American Water's Subsidiary to Acquire Water and Wastewater Assets

American Water Works Company’s AWK subsidiary, Pennsylvania American Water, has announced agreements to acquire the Indian Creek Valley Water Authority and the Sutersville-Sewickley Municipal Sewage Authority. These acquisitions will expand its customer base by adding approximately 2,700 metered water connections and 500 wastewater consumers, respectively. The purchase price for the Indian Creek Valley system is $32.8 million, while the Sutersville-Sewickley wastewater system will be acquired for $3.25 million. 

Both transactions are expected to close in the third quarter of 2026, subject to necessary approvals. Following the acquisitions, Pennsylvania American Water plans to invest $8.9 million in upgrades to the Indian Creek Valley Water Authority’s infrastructure and allocate $800,000 to enhance the Sutersville-Sewickley wastewater system. 

Over the past decade, the company has invested more than $4.27 billion in capital improvements and expects to continue spending between $525 million and $625 million annually in the coming years. For 2025 alone, planned investments exceed $586 million to support ongoing improvements to water and wastewater facilities.

Fragmented and Aging Water Industry Needs Investment

The U.S. water industry remains highly fragmented, with more than 50,000 community water and 14,000 wastewater treatment systems. Many smaller utilities lack the financial resources to upgrade aging infrastructure, leading to operational inefficiencies and water loss. Acquisitions by larger players having more financial capabilities will lead to the modernization of smaller old systems and customers will get better services.

The U.S. water and wastewater infrastructure is deteriorating, with water main breaks occurring every two minutes, according to the American Society of Civil Engineers. The Environmental Protection Agency estimates that $1.25 trillion in investments will be needed in the next 20 years to maintain and expand water services.

Utilities Are Consolidating to Improve Water Infrastructure

American Water is quite active in making strategic acquisitions and then making necessary investments in upgrading the acquired assets. AWK completed three acquisitions in three states as of April 30, 2025. The pending 18 acquisitions (as of April 30, 2025), when completed, will add another 37,400 customers to its customer base. 

Essential Utilities WTRG is pursuing 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 expected to serve more than 210,000 equivalent retail customers. 

California Water Service Group CWT makes strategic acquisitions to expand its operations and make necessary investments to upgrade the acquired assets to provide high-quality services to an expanding customer base and emergency firefighting requirements. The company’s strategic acquisitions target new markets in high-growth regions. California Water Service Group’s subsidiary, California Water Service, recently signed an agreement with an affiliate of DMB Development to own and operate the wastewater and recycled water systems of Silverwood.
 
Consolidated Water Co. Ltd. CWCO has a history of strategic acquisitions to expand its operations and offerings. CWCO pursues opportunities in businesses that operate advanced water-treatment plants for the government or government agencies, under medium or long-term contracts.

AWK Stock’s Price Performance

In the past six months, shares of the company have risen 15.2% compared with the industry’s 18.7% growth.

AWK’s Zacks Rank

American 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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