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Aqua America's (WTR) Unit Buys Wastewater System for $50.3M

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Aqua America Inc. announced that its subsidiary, Aqua Pennsylvania has completed the purchase of the Cheltenham Township wastewater system for $50.25 million. This acquisition will add 10,200 customers to Aqua America’s existing customer base.

The acquisition will ensure that the 90-year old sewer system of Cheltenham Township is provided with the much needed investments for its upgrade and maintenance. Without Aqua America’s aid, it would have been difficult for the township to make these investments without assuming loans and significant tax increases.

Aqua America is following the acquisition route to expand operations. During the five-year period ended Dec 31, 2018, the company had expanded utility operations by completing 64 water and wastewater system acquisitions. It is going to invest nearly $550 million in 2019 to strengthen its water and wastewater infrastructure. This will be part of Aqua America’s investment target of more than $1.4 billion in the 2019-2021 time period.

Acquisitions in Pennsylvania

In the recent past, we have noticed a number of acquisitions of water and wastewater systems in Pennsylvania, which were essential for repair and upgrade of old systems. Earlier this month, Aqua Pennsylvania completed the purchase of three municipal water systems for $3.5 million, which added 535 customer connections.

American Water Works Company (AWK - Free Report) , through its subsidiary Pennsylvania American Water, has added 10,300 and 2,700 new wastewater and water customers, respectively, to the existing customer base through the inorganic route in the year-to-date period.

These acquisitions will ensure extension of high-quality water and wastewater services to new customers, without an immediate increase in rates.

Acquisitions to Aid Water Industry
 
The U.S. water and wastewater infrastructure is aging. Per an American Water Works Association report, more than 200,000 water lines break per year was registered in the United States, resulting in 7 billion gallons of water leaking out of aging pipes.

At present, more than 53,000 water systems in the United States are providing water solutions to customers. The highly fragmented water industry creates operational challenges in meeting increasing water requirement, as it becomes difficult for small water suppliers to replace the aging water and wastewater infrastructure.

Hence, consolidation in the water industry is quite essential as it provides big water utilities with the financial strength to make the much required investments to repair and upgrade the old systems.

Price Performance

Shares of Aqua America have outperformed the industry in the past 12 months.



Zacks Rank and Key Picks

Currently, Aqua America has a Zacks Rank #3 (Hold). Some better-ranked water utilities are AquaVenture Holdings Ltd. (WAAS - Free Report) and The York Water Company (YORW - Free Report) . AquaVenture sports a Zacks Rank #1 (Strong Buy) and The York Water Company carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AquaVenture Holdings delivered average positive earnings surprise of 15.6% in the last four quarters. The Zacks Consensus Estimate for 2019 and 2020 has moved up 9.9% and 5.2%, respectively, in the past 60 days.

The York Water Company delivered average positive earnings surprise of 2.3% in the last four quarters. The Zacks Consensus Estimate for 2019 and 2020 has moved up 1.8% and 0.9%, respectively, in the past 60 days.

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