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American Water's Illinois subsidiary completed the purchase of the City of Venice's wastewater collection system. The company plans to spend about $2.6 million over the next five years to modernize the infrastructure. This is a small deal, but it follows the company's core strategy of buying local, municipal systems. By taking over these smaller operations and spending money to fix them, the company grows the total value of the assets it owns, which is the primary way it earns higher profits through regulator-approved rate increases.
Source: PRNewsWire
Indiana American Water opened a new $2.2 million training center and launched a program to introduce students to careers in the water industry. This investment is part of the company's effort to develop a local workforce to maintain its infrastructure. For a company that manages thousands of miles of pipes, having a steady pipeline of trained workers is a practical necessity.
Source: PRNewsWire
American Water has chosen VertexOne to provide a new mobile-friendly platform for its 14 million customers. The system will handle self-service tasks and provide data on how much water a household is using. While this is a standard technology upgrade for a utility of this size, it helps modernize the business as it prepares to integrate with Essential Utilities.
Source: PRNewsWire
New Jersey American Water received approval from state regulators to raise its rates. This decision helps the company recover more than 1.4 billion dollars it is spending to modernize its water and wastewater systems. For a utility, winning these "rate cases" is the primary way it grows, as regulators allow the company to raise prices to earn a set return on the money it spends on new pipes and plants.
To help manage the impact on customers, the company is also issuing a 12-month bill credit. This credit comes from a settlement related to PFAS, which are long-lasting chemicals that have contaminated some water supplies. While the credit lowers what customers pay for the next year, the underlying rate approval is a win for the company because it confirms that its heavy infrastructure spending will be covered by future revenue.
Source: PRNewsWire
Treasury yields, which set the benchmark for borrowing costs, rose after a hot jobs report suggested the Federal Reserve might raise interest rates this month. For a utility like American Water Works, higher rates can be a double-edged sword.
The company spends billions of dollars each year to replace old pipes and treatment plants. When interest rates go up, it costs more to borrow the money needed for those projects. While regulators eventually allow the company to raise prices to cover these costs, there is often a delay between when interest expenses rise and when new rates take effect.
Source: CNBC
Management has a choppy track record of meeting its own targets, with misses in five of the last eight quarters. This suggests the business is harder to predict than its steady utility image implies.
| Expectation | |
|---|---|
| EPS | $2.11 |
| Revenue | $1.55B |
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