American Water Works Company, Inc. · NYSE:AWK
American Water Works — Investor Presentation (May 2021)
41 slides from American Water Works's investor presentation, May 2021
Slide 1: Investor Presentation May 2021
DRAFT V7 4/30/21 Investor Presentation May 2021
Slide 2: Forward-Looking Statements
DRAFT Forward-Looking Statements V7 4/30/21 Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and the Federal securities laws. They are not guarantees or assurances of any outcome
Slide 3: Investment Thesis
DRAFT V7 4/30/21 Investment Thesis 3
Slide 4: Our Business at a Glance
DRAFT Our Business at a Glance V7 4/30/21 Regulated Business as of December 31, 2020 53,000+ miles of pipe 609 water treatment plants 150 wastewater facilities 1,100 wells 75 dams Homeowner Services ~3 million contracts serving ~1.5 million customers Military Services Group Regulated Operations Home
Slide 5: Our Compelling Story
DRAFT Our Compelling Story V7 4/30/21 2021-2025 Plan 7-10%* EPS CAGR range Market-Based Businesses ~0.5% ~1% Regulated Acquisitions 2-3% 1.5-2.5% Regulated Investment CAPEX 5-7% *Anchored off 2020 EPS 5
Slide 6: Increase in Regulated Investment of $1.3 Billion Over the Next 5 Years
Increase in Regulated Investment of $1.3 Billion DRAFT V7 4/30/21 Over the Next 5 Years 2021 - 2025 Average Regulated Capital Plan ($ in billions) Capital Expenditures by Purpose 2021 – 2030 $22 - $25 4% 7% Infrastructure Renewal Regulated $3 - $4 Acquisitions Operational Efficiency, 8% Technology &
Slide 7: Managing Customer Bill Impact with a Disciplined Focus on Operating Costs
Managing Customer Bill Impact with a Disciplined DRAFT V7 4/30/21 Focus on Operating Costs Regulated O&M ** Efficiency Ratio* Added ≈327,000*** Adjusted O&M Expenses from customer connections 2010 to LTM 2021 increased only since 2010 1.1% CAGR* * Non-GAAP Measure – See appendix for reconciliation.
Slide 8: State Legislation Enables Growth
DRAFT State Legislation Enables Growth V7 4/30/21 Water Quality Fair Market Value 11 Consolidated Tariffs 12 Accountability Legislation 3 CA MO CA IA IA NJ IL IN NJ IL NY KY MD IN IN PA MO NJ MO KY VA PA WV MD WV VA 8
Slide 9: Timely Recovery of Revenues, Expense, and Investment Mechanisms
Timely Recovery of Revenues, Expense, and Investment DRAFT V7 4/30/21 Mechanisms 17 New Regulatory Mechanisms Across Our Footprint Since 2010 As of 2010 As of 3/31/2021 12 11 10 9 7 7 7 7 6 6 3 2 Revenue Stability Utility Plant Recovery Future Expense Infrastructure Consolidated Mechanisms Mechanism
Slide 10: Market-Based Businesses Provide Strategic Value
DRAFT Market-Based Businesses Provide Strategic Value V7 4/30/21 Military Services Group Homeowner Services 17 installations in current footprint ~3 million protection plan contracts serving Opportunity for infrastructure upgrades on ~1.5 million customers existing bases Over 40 different partnershi
Slide 11: Balance Sheet Strength
DRAFT Balance Sheet Strength V7 4/30/21 AWK Long-Term Issuer Rating Debt to Total Capital* S&P Global Moody’s 2020 ** 5-year Plan 2025 62% 59-60% A Baa1 (stable) (stable) *Includes both long-term and short-term debt **Excludes $500 million term loan Consolidated Debt Maturity Profile 5 years Liquidi
Slide 12: Superior Dividend Growth
DRAFT Superior Dividend Growth V7 4/30/21 Dividend Growth AWK 5-Year Dividend Growth Significantly Outperforms (Calendar Basis) DJUA & PHLX Utility Indexes * Future dividends are subject to approval of the American Water Board of Directors ** Source: Factset as of 4/28/21; 2021 consensus estimate 12
Slide 13: Our ESG Goals
DRAFT V7 4/30/21 Our ESG Goals 13
Slide 14: What ESG Means at American Water
DRAFT What ESG Means at American Water V7 4/30/21 Activists/ Investors Stakeholder Advocacy Groups Engagement Industry Associations Employees Workforce The Journey ESG Customers of ESG engagement Board of Customers Directors Infrastructure Regulatory Agencies/ Environmental State Utility Communities
Slide 15: How We Work
DRAFT How We Work V7 4/30/21 Inclusion & Diversity Supplier Diversity Safety People 59% 27.6% 67% >100k HRS Of Transfers/Promotions 2021 Goal: Achieve Reduction in workplace Safety training completed were minority, female, diverse supplier/small injuries since 2015 by employees veteran or disabled b
Slide 16: Environmental Goals
DRAFT Environmental Goals V7 4/30/21 Energy & Emissions* Water Use & Efficiency Climate Variability & Reduce absolute scope 1 and By 2035, meet customer needs Water Supply Resilience scope 2 greenhouse gas emissions while saving 15% in water By 2030, increase our water by more than 40% by 2025 from
Slide 17: Water Use & Efficiency Goal
DRAFT Water Use & Efficiency Goal V7 4/30/21 By 2035, American Water commits to meet customer needs while saving BENEFITS 15% in water delivered per customer compared to a 2015 baseline 2015 2020 2035 › Environment › Energy Savings 4.3% reduction gained since 2015 › Avoided Capital › Reduce Non-Reve
Slide 18: Climate Variability & Water Supply Resilience Goal
DRAFT Climate Variability & Water Supply Resilience Goal V7 4/30/21 By 2030, increase our water system resiliency to respond to more extreme events by increasing URI* weighted average by 10% from 2020 baseline BENEFITS › Availability and reliability of service › Customer, employee and public safety
Slide 19: Climate Variability & Water Supply Resilience Goal
DRAFT Climate Variability & Water Supply Resilience Goal V7 4/30/21 URI assesses a utility's ability to absorb and cope with an incident and return to normal operations as quickly as possible. People Power Utility Improved Enhanced Resilient Capital Employee Asset Resiliency Resilience Emergency Res
Slide 20: 1Q 2021 Overview
DRAFT V7 4/30/21 1Q 2021 Overview 20
Slide 21: First Quarter 2021 EPS Detail by Business
DRAFT First Quarter 2021 EPS Detail by Business V7 4/30/21 Regulated $0.06 MBB ($0.03) Other $0.02 Note: Results for Q1 2020 & Q1 2021 both included a $0.01 per share benefit from depreciation not recorded as required by assets held for sale accounting 21
Slide 22: Regulated Business Update
DRAFT Regulated Business Update V7 4/30/21 Legislative Indiana Kentucky House Enrolled Act 1287 House Bill 465 • Creates a mechanism that reduces the • Allows for acquisition price above net book upfront cost to new customers to extend value when certain criteria are met service to underserved areas
Slide 23: Regulated Business Update
DRAFT Regulated Business Update V7 4/30/21 Completed Rate Cases Pending Rate Cases • Effective as of January 28, 2021 • Additional authorized revenues of • Rate case filed August 28, 2020 $90 million over two steps (2021 and • Capital Investment of ≈$87 million 2022), excluding reduction for tax • 1
Slide 24: Rate Filings Summary
DRAFT Rate Filings Summary V7 4/30/21 ($ in millions) Rate Filings Requested Revenue in Completed* Pending Base Rate Effective since January 1, 2021 Proceedings * Annualized Revenue Increase for Rates Effective Since January 1, 2021; excludes a reduction in revenues from tax savings passed back to c
Slide 25: Acquisition of City of York, Pa. Wastewater System
DRAFT Acquisition of City of York, Pa. Wastewater System V7 4/30/21 Strategic Benefits City of York, PA Wastewater • Acquisition of customers near existing water footprint allows Pennsylvania American Water to Largest acquisition in Pennsylvania achieve operating efficiencies American Water History
Slide 26: Regulated Acquisitions Update
DRAFT Regulated Acquisitions Update V7 4/30/21 Egg Harbor City, NJ Under Agreement Water & Wastewater as of May 1, 2021 Number of Total Number of State Systems Customer Connections First sale being executed through New California 4 6,200 Jersey’s Water Infrastructure Illinois 4 2,400 Opportunities T
Slide 27: Appendix
DRAFT V7 4/30/21 Appendix 27
Slide 28: Forward-Looking Statements
DRAFT Forward-Looking Statements V7 4/30/21 Statements made, referred to or relied upon in this presentation, including, without limitation, with respect to: earnings per share guidance; dividend growth guidance; the timing and outcome of pending or future acquisition activity; our future financial
Slide 29: Non-GAAP Financial Information
DRAFT Non-GAAP Financial Information V7 4/30/21 This presentation includes adjusted regulated O&M efficiency ratios, both historical and forward-looking, which exclude from their calculation (i) estimated purchased water and other revenues and purchased water expenses, (ii) the impact of the Freedom
Slide 30: Inclusion & Diversity
DRAFT Inclusion & Diversity V7 4/30/21 American Water Community Healing Discussion 30
Slide 31: 2021 Closed Acquisitions
DRAFT 2021 Closed Acquisitions* V7 4/30/21 As of May 1, 2021 NUMBER OF WATER CUSTOMER WASTEWATER CUSTOMER TOTAL CUSTOMER STATE SYSTEMS CONNECTIONS CONNECTIONS CONNECTIONS Illinois 1 150 - 150 Missouri 3 50 300 350 West Virginia 1 400 - 400 Total 5 600 300 900 *Customer Connections are rounded and ma
Slide 32: Acquisitions Under Agreement as of May 1, 2021
DRAFT Acquisitions* Under Agreement as of May 1, 2021 V7 4/30/21 NUMBER OF WATER CUSTOMER WASTEWATER CUSTOMER TOTAL CUSTOMER STATE SYSTEMS CONNECTIONS CONNECTIONS CONNECTIONS California 4 6,200 - 6,200 Illinois 4 1,200 1,200 2,400 Indiana 3 4,100 100 4,200 Missouri 8 4,700 5,800 10,500 New Jersey 2
Slide 33: Investment in Rate Base is the Foundation of Our Growth
DRAFT Investment in Rate Base is the Foundation of Our Growth V7 4/30/21 ($ in billions) ≈7-8%* Rate base CAGR expected through 2025 Estimated Rate Base** As of 3/31/2021 Net Utility Plant $20.3 Less Advances for Construction $0.3 CIAC - Contributions in Aid of Construction $1.4 Net Deferred income
Slide 34: Rates Effective Since January 1, 2021
DRAFT Rates Effective Since… V7 4/30/21 January 1, 2021 Date Annualized Date Annualized Rate Cases & Step Increases Infrastructure Charges Effective Revenue Increases Effective Revenue Increases Pennsylvania 1/28/21 $70(a) West Virginia (DSIC) 1/1/2021 $5 Missouri 5/28/21 22(b) Pennsylvania (DSIC) 1
Slide 35: Pending Rate Case Filings
DRAFT Pending Rate Case Filings V7 4/30/21 Rate Cases Filed Docket/Case Number Date Filed Requested Revenue Increase ROE Requested Rate Base California Case No. A.19-07-004 7/1/2019 $26(a) $689 Iowa Case No. RPU-2020-0001 8/28/2020 3(b) 10.5% 145 Case No. 21-0369-W-42T & West Virginia 4/30/21 32(c)
Slide 36: Regulatory Information
DRAFT Regulatory Information V7 4/30/21 CALIFORNIA ILLINOIS INDIANA KENTUCKY MISSOURI Authorized Rate Base* $498,135 $883,386 $1,182,170 $443,654 $1,703,170(b) ROE 9.20%(a) 9.79% 9.80% 9.70% 9.55%(e) Equity 55.39%(a) 49.80% 53.41%(c) 48.90% 50.00%(d) Effective Date of Rate Case 1/1/2018(a) 1/1/2017
Slide 37: Fair Market Value Type Legislation in American Water Footprint
DRAFT Fair Market Value Type Legislation in American Water Footprint V7 4/30/21 State Legislation Eligibility Requirements Fair Market Determination California California Fair Market Value Legislation Greater than 25 connections • Highest price on date of valuation, a buyer would pay and seller woul
Slide 38: Reconciliation Table: Regulated Segment O&M Efficiency Ratio
Reconciliation Table: DRAFT V7 4/30/21 Regulated Segment O&M Efficiency Ratio Regulated Segment O&M Efficiency Ratio FY FY FY FY FY LTM LTM (A Non-GAAP Unaudited Number) 2010 2012 2014 2016 2018 3/31/2020 3/31/2021 ($ in millions) Total operations and maintenance expense $1,291 $1,330 $1,350 $1,504
Slide 39: Reconciliation Table: Adjusted Consolidated Return on Equity
Reconciliation Table: DRAFT V7 4/30/21 Adjusted Consolidated Return on Equity LTM LTM Adjusted Consolidated Return on Equity March 31, 2020 March 31, 2021 Net Income $632 $718 Adjustments: Keystone Sale $44 $0 Tax Impact for items above ($9) $0 Adjusted Net Income from Continuing Operations (a) $667
Slide 40: Military Services Group
DRAFT Military Services Group V7 4/30/21 Currently Serving 17 Military Installations 68 Additional Installation Opportunities Marine 13 Air Force 23 Navy 20 Army 12 40
Slide 41: Investor Relations Contacts
DRAFT Investor Relations Contacts V7 4/30/21 Ed Vallejo Vice President, Investor Relations [email protected] Michael Tavani, CFA Senior Manager, Investor Relations [email protected] Abbey Barksdale Senior Manager, Investor Relations & ESG [email protected] 41
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