Aqua America (WTR) to Invest USD 555 million to fortify infrastructure

16-05-2019
investment,wastewater treatment,Aqua America,infrastructure

Aqua America Inc. WTR has announced that is going to invest more than $555 million (SGD 759 million) in 2019 to strengthen its water and wastewater infrastructure. This will be part of its investment target of more than $1.4 billion (SGD 1.9 billion) in the 2019-2021 time period.

Aqua America has been investing consistently over the past few years to further improve the quality of water and wastewater services that it provides to customers across eight states. In the past five years, the company invested $1.5 billion (SGD two billion) in infrastructure improvements that helped in reduced water loss and lowering the frequency of service interruptions.

Aging Water Industry Needs Investment
Massive funding is needed to upgrade the quality of the U.S. water infrastructure. Per an American Water Works Association (“AWWA”) report, the cost of restoring aging underground water pipelines in the United States will be at least one trillion dollars (SGD 1.3 trillion) in the next 25 years. The AWWA report indicates in excess of 200,000 water line breaks per year in the United States, with more than seven billion gallons of water leaking out of aging pipes every year.

Regular investments from big water utilities will help to lower wastage of water from old pipelines. Apart from Aqua America, another water utility American Water Works Company AWK is investing regularly to strengthen its existing infrastructure. To this end, it aims to invest within $8-$8.6 billion in the 2019-2023 time period.

Bright Prospects for Water Industry
Demand for potable water and wastewater services is steadily increasing, thereby creating ample opportunities for growth and expansion in the industry.

Per an industry research, the global market for desalination is strong and its size is expected to reach more than $37 billion (SGD 50.6 billion) by 2026, doubling from the current level. This development shows that there is ample opportunity for growth in the water utility space.

With ample room for growth in the long term, companies like Eversource Energy ES from the electric utility space have started to show interest in the water supply industry.

Price Performance
Shares of Aqua America have gained 10.6 per cent over the past three months, outperforming its industry’s 7.9 per cent growth.

Zacks Rank & Key Pick
Aqua America currently has a Zack Rank #3 (Hold). A better-ranked stock in the same industry is Middlesex Water Co. MSEX, which sports a Zacks Rank #1 (Strong Buy).

Middlesex Water’s earnings have surpassed the Zacks Consensus Estimate in the last four quarters, resulting in average of 19.72 per cent. The Zacks Consensus Estimate for 2019 has moved up 5.9 per cent in the past 30 days to $2.17 (SGD 2.97) per share.