California Water Service Group
’s
CWT
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 (ML&P).
If the acquisition succeeds, the water utility will provide water and wastewater services to 1,000 service connections in the Kapalua, Maui resort area along with the expansion areas of Kapalua, which are developed by ML&P.
Prior to this, in 2020, the same subsidiary bought Kalaeloa Water Company while its another unit Washington Water completed the acquisition of Rainier View Water Company, which doubled its operations.
Need for Acquisition in Water Space
The U.S. water and wastewater infrastructure is aging and requires a huge expenditure to ensure 24×7 supply of potable water and continuous wastewater services. Since small water utilities cannot make huge investments in improving, maintaining or repairing their facilities, consolidation makes it easier for the big operators with ample financial strength to make necessary investments in enhancing the water and wastewater infrastructure.
Delay in revamping the pipelines could result is loss of water on a daily basis and pipeline breaks 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. Notably, the company invested $298.7 million in 2020, up from $273.8 million in 2019. Its capital estimates for 2021 are $270-$300 million.
Hence, large water utilities are actively acquiring small water and wastewater service units as well as ensuring a heavy capex to upgrade their quality of services.
American Water Works Company
AWK
is active in buying small service providers.
Global Water Resources, Inc.
GWRS
is also taking the inorganic route to expand operations in the United States. Another water utility
Essential Utilities
WTRG
not only expanded water and wastewater operations through integrations but also ventured into the natural gas distribution business through the buyout of Peoples.
Zacks Rank & Price Performance
Shares of this currently Zacks Rank #2 (Buy) utility have gained 1.6% in the past three months against the
industry
’s fall of 8.6%. You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
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