the loss of water utility operators.
Per the findings of the American Society of Civil Engineers, water main breaks occur every two minutes in the United States due to the aging of the existing water infrastructure. The pipeline breaks not only increase the cost of water services but also expose it to the possibility of contamination.
Why Regular Investment is Essential
Upgrading the massive network of pipelines is a daunting task and requires huge systematic investments. Per the U.S. Environmental Protection Agency, a $750-billion investment is necessary to maintain and expand drinking water as well as wastewater services to meet demand over the next 20 years.
Apart from regular investments from investor-owned utilities, the U.S. government has made provisions for the upgrade of aging water and wastewater assets. The American Jobs Plan has provisions for $111 billion in water and wastewater infrastructure upgrade.
American Water Works has plans to invest $10.4 billion between 2021 and 2025, and $22-$25 billion in the next decade to upgrade as well as strengthen its existing water and wastewater infrastructure.
In addition to American Water, other water utilities like Essential Utilities WTRG, California Water Service Group CWT, and Middlesex Water Company MSEX continue to invest in their respective water and wastewater infrastructure to provide high-quality services to customers.
Shares of American Water have outperformed the industry in the past six months.
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The company 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
Middlesex Water Company (MSEX) : Free Stock Analysis Report
Essential Utilities Inc. (WTRG) : Free Stock Analysis Report
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