American Water Works Company (AWK - Free Report) announced that its unit Missouri American Water is going to start a project to revamp and restore the wastewater lagoons at its Lake Carmel wastewater treatment facility beginning in late April 2019.
American Water’s unit will invest nearly $650,000 for this project and utilize the most advanced Triplepoint’s NitrOx system to remove ammonia from wastewater. This NitrOx system is a new technology that is far more effective than the existing ammonia removal technologies. In addition, cost of operating the NitrOx System is cheaper than the conventional system, enabling the operators to meet potential stringent regulations in the future.
Missouri American Water expects to complete the project by August 2019, which is part of its annual capital expenditure of $200 million to upgrade existing water and wastewater assets in the state.
Regular Investment — A Must for Water Space
The existing water and wastewater infrastructure in the United States is aging. Hence, proper maintenance and upgradation of the system will require investment of billions of dollars. Per an American Water Works Association (“AWWA”) report, the cost of restoring aging underground water pipelines in the United States will be at least $1 trillion in the next 25 years. The AWWA report indicates more than 200,000 water line breaks per year in the United States, with more than 7 billion gallons of water leaking out of aging pipes every year.
So, regular investments are quite essential at the present juncture to maintain the quality of water and wastewater services. American Water has plans to invest within $8-$8.6 billion from 2019 through 2023 in different service territories, which will help improve earnings by 7-10% per year in the aforesaid period from a 2017 base. Another water utility Aqua America Inc. is expected to invest nearly $1.4 billion over the 2019-2021 time period to improve its existing infrastructure.
Opportunities in the Water Space
The demand for potable water and wastewater services is steadily increasing, thereby creating ample opportunities for growth and expansion in the industry. With ample room for growth over the long term, companies like Eversource Energy (ES - Free Report) from the electric utility space have started showing interest in the water supply industry. We expect to see more acquisitions in the fragmented water utility space.
At present, more than 53,000 water systems in the United States provide water solutions to customers. It becomes very difficult for small water and wastewater service providers to carry on expensive overhauls, in turn increasing the possibility of failure and contamination of existing water systems. Amid such a backdrop, consolidation of small water units under a bigger water utility company ensures a regular funding for upgrade and usage of new technology to provide quality services to clients. Notably, Global Water Resources, Inc. (GWRS - Free Report) and other big water utility operators are actively pursuing acquisitions.
Rank and Price Performance
Currently, American Water has a Zacks Rank #3 (Hold). You can see tthe complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of American Water have outperformed the industry in a year’s time.
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