California Water Boosts Wastewater Operations Through Silverwood Deal

California Water Service Group’s CWT subsidiary, California Water Service (Cal Water), has signed an agreement with an affiliate of DMB Development to own and operate the wastewater and recycled water systems of Silverwood. It is a new master-planned, mixed-use community currently under construction in San Bernardino County, CA. 

This focus on wastewater acquisition aligns with California Water's broader efforts to diversify water sources and enhance water sustainability, especially in the face of drought and growing demand.

Details of the Agreement

Per the terms of the agreement, Cal Water will start serving about 500 wastewater connections (now being supplied by the City of Hesperia) after the community's wastewater treatment plant is completed. Silverwood is anticipated to have over 15,000 customer connections when the buildout is fully developed. The company will take ownership of the wastewater collection system and recycled water distribution system in phases as they are completed and ready to accommodate new connections.

Phased ownership transfers are contingent upon satisfying closing conditions. Under the California Public Utilities Commission's supervision, the Silverwood system will be reorganized as a Cal Water district.

CWT Continues to Improve Service Reliability

California Water is primarily focused on expanding operations in the western United States through acquisitions. It continues to explore new opportunities to expand regulated and non-regulated water and wastewater activities. 

The company, through strategic acquisitions, expands its operations and makes necessary investments to upgrade the acquired assets. This helps provide high-quality services to an expanding customer base and meet emergency firefighting requirements. 

California Water’s capital expenditure directly improves service quality by enabling investments in infrastructure upgrades, such as replacing aging pipelines and enhancing water systems to withstand power outages and protect against contaminants. These investments ensure a more reliable and safer water supply for customers. The company plans to invest $660 million in 2025 and $2.06 billion during 2025-2027.

Significance of Consolidation

According to the American Society of Civil Engineers, there are nearly 50,000 community water systems and 14,000 wastewater treatment systems in the United States. These systems play a crucial role in providing clean drinking water and treating wastewater, which are essential for public health and the environment. 

There is a trend of U.S. water utility companies acquiring wastewater systems. Many municipalities face challenges in funding and managing their wastewater infrastructure. Acquisitions by private companies can bring in needed capital and expertise for upgrades and improvements. Acquisitions can bring technological advancements and operational efficiencies to wastewater systems.

Here are some other companies that also benefit from acquisitions: 

American Water Works AWK is actively pursuing acquisitions of wastewater systems as part of its growth strategy. It is also doing so to address the aging infrastructure challenges in the water and wastewater industry. In 2025, American Water's subsidiary, Pennsylvania American Water, acquired the wastewater system assets of the Butler Area Sewer Authority for $231.5 million.

AWK’s long-term (three to five years) earnings growth rate is 7.4%. The Zacks Consensus Estimate for 2025 earnings per share (EPS) implies year-over-year growth of 5.9%.

Middlesex Water Company MSEX is focused on expanding into the wastewater business. The company views wastewater operations as a natural extension of its existing water services, allowing it to offer a more comprehensive suite of solutions to customers and communities. 

MSEX’s long-term earnings growth rate is 6.1%. The Zacks Consensus Estimate for 2025 EPS implies year-over-year growth of 2.4%.

Essential Utilities WTRG, through its subsidiary Aqua, is actively pursuing wastewater acquisitions as part of its growth strategy. The company has six signed purchase agreements for additional water and wastewater systems in Pennsylvania, Texas, and Ohio that are pending closing and are expected to serve over 210,000 equivalent retail customers. 

WTRG’s long-term earnings growth rate is 5.18%. The Zacks Consensus Estimate for 2025 EPS implies year-over-year growth of 6.6%.

CWT’s Stock Price Performance

In the past three months, shares of the company have risen 0.5% compared with the industry’s 4.3% growth.

CWT’s Zacks Rank

California Water currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

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This article originally published on Zacks Investment Research (zacks.com).

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