American Water Works Company, Inc. · NYSE:AWK
American Water Works — Investor Day (February 2021)
57 slides from American Water Works's investor day presentation, Feb 24, 2021
Slide 1: Our Compelling Story: 2021 Investor Day
Exhibit 99.2 Our Compelling Story: 2021 Investor Day February 25, 2021
Slide 2: Ed Vallejo, Vice President, Investor Relations
Ed Vallejo Vice President, Investor Relations 2Ed Vallejo Vice President, Investor Relations 2
Slide 3: Forward-Looking Statements Safe Harbor
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: Safety Above All
Safety Above All Safety is a priority in everything that we do 1 2 3 4 5 Bedrock of Zero Injuries Emotional Safety Virtual Continued Culture Investor Day Execution of COVID-19 Safety Measures 4
Slide 5: Walter Lynch, President and Chief Executive Officer
Walter Lynch President and Chief Executive Officer 5
Slide 6: Agenda
Agenda Vision and Strategy 1 Walter Lynch, President and CEO Growth 2 Bill Varley, Chief Growth Officer ESG 3 Cheryl Norton, Chief Environmental Officer 2020 Results, 2021 Guidance and Business Plan 4 Susan Hardwick, EVP and CFO 5 Minute Break 5 Q&A Session 6 6Agenda Vision and Strategy 1 Walter Lyn
Slide 7: Strategic Focus - Creating Value for the Long Term
Strategic Focus - Creating Value for the Long Term Vision 1 2 3 Operate where Champion an we can create Develop and inclusive and value for invest in our high performing customers, people culture employees and shareholders 7 7Strategic Focus - Creating Value for the Long Term Vision 1 2 3 Operate wh
Slide 8: Our Business at a Glance
Our Business at a Glance Regulated Business as of December 31, 2020 53,000+ miles of pipe 609 water treatment plants 150 wastewater facilities 1,100 wells 75 dams Homeowner Services ~3 million contracts serving ~1.5 million customers Military Services Group Regulated Operations Homeowner Services 17
Slide 9: Our Compelling Story 2021-2025 Plan
Our Compelling Story 2021‐2025 Plan 7‐10%* EPS CAGR range Market‐Based Businesses ~0.5% ~1% Regulated 1.5‐2.5% 2‐3% Acquisitions Regulated Investment 5‐7% 5‐7% CAPEX *Anchored off 2020 EPS 9Our Compelling Story 2021‐2025 Plan 7‐10%* EPS CAGR range Market‐Based Businesses ~0.5% ~1% Regulated 1.5‐2.5%
Slide 10: Increase in Regulated Investment of $1.3 Billion Over the Next 5 Years
Increase in Regulated Investment of $1.3 Billion Over the Next 5 Years Capital Plan ($ in billions) 2021 ‐ 2025 Average Regulated Capital Expenditures by Purpose 2021 – 2030 $22 ‐ $25 4% Infrastructure Renewal Regulated 7% $3 ‐ $4 Acquisitions Operational Efficiency, 8% 2021 – 2025 Technology & Inno
Slide 11: Balancing Investment Opportunity & Customer Bill Impact
Balancing Investment Opportunity & Customer Bill Impact System investment needs Customer bill impact What can help us do more O&M and capital efficiencies Regulatory support and constructive legislation Increase customer base 11
Slide 12: Strategic Approach to Managing Costs
Strategic Approach to Managing Costs TECHNOLOGY Enabling employees Enhancing customer experience Best-in-class operations SUPPLY CHAIN Leverage our scale More competitive pricing/buying power Access to supply Commitment to diverse suppliers CULTURE Strong customer focus Embrace Innovation Continuous
Slide 13: Managing Customer Bill Impact with a Disciplined Focus on Operating Costs
Managing Customer Bill Impact with a Disciplined Focus on Operating Costs 46.1% 41.0% 39.1% 36.6% 35.6% 34.5% 34.3% Regulated O&M 30.4%** Efficiency Ratio* 2010 2012 2014 2016 2018 2019 2020 2025 Target 2025 O&M Adjusted O&M Expenses from Added≈322,000*** Efficiency Target 2010 to 2020 increased onl
Slide 14: Market-Based Businesses Provide Strategic Value
Market-Based Businesses Provide Strategic Value Military Services Group 17 installations in current footprint Opportunity for infrastructure upgrades on existing bases Homeowner Services ~3 million protection plan contracts serving ~1.5 million customers Over 40 different partnerships with municipal
Slide 15: Our Objectives for the Next Five Years
Our Objectives for the Next Five Years 2021‐2025 Plan Advance infrastructure improvement through five‐ 7‐10% EPS CAGR range year capital investment plan of approximately $10.4 billion and expected ten‐year plan of $22‐$25 billion Market‐Based Businesses ~0.5% ~1% Accelerate growth through acquisitio
Slide 16: Bill Varley, Chief Growth Officer
Bill Varley Chief Growth Officer 16Bill Varley Chief Growth Officer 16
Slide 17: Highly Fragmented Water Industry Creates Opportunity
Highly Fragmented Water Industry Creates Opportunity Water Utilities Electric Utilities Natural gas Utilities Industry opportunity Water 16% investor owned 2% investor owned 84% Public & other 98% Public & other Water Utilities Source: EPA SDWIS Federal Reports Search www3.epa.gov/enviro/facts/sdwis
Slide 18: Leveraging Our Competitive Advantage
Leveraging Our Competitive Advantage Focus on Efficient Operations Focus on Efficient Operations Scale and large customer base Increase wastewater within and adjacent to water footprint People with deep utility experience Engagement on Regulatory and Legislative Policy 18Leveraging Our Competitive A
Slide 19: State Legislation Enables Growth
State Legislation Enables Growth Water Quality Fair Market Value Consolidated Tariffs 10 12 3 Accountability Legislation CA MO CA NJ IA NJ IA MD NJ IL NY IN IL IN IN PA PA MO MO KY VA VA WV MD WV 19State Legislation Enables Growth Water Quality Fair Market Value Consolidated Tariffs 10 12 3 Accounta
Slide 20: Strong Pipeline of Opportunities
Strong Pipeline of Opportunities Growing Opportunity for 1,230,000 Acquisition Activity Since Customer Connections Over Customer Connections in 2015 Five Year Outlook Pipeline 1,230, 000 106 acquisitions adding over 211,000 800,00 Opportunity A –78,000 customer connections 0 Opportunity B –50,000 Op
Slide 21: Regulated Growth: Strategy
Regulated Growth: Strategy Executing 2021‐2025 Plan Fundamentals 7‐10% EPS CAGR range Continued focus on acquisitions in the target range of – Market‐Based 5,000 to 50,000 customers – and larger acquisitions Businesses ~0.5% ~1% where appropriate Regulated 1.5‐2.5% 2‐3% Leverage water footprint to a
Slide 22: Cheryl Norton, Chief Environmental Officer
Cheryl Norton Chief Environmental Officer; President, New Jersey American Water 22Cheryl Norton Chief Environmental Officer; President, New Jersey American Water 22
Slide 23: What ESG Means at American Water
What ESG Means at American Water Activists/ Investors Advocacy Groups Stakeholder Engagement Industry Employees Associations Workforce ESG The Journey Customers engagement of ESG Board of Customers Directors Infrastructure Regulatory Agencies/ State Utility Communities Environmental Commissions Stew
Slide 24: How We Work
How We Work Inclusion & Diversity Supplier Diversity Safety People 59% 27.6% 67% >100k HRS Of Transfers/Promotions 2021 Goal: Achieve Reduction in workplace Safety training completed were minority, female, diverse supplier/small injuries since 2015 by employees veteran or disabled business spend, of
Slide 25: Environmental Goals
Environmental Goals Water Use & Efficiency Energy & Emissions* Climate Variability & Water Supply Resilience B By y 2035, 2035, m mee eet cus t cust tomer omer n needs eeds R Re educ duce absolut e absolute e s sc co ope 1 and pe 1 and while saving while saving 15% in wat 15% in wate er r sc scope 2
Slide 26: Water Use & Efficiency Goal
Water Use & Efficiency Goal By 2035, American Water commits to meet customer needs while saving BENEFITS 15% in water delivered per customer compared to a 2015 baseline › Environment 2015 2020 2035 › Energy Savings 4.3% reduction gained since 2015 › Avoided Capital › Reduce Non‐Revenue Water 4.3% 4.
Slide 27: Climate Variability & Water Supply Resilience Goal
Climate Variability & Water Supply Resilience Goal By 2030, increase our water system resiliency to respond to more extreme events by increasing URI* weighted average by 10% from 2020 baseline BENEFITS › Availability and reliability of service › Robust, comprehensive emergency planning › Response to
Slide 28: Climate Variability & Water Supply Resilience Goal
Climate Variability & Water Supply Resilience Goal URI assesses a utility’s ability to absorb and cope with an incident and return to normal operations as quickly as possible. People Power Asset Resiliency Community Resilience Utility Improved Enhanced Resilient Capital Employee Emergency Resiliency
Slide 29: Susan Hardwick, Chief Financial Officer
Susan Hardwick Chief Financial Officer 29Susan Hardwick Chief Financial Officer 29
Slide 30: 2020 Results: EPS Contribution by Business
2020 Results EPS Contribution by Business Fourth Quarter Three Months Ended Three Months Ended 2020 Results 12/31/2020 12/31/2019 Change Regulated $0.85 $0.84 $0.01 Market‐Based $0.13 ($0.09) $0.22 Parent Interest & Other ($0.18) ($0.21) $0.03 Total EPS $0.80 $0.54 $0.26 EPS Contribution by Business
Slide 31: 2021 EPS & Long-Term Guidance
2021 EPS & Long-Term Guidance 7‐10%* CAGR Range 2021 EPS Guidance 2021 – 2025 LT 2020 EPS 7‐10%* EPS CAGR 2020 EPS Guidance includes $0.07 per $4.18 share of favorable weather; $3.84 per share weather normalized $4.28 2021 EPS Guidance $3.91 $4.18 ‐ $4.28 2020 2021 2025 31 * Anchored off 2020 EPS202
Slide 32: Investment for Growth
Investment for Growth in Regulated Acquisitions Market-Based Businesses 1-2% Market-Based Businesses ~1%% Regulated Acquisitions 1-2 % Regulated Acquisitions 1.5-2.5 % Regulated investment CAPEX 5-7% Regulated investment CAPEX 5-7% 32
Slide 33: Our Capital Plan Drives Rate Base Growth
Our Capital Plan Drives Rate Base Growth Capital Plan ($ in billions) $22 ‐ $25 $20 ‐ $22 Regulated $3 ‐ $4 $2 ‐ $3 Acquisitions $10.3 ‐ $10.5 $8.8 ‐ $9.4 $1.4 ‐ $1.6 $0.6 ‐ $1.2 $1.9 Regulated $19 ‐ $21 $18 ‐ $19 $0.3 System Investments $8.9 $8.2 $1.6 2021 2020 – 2024 2021 – 2025 2020 – 2029 2021 –
Slide 34: Investment in Rate Base is the Foundation of Our Growth
Investment in Rate Base is the Foundation of Our Growth ($ in billions) ≈7‐8%* Rate base Estimated Rate Base** CAGR As of 12/31/2020 Net Utility Plant $20.1 Less Advances for Construction $0.3 $1.4 CIAC ‐ Contributions in Aid of Construction $3.4 Net Deferred income taxes $5.1 Total Estimated Rate B
Slide 35: Financing $1.3 Billion Increase in Regulated Investment
Financing $1.3 Billion Increase in Regulated Investment Over Prior Plan ($ in millions) Total Change in Financing Equity Financing Sources ~54% Debt Financing Sources ~46% from Prior Plan Change from Prior Plan Change from Prior Plan +$250 +$600 Operating Cash Flows Debt Issuances $1.3 billion + NYA
Slide 36: Rate Filings Completed & Awaiting Final Order
Rate Filings Completed & Awaiting Final Order ($ in millions) Requested Revenue in Rate Filings Pending Base Rate Completed* Effective since January 1, 2020 Proceedings** *Annualized Revenue Increase for Rates Effective Since January 1, 2020 36 ** Includes revenues originally requested by Pennsylvan
Slide 37: Balance Sheet Strength
Balance Sheet Strength AWK Long‐Term Issuer Rating Debt to Total Capital* S&P Global Moody’s 5‐year Plan ** 2020 2025 62% 59‐60% A Baa1 (stable) (stable) *Includes both long‐term and short‐term debt **Excludes $500 million term loan Consolidated Debt Maturity Profile 5 years Liquidity Available as o
Slide 38: Delivering Value for Our Shareholders
Delivering Value for Our Shareholders Target long term dividend growth 5‐Year Total Shareholder Return** CAGR at high end of 7‐10%* 182% 103% 79% American Water PHLX Utility Sector S&P 500 Works Company *Future dividends are subject to approval of the American Water Board of Directors 38 **As of 12/
Slide 39: Walter Lynch, President and Chief Executive Officer
Walter Lynch President and Chief Executive Officer 39Walter Lynch President and Chief Executive Officer 39
Slide 40: Our Strengths
Our Strengths People Solutions ESG Safety Performance Provider Inclusion & Going beyond the Safety is both a ESG affirms the Growth enables empowerment pave a minimum requirement strategy & core values we have investment in path for employee & to solidify our position company value. upheld for decad
Slide 41: Demonstrating Leadership
Demonstrating Leadership Sustainability Supplier Diversity Ranked #9on Corporate Knight’s Global 100 Most Sustainable Companies; Top ranked Water company in the world American Water ranked #15 on Barron’s 100 Most Sustainable Companies S&P Global Ratings ESG Evaluation Ranked (87 out of 100), the hi
Slide 42: Our Compelling Story 2021-2025 Plan
Our Compelling Story 2021‐2025 Plan Top tier long‐term EPS growth at CAGR of 7‐10% 7‐10% EPS CAGR range Regulated growth driven by capital investment of Market‐Based approximately $10.4 billion over the next five years and Businesses ~0.5% ~1% expected $22 to $25 billion over the next ten years Regu
Slide 43: Minute Break
5 Minute Break 435 Minute Break 43
Slide 44: Q&A Session
Q&A Session 44 44Q&A Session 44 44
Slide 45: Investor Relations Contacts
Investor Relations Contacts Ed Vallejo Vice President, Investor Relations edward.vallejo@amwater.com Michael Tavani, CFA Senior Manager, Investor Relations michael.tavani@amwater.com Abbey Barksdale Senior Manager, Investor Relations & ESG abbey.barksdale@amwater.com 45Investor Relations Contacts Ed
Slide 46: Appendix
Appendix 46 46Appendix 46 46
Slide 47: Forward-Looking Statements
Forward-Looking Statements Statements made, referred to or relied upon 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; our future financial performance, liqu
Slide 48: Non-GAAP Financial Information
Non-GAAP Financial Information This presentation includes adjusted regulated segment O&M efficiency ratios, both historical and forward‐looking, which, in addition to the pro forma adjustment for the impact of the Tax Cuts and Jobs Act (the “TCJA”), excludes from its calculation (i) estimated purcha
Slide 49: Fourth Quarter 2020 EPS Detail by Business
Fourth Quarter 2020 EPS Detail by Business Regulated $0.01 MBB $0.22 Other $0.03 * 49Fourth Quarter 2020 EPS Detail by Business Regulated $0.01 MBB $0.22 Other $0.03 * 49
Slide 50: Full Year 2020 EPS Detail by Business
Full Year 2020 EPS Detail by Business Regulated $0.33 MBB $0.26 Parent ($0.09) * 50Full Year 2020 EPS Detail by Business Regulated $0.33 MBB $0.26 Parent ($0.09) * 50
Slide 51: 2020 Closed Acquisitions
2020 Closed Acquisitions* As of December 31, 2020 NUMBER OF WATER CUSTOMER WASTEWATER CUSTOMER TOTAL CUSTOMER STATE SYSTEMS CONNECTIONS CONNECTIONS CONNECTIONS California 2 6,300 ‐ 6,300 1 ‐ 200 200 Hawaii Iowa 2 250 ‐ 250 Illinois 11 6,500 18,500 25,000 Indiana 1 ‐ 400 400 1 ‐ 100 100 Missouri 1 ‐
Slide 52: Acquisitions Under Agreement
Acquisitions* Under Agreement as of January 31, 2020 NUMBER OF WATER CUSTOMER WASTEWATER CUSTOMER TOTAL CUSTOMER STATE SYSTEMS CONNECTIONS CONNECTIONS CONNECTIONS California 4 6,200 ‐ 6,200 3 900 ‐ 900 Illinois Indiana 2 100 100 200 Missouri 9 4,100 5,400 9,500 Pennsylvania 7 1,700 10,300 12,000 2 1
Slide 53: Timely Recovery Through Regulatory Mechanisms
Timely Recovery Through Regulatory Mechanisms 64% Infrastructure Forward Surcharge Test Years Mechanisms (36%) (28%) 36% Traditional Recovery 2021‐2025 Capital Plan (average) 53Timely Recovery Through Regulatory Mechanisms 64% Infrastructure Forward Surcharge Test Years Mechanisms (36%) (28%) 36% Tr
Slide 54: Rates Effective Since January 1, 2020
Rates Effective Since… January 1, 2020 January 1, 2021 Date Annualized Date Annualized Date Annualized Infrastructure Charges Rate Cases & Step Increases Infrastructure Charges Effective Revenue Increases Effective Revenue Increases Effective Revenue Increases West Virginia (DSIC) 1/1/2020 $3 West V
Slide 55: Pending Rate Case Filings
Pending Rate Case Filings Rate Cases Filed Docket/Case Number Date Filed Requested Revenue Increase ROE Requested Rate Base (a) California Case No. A.19‐07‐004 7/1/2019 $26 $689 Docket R‐2020‐3019369 (W) & (b) Pennsylvania 4/29/2020 92 10.8% 3,975 R‐2020‐3019371 (WW) (c) Missouri Case No. WR‐2020‐03
Slide 56: Regulatory Information
Regulatory Information CALIFORNIA ILLINOIS INDIANA KENTUCKY MISSOURI (b) $498,135 $883,386 $1,182,170 $443,654 $1,249,293 Authorized Rate Base* (a) (e) 9.20% 9.79% 9.80% 9.70% 10.00% Authorized ROE (a) (c) (d) 55.39% 49.80% 53.41% 48.90% 52.80% Authorized Equity (a) Effective Date of Rate Case 1/1/2
Slide 57: Reconciliation Table: Regulated Segment O&M Efficiency Ratio
Reconciliation Table: Regulated Segment O&M Efficiency Ratio Regulated Segment O&M Efficiency Ratio FY FY FY FY FY FY FY 2010 2012 2014 2016 2018 2019 2020 (A Non-GAAP Unaudited Number) ($ in millions) Total operations and maintenance expense $1,291 $1,330 $1,350 $1,504 $1,479 $1,544 $1,622 Less: Op
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