Pennsylvania American Water, a business wing of American Water Works Company Inc., (AWK) announced its plans to set up two new transmission lines in Scranton, PA to replace a 104-year-old aging pipeline system.
The transmission lines will be installed in the city’s south side across the Roaring Brook flood control channel and will cost the company roughly $1.5 million. The pipeline system, a crucial water asset serving Scranton, has been suffering from leaks and other infrastructure impairments for a long time. The project will improve service reliability for customers in Scranton and Taylor.
American Water Works will install roughly 350-feet of new 30- and 24-inch ductile iron pipe across the channel linking River Street to Mattes Avenue. The pipe will run parallel to the current 36-inch pipe that services the Keyser Valley and Taylor areas. The upgrade is expected to begin in Oct 2013 and will be completed by the end of the year.
American Water Works is lately modernizing its existing water systems across the U.S. forced by deteriorating infrastructure. The implementation of proper regulatory rate mechanism for water utilities in the U.S. has provided an incentive to the company for undertaking infrastructure upgrade projects. Recently, American Water Works filed for a rate increase to the California Public Utilities Commission for the implementation of its large-scale Monterey Peninsula Water Supply Project.
In addition, American Water Works’ inorganic growth-by-acquisition strategy will bode well for its future prospects. So far in 2013, American Water Works closed ten acquisitions.
Another emerging growth avenue for American Water Works is the water services required by shale explorers in hydraulic fracturing. However, water utilities are still experiencing financial crunch owing to budgetary constraints. The U.S. government projects about $1 trillion in capital expenditures for water and wastewater upgrades by 2020.
Water utilities like American Water Works needs to improve their assets to optimize the existing resources as the rising threat of global warming is contributing to drought in almost half of the American states.
Currently, American Water Works carries a Zacks Rank #3 (Hold). Investors who are looking to add water utilities in their portfolio can opt for better-placed operators like Zacks Ranked #1 (Strong Buy) Connecticut Water Service Inc. (CTWS) and Consolidated Water Co. Ltd. (CWCO), and Zacks Ranked #2 (Buy) SJW Corp. (SJW).