American Water Competition
Now Viewing American Water's competition in: Water & Sewer Utilities (primary)
Call Preparation Questions
Customers, Marketing, Pricing, Competition
Does the company bid on supplying water systems to newly developing communities in high-growth areas? -
Competitive Landscape
Demand depends on commercial and residential water needs, which are partly related to population growth and partly to the level of economic activity. The profitability of individual companies depends on efficiency of operations, because prices are fixed by public utility commissions (PUCs). Large companies have economies of scale in operations and the ability to raise capital for infrastructure improvements. Small companies can compete successfully through superior engineering or by serving smaller local markets. The industry is capital-intensive: average annual revenue per employee at the large companies is $250,000.
Business Challenges
CRITICAL ISSUES
Required Capital Investments - Deteriorating sewage collection and water distribution pipes and pumps requires large periodic capital investments. Federally mandated water and sewer improvements to fix outdated sewer systems are expensive, with little federal money available. Annual spending to maintain and expand water and sewage systems lags tens of billions what's needed to keep up with population growth and tighter health and pollution standards, according to the EPA, which confirms studies by private groups. About 450,000 of the 1.2 million miles of water and sewer pipes in the US need repair or replacement, and by 2020, about 45 percent of the nation's sewer pipes will. Spending requirements in the commercial end of the industry are smaller but just as urgent. Utilities sometimes defer needed repairs and upgrades because of the short-term impact on profitability.
Profitability Tied to Unpredictable Water Consumption - The revenue of water utilities depends on the volume of water consumed, which in turn depends on weather conditions. Residential water use increases in hot, dry weather and decreases during cool, rainy periods. During dry periods, municipalities may also restrict water use to conserve depleted supplies; consequently, profitability can vary highly throughout the year.
Industries Where American Water Competes
- Energy & Utilities
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Water Utilities(primary)
- Wastewater Treatment
- Water Distribution
- Utility Services
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Water Utilities(primary)
