California Water Service (CWT) Arm To Acquire Kalaeloa Water

California Water Service Group (NYSE:CWT) announced that its subsidiary, Hawaii Water Service (“Hawaii Water”) has decided to expand its operation in Hawaii through the acquisition of Kalaeloa Water Company, a water and wastewater utility located in the Kapolei area of Honolulu County on Oahu, Hawaii. This acquisition is subject to the approval of Hawaii Public Utilities Commission.

The acquisition, on approval by the commission, will further boost the residential, commercial, and industrial customer count of Hawaii Water, which presently stands at 4,500 customers.

Consolidation is Essential in Water Space

The water and wastewater infrastructure in the United States is aging, and gradually nearing the end of its effective life. At present, more than 53,000 water systems in the United States provide water solutions to customers. The highly fragmented water industry creates operational challenges in meeting increasing water requirement.

Since the existing water and wastewater infrastructure in the United States is aging, proper maintenance and upgradation of the system will require investment of billions of dollars, which becomes difficult for small water utilities to make arrangement for. Per an American Water Works Association (“AWWA”) report, the cost of restoring aging underground water pipelines in the United States will be at least $1 trillion in the next 25 years.

Hence, consolidation enables the bigger water utility operators to make necessary investments to repair, maintain and replace the aging pipelines, and render high-quality potable water and wastewater services to the expanding customer base.

American Water Works Company (NYSE:AWK) and water utilities like Global Water Resources, Inc. (NASDAQ:GWRS) and Aqua America (NYSE:WTR) have been pursuing acquisitions to expand operations and provide high-quality service to customers.

Price Movement

Shares of California Water Service have outperformed the industry in a year’s time.

Zacks Rank

Currently, California Water Service has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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