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American Water Works Unit Acquires Dunnigan Water Works

A subsidiary of the water utility American Water Works Company Inc. AWK ) - California American Water - has acquired Dunnigan Water Works for an aggregate value of $2 million.

This acquisition will provide California American Water access to the technical expertise of Dunnigan in water and waste water treatment and distribution. Additionally, it will add 243 service connections to the utility's existing customer base of 600,000.

The industry outlook for U.S. water and sewer facilities for 2016 is relatively stable despite current challenges like rising costs and lower sales. As states like California try to keep up with the 25% state-wide mandatory conservation requirement, development of alternative water sources through drinking water projects, like saltwater desalination and recycled water, will get a major boost.

Last month, the company further expanded its operations by acquiring Hickory Hills water and sewer systems, through its unit Missouri American Water. This acquisition added 48 customers to Missouri American Water's customer base (read: American Water Works (AWK) Unit Acquires Hickory Hills ).

The U.S. water utility space is highly fragmented as there are a number of water utilities operating on various scales ranging from some hundreds of customers to a million. The fragmented water industry has raised concerns about whether the smaller systems are sustainable in terms of competence and adaptability.

Consolidation allows larger operators with financial strength and the ability to upgrade the systems of smaller service providers to render quality water services across all customer classes.

Zacks Rank

American Water Works currently has a Zacks Rank #3 (Hold). Some better-ranked water stocks are Artesian Resources Corp. ARTNA , Connecticut Water Service Inc. CTWS and The York Water Company YORW , all carrying a Zacks Rank #2 (Buy).

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YORK WATER CO (YORW): Free Stock Analysis Report

CONN WATER SVC (CTWS): Free Stock Analysis Report

AMER WATER WORK (AWK): Free Stock Analysis Report

ARTESIAN RES (ARTNA): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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