American Water Works Company, Inc. · NYSE:AWK
American Water Works — Investor Presentation (July 2011)
42 slides from American Water Works's investor presentation, Jul 18, 2011
Slide 1: Institutional Investor Meetings July 2011
Institutional Investor Meetings July 2011 Exhibit 99.1
Slide 2: Forward-looking statements
2 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 current expectations and assumptions regarding future event
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 Capitalization: $5.2 Billion Enterprise Value: $10.8 Billion Average Daily Volume Traded: 1.1 Million shares (1) Based on 2010 Revenues (2) Market data as of 6/29/11 (3) Mark
Slide 4: American Water has achieved impressive growth since its IPO
4 Earnings Per Share* Cash Flow From Operations (millions) Net Income (millions) American Water has achieved impressive Growth since its IPO * 2008 and 2009 exclude impairment charges. See slide 42 for reconciliation table $268 $210 $176 2010 2009 2008 $1.10 $1.25 $1.53 $552 $596 $775 2008 2009 2009
Slide 5: The US Water Industry
The US Water Industry
Slide 6: Key Water Sector Themes
6 Key Water Sector Themes The U.S. Water Industry Aging Infrastructure Fragmented Industry Increasing Environmental Requirements Capital Availability Technology
Slide 7: Water Industry Has a Favorable Utility Profile
7 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 8: Aging US Infrastructure Investment Remains Critical
8 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 $1 trillion needed for p
Slide 9: Aging Pipe Infrastructure Network Propels Need for Capital Expenditures
Without renewal or replacement of existing systems, pipe classified as poor, very poor or life elapsed will increase from 10% to 44% by 2020 9 Aging Pipe Infrastructure Network Propels Need for Capital Expenditures Percentage of Pipes by Classification Source: American Water Works Association, Dawn
Slide 10: Water and wastewater rates in U.S. vs. other countries
10 Domestically: % of Annual Household Budget (1) Internationally: Cost comparison vs other countries (cents per gallon (2) ) Water and wastewater rates in U.S. vs. other countries (cents per gallon) (1) Source: 2008-2009 Bureau of Labor Statistics; Assumes four person household. (2) Canadian govern
Slide 11: American Water
American Water
Slide 12: Top Seven States
12 Top Seven States Customers Served (2010) % of Total 2010 Revenues ($ mm) % of Total Rate Base Approved per Last Rate Case Date of Last Rate Case DSIC Test Year (1) Tariff Structure (2) Largely residential customer base promotes consistent operating results Geographic presence hedges both weather
Slide 13: Prudent Investments in US Water Infrastructure drive Long Term Growth
13 Net Utility Plant ($ mm) % Projected CAPEX by Purpose Prudent Investments in US Water Infrastructure drive Long Term Growth *Net utility plant as of 1Q 2011 of $10,555,698 excluding Discontinued Operations Quality of Service, 20% Other, 6% Asset Renewal, 44% Regulatory Compliance, 13% Capacity Ex
Slide 14: American Water's Portfolio Optimization Initiatives
14 Continue to Lower Costs Focus on Value Drivers Redeploy Value Into Core Growth Markets Explore Opportunities for Long -Term Success Drive Profitability and Returns Optimizing Long-term Value Through Proactive Management American Water’s Portfolio Optimization Initiatives • Balanced Portfolio Anal
Slide 15: Our Market-Based Operations: A Portfolio of Water Resource Services
15 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 16: Strategy Specifics: Homeowner Services Growth
16 Large Untapped Market Strong Growth Potential Strategy Specifics: Homeowner Services Growth • Million Single family homes in US • 3% Purchase water/sewer service contracts • American Water has 34% market share • 61% of HOS customers buy more than 1 product • EXTRAORDINARY customer satisfaction •
Slide 17: Strategy Specifics: Market Size of Military Utility Privatizations
17 Market Opportunity represents approximately $11Bn in Total Revenues Over $2 Billion in Revenues Backlog 3 3 4 Strategy Specifics: Market Size of Military Utility Privatizations 2011-13 2014-16 Major Water/Wastewater Contracts to be Awarded Contracts Awarded to American Water Contracts Awarded to
Slide 18: Financial Update
Financial Update
Slide 19: Total Shareholder Return: American Water vs. Indices
19 Shareholder Return YTD Total Shareholder Return : American Water vs. Indices (July 12, 2010 – July 12, 2011) American Water S&P 500 Dow Jones Utilities +45.8% +24.8% +18.6%
Slide 20: American Water: A Solid First Quarter
20 American Water: A Solid First Quarter Adjusted Net Income Adjustment for cessation of depreciation Adjusted Net Income Adjustment for cessation of depreciation * Adjusted Net Income reflects the effect of the cessation of depreciation on assets subject to an agreement of sale – a Non-GAAP measure
Slide 21: Regulated O&M Efficiency Ratio Continues to Improve
21 Adjusted O & M Efficiency Ratio Regulated O&M Efficiency Ratio Continues to Improve * O&M Efficiency Ratio (A Non-GAAP, unaudited measure) = operating and maintenance expenses / revenues, adjusted to eliminate revenues and expenses related to purchased water. * Quarterly data reflects the effect
Slide 22: Rate Cases Awarded That Will Have an Impact on 2011 Results
22 Rate Cases Awarded That Will Have an Impact on 2011 Results (As of July 13, 2011) ($ in millions) Effective Date for new rates ROE Granted Annualized Increase to 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 Vi
Slide 23: Rate Cases Awaiting Final Order
23 Rate Cases Awaiting Final Order Docket / Revenue Increase ROE Rate Base Filing Case Number Date Filed Filed Requested (Filed) Status Virginia* PUE 2010-00001 03/08/10 6.9 $ 11.50% 99.1 $ California A 10-07-007 07/01/10 37.3 10.20% 409.6 Arizona W-01303A-10-0448 11/03/10 20.8 11.50% 148.9 Hawaii 2
Slide 24: Years Investing in Water Infrastructure and Paying Dividends
24 1886 1947 2003 2008 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 commo
Slide 25: Quarterly Dividend Rate Increases
Quarterly Dividend Rate Increases 25 Recent Dividend History • Key component of American Water’s total shareholder return proposition • Dividend Growth – Board of Directors increased dividend 5% to $0.23 or $0.92 annualized • Dividend Yield – 3.1% at 7/13/11 • Growth in Dividend reflects growth in N
Slide 26: Past performance and future growth compare favorably vs Water, Electric and Gas Peers
26 2008 – 2010 EPS CAGR + Average Dividend Yield (4) Total Shareholder Return (Long Term Expected EPS Growth* and Dividend Yield**) American Water’s past performance and future growth expectations compare very favorably vs Water, Electric and Gas Peers 1) Water Companies Include: AWR, CTWS, CWT, MSE
Slide 27: P/E Compared with Total Return
27 P/E Compared with Total Return Source: Thomson Reuters * PE data as of July 2011 American Water’s higher growth expectations are not fully reflected in its PE multiple CTWS LG MSEX SWX NWN ATO YORW WGL AWR PCG AEP WTR PNY DUK UIL XEL SJI SO CNP NU TE AWK CWT HE 11.0x 16.0x 21.0x 6% 7% 8% 9% 10% 1
Slide 28: What to Expect from American Water - 2011
28 What to Expect from American Water - 2011 Accomplishments Start execution of Portfolio Optimization Initiative Missouri acquisition closed May, Texas sale closed June Filed for regulatory approvals for transactions in NM and AZ Agreement to purchase Aqua’s NY subsidiary and sell to Aqua our Ohio
Slide 29: American Water – A Compelling Value Proposition
29 American Water – A Compelling Value Value Proposition Market Leader Strong Visible Growth Proven Management Trades at Discount to Peers Sound Regulatory Framework
Slide 30: Investor Relations Contacts
30 Ed Vallejo Vice President – Investor Relations Muriel Lange Manager – Investor Relations Tel: 856-566-4005 Fax: 856-782-2782 Edward.vallejo@amwater.com Muriel.lange@amwater.com Investor Relations Contacts:
Slide 31: American Water
AMERICAN WATER
Slide 32: Investment Thesis: Sustained 7-10% EPS Growth
32 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 33: Rate of Return Regulation in the United States
American Water has experience in securing appropriate rates of return and promoting constructive regulatory frameworks Operating Expenses Taxes, Depr & Amortization WACC Allowed Return Allowed Return Revenue Requirement 33 Establish Rate Base Rate of Return Regulation in the United States Prudent In
Slide 34: How is Net Income generated in Rate of Return Regulation?
34 Pass Through 1:1 Pass Through 1:1 If all assets are included in the Company’s Rate Base and all operating expenses are deemed prudent and recoverable by regulator, Company earns allowed ROE* AW Parent Company Debt Equity (Capex) Operating Expenses Debt Regulatory Treatment Net Income Impact • Neu
Slide 35: Water vs Other Utility Expenditures
Water vs Other Utility Expenditures Water Use in the Home 35 Water Utility Expenditures
Slide 36: Infrastructure Surcharges: A viable mechanism to address Regulatory Lag
36 Infrastructure Surcharges: A viable mechanism to address Regulatory Lag Infrastructure Surcharges allows companies to recover infrastructure replacement costs without necessity of filing full rate proceeding States that currently allow use of infrastructure surcharges Pennsylvania Indiana Illinoi
Slide 37: Case in point: Increased investment in Pennsylvania's Infrastructure
37 Case in point: Increased investment in Pennsylvania’s Infrastructure
Slide 38: Debt Maturities at March 31, 2011
38 $100 million of Parent Company debt swapped from 6.085% to 6 month LIBOR + 3.422%, to mature with fixed-rate debt in 2017 Weighted Average Interest Rates Debt Maturities at March 31, 2011 (in millions) Parent Company Debt * Amount excludes Preferred Stock with Mandatory Redemptions
Slide 39: Income Statement
39 ($ 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 40: www.amwater.com
NYSE: AWK www.amwater.com
Slide 41: GAAP and Non-GAAP Measures
Net Income (Loss) – Earnings per Share Excluding Impairment Charge (A Non-GAAP Unaudited Number) Historical Net income excluding impairment charge $176,054 $209,941 $267,827 $284,351 Net income per common share excluding impairment charge: 41 Rate Base as of March 31, 2011 (1) Rate Base TOTAL $7,913
Slide 42: American Water
AMERICAN WATER
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