American States Water Unit Signs Defense Deal Worth $510M

American States Water Company (NYSE:AWR) announced that its unit American States Utility Services Inc. (‘ASUS’) has received a contract worth $510 million to operate and maintain the water distribution and wastewater collection systems at Eglin Air Force Base, Florida.

Contract Details

Per the contract, American States Water Company unit will be required to provide fresh water and wastewater collection facilities to the Air Force base for the next 50 years.

ASUS was selected through a competitive bid for this defense contract. Appreciating its knowledge and expertise in maintenance and construction management services for water and wastewater systems located in military bases throughout the country, this company was found suitable among the six bidders.

Existing Defense Contract of ASUS

ASUS through its subsidiaries already has five, 50-year firm, fixed-price defense service contracts from the various United States military bases. The inclusion of this new defense contract will further enhance the earnings visibility of this water utility company.

Contracted Services segment of American States Water Company made up nearly 20% of its total revenues in 2015, signing of the new defense contact will certainly increase the contribution of this segment in the total mix.

Our View

American States Water Company’s strength lies in its expanding customer base, extensive water rights and strong credit ratings. Plus the long term defense service contracts will boost the topline of this water utility company. In addition, organic growth initiatives and consistent dividend payment makes this stock attractive.

American States Water Company currently has a Zacks Rank#3(Hold). Some better-ranked stocks in the water space are American Water Works Company, Inc. (NYSE:AWK) , Connecticut Water Service Inc. (NASDAQ:CTWS) and California Water Service Group (NYSE:CWT) , all three currently carrying a Zacks Rank #2 (Buy).

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