American Water Works' (AWK) Illinois Arm Acquires Assets
American Water Works AWK announced that its unit, Illinois American Water, acquired the Village of Broadlands water system for $0.425 million. This acquisition will add 155 new water customers to Illinois American Water’s customer base.
Illinois American Water has been expanding its high-quality services in Illinois since 2020 and 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 Broadlands water system also require investments. American Water Works’ unit has plans to invest in critical infrastructure in the first year, which will enhance water quality and system reliability.
Illinois American Water is active in expanding its operations through inorganic routes. The company acquired the Village of Tolono’s water and wastewater systems for $9.416 million in June 2023, its first acquisition in 2023. This acquisition added 1,295 new water and 1,254 wastewater customers to Illinois American Water’s customer base.
Widely Scattered Industry Need Consolidation
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.
Large water utilities are acquiring smaller units to expand operations and extend their high-quality services to the acquired smaller units. However, the pace of acquisitions needs to accelerate, as there are too many small units in the United States that require attention and funding.
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 for aging assets.
American Water Works is making regular investments to maintain its infrastructure. It aims to invest $2.9 billion in 2023 to strengthen and expand its water and wastewater infrastructure.
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 three months, American Water Works’ stock lost 3.3% compared with the industry’s decline of 38.3%.
Image Source: Zacks Investment Research
Zacks Rank
American Water Works currently has a Zacks Rank #2 (Buy).
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
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