Essential Utilities (WTRG) Completes Sale of Gas Utility in WV
Essential Utilities Inc. WTRG announced that it has completed the sale of its natural gas utility assets in West Virginia to Hope Gas, a company located in Morgantown, WV.
The customer base of Peoples West Virginia, with a total of around 13,000, was the lowest among all the states where Essential Utilities works. WTRG’s decision of selling its natural gas operations to Hope Gas makes sense as the latter has larger operations in the state. This now allows WTRG to concentrate on the states where it performs the majority of its natural gas business.
The transaction will allow Essential Utilities to prioritize the growth of Aqua, its water and wastewater business. With Aqua’s increasing presence Western Pennsylvania and long-standing involvement in the neighborhood, the Peoples Gas operation in the area continues to be a significant part of WTRG’s acquisition plan.
The remaining gas operations will focus on conducting effective, safe operation, and lowering emissions through pipeline replacement and creating a local energy center that supports high-potential alternative fuels. WTRG is committed to lowering emissions from natural gas, water and wastewater operations. It also aims to reduce annual Scope 1 and 2 emissions by 60% within 2035 from the 2019 level.
Water Industry’s Focus on Investment
Per the U.S. Environmental Protection Agency, an estimated $744 billion investment is necessary to maintain and expand drinking water and wastewater services to meet customers’ demand over the next 20 years.
Post the sale of West Virginia gas utility assets, Essential Utilities will focus on its long-term strategy of infrastructure investment and growth with the acquisition of water and wastewater systems. The company has already invested $1.06 billion in 2022 and plans to invest $3.3 billion during 2023-2025 to fortify operations and efficiently serve the expanding customer base.
Along with Essential Utilities, other water supply companies like American Water Works Company, Inc. AWK, American States Water AWR and California Water Service Group CWT also aim to improve their infrastructure through investments.
American Water Works aims to invest $2.9 billion in 2023 to strengthen and expand its water and wastewater infrastructure. In the first six months of 2023, the company invested $1.15 billion, with a major portion utilized for infrastructure improvements in Regulated Businesses. The company is on track to meet its capital expenditure plan for 2023.
AWK’s long-term (three to five-year) earnings growth rate is 8.18%. The Zacks Consensus Estimate for 2023 earnings per share (EPS) indicates a year-over-year increase of 6.4%.
American States Water’s strategic investment plans are making its infrastructure stronger and resilient. The regulated utilities invested $167.4 million in company funded capital projects in 2022 and expect capital expenditures in the range of $140-$160 million for 2023, which will further help upgrade its infrastructure.
AWR’s long-term earnings growth rate is 6.3%. The Zacks Consensus Estimate for 2023 EPS indicates a year-over-year increase of 29.8%.
California Water Service invested $177.2 million in capital improvements during the first six months of 2023. The company is expected to invest $360 million and $365 million in 2023 and 2024, respectively, to upgrade its infrastructure and efficiently serve its expanding customer base.
The Zacks Consensus Estimate for CWT’s 2023 and 2024 EPS indicates a year-over-year increase of 7.9% and 13.6%, respectively.
Price Performance
Shares of the company have lost 24.2% in the past six months compared with the industry’s 16.5% decline.
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Zacks Rank
Essential Utilities currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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