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Middlesex Water (MSEX) Arm Gets Water & Sewer Management Deal

Middlesex Water Company MSEX announced that its subsidiary Utility Service Affiliates, Inc. received a long-term contract from the Borough of Avalon, NJ, to manage the day-to-day operation of Avalon’s Water, Wastewater and Stormwater Systems. The contract was awarded to Middlesex Water’s unit after a competitive process and the contract will begin on Sep 1, 2022, and continue for a decade.

The ten-year contract will ensure a steady flow of revenues for Middlesex Water. Utility Service Affiliates has been managing Borough of Avalon’s water, wastewater and stormwater collection systems under a contract for the past ten years and past experience will assist the company in providing quality services for the next ten years.

Aging Water Infrastructure

The U.S. water and wastewater infrastructure is aging and nearing the end of its effective service life. Per the U.S. Environmental Protection Agency, a $473-billion investment is necessary to maintain and expand drinking water pipelines, and $271 billion for wastewater pipelines to meet the demand over the next 20 years.

Frequent pipeline breaks due to aging result in the wastage of previous water and create the possibility of contamination in potable water. In such a scenario, systematic investment is essential for the aging water and wastewater infrastructure to ensure that the essential services are provided to millions of customers across the United States.

The regulated water utilities are making systematic investments to avoid pipeline breaks and provide uninterrupted services to customers.

Water utilities like American Water Works AWK, Essential Utilities WTRG and California Water Service Group CWT  have well-chalked-out capital investment plans to strengthen their infrastructure and appeal to their respective utility commission to increase rates.

American Water Works plans to invest $13-$14 billion in 2022-2026 and $28-$32 billion between 2022 and 2031 to upgrade and strengthen the existing water and wastewater infrastructure. Long-term (three to five years) earnings growth of AWK is currently pegged at 8.1%. The current dividend yield of American Water Works is 1.6%.

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 growth of 6.6% from the year-ago reported figure. Long-term (three to five years) earnings growth of WTRG is currently pegged at 6.1%. The current dividend yield of Essential Utilities is 2.2%.

California Water Service has more than $1 billion in capital expenditure planned for 2022-2024. The current dividend yield of California Water Service is 1.6%.

Price Performance

Shares of MSEX have risen 5.7% in the past three months compared with the industry’s 9.3% growth.


Zacks Investment Research
Zacks Investment Research

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Zacks Rank

Middlesex Water currently has a Zacks Rank #4 (Sell).

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
Middlesex Water Company (MSEX) : Free Stock Analysis Report
Essential Utilities Inc. (WTRG) : Free Stock Analysis Report
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