American Water Works Company, Inc.
) continues with its strategic acquisition program. The company's
unit Kentucky American Water has inked a deal to acquire the water
and wastewater assets of the City of Millersburg, KY. The
transaction is expected to be completed by 2014.
Post transaction, Kentucky American Water will provide water and
wastewater services to the Millersburg community.
American Water Works has a low customer base in the state of
Kentucky compared with its operations in Pennsylvania, New Jersey,
Missouri and several other states. The acquisition will enable
Kentucky American Water to enhance its customer base by around 800.
We believe Kentucky American Water's decision to include the City
of Millersburg's assets will not only reap synergies from economies
of scale but also reduce competition.
Past records show that American Water Works has a systematic
inorganic growth strategy. The company generally acquires assets
having similar lines of business, which are instantly accretive.
American Water Works' previous acquisitions have helped it to
expand its core offerings.
Year to date, American Water Works completed several significant
acquisitions, including the Yankeetown Water System in southwestern
Indiana and Lucas Estates Water Company in Ulster County, NY.
We note that many utility providers follow acquisitions and
joint-venture initiatives to strengthen their presence in
respective territories. Apart from American Water Works, its peers
Consolidated Water Co. Ltd.
Connecticut Water Service Inc.
Aqua America Inc.
) utilized inorganic strategies to enhance their scale of
American Water Works has a stable liquidity position. As of Mar 31,
2014, the company had cash balance of $30.8 million and available
fund of $1,200 million under the credit facility through its unit
American Water Capital Corp. In addition, the company had a strong
cash generation capacity. In first-quarter 2014, cash flow from
operating activities increased to $244.9 million from $149.6
million in the year-ago comparable period. A favorable financial
position enables American Water Works to pursue a steady expansion
American Water Works' acquisition program and upgrading of aging
infrastructure will enable it to deliver reliable services to its
customers, while maintaining government regulations and public
Voorhees, N.J.-based American Water Works serves around 14 million
people in the U.S. and Canada, offering drinking water, wastewater
and other allied services. The company currently has a Zacks Rank
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
AMER WATER WORK (AWK): Free Stock Analysis
CONN WATER SVC (CTWS): Free Stock Analysis
CONSOLTD WATER (CWCO): Free Stock Analysis
AQUA AMER INC (WTR): Free Stock Analysis Report
To read this article on Zacks.com click here.