American Water Unit Provides 2014 Construction Plan - Analyst Blog

American Water Works Company, Inc.'s AWK subsidiary Pennsylvania American Water has provided its construction program for 2014. Per the plan, the company will restore thirteen existing water storage tanks and construct four new storage infrastructures in the state of Pennsylvania. The expected investment for these projects will be approximately $10 million.

Under the water storage tanks restoration program, Pennsylvania American Water will have to examine, sandblast and repaint the existing tanks.

The current project will help Pennsylvania American Water to expand the service life of the infrastructure and reduce delivery interruption, thereby improving water supply reliability.

Pennsylvania American Water plans to complete the construction by 2014. American Water Works continues to increase its customer base. In 2013, the company added around 30,000 customers, including roughly 20,000 under the wastewater operations. We believe addition of the new storage facility will help the company to meet increasing customer demand.

In addition, this initiative will help to enhance water flow capacity for firefighting activities in the locality.

The U.S. government continues to impose new guidelines to maintain reliability in water supply. As per the U.S. Environmental Protection Agency's report, the U.S. utility providers need to invest $384 billion through 2030 to rehabilitate and improve the water system.

We note that American Water Works is strictly following the government regulations and continues to improve its existing water systems while adding new assets to its portfolio. Meanwhile, Pennsylvania American Water reported that the company will invest around $380,000 to replace roughly 4,100 feet of aging water main in Punxsutawney.

In 2013, Pennsylvania American Water invested roughly $16.5 million to restore fifteen existing tanks and build nine new storage assets.

American Water Works' stable cash position of $27 million as of Dec 31, 2013, up 10.7% from the prior-year level, supports its steady infrastructure upgrade program.

American Water Works currently has a Zacks Rank #3 (Hold). However, some better-ranked stocks in the same industry include American States Water Company AWR, Middlesex Water Company MSEX and Connecticut Water Service Inc. CTWS. While American States Water and Middlesex Water hold a Zacks Rank #1 (Strong Buy), Connecticut Water Service carries a Zacks Rank #2 (Buy).