American Water Works Company, Inc. · NYSE:AWK
American Water Works — Non-Deal Roadshow (May 2011)
46 slides from American Water Works's roadshow presentation, May 23, 2011
Slide 1: Institutional Investor Meetings May 2011
Institutional Investor Meetings May 2011 Exhibit 99.1
Slide 2: Cautionary Statement Concerning Forward-Looking Statements
2 Cautionary Statement Concerning Forward-Looking Statements Certain statements in this presentation are forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are predictions based on our
Slide 3: American Water: The Premier Water Services Provider in North America
3 American Water: The Premier Water Services Provider in North America Geographic Diversity (1) Business Diversity (1) Market Cap: $5.2 Billion Enterprise Value: $10.8 Billion Average Volume Traded: 1.1 Million shares (1) 2010 Revenues (2) Market data as of 4/29/11 (3) Market-Based includes Other
Slide 4: The US Water Industry
The US Water Industry
Slide 5: Key Water Sector Themes
5 Key Water Sector Themes The U.S. Water Industry Aging Infrastructure Fragmented Industry Increasing Environmental Requirements Capital Availability Technology
Slide 6: Water Utility Characteristics Implications
6 Water Utility Characteristics Implications Water Industry Has a Favorable Utility Profile • Capital projects focused on maintaining public health & safety standards • Regulators supportive of prudent projects • Water bills low portion of household budget • Essential product – no substitutes • Dema
Slide 7: Aging US Infrastructure Investment Remains Critical
US EPA Estimated 20 Year Total Needs of US Public Water Systems* American Society of Civil Engineers (ASCE) grades US infrastructure • 2009: $335 billion • 2005: $277 billion • 2002: $154 billion • 2009 Grade: D- • 2005 Grade: D- • 2001 Grade: D US EPA estimates upwards to $1 trillion needed for pub
Slide 8: Aging Pipe Infrastructure Network Propels Need for Capital Expenditures
Without renewal or replacement of existing systems, pipe classified as poor, very poor or life elapsed will increase from 10% to 44% by 2020 8 Aging Pipe Infrastructure Network Propels Need for Capital Expenditures Percentage of Pipes by Classification Source: American Water Works Association, Dawn
Slide 9: Water and wastewater rates in U.S. vs. other countries
9 Domestically: % of Annual Household Budget (1) Internationally: Cost comparison vs other countries (cents per gallon (2) ) Water and wastewater rates in U.S. vs. other countries (cents per gallon) (1) Source: 2008-2009 Bureau of Labor Statistics; Assumes four person household. (2) Canadian governm
Slide 10: American Water
American Water
Slide 11: American Water's Geographic Presence and Regulated Portfolio
11 Net Utility Plant Regulated Customers American Water’s Geographic Presence Total = 3,335,518 Regulated Market Based Both Corporate headquarters 2010 EBIT Total = $748 million Total = $11.1 billion American Water’s Regulated Portfolio Regulated operations in AZ, NM and TX are subject to agreement
Slide 12: Providing Value to Customers, Employees and Shareholders
12 American Water provides value-added products and services that address customers’ needs V alue P rice C ost American Water: Providing Value to Customers, Employees and Shareholders Operational Excellence Employer of Choice Sustainability Customer Focus Regulatory & Public Policy Targeted Growth I
Slide 13: Strategy Specifics: Goals and Actions
Goals Actions 13 • Earn appropriate return on investments • Promote constructive regulatory frameworks • Grow Regulated Businesses through focused acquisitions • Pursue “regulated-like” opportunities • Focus on Operations Efficiencies Regulated Operations & Support • Invest in states where we can ad
Slide 14: American Water's Portfolio Optimization Initiatives
Continue to Lower Costs Focus on Value Drivers Optimizing Long-term Value Through Proactive Management Redeploy Value Into Core Growth Markets Explore Opportunities for Long-Term Success Drive Profitability and Returns 14 American Water’s Portfolio Optimization Initiatives • Balanced Portfolio Analy
Slide 15: Regulated Operations: Invest in states where we can add value
15 States we are in process of exiting thru Portfolio Optimization Strategy Specifics: Regulated Operations - Invest in states where we can add value American Water Regulated Operations: Population Served 32,000 * 2009 Data
Slide 16: Our Market-Based Operations: A Portfolio of Water Resource Services
16 For 2010, American Water reported $311.8 million of Market-Based Operations revenues Our Market-Based Operations: A Portfolio of Water Resource Services Contract Operations Over 200 contracts** Serving 3.1m people Clarksville, IN Seattle, WA Warren Township, NJ 25 industrial contracts Design, Bui
Slide 17: Strategy Specifics: Homeowner Services Growth
17 Strategy Specifics: Homeowner Services Growth
Slide 18: Market Size of Military Utility Privatizations
18 Over $2 Billion in Revenues Backlog Market Opportunity represents approximately $11Bn in Total Revenues 3 3 4 Strategy Specifics: Market Size of Military Utility Privatizations 2011-13 2014-16 Major Water/Wastewater Contracts to be Awarded Contracts Awarded to American Water Contracts Awarded to
Slide 19: Strategy Specifics – Municipal Contract Operations
19 The Current Model Our Value Model • Shorter Term Contracts • Heavy Competition • High Risk • Low Margin • Resource Intensive • Minimal Scalability Strategy Specifics – Municipal Contract Operations • Longer Term Contracts • Form of Public Private Partnership • Shared Risk • Performance Metrics •
Slide 20: Financial Update
Financial Update
Slide 21: Total Shareholder Return: American Water vs. Indices
21 Shareholder Return YTD Price as a percent of base (May14, 2010 = 100%) Source: Thomson Reuters Total Shareholder Return : American Water vs. Indices (May 14, 2010 – May 13, 2011) American Water S&P 500 Dow Jones Utilities +41.1% +20.2% +19.5%
Slide 22: American Water: A Solid First Quarter
22 Cash Flow From Operations (in millions) Net Income* (in millions) Operating Revenues (in millions) Earnings Per Share* American Water: A Solid First Quarter *Adjusted Net Income includes the cessation of depreciation would have been $4.7 million after tax, or $0.3 per share on assets under agreem
Slide 23: Regulated O&M Efficiency Ratio Continues to Improve
23 Adjusted O & M Efficiency Ratio 49.4% 48.2% 30% 35% 40% 45% 50% 55% 3/31/2010 3/31/2011 Regulated O&M Efficiency Ratio Continues to Improve O&M Efficiency Ratio (A Non-GAAP, unaudited measure) = operating and maintenance expenses / revenues, adjusted for purchased water . March 31, 2011 quarterly
Slide 24: ATER |
ATER | NYSE: AWK
Slide 25: Rate Cases Awarded That Will Have an Impact on 2011 Results
24 May 2011 Rate Cases Awarded That Will Have an Impact on 2011 Results (As of May 24) Annualized ($ in millions) Effective Date ROE Increase to for new rates Granted Revenue General Rate Cases: Illinois 4/23/2010 10.38% $41.4 New Mexico (Edgewood) 5/10/2010 10.00% 0.5 Indiana 5/3/2010 10.00% 31.5 V
Slide 26: General Rate Cases Awaiting Final Order
General Rate Cases Awaiting Final Order as of May 18, 2011 25 Docket / Revenue Increase ROE Rate Base Filing Case Number Date Filed Filed Requested (Filed) Status Virginia* Case No. PUE 2010-00001 03/08/10 6.9 $ 11.50% 99.1 $ California Case No. A 10-07-007 07/01/10 37.3 10.20% 409.6 Arizona W-01303
Slide 27: Capital Expenditure Plan, by Asset Type: 2011-2013
• $800 - $1 Billion in Capex to be spent each year for the foreseeable future • 20% of Capital Expenditures qualify for an Infrastructure Surcharge mechanism 26 Capital Expenditure Plan, by Asset Type: 2011-2013 * includes Business Transformation capital spend
Slide 28: American Water continues to close ROE Gap
27 American Water continues to close ROE Gap On May 24, 2011 American Water Affirms Earnings Per Share Guidance Expectations 10 % - 10.5 % ROE (3) 6.8% - 7.2% 1.1% Parent Co. Debt Opportunity (2) 1. ROE calculation excludes impairment , SOX, divestiture and other 2. Adjusted for cessation of depreci
Slide 29: Earnings Per Share
Earnings Per Share 28 *2008 and 2009 EPS have been adjusted for goodwill impairment charge, Non-GAAP numbers. See reconciliation table in the Appendix. On May 24, 2011 American Water Reaffirms 2011 Annual EPS Guidance Guidance (Represented in Blue) Excludes Estimated $0.08 Benefit Related to the Ces
Slide 30: Investing in Water Infrastructure and paying Dividends to Shareholders
29 1886 1947 2003 2008 125 years Investing in Water Infrastructure and paying Dividends to Shareholders Dividend paid to private holders American Water Listed on NYSE – Dividend paid to common shareholders RWE takes AWK private. Dividend paid to shareholder AWK IPO Lists on NYSE. Pays dividends to c
Slide 31: Quarterly Dividend Rate as of Year-end
30 Quarterly Dividend Rate as of Year-end Recent Dividend History • Key component of American Water’s total shareholder return proposition • Dividend Growth – Board of Directors increased dividend 5% to $0.22 or $0.88 annualized • Dividend Yield – 3.0% at 5/13/11 • Growth in Dividend reflects growth
Slide 32: American Water – A Compelling Value
31 P/E Ratio Enterprise Value* / Net PP&E* *Data from Bloomberg Data Systems . Close price 5/13/11 unless otherwise indicated; trailing twelve months diluted GAAP EPS as of 3/31/2011 American Water – A Compelling Value AW Stock Price at Average PE: $32.23 AW Stock Price at Highest PE: $38.36 AW Stoc
Slide 33: What to Expect from American Water - 2011
32 What to Expect from American Water - 2011 Accomplishments Start execution of Portfolio Optimization Initiative Resolve Rate Cases worth $93 MM of filed Annualized Revenues by December 31, 2011 Initiate state specific efforts to address declining usage Continue reduction in Operating Efficiency Ra
Slide 34: American Water – A Compelling Value
33 American Water – A Compelling Value Value Proposition Market Leader Strong Visible Growth Proven Management Trades at Discount to Peers Sound Regulatory Framework
Slide 35: Investor Relations Contacts
34 Investor Relations Contacts: Ed Vallejo Vice President – Investor Relations Edward.vallejo@amwater.com Muriel Lange Manager – Investor Relations Muriel.lange@amwater.com Tel: 856-566-4005 Fax: 856-782-2782
Slide 36: American Water
AMERICAN WATER
Slide 37: Our Values, Mission and Vision
36 Our Values • Honesty and Integrity • Communication • Teamwork • Excellence • Engagement Our Mission Our Vision To be the trusted steward of your precious resource – water What We Stand For • Providing safe, reliable water services to our customers and communities • Driving Operational Excellence
Slide 38: Investment Thesis: Sustained 7-10% EPS Growth
37 Investment Thesis: Sustained 7-10% EPS Growth Future Growth New Services Regulated Investments Acquisitions Operational Excellence/ Efficiencies ROE improvement Long Term Growth Conceptual Representation
Slide 39: Recent debt issuances
Issue Name Issue Type Call Feature Borrower Type Underwriter Coupon Maturity Issue Date 38 $25.0M Tax-Exempt Unsecured Bonds Tax-exempt (Non AMT) Callable 10 Year AWCC/IL New Stifel Nicolaus & Blaylock Robert Van 5.25% 30 Years 27-May $26.0M Tax-Exempt Unsecured Bonds Tax-exempt (Non AMT) Callable 1
Slide 40: Debt Maturities at March 31, 2011
$100 million of Parent Company debt swapped from 6.085% to 6 month LIBOR + 3.422%, to mature with fixed-rate debt in 2017 39 Weighted Average Interest Rates Debt Maturities at March 31, 2011 (in millions) Parent Company Debt * Amount excludes Preferred Stock with Mandatory Redemptions
Slide 41: Comparison of Water Sales Volumes
Water sales volumes for the three months ended March 31, 2011 decreased over the same period in the prior year due to continuing, 10-year trend of lower usage and conservation Customer Class Water Sales Volumes (In Millions of Gallons) 40 Comparison of Water Sales Volumes March - Year to Date 2011 2
Slide 42: Reconciliation Tables
41 Adjusted EBIT (A Non-GAAP Unaudited Number) Segment income before income taxes 350,977 396,638 513,013 Income (loss) before income taxes $(450,594) $(111,665) $449,436 Net Income (Loss) – Earnings per Share Excluding Impairment Charge (A Non-GAAP Unaudited Number) Historical Net income excluding
Slide 43: Adjusted Return on Equity
Adjusted Return on Equity (A Non-GAAP Unaudited Number) Historical Adjusted Net Income $194,048 $211,067 $267,827 $279,622 ROE Percentage 4.73% 5.28% 6.49% 6.74% Rate Base as of March 31, 2011 (1) Rate Base TOTAL $7,913,049 42 ($ in thousands ) 2008 2009 2010 LTM 3/31/11 Net income (Loss) ($562,421)
Slide 44: Slide 44
Slide 45: Income Statement
44 ($ in Thousands, except per share data) Three Months Ended March 31, Net income $ 47,332 $ 30,808 Net income $ 0.27 $ 0.18 Dividends per common share $ 0.22 $ 0.21 Income Statement 2011 2010 Operating revenues $ 610,936 $ 566,762 Operating expenses Operation and maintenance 320,571 305,642 Deprec
Slide 46: American Water
AMERICAN WATER
American Water Works Company — Non-Deal Roadshow (May 2011) on 6ix