Slide 1: 2020 Second Quarter Earnings Conference Call
2020 Second Quarter Earnings Conference Call August 6, 2020
Slide 2: Ed Vallejo, Vice President, Investor Relations
Ed Vallejo Vice President, Investor Relations 2
Slide 3: Forward-Looking Statements
Forward-Looking Statements 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 outcomes, financial resu
Slide 4: Walter Lynch, President and Chief Executive Officer
Walter Lynch President and Chief Executive Officer 4
Slide 5: American Water's COVID-19 Response
American Water’s COVID-19 Response Employees Customers and Communities • Suspended billing-related service shutoffs and restored • Suspended all work-related air and rail travel as of March 3 & service to customers who were previously shut off for non- suspended participation in sponsored events and
Slide 6: COVID-19 Financial Impact Details Through June 30, 2020
COVID-19 Financial Impact Details Through June 30, 2020 ($0.05) Net EPS COVID-19 Impact 0.05 0.04 (0.07) (0.02) (0.03) (0.01) (0.01) Residential Commercial Industrial/Other Waived Disconnection O&M/Other HOS/Parent Regulatory and Late Fees Treatment/Recovery Base Revenue 6
Slide 7: COVID-19 Regulatory and Financial Summary
COVID-19 Regulatory and Financial Summary Regulatory Segment Other • Regulated: • No change to 2020 capital plan 10 States with Approval to Defer Costs • Base Revenue - lower Commercial expected; increase driven by & Industrial, while Residential demand/opportunity • California • Maryland demand has
Slide 8: Year to Date and Q2 2020 Financial Performance and Growth
Year to Date and Q2 2020 Financial Performance and Growth Regulated Investment GAAP Earnings Per Share* • ≈$930 million total capex invested • Organic growth ≈6,900 customer connections as of June 30, 2020 • 34.3%** O&M efficiency ratio LTM $1.65 $1.56 $0.97 * Regulated Acquisitions $0.94 • Closed 1
Slide 9: In This Environment, The Execution of Our Strategy Continues
In This Environment, The Execution of Our Strategy Continues Long-term EPS growth expected in the 7-10%* target range Clear investment thesis provides confidence in EPS CAGR guidance through 2024 long-term strategy Decades of investment needed Market Based Businesses 1-2% Line of sight to $20 - $22
Slide 10: Regulated Business Update
Regulated Business Update Regulatory Legislative Indiana • Rate Case filed June 30, 2020 • Established an appraisal process for non-municipal utilities to • Capital Investment of ≈$950 million establish fair value • Requested ROE 10.5% • Authorized recovery without full rate case for service enhance
Slide 11: Disciplined Focus on Expenses
Disciplined Focus on Expenses Regulated O&M Efficiency Ratio** 46.1% 2024 O&M Efficiency Target of 31.3%* 41.0% 39.1% Adjusted O&M Expenses from 36.6% 35.6% 35.2% 2010-LTM 2020 increased only 34.3% 0.8% CAGR** Added ≈281,000*** customer connections since 2010 2010 2012 2014 2016 2018 LTM LTM 6/30/20
Slide 12: Regulated Acquisitions Update
Regulated Acquisitions Update Under Agreement* Agreement Process ≈ 43,600** Customer Connections As Communities face 28 Acquisitions increasing challenges CA: 4 IN: 2 PA: 7 IA: 1 MO: 4 TN: 1 IL: 7 NJ: 1 WV: 1 * As of 7/31/2020; does not reflect the announced pending sale of NYAW. Regulatory ** This
Slide 13: Susan Hardwick, Chief Financial Officer
Susan Hardwick Chief Financial Officer 13
Slide 14: Continued Execution of Company Strategy
Continued Execution of Company Strategy EPS Contribution by Business Three Months Ended Three Months Ended Second Quarter 06/30/2020 06/30/2019 Change Regulated $0.97 $0.87 $0.10 2020 Results* Market-Based $0.13 $0.12 $0.01 Parent Interest & Other ($0.13) ($0.05) ($0.08) Total GAAP EPS $0.97 $0.94 $
Slide 15: Second Quarter EPS Detail by Business
Second Quarter EPS Detail by Business 0.04 0.20 0.02 0.02 (0.05) (0.07) (0.02) (0.03) 0.97 0.94 (0.03) (0.05) Regulated $0.14 MBB Parent ($0.08) Jun QTD Revenue Weather in 2019 O&M Depreciation Depreciation HOS Interest, net Sale of Timing/Other Estimated impact Jun QTD 2019 (GAAP) Related to Assets
Slide 16: First Half EPS Detail by Business
First Half EPS Detail by Business 0.04 0.34 0.03 0.03 (0.09) (0.04) 1.65 (0.10) (0.03) 1.56 (0.04) (0.05) Regulated $0.22 MBB Parent ($0.11) Jun YTD Revenue Weather in 2019 O&M Depreciation Depreciation HOS Interest, net Sale of Other Estimated impact of Jun YTD 2019 (GAAP)* Related to Assets a Lega
Slide 17: Rate Filings Completed and Awaiting Final Order
Rate Filings Completed and Awaiting Final Order ($ in millions) Rate Filings Requested Revenue in Pending Completed* Base Rate Proceedings $289 $5 $294 $62 $80 $18 Rate Cases Infrastructure Total Rate Cases Infrastructure Total (Step Increases) Charges Charges *Annualized Revenue Increase for Rates
Slide 18: 2020 EPS and Long-Term Guidance
2020 EPS and Long-Term Guidance 2020 – 2024 Long-Term EPS CAGR Guidance*** 2020 EPS Guidance 7-10%*** 2019 CAGR Adjusted EPS 2020 EPS Guidance* (GAAP EPS $3.43)** 2018 $3.79 - $3.89 Adjusted EPS (GAAP EPS $3.15)** $3.89 $3.79 $3.61** $3.30** 2018 2019 2020 2024 * 2020 GAAP Guidance includes: $0.06 p
Slide 19: Delivering Value
Delivering Value AWK Shareholder Value Value Drivers Adjusted Consolidated Return on Equity* Regulated 10.7% Wt Avg authorized • Consistent Earnings Growth 10.3% ROE is 9.8% • Smooth Capital Deployment LTM LTM June 30, 2019 June 30, 2020 • Disciplined Approach to Acquisitions Dividend Growth** • Str
Slide 20: Purpose Driven. People Powered. Customer Obsessed.
Purpose Driven. People Powered. Customer Obsessed. * *American Water. (2020, June 4). https://www.facebook.com/weareamericanwater 20
Slide 21: Q&A Session
Q&A Session 21
Slide 22: Investor Relations Contacts
Investor Relations Contacts Ed Vallejo Vice President, Investor Relations edward.vallejo@amwater.com Ralph Jedlicka Director, Investor Relations ralph.jedlicka@amwater.com Abbey Barksdale Manager, ESG abbey.barksdale@amwater.com 22
Slide 23: Appendix
Appendix 23
Slide 24: Forward-Looking Statements
Forward-Looking Statements Certain statements in this presentation, including, without limitation, with respect to: earnings per share guidance; dividend growth guidance; the timing and outcome of pending or future acquisition activity and the completion of the announced sale of New York American Wa
Slide 25: 2020 Closed Acquisitions
2020 Closed Acquisitions* As of July 31, 2020 NUMBER OF WATER CUSTOMER WASTEWATER CUSTOMER TOTAL CUSTOMER STATE SYSTEMS CONNECTIONS CONNECTIONS CONNECTIONS California 2 6,300 - 6,300 Hawaii 1 - 200 200 Iowa 1 100 - 100 Illinois 7 1,100 2,400 3,500 Indiana 1 - 400 400 West Virginia 1 300 - 300 Total
Slide 26: Acquisitions Under Agreement as of July 31, 2020
Acquisitions* Under Agreement as of July 31, 2020 NUMBER OF WATER CUSTOMER WASTEWATER CUSTOMER TOTAL CUSTOMER STATE SYSTEMS CONNECTIONS CONNECTIONS CONNECTIONS California 4 6,300 - 6,300 Iowa 1 100 - 100 Illinois** 7 6,000 16,800 22,800 Indiana 2 100 100 200 Missouri 4 - 1,000 1,000 New Jersey 1 - 2
Slide 27: Rate Base Calculation
Rate Base Calculation* ($ in millions) $14.4 $13.7 Estimated Rate Base* $12.5 As of $11.7 6/30/2020 $10.7 Net Utility Plant $19.3 Less Advances for Construction $0.3 CIAC - Contributions in Aid of Construction $1.4 Net Deferred income taxes $3.3 $4.9 As of As of As of As of As of 12/31/2016 12/31/20
Slide 28: Rates Effective Since January 1, 2020
Rates Effective Since… January 1, 2020 Annualized Revenue Increases Annualized Revenue Increases Rate Cases & Step Increases Date Effective Infrastructure Charges Date Effective Effective in 2020 Effective in 2020 California (Step Increase) 1/1/2020 $5 West Virginia (DSIC) 1/1/2020 $3 Indiana (Step
Slide 29: Pending Rate Filings
Pending Rate Filings Requested Revenue Rate Cases Filed Company Docket/Case Number Date Filed ROE Requested Rate Base Increase Virginia Case No. PUR-2018-00175 11/2/2018 $5(a) 10.8% $196 California Case No. A. 19-07-004 7/1/2019 26(b) 689 New Jersey Case No. WR-19121516 12/16/2019 88(c) 10.5% 3,639
Slide 30: Regulatory Information
Regulatory Information CALIFORNIA ILLINOIS INDIANA KENTUCKY MISSOURI Authorized Rate Base* $498,135 $883,386 $1,182,170 $443,654 $1,249,293(b) Authorized ROE 9.20%(a) 9.79% 9.80% 9.70%(e) 10.00%(e) Authorized Equity 55.39%(a) 49.80% 53.41%(c) 48.90% 52.80%(d) Effective Date of Rate Case 1/1/2018(a)
Slide 31: Reconciliation Table: Regulated Segment O&M Efficiency Ratio
Reconciliation Table: Regulated Segment O&M Efficiency Ratio Regulated Segment O&M Efficiency Ratio FY FY FY FY FY LTM LTM (A Non-GAAP Unaudited Number) 2010 2012 2014 2016 2018 6/30/2019 6/30/2020 ($ in millions) Total operations and maintenance expense $1,291 $1,330 $1,350 $1,504 $1,479 $1,520 $1,
Slide 32: Reconciliation Table: Consolidated Adjusted EPS
Reconciliation Table: Consolidated Adjusted EPS For the Twelve Months Consolidated Adjusted EPS Ended December 31, 2019 2018 Diluted earnings per share (GAAP): Net income attributable to common shareholders $3.43 $3.15 Adjustments: Loss on sale of Keystone 0.24 - Income tax impact (0.05) - Net adjus
Slide 33: Reconciliation Table: Adjusted Return on Equity
Reconciliation Table: Adjusted Return on Equity LTM LTM June 30, 2019 June 30, 2020 Net Income $582 $638 Adjustments: Keystone Sale - 44 Keystone Impairment 54 - Contract Services Gain on Sale (14) - Tax Impact for items above (11) (9) Re-measurement from Tax Reform 12 - Adjusted Net Income from Con