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American Water's (AWK) Tennessee Arm Acquires Water Assets

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American Water Works Company (AWK - Free Report) announced that its subsidiary, Tennessee American Water has acquired the water distribution system of Jasper Highlands. This acquisition will add 600 customers to its existing customer base over the next few years. Tennessee American Water has paid $2.4 million to acquire the distribution assets of Jasper Highlands.

The acquisition will enable Tennessee American Water to extend high-quality water services to new customers, and bring considerable expertise and resources to the Jasper Highlands system operation.

Tennessee American Water currently provides reliable water and wastewater services to more than 380,000 people in Tennessee and north Georgia.

Acquisition Essential for Water Space

Per an American Water report, more than 53,000 water systems in the United States are providing water solutions to customers at present, which creates operational challenges in meeting the requirement for replacement, and modification of aging water and wastewater infrastructure. At present, only 7% of the country’s systems serve a population of more than 10,000 and a mere 1% of the systems serve more than 100,000 people.

Per the Water and Wastewater Equipment Manufacturers Association, an estimated $750 billion investment is necessary to maintain and expand the drinking water and wastewater service to meet demand over the next 20 years.

American Water is quite active in acquiring small service providers. Last year, the company added more than 36,000 customers to the existing customer base through acquisitions and its yet-to-completed deal could add another 19,000 customers to the existing customer base. In addition to consolidating, the company is making regular investments to upgrade the existing and acquired assets. It is planning to invest $8.8-$9.4 billion in the 2020-2024 time period and $20-$22 billion in the next decade to upgrade, as well as maintain its infrastructure.

Likewise, another water utility, Essential Utilities (WTRG - Free Report) has not only expanded water and wastewater operations through acquisitions but also ventured into the natural gas distribution business through the acquisition of Peoples. The company aims to invest more than $2.8 billion over the 2020-2022 time period to rehabilitate and strengthen water, as well as gas infrastructure. Other water utilities like California Water Service Group (CWT - Free Report) and Global Water Resources, Inc. (GWRS - Free Report) are also taking the inorganic route to expand operations in the United States, as well as making investments to upgrade infrastructure.

Price Performance

Shares of American Water have outperformed the industry in the past 12 months.

Zacks Rank

The company currently 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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