American Water Works (AWK) in Illinois acquires assets

American Waterworks AWK announced that its unit, Illinois American Water, has acquired the Village of Broadlands water system for $0.425 million. This acquisition will add 155 new water customers to Illinois American Water’s customer base.

Since 2020, Illinois American Water has been expanding its high-quality service in Illinois and partnering with 12 communities across Illinois through acquisitions and making necessary investments to modernize aging infrastructure.

The aging water and wastewater infrastructure of the Village of Broadlands water system also requires investment. The American Water Works unit plans to invest in critical infrastructure in the first year that will improve water quality and system reliability.

Illinois American Water is actively expanding its operations into inorganic routes. The company acquired Village of Tolono Water and Wastewater Systems for $9.416 million in June 2023, its first acquisition of 2023. This acquisition added 1,295 new water and 1,254 wastewater customers to Illinois American Water’s customer base.

The widely dispersed industry needs consolidation

According to the American Society of Civil Engineers (“ASCE”), more than 50,000 municipal water systems and 16,000 municipal sewer systems in the United States currently provide water solutions to customers.

According to ASCE findings, 6 billion gallons of treated water are lost every day in the United States due to delays in necessary pipeline repairs and maintenance. Due to the large number of small operators in the industry and the lack of adequate funding, necessary infrastructure upgrades and repairs are sometimes delayed.

The takeover of small units by larger companies ensures the necessary investments in infrastructure modernization and continued high-quality customer service. American Water Works is the largest, most geographically diversified and publicly traded water and wastewater company that continues to expand its market reach through strategic acquisitions.

Large water companies acquire smaller units in order to expand their operations and extend high-quality services to the smaller units they acquire. However, the pace of acquisitions must accelerate because there are too many small units in the United States requiring attention and financing.

Investments for water space

According to the U.S. Environmental Protection Agency, approximately $744 billion in investments are needed to maintain and expand drinking water and wastewater services to meet demand over the next 20 years. Water utilities are gradually consolidating and investing in necessary upgrades to aging assets.

American Water Works regularly invests in maintaining its infrastructure. It intends to invest $2.9 billion in 2023 to strengthen and expand water and wastewater infrastructure.

Other water utilities such as Essential tools WTRG, California Water Services Group CWT and Middlesex Water MSEX have well-developed capital investment plans to strengthen their infrastructure.

Essential Utilities plans to invest $1.1 billion in 2023 and $3.3 billion by 2025 to improve water and natural gas systems and better serve customers through improved information technology.

The California Water Service plans to invest more than $725 million in capital expenditures through 2024.

Middlesex Water plans to invest $266 million between 2023 and 2025 to strengthen water and wastewater infrastructure and deliver services to customers safely, reliably and efficiently.

Price performance

Over the past three months, American Water Works shares have lost 3.3% compared with the industry’s decline of 38.3%.

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Zacks Rank

American Water Works is currently sporting a Zacks Rank of #2 (Buy).

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