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American Water Works Company, Inc. (AWK - Snapshot Report) continues to upgrade its existing utility infrastructure. Recently, the company’s unit Missouri American Water announced that it has completed a vital water main replacement project in St. Louis County, Mo.

Per the guidelines of the project, the company has replaced a 73-year old water line of approximately 11,100-feet long. In addition, Holloran Contracting, on behalf of Missouri American Water, will complete the final road resurfacing along Manchester Road within the next couple of weeks.

The infrastructure upgrade program will enable Missouri American Water to reduce the water main breaks while improving reliability of the water system in the St. Louis area.

As per a U.S. Environmental Protection Agency’s report, the U.S. utility providers need to invest $384 billion through 2030 for restoring and improving drinking water system. It is evident from American Water Works’ activities that it is investing heavily in infrastructure upgrades like its water utility peers Aqua America Inc. (WTR - Snapshot Report) and Connecticut Water Service Inc. (CTWS - Snapshot Report).

Missouri American Water upholds about 4,200 miles of water mains in the St. Louis area. The company has planned to invest roughly $0.1 billion for upgrading the water main in St. Louis County over a two-year timeframe ending Dec 2013.

We remind investors that American Water Works invested $0.43 billion under its capital spending program during the first six months of 2013, primarily for several growth projects. In 2013, the company plans to spend around $1 billion in different ventures to ensure the safety and standard of its utility operations.

During the first six months of 2013, American Water Works’ net cash from operating activities was $0.3 billion and the cash balance as of Jun 30, 2013 was $20.4 million. Recently, the company strengthened its existing liquidity position by raising commitments under its revolving credit facility and commercial paper program. We believe that a stable financial position enables the company to follow steady infrastructure development activities along with strategic acquisitions.

These initiatives will subsequently help the company to provide uninterrupted water supply to its customers, improve consumer confidence and public safety while maintaining government water quality regulations.

However, we remain concerned about the stringent government regulations for maintaining water supply, health and safety standard and treatment of wastewater, risks related to severe weather conditions, and higher expenditure for construction and modernization of utility assets, which may challenge American Water Works’ future performance.

American Water Works currently has a Zacks Rank #3 (Hold). However, another water utility that is currently performing well include Consolidated Water Co. Ltd. (CWCO - Snapshot Report) with a Zacks Rank #1 (Strong Buy).

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