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American Water (AWK) Unit Seeks Approval for System Upgrade

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American Water Works (AWK - Free Report) announced that its West Virginia American Water unit has filed an application with the Public Service Commission of West Virginia, seeking approval of the 2022 infrastructure replacement program and associated Distribution System Improvement Charge.

West Virginia American Water’s 2022 infrastructure replacement plan includes nearly $32.5 million investment for infrastructure replacement and system upgrades. Per the plan, $18.6 million will be used to replace or upgrade almost 38 miles of water mains; $4.2 million to restore service lines and fire hydrants; $4.8 million to replace water meters; $0.2 million for a booster station, $2.5 million for additional storage tanks, and $2.2 million for post-acquisition investment in troubled water systems.

Underground water mains, service pipelines, overhead water storage tank, water meters and water purification units work in tandem to assist utility operators in providing uninterrupted water supply. The U.S. water and wastewater infrastructure is aging and regular investment is essential to maintain the high quality of potable water running from the taps.

Aging of Water Infrastructure a Concern

Per the findings of the American Society of Civil Engineers, water main breaks occur every two minutes in the United States. Pipeline breaks result in the wastage of 6 billion gallons of potable water each day and add to the loss of water utility operators. The pipeline breaks not only increase the cost of water services but also expose it to the possibility of contamination.

Hence, to stop the wastage of potable water and prevent the failure of pipelines and essential infrastructure, regular investment and upgrade of the pipelines is quite essential. Per Water and Wastewater Equipment Manufacturers Association, an estimated $750 billion investment is necessary to maintain and expand drinking water as well as wastewater services to meet demand over the next 20 years.

Utilities Making Investments

Large water utilities operating in the United States are making regular investments and plans to improve their infrastructure. American Water Works makes regular investments in its infrastructure to upgrade, enhance and maintain the same. The company has plans to invest $10.4 billion between 2021 and 2025 and $22-$25 billion in the next decade.

Essential Utilities (WTRG - Free Report) is also making regular investments to upgrade the existing water and wastewater systems. Its long-term plan is to invest nearly $3 billion through 2023 to rehabilitate and strengthen water as well as natural gas pipeline systems. California Water Service (CWT - Free Report) plans to invest in the range of $270-$300 million in 2021 to strengthen its water and wastewater infrastructure. Middlesex Water MSEX — under the Water for Tomorrow program — is making regular capital investments to enhance system reliability, resiliency and overall service quality.

In addition to the investor-owned utilities, the U.S. government — through the “American Jobs Plan” — unveiled that it will invest $111 billion in the aging water and wastewater infrastructure over the next 10-year period.

Price Performance

Shares of American Water have outperformed the industry in the past year.

Zacks Investment ResearchImage Source: Zacks Investment Research

Zacks Rank

American Water 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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