U.S. Markets open in 9 hrs 27 mins

American Water Works (AWK) Hawaii Unit Gets Rate Hike Consent

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·3 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

American Water Works AWK announced that its unit, Hawaii American Water, has received approval from The Hawaii Public Utilities Commission to set new wastewater service rates for its Hawaii Kai wastewater customers. The last rate revision request was filed in 2011 and since then, the company has invested $32 million in improving the wastewater treatment service.

The approval of new rates will increase average single-family customer monthly rates to $78.60 from $67.08 and multi-family customer monthly rates would increase to $66.88 from $57.08. The new rates will provide nearly $1.7 million in additional annualized revenues to Hawaii American Water and allow it to carry out infrastructure upgrades. The company is investing in the installation of ultraviolet disinfection treatment, a sludge de-watering facility, solar energy upgrades, upgrading pumps at its lift stations and treatment plant, and other process improvements to provide high-quality services to customers.

Investment to Upgrade Aging Infrastructure

The U.S. water and wastewater infrastructure is aging and gradually nearing the end of its effective service life. Per the U.S. Environmental Protection Agency, a $473 billion investment is necessary to maintain and expand drinking water pipelines, and $271 billion for wastewater pipelines, to meet the demand over the next 20 years.

Systematic investment is quite essential for the aging water and wastewater infrastructure to ensure that these essential services are provided to millions of customers across the United States.

Rate Hike Allows Utilities to Recoup Investments

The increase in utility rates might cause financial difficulties to customers.  However, rate hikes at regular intervals are essential and aid utility service providers to generate funds so that they can carry on with long-term infrastructure upgrades.

American Water plans to invest around $13-$14 billion 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 and appeal to their respective utility commission to increase rates.

California Water Service has more than $1 billion capital expenditure planned for the 2022-2024 time period. The current dividend yield of California Water Service is nearly 2.1%. The Zacks Consensus Estimate for CWT’s 2023 earnings indicates year-over-year growth of 9.3%.

Essential Utilities aims to invest $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 6.6%. The long-term (three to five years) earnings growth of WTRG is currently pegged at 6.1%. The current dividend yield of Essential Utilities is nearly 2.6%.

Middlesex Water plans to invest $229 million during 2022-2024 to strengthen its water and wastewater infrastructure to provide services to customers in a safe, reliable and efficient manner. The Zacks Consensus Estimate for MSEX’s 2022 and 2023 earnings indicates year-over-year growth of 28% and 7.6%, respectively. MSEX reported an average surprise of 2.02% in the last four quarters.

Price Performance

Shares of AWK have lost 13.6% in the past three months compared with the industry’s 13.9% decline.

 

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Zacks Rank

American Water currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research