Slide 1: 2021 Fourth Quarter & Year-End Earnings Conference Call
2021 Fourth Quarter & Year-End Earnings Conference Call February 17, 2022
Slide 2: Aaron Musgrave, Senior Director, Investor Relations
Aaron Musgrave Senior Director, 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, Chief Executive Officer and Chief Financial Officer 4
Slide 5: Earnings Achieved Management's Guidance Again in 2021
Earnings Achieved Management’s Guidance Again in 2021 EPS Contribution by Business Three Months Ended Three Months Ended Fourth Quarter 12/31/2021 12/31/2020 Change 2021 Results Regulated $0.91 $0.85 $0.06 Market-Based $0.08 $0.13 ($0.05) Parent Interest & Other ($0.14) ($0.18) $0.04 Subtotal – Oper
Slide 6: Highlights of a Successful 2021
Highlights of a Successful 2021 Earnings Per Share Executing the Plan $6.95 Achieved 8.7% EPS growth vs. 2020, meeting our $2.70 earnings guidance target for the year Invested $1.9 billion of capital in regulated infrastructure improvements and acquisitions Executing on our regulatory, rate case, an
Slide 7: Delivering Exceptional Value to Shareholders
Delivering Exceptional Value to Shareholders AWK Significantly Outperforms Strong and Consistent Dividend Growth from AWK with 5-Year Total Shareholder Return Note: 5-Year TSR as of 12/31/21. Source: FactSet. 7
Slide 8: Strong Balance Sheet and Industry-Leading Credit Ratings
Strong Balance Sheet and Industry-Leading Credit Ratings AWK Long-Term Issuer Ratings Total Debt to Total Capital S&P Global Moody’s Long-Term A Baa1 2021 Target (Stable Outlook) (Stable Outlook) 61% ≤ 60% Ratings affirmed at both Low risk business profile agencies following Nov. Strong regulato
Slide 9: Compelling, Pure-Play Regulated Water and Wastewater Utility Business
Compelling, Pure-Play Regulated Water and Wastewater Utility Business Regulated Customer Count 3.4M Total Customer Connections Regulated Operations Military Services Group 52,500 miles of pipe Regulated-like earnings 560 water treatment plants Serves 17 military installations 160 wastewate
Slide 10: Key Strategies for Growth and Success
Key Strategies for Growth and Success Capital Plan ($ in billions) Advance infrastructure improvement through five- 2022 – 2031 year capital investment plan of approximately $13 - $28 - $32 $14 billion and expected ten-year plan of Regulated approximately $28 - $32 billion $3 - $4 Acquisitions 2022
Slide 11: 2022 EPS Detail by Business
2022 EPS Detail by Business 11
Slide 12: 2022 Earnings Guidance Affirmed
2022 Earnings Guidance Affirmed 7-9% EPS CAGR Target 2022 EPS Guidance 2022 EPS Guidance 2021 EPS $4.39 - $4.49 $6.95 2020 EPSEPS 2021 excludes $0.07 $6.95 of of $3.84 per share reflects $4.49 of favorable $2.70 gainweather on sale of HOS $4.39 $4.25 2026 2021 2022 & Beyond 12
Slide 13: American Water's High Growth Outlook and ESG Leadership Widely Recognized
American Water’s High Growth Outlook and ESG Leadership Widely Recognized; Long Runway Ahead “Our investments in community systems that we acquire Sustainability through our regulated business will drive significant ESG impacts for decades to come.” - Susan Hardwick, American Water President, CEO &
Slide 14: Our Acquisition Pipeline: Continued Growth and Community Impact
Our Acquisition Pipeline: Continued Growth and Community Impact for Decades to Come ≈1,300,000 Customer Sheridan, IN Connections in Pipeline Prior to Acquisition • Environmental compliance challenges with the U.S. EPA • Consistent sewer overflow events during wet weather • Community growth restricti
Slide 15: Cheryl Norton
Cheryl Norton Executive VP & Chief Operating Officer 15
Slide 16: Focused on Executing the Plan and Building on Our Strengths in 2022
Focused on Executing the Plan and Building on Our Strengths in 2022 Safety Performance People Growth ESG Safety is both a Going beyond the Inclusion & Growth enables ESG affirms the strategy & core minimum requirement empowerment pave a investment in critical values we have company value. to solidif
Slide 17: Achieved Capital Investment Goal of $1.9B in 2021
Achieved Capital Investment Goal of $1.9B in 2021; Prepared for Greater Investment in 2022 AWK Growth Outlook Capital Investments 7-9% EPS CAGR Target (2022-2026 Plan) ($ in billions) 2022 Military $2.5 ~0.5% ~1% Services ≈0.2% Group 2021 $0.5 Regulated $1.9 Acquisitions Regulated Acquisitions 2-3%
Slide 18: Investment in Rate Base is the Foundation of Our Growth
Investment in Rate Base is the Foundation of Our Growth ($ in billions) Long-Term Target ≈8-9% CAGR for Rate Base Estimated Rate Base* As of 12/31/2021 Net Utility Plant $21.5 Less Advances for Construction $0.3 CIAC – Contributions in Aid of Construction $1.4 Net Deferred Income Taxes $3.5 $5.2 Tot
Slide 19: Update on Rate Case Filings Across the Business
Update on Rate Case Filings Across the Business Completed Rate Cases in 2021 Rate Cases filed in 2021 • Rate case filed April 30, 2021 • Additional authorized revenues of $22 million • Capital Investment of ≈$258 million • Effective 1/1/2021 • 10.5% ROE requested • Additional authorized revenues of
Slide 20: Rate Filings Summary
Rate Filings Summary ($ in millions) Rate Filings Requested Revenue in Completed* Pending Base Rate Effective since January 1, 2021 Proceedings 20 * Annualized revenue increase for rates effective since January 1, 2021; excludes agreed to revenue reductions for excess accumulated deferred income tax
Slide 21: Focus on Customer Affordability Continues
Focus on Customer Affordability Continues $ Monthly Bill Regulated O&M as % of Median Efficiency Ratio* Household Income*** ** * Non-GAAP Measure – O&M Efficiency Ratio = Adjusted Regulated O&M Expenses (O&M Expenses is most comparable GAAP measure) / Adjusted Regulated Operating Revenues (Operating
Slide 22: Key State and Federal Legislation Passed in 2021
Key State and Federal Legislation Passed in 2021 22
Slide 23: Strategies for Growth thru Regulated Acquisitions
Strategies for Growth thru Regulated Acquisitions Regulated Acquisition AWK Growth Outlook Strategy Fundamentals 7-9% EPS CAGR Target (2022-2026 Plan) Continued focus on acquisitions in the target range of Military ~0.5% ~1% Services ≈0.2% 5,000 to 50,000 customers; larger acquisitions where Group a
Slide 24: Closed Acquisitions Slow in 2021, but Strong Level Under Agreement
Closed Acquisitions Slow in 2021, but Strong Level of Acquisitions Under Agreement Growing Opportunity for Closed Over Five- Under Agreement Bids Accepted Customer Connections As of December 31, 2021 As of December 31, 2021 As of December 31, 2021 Year Outlook ≈20,000 Customer Connections ≈73,750 Cu
Slide 25: Military Services Group Provides Strategic Value
Military Services Group Provides Strategic Value AWK Growth Outlook Military 7-9% EPS CAGR Target (2022- 2026 Plan) ~0.5% ~1% Services ≈0.2% Group Regulated Acquisitions 2-3% 1.5-2.5% Military Services Group • Serving 17 installations; 50-yr contracts Regulated Regulated Investment Investment • 3 ac
Slide 26: Susan Hardwick
Susan Hardwick President, Chief Executive Officer and Chief Financial Officer 26
Slide 27: Strong and Sustainable Growth Outlook for Future
Strong and Sustainable Growth Outlook for Future ESG Leadership and Rate Base Growth Earnings Growth Dividend Growth ESG Opportunities Affirmed Target Affirmed Target Affirmed Target Adds to TSR Targeting 8-9% rate Targeting 7-9% EPS Targeting high end Exceptional 185% base growth in our growth in o
Slide 28: Q&A Session
Q&A Session 28
Slide 29: Investor Relations Contacts and Upcoming Events
Investor Relations Contacts Aaron Musgrave, CPA Upcoming Events Senior Director, Investor Relations aaron.musgrave@amwater.com April 28, 2022 (projected) Q1 2022 Earnings Call Janelle McNally May 11, 2022 Senior Manager, Investor Relations & ESG Annual Shareholders Meeting janelle.mcnally@amwater.co
Slide 30: Appendix
Appendix 30
Slide 31: Forward-Looking Statements
Forward-Looking Statements Certain statements made, referred to or relied upon in this presentation including, without limitation, with respect to 2022 earnings guidance, the Company’s long-term financial, growth and dividend targets, future capital needs, the ability to achieve the Company’s strate
Slide 32: 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 33: Fourth Quarter EPS Detail by Business
Fourth Quarter EPS Detail by Business * $3.55 * Gain on sale of HOS also reflects contribution to American Water Charitable Foundation from proceeds of sale. 33
Slide 34: Full Year EPS Detail by Business
Full Year EPS Detail by Business * $6.95 * Gain on sale of HOS also reflects contribution to American Water Charitable Foundation from proceeds of sale. 34
Slide 35: Closed Acquisitions
Closed Acquisitions December 31, 2021 Jan 1 - Feb 16, 2022 NUMBER WATER CUSTOMER WASTEWATER CUSTOMER TOTAL CUSTOMER NUMBER WATER CUSTOMER WASTEWATER CUSTOMER TOTAL CUSTOMER STATE CONNECTIONS STATE CONNECTIONS OF SYSTEMS CONNECTIONS CONNECTIONS OF SYSTEMS CONNECTIONS CONNECTIONS California 1 3,050 -
Slide 36: Acquisitions Under Agreement
Acquisitions Under Agreement December 31, 2021 Jan 1 - Feb 16, 2022 NUMBER WATER CUSTOMER WASTEWATER CUSTOMER TOTAL CUSTOMER NUMBER WATER CUSTOMER WASTEWATER CUSTOMER TOTAL CUSTOMER STATE CONNECTIONS STATE CONNECTIONS OF SYSTEMS CONNECTIONS CONNECTIONS OF SYSTEMS CONNECTIONS CONNECTIONS California 3
Slide 37: Rates Effective Since...
Rates Effective Since… January 1, 2021 January 1, 2022 Date Annualized Date Annualized Date Annualized Rate Cases & Step Increases Infrastructure Charges Infrastructure Charges Effective Revenue Increases Effective Revenue Increases Effective Revenue Increases Pennsylvania 1/28/21 $70(a) West Virgin
Slide 38: Pending Rate Case Filings
Pending Rate Case Filings Rate Cases Filed Docket/Case Number Date Filed Requested Revenue Increase ROE Requested Rate Base Case No. 21-0369-W-42T and 21- West Virginia (a) 4/30/2021 $32 10.5% $757 0370-S-42T Hawaii (b) Docket No. 2021-0063 8/18/2021 2 10.3% 40 Virginia (c) Case No. PUR-2021-00255 1
Slide 39: 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(a) 1/1/2017 5
Slide 40: 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