American Water Works Company
AWK
announced that its subsidiary, West Virginia American Water, has acquired the Town of Cedar Grove’s water distribution system. The company, through this acquisition, will be providing water services to 395 customers in the Kanawha Valley region.
West Virginia American Water recently acquired water distribution systems in the neighboring towns of Glasgow and East Bank. All these small service providers have one thing in common, they are unable to make the necessary investments required to upgrade and maintain the aging infrastructure. As a consequence, it is difficult for them to provide adequate and reliable services to customers.
The acquisition of the Town of Cedar Grove water distribution by West Virginia American Water will bring in the required investments for maintenance and infrastructure upgrades in its water treatment plant and distribution system. An average residential customer in Cedar Grove using 3,000 gallons will receive a water bill of $43.46 per month. Cedar Grove rates will increase annually until Oct 6, 2023, when customers reach West Virginia American Water’s standard rates, as set by the Public Service Commission of West Virginia.
Acquisition Holds the Key in Fragmented Water Industry
Per the U.S. Environmental Protection Agency reports, more than 53,000 community water systems and 16,000 wastewater systems in the United States are providing water solutions to customers. This highly fragmented industry creates operational challenges as a major portion of the existing water infrastructure in the United States is approaching toward the end of its effective service life. At times, it becomes quite difficult for the small service providers to make costly investments to upgrade the infrastructure.
Here lies the need for consolidation in the water space, as large water utilities with deep pockets can make the necessary investments and provide high-quality water and wastewater services to customers. A substantial portion of potable water is wasted every day in the United States due to pipeline breaks. Timely repairs and investments can stop this wastage.
American Water is quite active in making acquisitions to expand operations and make the necessary investments to upgrade the acquired property. Last month, its unit California American Water acquired privately-held East Pasadena Water Company.
Likewise, water utilities like
Essential Utilities
WTRG
,
Global Water Resources, Inc
.
GWRS
and
California Water Service
CWT
, among others, in the space are making acquisitions and investing regularly to upgrade the aging acquired assets.
Price Performance
Shares of American Water have outperformed the
industry
in the past 12 months.
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Zacks Rank
The company currently has a Zacks Rank #3 (Hold). You can see
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