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California Water's (CWT) Arm to Maintain Stroh's Water System

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Zacks Equity Research
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A subsidiary of California Water Service Group CWT Washington Water Service inked a deal to operate and maintain Stroh’s Water Company’s water system. This operation and maintenance (O&M) agreement will run for a two-year term and provide with an opportunity to purchase the system in the future.

Notably, the water system serves 1,000 customer connections near the unit’s existing service areas. Washington Water aims to improve the reliability of Stroh’s Water services by interconnecting the East Pierce system with its own. Per the agreement, Washington Water will also provide billing, customer service and emergency services to Stroh’s Water customers.

Strengthening Operations Via Investments & Acquisition

The company is making steady efforts to grow either organically or inorganically. Prior to this, the utility’s another unit California Water had signed a deal to acquire the water system assets of Skylonda Mutual Water Company. Also, California Water’s another unit Hawaii Water Service received necessary permission from The Hawaii Public Utilities Commission to acquire the assets of Kapalua Water Company and Kapalua Waste Treatment Company from Maui Land and Pineapple Company.

Notably, California Water invested $298.7 million in 2020, up from $273.8 million in 2019. Its capital expenditure estimate for 2021 is $270-$300 million.

Need for Investments in Water Space

Delay in revamping the pipelines could result in loss of water on a daily basis while pipeline cracks might increase the possibility of potable water contamination. Per the Water and Wastewater Equipment Manufacturers Association, an estimated investment of $750 billion is needed to meet demand over the next 20 years.

The aging U.S. water and wastewater infrastructure requires bulk expenditure to ensure 24x7 supply of drinkable water and continuous wastewater services. Hence, large water utilities are actively investing heavy capex in enhancing their quality of services. American Water Works Company AWK has plans to invest $10.4 billion in the 2021-2025 time period and $22-$25 billion in the next decade.

Global Water Resources, Inc. GWRS is also taking the organic and inorganic route to expand its operations in the United States. Another water utility Essential Utilities WTRG aims to invest $3 billion through 2023 to fortify operations and efficiently serve its expanding customer base

Zacks Rank & Price Performance

Shares of this currently Zacks Rank #2 (Buy) utility have gained 25.3% in the past six months, outperforming the industry’s rise of 2.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

California Water Service Group (CWT) : Free Stock Analysis Report

Global Water Resources, Inc. (GWRS) : Free Stock Analysis Report

Essential Utilities Inc. (WTRG) : Free Stock Analysis Report

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