Water Utilities Key Trends and Factors
ESG investing boosts water utilities
Water utilities investing as a proxy of combatting world water scarcity - expected to hurt the world. A lot of those ESG funds are boosting water utilities. Growth in ESG (environmental, social and corporate-governance) investing, which pushed up the stock prices of U.S. water utilities in 2019.
AWK c143.6 M=26b TotRet1yr=18% y=2%
- CAGR eps to grow 7-10%/year - 5-7% of that to come from capex on regulated
- Capex to be spent $1.7b/yr for next four years
GROWTH by Rollups of local Muni waterworks
2019 46,900 new customers in 2019, and had other acquisitions in process that will add 26,400, Added 10,400 organically
2018 $3.4b Revenue
- 13% market svcs (military installations, warranty services and water-related services to the oil-and-gas)
AWK plans to reduce its greenhouse gas emissions by 40% by 2025. Through infrastructure spending, it has reduced its annual water usage by 3.5 million gallons.
American Water Works is a holding company that provides water, wastewater, and other water-related services. It owns regulated and market-based water utilities in 46 states and one Canadian province, providing services to more than 14 million people. 1886 founded - 2008 public it was spun off from Germany's RWE Group.
WTR c46 M=26b TotRet1yr=18% y=2%
FY 2019/2020 - Analysts expect WTR to report 5% to 6% profit growth for both full-year 2019 and 2020. Meanwhile, Aqua America increased its dividend by 7% at the beginning of September, and has improved it by 7.3% annually over the past half-decade.
SEG: Gas utility
In October 2018 to do a $4.3B acq Pennsylvania's natural gas utility Peoples Gas. The deal was done to turn Aqua America into an energy infrastructure company, diversifying its revenue streams beyond water. Originally, the acquisition was expected to close in mid-2019. Unfortunately, it has hit a few regulatory snags along the way. However, at the end of October, a judge for the Pennsylvania Public Utility Commission ruled that the purchase is in the best interests of Pennsylvania residents. The full PPUC should rule on it early this year, with Aqua America expecting to close the deal soon thereafter. The combined entity would have a rate base of $7.2 billion (69% water, 31% natural gas) with customers in 11 states, including Aqua America's home state of Pennsylvania. Together, it would serve more than 1.7 million customers and have an enterprise value of $13.4 billion.