Aqua America WTR announced that it will receive nearly $750 million investment from Canada Pension Plan Investment Board (“CPPIB”). This funding will help Aqua America to complete its pending acquisition of privately-owned natural gas utility, Peoples Natural Gas. The acquisition, on completion, will create a unique utility that will provide water and natural gas services.
Through the $750-million investment, CPPIB will acquire nearly 21.7 million newly issued shares of Aqua America’s common stock.
Acquisition in Utility Space
The water and wastewater infrastructure in the United States is aging, and gradually nearing the end of its effective life. At present, more than 53,000 water systems in the United States provide water solutions to customers. The highly fragmented water industry creates operational challenges in meeting increasing requirement for water.
Growth prospects in the water utility space have resulted in companies like Eversource Energy ES, which has acquired water utilities to expand operation, to make considerable investments. Other water utilities like American Water Works Company AWK and Global Water Resources, Inc. GWRS have been pursuing acquisitions.
Prospects in Natural Gas Industry
Aqua America continues to make strategic acquisitions to expand water operations. It has decided to acquire Peoples Natural Gas in an all-cash deal worth $4.3 billion, inclusive of debt. The acquisition will expand Aqua America’s revenue stream, as the natural gas industry is poised to expand in the United States.
Per the U.S. Energy Information Administration (“EIA”) release, natural gas production in the United States will increase 7% per year during the 2018-2020 time period, primarily due to higher domestic consumption and improving exports. Therefore, given the prospects, we expect to see more investments and acquisitions in the natural gas industry.
Rank and Price Performance
Currently, Aqua America has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of the company have underperformed its industry in the past three months.
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Global Water Resources, Inc. (GWRS) : Free Stock Analysis Report
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