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AWK Unit to Complete $0.6M Project

Zacks Equity Research

American Water Works Company (AWK) continues with its effort to upgrade the existing utility infrastructure. Recently, the company’s unit Iowa American Water announced that it is almost on the verge of completing its two important water main improvement projects in Clinton District, Iowa. The cost of the project is $0.6 million. Both the projects are expected to be online in Sep 2013.

Per the project, Iowa American Water is replacing and upgrading approximately 1700 feet of aging water main, along South 19th Street north of 22nd Avenue South to Manufacturing Drive. In addition, the company will be replacing nearly 2100 feet of 6 inch water main and upgrading it to an 8 inch water main on 33rd Avenue North. Both restoration activities and shifting of the service lines to the new water main will continue through Oct 2013 while the projects will be in service by the end of this month.

The infrastructure upgrade program will enable Iowa American Water to provide uninterrupted water supply to its customers and strengthen system competence. Further, this project will help to increase water flow for firefighting activities in the locality. These factors will subsequently improve reliability, consumer confidence and public safety while maintaining government water quality regulations.

As per a report circulated by the U.S. Environmental Protection Agency (:EPA), the U.S. based utilities need to invest $384 billion through 2030 to refurbish and improve drinking water system. It is evident from American Water Works’ activities that the company is laboriously following this guideline. On Sep 12, 2013, Pennsylvania American Water, a unit of the company, announced the commencement of two water storage tank construction projects in Delaware Township, Pike Country.

During the first six months of 2013, American Water invested $0.4 billion under its capital spending program. In 2013, the company intends to invest approximately $1 billion in various projects to ensure the safety and standard of utility operations.

American Water Works’ net cash from operating activities was $0.3 billion during the first six months of 2013 and the cash balance as of Jun 30, 2013 was $20.4 million. Recently, the company strengthened its existing liquidity position in terms of raising  commitments under its revolving credit facility and commercial paper program. We believe that a stable financial position allows the company to follow steady infrastructure development activities along with strategic acquisitions.

American Water Works currently has a Zacks Rank # 3 (Hold). However, other water utilities that are currently performing well include Connecticut Water Service Inc. (CTWS), Consolidated Water Co. Ltd. (CWCO) and SJW Corp. (SJW), each with a Zacks Rank #2 (Buy).

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