Middlesex Water Company MSEX announced that its subsidiary Tidewater Utilities, Inc. (Tidewater) has received necessary approval from the Delaware Public Service Commission to acquire the Wilkerson Water Company (Wilkerson) and Broadkiln Beach Water Company (Broadkiln), both in Delaware, from J.H. Wilkerson & Son, Inc.
Acquisition of Wilkerson and Broadkiln will add nearly 1,000 customers to Tidewater’s existing customer base of 47,000 in the Delaware area. Tidewater will extend high-quality services to the new customers, keeping water rates unchanged for the time being.
Consolidation in Water Industry
The U.S. water and wastewater industry is highly fragmented, which is a concern, as the overall water infrastructure in the United States is aging. At present, 53,000 water systems in the United States provide water and wastewater solutions to customers. The highly fragmented water industry creates operational challenges in meeting increasing requirement for water and sanitary services, as it becomes difficult for small water suppliers and wastewater service providers to make regular investments for upgrading old and soiled water and wastewater lines.
Consolidation is essential for this fragmented industry as it is easy for large companies to take up massive upgradation work without substantially increasing the rates, unlike small operators. Middlesex Water has a history of successfully integrating new acquisitions. Currently, 47 investor- and municipally-owned water utilities are targeted for acquisition.
Water utility American Water Works AWK is one of the most active players in the water space, having completed 74 deals from 2015 to date. As of Jun 31, the company added 30,700 customers to the existing customer base. The pending acquisitions as of the same date, on completion, are expected to add nearly 38,200 customers to its customer base.
In addition to American Water, another water utility Aqua America WTR is following the acquisition route to expand operations. During the five-year period ended Dec 31, 2018, the company had expanded utility operations by completing 64 water and wastewater system acquisitions.
Another water utility Global Water Resources GWRS keeps on making strategic acquisitions to expand operations. An American Water Works Association report indicates more than 200,000 water lines breaks per year in the United States with more than 7 billion gallons of water leaking out of aging pipes. All these acquisitions will augment the necessary repair work on the pipelines, and help us preserve and save water.
Shares of Middlesex Water have outperformed the industry in the past 12 months.
Currently, Middlesex Water has 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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