American Water Works Company (AWK - Free Report) announced that its subsidiary, New Jersey American Water will invest $2 million in 2018 to replace the aging water mains in its Millburn service area.
The company aims to replace 6,300 feet of old mains to increase service reliability and improve water flow for residential consumption. This project will also replace 12 fire hydrants and 53 utility-owned service lines along the pipeline route.
Upgrading and replacing the aging infrastructure is an ongoing work for this water utility. This investment is part of a multi-million program to upgrade and replace water lines in more than 100 communities in New Jersey. Last year, the company invested $1.5 million to replace 2,200 feet of old mains in its Millburn service area. (Read more: American Water Unit to Invest $1.5M for Replacing Old Mains)
Investment to Upgrade the Aging Infrastructure
The U.S. water infrastructure in quite old, and massive investment is required to upgrade the existing water and wastewater systems. Some of the water mains are nearly a century old and require immediate replacement. Investment of billions of dollars is required to improve the water infrastructure.
The company aims to invest $8.0-$8.6 billion from 2018 through 2022, which will help it to improve earnings by 7-10% per year in the aforesaid period from a 2016 base. In 2018, the company plans to invest in the range of $1.9-$2.1 billion for capital expenditures and acquisitions.
Aqua America (WTR - Free Report) , another water utility, aims to make capital investments in excess of $500 million in 2018, which is part of an ambitious investment target of more than $1.4 billion in the 2018-2020 time period. Connecticut Water Service Inc. also aims to invest more than $150 million in the 2018-2020 time frame to strengthen its existing infrastructure.
Consolidation in the Water Space
The water utility industry offers excellent growth opportunities and as a consequence, we are noticing a rising interest in this space, shown by companies that were earlier focused primarily on other businesses.
American Water Works is quite busy in the acquisition front. During the first four months of 2018, the company added 3,689 customers through five completed acquisitions and nearly 1,500 via organic initiatives. The company is already in discussion to acquire 15 more companies, which will add another 47,186 customers.
Eversource Energy (ES - Free Report) , a company primarily focused on energy supply, forayed in the water utility space via acquisition. The company aims to expand water operation through strategic acquisition. However, its initial bid to acquire water utility Connecticut Water Service was unsuccessful. The company might explore the idea of further making a fresh acquisition offer, due to amendment in Connecticut Water’s merger agreement. (Read more: Connecticut Water Amends Merger Covenant, Open to New Offer)
In a year’s time, shares of American Water Works have outperformed its industry. The stock has gained 4.2% compared with the industry’s gain of 1.3%.
Currently, American Water Works 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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