Pennsylvania American Water Awarded Two PENNVEST Loans and a Grant to Make Water and Wastewater Infrastructure Improvements

Rhea-AI Summary

Pennsylvania American Water has been awarded $7.9 million in low-interest financing from PENNVEST for two infrastructure improvement projects. The funding includes:

• A $1,891,056 loan and a $3,908,944 grant to replace 357 lead water service lines in Pittsburgh
• A $2.1 million loan to repair aging wastewater infrastructure in Exeter, Berks County

The Pittsburgh project will replace 258 residential lines in the 29th Ward and 99 in Mt. Oliver Borough, improving water quality for customers. The Exeter project will replace 1,815 feet of sanitary sewer main and 18 manholes, reducing inflow and infiltration. These investments align with Governor Shapiro's focus on ensuring clean water access for all Pennsylvanians.

Positive

• Secured $7.9 million in low-interest financing for infrastructure improvements
• Replacement of 357 lead water service lines in Pittsburgh, improving water quality
• Repair of aging wastewater infrastructure in Exeter, enhancing system efficiency
• Low-interest loan terms: 1% for 30 years (Pittsburgh) and 1% for 5 years, 1.743% for remaining 15 years (Exeter)

Negative

• None.

Insights

Financial Analyst

The $7.9 million PENNVEST financing for Pennsylvania American Water (PAW) is a positive development, albeit with modest financial impact given AWK's $27.6 billion market cap. The funding, split between loans and a grant, will support critical infrastructure improvements without significantly impacting the company's balance sheet.

The $5.8 million allocated for lead service line replacements in Pittsburgh aligns with regulatory trends and could mitigate future compliance risks. The $2.1 million for wastewater system repairs in Exeter demonstrates PAW's commitment to maintaining service quality and reducing operational inefficiencies.

The favorable loan terms (1% interest for 30 years on the Pittsburgh project and 1% for 5 years, then 1.743% for 15 years on the Exeter project) will minimize the financial burden of these improvements. This low-cost financing should allow PAW to invest in infrastructure without significantly impacting customer rates or profitability.

While these projects are important for local operations, they are unlikely to materially affect AWK's overall financial performance or stock price in the short term. However, they contribute to the company's long-term strategy of maintaining and upgrading its water and wastewater infrastructure, which is important for sustaining growth and regulatory compliance in the water utility sector.

Environmental Engineer

The PENNVEST funding for Pennsylvania American Water's infrastructure projects addresses critical environmental and public health concerns. The replacement of 357 lead service lines in Pittsburgh is particularly significant, as it directly improves water quality and aligns with broader initiatives to eliminate lead from public water systems.

This proactive approach to lead removal not only enhances public safety but also positions PAW favorably in terms of regulatory compliance. The EPA's Lead and Copper Rule Revisions mandate more aggressive lead service line replacement and this project demonstrates PAW's commitment to meeting and exceeding these standards.

The Exeter wastewater system repairs, including the replacement of 1,815 feet of sanitary sewer main and 18 manholes, will reduce inflow and infiltration issues. This improvement is important for maintaining environmental integrity, as it prevents untreated wastewater from entering groundwater and surface water systems during heavy rainfall events.

These projects showcase PAW's dedication to sustainable infrastructure management, which is increasingly important in the face of aging water systems nationwide. By addressing these issues proactively, PAW is likely to avoid more costly emergency repairs and potential environmental violations in the future, ultimately benefiting both the company and its customers.

MECHANICSBURG, Pa.--(BUSINESS WIRE)-- The Shapiro administration recently announced that Pennsylvania American Water was awarded $7.9 million in low-interest financing from the Pennsylvania Infrastructure Investment Authority (PENNVEST), for two infrastructure improvement projects, including the replacement of lead service lines in the City of Pittsburgh and wastewater collection system repairs in Exeter, Berks County.

“At Pennsylvania American Water, we strive to provide our customers with high-quality, reliable water and wastewater services while also meeting environmental standards and regulations. We’re thankful to PENNVEST for approving loan requests for projects that will support us in those efforts,” said Pennsylvania American Water Vice President of Engineering Bruce Aiton. “This funding will have a positive impact on the service provided for many of our customers by enabling us to continue our efforts to remove lead service lines in our City of Pittsburgh water system and also to repair aging wastewater infrastructure in our Exeter wastewater system.”

One PENNVEST loan of $1,891,056 and one grant of $3,908,944 million will support a project to replace 357 identified lead water service lines in the City of Pittsburgh, including 258 residential lines in the 29th Ward and 99 residential lines in Mt. Oliver Borough.

The project will replace 57 utility-owned and 300 private-owned lead water service lines. Removal of all leaded components will provide direct water quality improvements to customers and is consistent with regulatory and Pennsylvania American Water initiatives to eliminate lead-containing lines from the public water supply system. Learn more at pennsylvaniaamwater.com/leadfacts.

The $2.1 million loan will repair aging infrastructure in the company’s Exeter wastewater system, reduce inflow and infiltration, and improve treatment plant operations. Specifically, the project consists of replacing 10 sections of sanitary sewer main totaling approximately 1,815 feet and the 18 manholes located therein.

“Investing in Pennsylvania’s infrastructure is commonsense – my Administration continues to focus on these upgrades with the goal that every Pennsylvanian has access to clean water,” said Governor Josh Shapiro in the Commonwealth’s official announcement. “This investment will help to ensure that public health is protected across the Commonwealth and that residents have their constitutional rights to pure water upheld.”

The terms for the PENNVEST loan for the Pittsburgh project are 1 percent for the full 30-year loan period. For the Exeter loan, the terms are 1 percent for the first five years and 1.743 percent for the remainder of the 20-year loan period.

About American Water
American Water (NYSE: AWK) is the largest regulated water and wastewater utility company in the United States. With a history dating back to 1886, We Keep Life Flowing® by providing safe, clean, reliable and affordable drinking water and wastewater services to more than 14 million people with regulated operations in 14 states and on 18 military installations. American Water’s 6,500 talented professionals leverage their significant expertise and the company’s national size and scale to achieve excellent outcomes for the benefit of customers, employees, investors and other stakeholders.

For more information, visit amwater.com and join American Water on LinkedIn, Facebook, X and Instagram.

About Pennsylvania American Water
Pennsylvania American Water, a subsidiary of American Water, is the largest regulated water utility in the state, providing high-quality and reliable water and wastewater services to approximately 2.3 million people.

View source version on businesswire.com: https://www.businesswire.com/news/home/20241016625499/en/

Media Contact:

David Misner

Senior Manager, External Communications

717-262-7525

david.misner@amwater.com

Source: Pennsylvania American Water

FAQ

What financing did Pennsylvania American Water (AWK) receive from PENNVEST?

Pennsylvania American Water received $7.9 million in low-interest financing from PENNVEST, including a $1,891,056 loan and $3,908,944 grant for Pittsburgh, and a $2.1 million loan for Exeter.

How many lead water service lines will AWK replace in Pittsburgh?

Pennsylvania American Water will replace 357 lead water service lines in Pittsburgh, including 258 in the 29th Ward and 99 in Mt. Oliver Borough.

What improvements will AWK make to the Exeter wastewater system?

AWK will replace 10 sections of sanitary sewer main totaling 1,815 feet and 18 manholes in the Exeter wastewater system to reduce inflow and infiltration and improve treatment plant operations.

What are the loan terms for AWK's PENNVEST financing?

For the Pittsburgh project, the loan terms are 1% for the full 30-year period. For the Exeter project, the terms are 1% for the first five years and 1.743% for the remaining 15 years of the 20-year loan.