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California Water Receives Nod to Acquire Rainier View Water

California Water Service Group’s CWT subsidiary — Washington Water Service (Washington Water) — received approval from the Washington Utilities and Transportation Commission to acquire the Rainier View Water Company’s water system assets.

The company submitted application for the same in February 2020. The final transaction is expected to be completed in June 2020. Along with providing water services to about 46,500 people, Washington Water will now serve additional 35,000 people, previously belonging to Rainier View Water. Notably, Rainier View Water had 27 water systems in service.

Importance of Consolidation  

Currently, the global economy is affected by the impact of the novel coronavirus outbreak. California Water is playing a significant role. Per the United States Environmental Protection Agency, drinking water doesn’t contain COVID-19 virus. People are staying back at home and using water to wash their hands with soap at regular intervals to break the spread of this contagious virus.

Water utility industry is very fragmented and faces operational challenges in meeting increasing demand for water. At present more than 53,000 water systems in the United States are providing water solutions to customers. It becomes difficult for small water suppliers to make regular investments for upgrading old and soiled water as well as wastewater lines. Thus, acquisitions enable big water utility companies to make regular investments to repair and upgrade old water infrastructure as well as avoid wastage of potable water. Notably, 24x7 potable water supply is required to fight the coronavirus pandemic.  

Regular Investments in Water Space

The aging water and wastewater infrastructure in the United States requires consistent investment. Per an American Water Works Association report, a significant number of water lines burst in the country everyday due to the aging of existing water and wastewater infrastructure. Water main line breaks not only disrupt the supply of potable water but also increase the risk of contamination. Moreover, to lower the threat of COVID-19, clean water is absolutely essential. Upgrades and repair of old and soiled pipelines will ensure lesser of pipeline breaks.

In 2019, California Water invested $273.8 million, up 0.8% from 2018 levels. The company also intends to invest $275 million and $285 million in 2020 and in 2021 respectively. The near-zero interest rates will assist the company to source funds at a cheaper rate if required and carry on infrastructure strengthening work.

Other water utilities are also investing to upgrade and maintain their existing assets. American Water AWK plans to invest $8.8-$9.4 billion in the 2020-2024 time period and $20-$22 billion in the next decade. Middlesex Water Company MSEX aims to invest $295 million in 2020 to 2022 time period. American States Water Company’s AWR subsidiary, Golden State Water Company expects to invest $120-$135 million in 2020.

Price Movement



California Water Service’s shares have dropped 1.1% in the past 12 months against 8.9% growth of the industry.

Zacks Rank

Currently, California Water Service has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Middlesex Water Company (MSEX) : Free Stock Analysis Report
 
American States Water Company (AWR) : Free Stock Analysis Report
 
American Water Works Company, Inc. (AWK) : Free Stock Analysis Report
 
California Water Service Group (CWT) : Free Stock Analysis Report
 
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