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California Water (CWT) Unit to Expand Water Supply Operation

California Water Service Group’s CWT unit, Texas Water Service, the majority equity investor in BVRT Utility Holding Company (BVRT), announced that its subsidiary Camino Real Utility has entered into a long-term water supply agreement with the Guadalupe Blanco River Authority to extend a water supply pipeline from the City of Lockhart, TX, into the City of Mustang Ridge area.

Camino Real Utility will receive up to 2,419 acre-feet of potable water per year as part of the agreement, allowing CWT to provide potable water, recycled water and wastewater services in the rapidly growing area of the Austin metropolitan region by extending the water supply pipeline infrastructure in Texas.

To satisfy the increasing demand from the expanding customer base with high-quality services, it is imperative to expand the water supply infrastructure. Texas Water Service is constantly investing funds to allow BVRT to construct water and wastewater infrastructure.

Infrastructural Investments

California Water Service’s customer base increased year over year by 0.8% in 2021. The company is making efforts to expand operations organically and inorganically. CWT’s customer base is likely to further expand in 2022. Utilities require significant investments to upgrade and expand the infrastructure for the continuation of high-quality services to customers. As a result, California Water Service invested $293.2 million in 2021 and $144.6 million in the first six months of 2022. The utility also expects to invest $1,080 million in the 2022-2024 period for upgrading infrastructure.

Per the U.S. Environmental Protection Agency, the investment of $473 billion and $271 billion is necessary to maintain and expand drinking water pipelines and wastewater pipelines, respectively, to meet demand over the next 20 years. Water infrastructure like storage tanks and water purifying units also need maintenance at proper intervals.

Zacks Rank & Price Performance

California Water Service presently has a Zacks Rank #4 (Sell). In the past month, shares of CWT have rallied 12.5% compared with the industry’s growth of 9.1%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Utilities Making Systematic Investment

Given the above scenario, it is quite evident that systematic investments to upgrade infrastructure and make provisions for adding new infrastructure will assist operators in meeting the demand from the rising customer base. Hence, water utilities are making systematic investments to expand and upgrade the water infrastructure.

Water utilities like American Water Works Company AWK, Essential Utilities WTRG and Middlesex Water MSEX have well-chalked-out capital investment plans to strengthen their infrastructure.

American Water plans to invest around $13 to $14 billion during the 2022-2026 period and around $28 to $32 billion between 2022 and 2031 to upgrade as well as strengthen the existing water and wastewater infrastructure. The Zacks Consensus Estimate for AWK’s 2022 earnings indicates year-over-year growth of 4.7%. The long-term (three to five years) earnings growth of American Water is currently pegged at 8.1%.

Essential Utilities aims to invest $3 billion through 2024 to strengthen water and natural gas operations. The Zacks Consensus Estimate for WTRG’s 2022 earnings indicates year-over-year growth of 6.6%. The long-term earnings growth of Essential Utilities is currently pegged at 6.1%.

Middlesex Water plans to invest $229 million during the 2022-2024 period to strengthen its water and wastewater infrastructure for providing services for customers in a safe, reliable and efficient manner. The Zacks Consensus Estimate for MSEX’s 2022 and 2023 earnings indicates year-over-year growth of 15.5% and 10.5%, respectively.

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American Water Works Company, Inc. (AWK) : Free Stock Analysis Report
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