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Aqua America's North Carolina Unit Buys Water System Assets

Zacks Equity Research

Aqua America Inc. (WTR) announced that its North Carolina unit has acquired the water system assets of Hubquarter Forestry, LLC, in Carteret County, NC for $25,000. This acquisition will increase Aqua America’s customer count by 125 people.  The system will have the capacity to serve another 75 people once it is fully built out.

The company will operate the acquired asset from its coastal regional office in Hampstead, NC.  This acquisition will expand Aqua America’s operation in North Carolina’s Crystal Coast. These acquisitions are part of Aqua America’s growth-through-acquisition strategy.

The U.S. water industry is highly fragmented and the big operators in the space are on the lookout for potential buys to expand market reach.  Aqua America through its regulated utilities has completed eight acquisitions this year. In fact, this is the third completed acquisition this month.

Besides acquisitions, Aqua America is investing capital to strengthen its resources. The company invested nearly $132 million in regulated infrastructure improvement in the first half of 2014. The company expects to invest more than $325 million in 2014 and plans to invest more than $1 billion over the next three years.

These investments aimed at improving and replacing aged pipelines, and strengthening its distribution network will allow the company to serve its increasing customer base more effectively.

Systematic acquisitions will expand the water utility’s customer base by 1.5% in 2014. Aqua America has surpassed the Zacks Consensus Estimate in last four quarters with an average beat of 3.64%.

Apart from Aqua America, another operator in this space, American Water Works (AWK), is also resorting to inorganic strategies to enhance its scale of operations. American Water Works utilized around $2.9 million for five acquisitions in the first half of 2014.

Aqua America Inc. currently has a Zacks Rank #3 (Hold). Stocks worth considering in the water industry include Connecticut Water Service Inc. (CTWS) and Consolidated Water Co. Ltd. (CWCO), both with a Zacks Rank #1 (Strong Buy).

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Read the Full Research Report on CWCO

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