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American Water's (AWK) Indiana Unit Buys Assets for $0.4M

·3 min read

American Water Works Company AWK announced that its subsidiary, Indiana American Water, has acquired water and wastewater system assets of River’s Edge, in southeast Indiana, for $0.42 million.

Indiana American Water, through this acquisition, will be providing water services to 100 new customers and wastewater services to 80 new customer connections. The acquisition will pave way for necessary investments to upgrade River’s Edge water and wastewater system. Customers will be able to enjoy high-quality services without experiencing an increase in rates.

Indiana American Water has successfully closed a few acquisitions and expanded the business in Indiana. This marks the third acquisition by the company in the past three years. It continues to provide high quality services to nearly 20% residents of Indiana.

Consolidation Essential for Water Space

Aging of water and wastewater assets along with fragmentation are primary concerns of the existing U.S. water and wastewater industry. Per the U.S. Environmental Protection Agency reports, more than 53,000 community water systems and 16,000 community wastewater systems in the United States are providing water solutions to customers.

This highly fragmented industry creates operational challenges in meeting the essential requirement for upgrades and maintenance, as small service providers at times do not have the necessary financial strength to fund costly infrastructural upgrades. Per the Water and Wastewater Equipment Manufacturers Association, an estimated $750 billion investment is necessary to maintain, and expand drinking water as well as wastewater services to meet demand over the next 20 years.

Given the backdrop, large water utilities like American Water are quite active in making acquisitions to expand operations and make the necessary investments to upgrade the acquired property. From the start of the year till Aug 1, the company expanded the customer base by 11,200 through organic means and acquisitions. Its pending acquisitions (as of Aug 1), when completed, will add another 86,900 customers to the customer base. The company remains committed to expand the business through inorganic and organic ways.

Likewise, another water utility, Essential Utilities WTRG has not only expanded water and wastewater operations through acquisitions but also ventured into the natural gas distribution business through the acquisition of Peoples. The company plans to invest $3 billion through 2023 to fortify water and natural gas operations as well as efficiently serve the expanding customer base.

Another water utility, Global Water Resources, Inc. GWRS is taking the inorganic route to expand operations in the United States and making investments to upgrade infrastructure. California Water Service CWT has decided to invest in the range of $270-$300 million in 2021 and expand operations through strategic acquisitions. In June, the company inked a deal to acquire the assets of HOH Utilities Company, thereby expanding the utility’s footprint in the island of Kauai.

Price Performance

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

Zacks Investment Research
Zacks Investment Research

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Zacks Rank

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

Global Water Resources, Inc. (GWRS) : Free Stock Analysis Report

Essential Utilities Inc. (WTRG) : Free Stock Analysis Report

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