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American Water (AWK) Missouri Arm to Spend $2.4M on Upgrades

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American Water Works (AWK - Free Report) recently announced that its unit, Missouri American Water, is going to invest $2.4 million to upgrade 10,500 feet of water main in Jefferson City. The company will invest the funds in four projects in the region, and replace as well as upsize the water mains. These necessary upgrades will increase water flow for customers and ensure adequate supply of water for fire fighters.

Missouri American Water provides water and wastewater services to nearly 1.5 million people in Missouri, and has been investing steadily for upgrading and maintaining its infrastructure. Since 2017, the company has invested more than $620 million in water and wastewater system improvements, and filed a rate hike appeal on Jun 30, 2020 to recoup the investment. The Missouri Public Service Commission approved a water and wastewater rate revision, which took effect from May 2021, and allowed the company to get the necessary funds to continue with these upgrade projects.

Investment in Aging Infrastructure

The U.S. water infrastructure, which includes more than 2.2 million miles of pipelines, is aging and needs major repair and maintenance to provide proper services to millions of Americans. Per the 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.

It is evident that massive investment is essential to improve the quality of water and wastewater services in the United States. The U.S. government, through the “American Jobs Plan”, unveiled that it will invest $111 billion for the aging water and wastewater infrastructure over the next 10-year period. Definitely, these investments will be helpful for upgrading the aging infrastructure but the requirement is larger.

Per the findings of the American Society of Civil Engineers, water main breaks occur every two minutes in the United States due to aging of the existing water infrastructure. 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.

Utilities are Investing in Upgrades

Large water utilities of the United States are making regular investments to upgrade and maintain the aging infrastructure to avoid and reduce the occurrence of water main breaks. 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 - Free Report) — under the Water for Tomorrow program — is making regular capital investments to enhance system reliability, resiliency and overall service quality.

Zacks Rank and Price Performance

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.

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

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