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AWK Unit Invests in Water Systems

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American Water Works Company’s (AWK - Free Report) unit Pennsylvania American Water decided to increase its water storage capacity my making fresh investments of $16.5 million. Of this $11.5 million will be used to construct 9 new water storage tanks and $5 million will be kept aside  for repair and maintenance of 14 existing water storage tanks.

The decision to invest in new storage tanks was driven by the need for sufficient and reliable water supply in its service territories. The new storage tanks will increase Pennsylvania American Water’s water storage capacity by around 4.4 million gallons and are expected to become operational by 2013 end. The new storage capacity will help the company to meet the growing demand for water from customers and for fire protection.

The repair and maintenance of the existing 14 storage units will not only ensure reliable supply of water to its customers but also save costs substantially in contrast to replacing the structures. These savings will free up capital for strategic acquisitions.
Recently, Pennsylvania American Water expanded its presence in northeast Pennsylvania by acquiring two water systems for a total price of $1.65 million. The strategy to grow through organic and inorganic initiatives will help the company to meet increasing customer demand.

Illinois American Water has also invested about $330 million in water and wastewater system improvements across the state in the 2009 through 2013 period.

As per American Water Works Association, the maintenance and replacement of outdated water systems in the U.S. will cost at least $1 trillion over the next 25 years. The 2013 capital budget of the water utility Connecticut Water Service Inc. (CTWS - Free Report) includes $31.3 million for infrastructure investment. Although it is an uphill task, systematic investments from water utilities would make it more feasible.

American Water Works Company currently has a Zacks Rank #2 (Buy). We also like Aqua America Inc. (WTR - Free Report) having a Zacks Rank #1 (Strong Buy). American States Water Company (AWR - Free Report) also looks favorable with a Zacks Rank #2 (Buy).

Voorhees, NJ based American Water Works Company was founded in 1886. This water and wastewater utility caters to approximately 14 million residents across the country and parts of Canada.  With approximately 6,700 employees, the company’s market capitalization is $7.17 billion.

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