Slide 1: 2022 Third Quarter Earnings & 2023 Outlook Conference Call
2022 Third Quarter Earnings & 2023 Outlook Conference Call November 1, 2022
Slide 2: Aaron Musgrave
Aaron Musgrave 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: Susan Hardwick
Susan Hardwick President and Chief Executive Officer 4
Slide 5: 2022: Successfully Executing the Plan
2022: Successfully Executing the Plan Earnings Per Share Q3/YTD Highlights $3.70 • Achieved solid EPS growth vs. 2021 driven by higher $3.40 revenue from new rates, mechanisms, and acquisitions • Invested $1.9 billion of capital in regulated infrastructure $1.63 improvements and acquisitions $1.53 •
Slide 6: EPS Guidance: Affirming 2022, Initiating 2023
EPS Guidance: Affirming 2022, Initiating 2023 2023 EPS 7-9% EPS Guidance CAGR Target 2022 EPS Guidance 7-9% EPS 2021 EPS CAGR Target On a weather- $6.95 normalized basis $4.82 2021 EPS of $6.95 reflects $4.49 $2.70 gain on $4.72 sale of HOS 2023 EPS Guidance $4.39 $4.25 $4.72 - $4.82 2027 2021 2022
Slide 7: High Quality, Top Tier Earnings Growth Outlook
High Quality, Top Tier Earnings Growth Outlook Coupled with Strong Long-Term Financial Targets 7-9% EPS Growth Outlook 2023–2027 Plan and Beyond Business Mix 100% Military Long-Term Financial Targets Regulated and ~0.5% ~1% Services ≈0.2% Group Regulated-Like Earnings Attractive, Long-Term Sustain
Slide 8: John Griffith
John Griffith Executive VP & Chief Financial Officer 8
Slide 9: 2022 Third Quarter EPS Detail
2022 Third Quarter EPS Detail 0.06 0.01 0.32 (0.10) (0.04) 0.06 (0.09) (0.09) $1.63 (0.03) $1.53 Sep QTD Revenue Weather in Weather in O&M/Other Depreciation New York Interest Income/ HOS Other Sep QTD 2021 Actual Q3 2022 Q3 2021 Operations (2021) Revenue Share from Operations 2022 Actual Unfav Sale
Slide 10: 2022 Year-To-Date EPS Detail
2022 Year-To-Date EPS Detail 0.06 0.66 (0.02) 0.18 (0.18) (0.10) 0.05 $3.70 (0.10) (0.25) $3.40 Sep YTD Revenue Weather in Net, Weather O&M/Other Depreciation New York Interest Income/ HOS Other* Sep YTD 2021 Actual Q3 2022 in 2021 Operations (2021) Revenue Share from Operations 2022 Actual Sale of
Slide 11: Rate Case and Legislative Updates
Rate Case and Legislative Updates Open Rate Cases Completed Rate Cases in 2022 • Rate case filed 11/15/21, Settlement filed 9/26/22 • Settlement: additional authorized revenues of $12M vs. • General Rate Case $15M requested • Additional authorized revenues of $15 million • Final Order expected Q1 20
Slide 12: Strong Growth through Acquisitions
Strong Growth through Acquisitions Growing Opportunity for Closed Over Five- Customer Connections Under Agreement As of September 30, 2022 As of September 30, 2022 Year Outlook ≈65,300 Customer Connections ≈21,600 Customer Connections 15 Acquisitions in 6 States, $308M 29 Acquisitions in 9 States, $
Slide 13: Considerations for 2023 Outlook
Considerations for 2023 Outlook Initiating 2023 EPS Guidance of $4.72 to $4.82 Growth Drivers Headwinds • Revenue growth from infrastructure investments • Elevated chemical costs likely to persist • Constructive general rate case outcomes expected • Higher interest rate environment to mitigate major
Slide 14: 2023 EPS Detail
2023 EPS Detail 1.15 - 1.25 0.25 - 0.29 0.00 - 0.01 0.28 - 0.32 $4.72 - $4.82 0.20 - 0.22 0.08 - 0.10 $4.39 - $4.49 2022 Guidance Revenue* Cost Inflation & Depreciation Incremental Debt & MSG O&M / 2023 Guidance Interest Rates* Equity Financing Other** * Over 75% of estimated impact of cost inflatio
Slide 15: Financing the Capital Investment Plan
Financing the Capital Investment Plan ($ in millions) Prior Plan 2022-2026 Financing Changes Current Plan 2023-2027 +$1B +Balance Sheet CapEx Capacity Debt Sources ≈50% Operating Cash Flows $8,700 Equity Sources ≈50% Operating Cash Flows $10,100 Debt Financing $5,200 Debt Financing +$500 $(400) Debt
Slide 16: Strong Balance Sheet and Credit Ratings; Limited Refinancing Needs Next Few Years
Strong Balance Sheet and Credit Ratings; Limited Refinancing Needs Next Few Years AWK Long-Term Senior Unsecured Ratings Total Debt to Total Capital S&P Global Moody’s 2022 Long-Term A Baa1 Projected Target (Stable Outlook) (Stable Outlook) 61% <60% Low risk business profile Strong regulatory ju
Slide 17: Cheryl Norton
Cheryl Norton Executive VP & Chief Operating Officer 17
Slide 18: Regulated Investments to Support System Needs
Regulated Investments to Support System Needs Capital Plan ($ in billions) 10 Year Capital Increase: ≈$2B 5 Year $30 - $34 $28 - $32 Capital Regulated $3 - $4 Increase: $3 - $4 Acquisitions ≈$1B $14 - $15 $13 - $14 $2.9 $1.5 - $2.0 $2.5 $1.5 - $2.0 $0.4 $0.4 $25 - $28 $27 - $30 Regulated System Inve
Slide 19: Investments Drive Continued Rate Base Growth – Foundational to Overall Growth
Investments Drive Continued Rate Base Growth – Foundational to Overall Growth ($ in billions) ≈8-9% CAGR for Rate Base Estimated Rate Base* As of 9/30/2022 $17.3 Net Utility Plant $22.6 $16.3 $15.0 $13.7 Less $12.5 $11.6 Advances for Construction $0.3 $10.7 CIAC – Contributions in Aid of Constructio
Slide 20: Timely Recovery of Capital and Operating Costs
Timely Recovery of Capital and Operating Costs American Water’s Jurisdictions Capital Recovery As of 2010 As of 2022 (2023-2027 Plan) 10 11 11 ≈65% Infrastructure 9 9 ≈70% Surcharge Mechanisms 7 ≈45% 6 5 5 ≈30% Forward Test Traditional Years Recovery 2 ≈30% ≈25% 1 1 Revenue Infrastructure Expense Co
Slide 21: Revenue Growth and Customer Growth Help Drive Operating Cost Efficiency
Revenue Growth and Customer Growth Help Drive Operating Cost Efficiency Regulated O&M Efficiency Ratio* Efficiency Drivers: Growing Revenues & Controlling Costs 46.1% • In early years (thru 2016), efficiency gains were steeper as culture of cost management formed 41.0% • Recently, more incremental e
Slide 22: Laser Focus on Customer Affordability
Laser Focus on Customer Affordability Monthly Customer Bill as % of Median Values around Affordability Household Income* Focused on keeping customer bills affordable compared to income (wallet share) Culture of continuous improvement, diligent cost management, and technology enhancements helps d
Slide 23: American Water’s GHG Emissions Profile
American Water’s GHG Emissions Profile Providing Services to 14M People with a Light GHG Footprint American Water Co. A 83M Co. B 78M • Stationary Co. C 57M Scope 1: • Fleet Vehicles 76,000 MT Direct Emissions Co. D 43M • Refrigerants Co. E 40M Scope 2: • Purchased Power from Electric 459,000 MT Co.
Slide 24: New, Science-Based Goals for Scope 1 and 2 GHG Emissions Reductions
New, Science-Based Goals for Scope 1 and 2 GHG Emissions Reductions - Aligned with Paris Agreement Medium-term: By 2035, reduce absolute Scope 1 and 2 emissions by 50% (2020 baseline1) Long-term: Achieve Net Zero Scope 1 and 2 emissions by 2050 • Medium- and long-term goals are science-based and ali
Slide 25: ESG at AWK: Expanded Disclosures
ESG at AWK: Expanded Disclosures New ID&E Voluntary Disclosures to be Further Aligning Compensation with added at DiversityatAW.com Sustainability Goals • Summary results to be released soon for: • Established two new people-related goals in • Pay Equity Study 2022 Annual Performance Plan (APP) mean
Slide 26: Q&A Session
Q&A Session 26
Slide 27: Investor Relations Contacts
Investor Relations Contacts Aaron Musgrave, CPA Jack Quinn, CPA Vice President, Investor Relations Senior Manager, Investor Relations aaron.musgrave@amwater.com jack.quinn@amwater.com Janelle McNally Kelley Uyeda Senior Manager, Investor Relations & ESG Analyst, Investor Relations & ESG janelle.mcna
Slide 28: Appendix
Appendix 28
Slide 29: Forward-Looking Statements
Forward-Looking Statements Certain statements made, referred to or relied upon in this presentation including, without limitation, with respect to 2022 and 2023 earnings guidance, the Company’s long-term financial, growth and dividend targets, future capital needs and the timing and amount of the Co
Slide 30: Non-GAAP Financial Information
Non-GAAP Financial Information 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 Industries chemi
Slide 31: Regulated Capital Expenditures by Purpose
Regulated Capital Expenditures by Purpose 2023-2032 3-5% 4-6% 5-7% Infrastructure Renewal Resiliency 5-7% Water Quality 10-12% Operational Efficiency, Technology & Innovation 68-70% System Expansion Other 31
Slide 32: Rate Filings Summary
Rate Filings Summary ($ in millions) Rate Filings Requested Revenue in Completed* Pending Base Rate Effective since January 1, 2022 Proceedings $21 $479 $458 $82 $193 $111 Rate Cases Infrastructure Total Rate Cases Infrastructure Total (Includes Charges Charges Step Increases) 32 * Annualized revenu
Slide 33: Closed Acquisitions
Closed Acquisitions September 30, 2022 NUMBER WASTEWATER CUSTOMER CONNECTIONS TOTAL CUSTOMER STATE WATER CUSTOMER CONNECTIONS OF SYSTEMS CONNECTIONS Illinois 5 2,200 1,500 3,700 Missouri 5 4,500 5,200 9,700 Pennsylvania 2 - 47,300 47,300 California 1 600 - 600 New Jersey 1 - 2,900 2,900 Virginia 1 1
Slide 34: Acquisitions Under Agreement
Acquisitions Under Agreement September 30, 2022 NUMBER WASTEWATER CUSTOMER CONNECTIONS TOTAL CUSTOMER STATE WATER CUSTOMER CONNECTIONS OF SYSTEMS CONNECTIONS California 2 2,800 - 2,800 Iowa 3 100 850 950 Illinois 6 2,350 1,600 3,950 Indiana 2 250 - 250 Missouri 9 900 800 1,700 New Jersey 2 1,600 1,4
Slide 35: Rates Effective Since January 1, 2022
Rates Effective Since… ($ in millions) January 1, 2022 Date Annualized Date Annualized Rate Cases & Step Increases Infrastructure Charges Effective Revenue Increases Effective Revenue Increases Illinois (QIP) 1/1/2022 $6 Pennsylvania, Step Increase (a) 1/1/2022 $20 Missouri (WSIRA) 2/1/2022 12 Calif
Slide 36: Pending Rate Case Filings
Pending Rate Case Filings ($ in millions) Rate Cases Filed Docket/Case Number Date Filed Requested Revenue Increase ROE Requested Rate Base Virginia (a) Case No. PUR-2021-00255 11/15/2021 $15 10.9% $287 Illinois (b) Docket No. 22-0210 2/10/2022 85 10.25% 1,649 Docket Nos. R-2022-3031672 & R- Pennsyl
Slide 37: Regulatory Information – Top 10 States
Regulatory Information – Top 10 States CALIFORNIA ILLINOIS INDIANA KENTUCKY MISSOURI Authorized Rate Base* $667,632 $883,386 $1,182,170 $443,654 $1,703,170(c) ROE 9.20%(a) 9.79% 9.80% 9.70% 9.55%(d) Equity 55.39%(a) 49.80% 53.41%(b) 48.90% 50.00%(e) Effective Date of Rate Case 1/1/2021 1/1/2017 5/1/
Slide 38: Reconciliation Table: Regulated Segment O&M Efficiency Ratio
Reconciliation Table: Regulated Segment O&M Efficiency Ratio * Calculation assumes purchased water revenues approximate purchased water expenses ** Includes the impact of the Company’s adoption of ASU 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic