American Water Works' (AWK) Illinois Arm Acquires Assets
American Water Works AWK announced that its unit, Illinois American Water, has acquired the Village of Tolono’s water and wastewater systems for $9.416 million. This acquisition will add 1,295 new water and 1,254 wastewater customers to Illinois American Water’s customer base.
Illinois American Water has been expanding its high-quality services in Illinois since 2020 and has been partnering with 12 communities across Illinois through acquisitions and making essential investments in upgrading aging infrastructure.
The aging water and wastewater infrastructures of the Village of Tolono also need investments for upgrades and maintenance. Illinois American Water is planning to invest nearly $17 million in the first five years of ownership to upgrade the Village of Tolono’s water and wastewater systems.
Consolidation – A Must for Widely Scattered Industry
One of the primary headwinds in the water industry is that there are too many small operators with limited financial capabilities. Due to financial constraints, at times the essential upgrades are deferred, causing infrastructure failure.
Per the American Society of Civil Engineers ("ASCE"), more than 50,000 community water systems and 16,000 community wastewater systems in the United States are currently providing water solutions to customers.
Per the ASCE findings, due to the delay in essential pipeline repairs and maintenance, 6 billion gallons of treated water is lost every day in the United States. Owing to the many small operators in the industry and a lack of adequate funds, essential infrastructural upgrades and repairs get delayed at times.
The acquisition of small units by larger utilities ensures necessary investments in infrastructure upgrades and the continuation of high-quality customer service. American Water Works is the largest, most geographically diverse and most publicly traded water and wastewater utility company that continues to widen its market footprint through strategic acquisitions.
American Water Works is quite active in acquiring small units in its service territories as well as expanding operations. Till Mar 31, 2023, the company completed five acquisitions in two states, which added 1,400 new customers. The pending 27 acquisitions as of Mar 31, 2023, when completed, will add another 48,200 customers.
Investments for Water Space
Per the U.S. Environmental Protection Agency, an estimated $744 billion in investment is necessary to maintain and expand drinking water and wastewater services to meet demand over the next 20 years. Water utilities are gradually consolidating and investing in essential upgrades to their aging assets.
American Water Works is making regular investments to maintain its infrastructure. It aims to invest in the range of $14-$15 billion in the 2023-2027 period and $30-$34 billion for the 10 years of 2023-2032.
Other water utilities like Essential Utilities WTRG, California Water Service Group CWT and Middlesex Water MSEX have well-chalked-out capital investment plans to strengthen their infrastructure.
Essential Utilities plans to invest $1.1 billion in 2023 and $3.3 billion through 2025 to improve water and natural gas systems and better serve customers using improved information technology.
California Water Service plans to invest more than $725 million in capital expenditures through 2024.
Middlesex Water plans to invest $266 million during 2023-2025 to strengthen its water and wastewater infrastructure and provide services to customers in a safe, reliable and efficient manner.
Price Performance
Over the last month, American Water Works’ stock gained 3.2% compared with the industry’s growth of 2.8%.
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Zacks Rank
American Water Works 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
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