Water utility company American Water Works Company Inc.’s AWK subsidiary, California American Water, has contracted three firms for building 22 miles of pipeline, pump stations and storage facilities to reach desalinated water to 100,000 customers. The contracts are part of the proposed Monterey Peninsula Water Supply Project and worth a total of $92 million.
The Monterey Peninsula Water Supply Project will include either a 9.6 million gallon per day (MGD) desalination plant or a 6.4 MGD desalination plant with 3.2 MGD advanced treated recycled water from Pure Water Monterey, a groundwater replenishment project (GWR). The purpose of the project is to lower the local community’s dependence on Carmel River.
Out of the six firms that responded to the proposals requested in August, Garney Pacific, Mountain Cascade and Monterey Peninsula Engineering were selected for their expertise and cost advantages. California American Water has also awarded contracts to CDM Contractors for the desalination plant and Boart Longyear to construct source wells. Outsourcing to multiple parties not only ensures timely completion and lower costs but also reduces the risks associated with outsourcing the entire project to one firm.
Recently, American Water Works expanded its operations as well as customer base with the acquisition of Hickory Hills’ water and sewer systems through its unit, Missouri American Water. (Read: American Water Works Unit Acquires Hickory Hills)
The industry outlook for U.S. water and sewer facilities for 2016 is relatively stable despite the current challenges like rising costs and lower sales. As states like California try to keep up with the 25% state-wide mandatory conservation requirement, development of alternative water sources through drinking water projects, like saltwater desalination and recycled water, will get a major boost.
Zacks Rank
American Water Works currently has a Zacks Rank #2 (Buy). A couple of well-ranked water stocks are Artesian Resources Corp. ARTNA and The York Water Company YORW both carrying a Zacks Rank #2. Another well-placed stock in the broader utility space is Korea Electric Power Corp. KEP sporting a Zacks Rank #1 (Strong Buy).
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