American Water Works Company, Inc. · NYSE:AWK
American Water Works — Investor Day (December 2016)
72 slides from American Water Works's investor day presentation, Dec 15, 2016
Slide 1: 2016 Investor Conference
Exhibit 99.2 Exhibit 99.2 2016 Investor Conference December 15, 2016
Slide 2: Agenda
TimeInto Agenda 1:00 Tap Mike 1:20 1:40 technology Kirwan, 2:10 2:40 Overview 2:55 Businesses Panelists: 3:25 Business 3:40 4:20 December NYSE: Sgro -Presentation –AWKwww.amwater.com2 2:10 Radha 1:20Welcome, 1:40American 2:40Presentation: 2:55BREAK 3:25Panel: 3:40Presentation: 4:20Tying 5:00Wrap Tal
Slide 3: Forward-Looking Statements
Forward-Looking Ed Vice December NYSE: Vallejo President AWK 2016 www.amwater.com Financial Statements Planning3and Investor Relations
Slide 4: Forward-Looking Statements
Forward-Looking Certain strategy, looking outcomes, statements those year governmental liabilities exploration pertaining drought temperatures; current capital contamination obtain growth regulated improvements access in fluctuations including customers or work public and readers this result possibl
Slide 5: Safety Message
Safety Message Robert Author: December NYSE: Lacorte AWK Don’t 2016 www.amwater.com Die Financial in a Car Analyst 5
Slide 6: Tap Into Our Talent
Tap Into Mike Executive December NYSE: Sgro AWK Talent Vice 2016 www.amwater.com President, General6Counsel & Corporate Secretary
Slide 7: Kentucky American Water
Kentucky “It’s By: Scott WaterSimpson American by American” and Water Charlie Boland Kentucky American Water
Slide 8: Susan Story Overview
Susan Story Overview December NYSE: AWK2016 President www.amwater.com and Chief Executive 8 Officer
Slide 9: Our Success Cycle
American Employees, Engaged Smart Investments, and Operations Efficient December Performance Financial NYSE: Safe, AWK Regulatory Water: 2016 Satisfied= CustomersSustainable Constructive HighlyOutcomes www.amwater.com9 Our Success Cycle
Slide 10: Today We Are Affirming and Announcing Guidance
Today Affirming Announcing Continuing Moving EPS GAAP) $4.75 Non /-$4.25 (GAAP Share $3.75 Revised 2017 Per Guidance $3.25 Earnings $3.00 $3.08 Diluted $2.81 $2.75 $2.64 2015 *Revised **Anchored NYSE: CAGR Guidance Growth 7-10% 2016 Guidance $3.50 We AWK $2.50 $4.00 $4.50 EPS 2016 Range $2.86 2016 A
Slide 11: Possible Impacts of President-Elect Trump's Administration
Possible Infrastructure Focus and Federal December NYSE: Financing AWK Taxes Defense Impacts 2016 www.amwater.com Interest Department Sequestration Natural of President-Elect Rates Gasof Pipelines Support 11Trump’s for More Administration
Slide 12: Our Next Five Years
OurNon-*** 2017—2021 NYSE: Invest infrastructure, Set ~2.5%*** Continue Lead Grow 50-60% December www.amwater.com ** Ancho the Commitment Innovation, dividends $6.7—$7.3 bar AWK target Industry complementary 2016 for Exc Plan expand payout customer inWater Over billion Leading line 12ratio water wit
Slide 13: The Customer Experience: Technology and Water Quality
The Customer Where Walter Chief Officer December Water NYSE: Operating Lynch Service, AWK Customer 2016 www.amwater.com Experience: Doug Technology Senior Experience Brand Director &Kevin Water New 13 VP KirwanRadha Jersey Quality OperationsChief AmericanInnovation MeetSwaminathan Technology Officer
Slide 14: The Customer Experience: Technology & Water Quality
The Customer Where December NYSE: Service, AWK2016 www.amwater.com Experience: Technology & Water 14 Quality Meet
Slide 15: Charting Our Growth: Regulated Overview
Charting Walter Chief December NYSE: Lynch AWK Operating Our 2016 Growth: www.amwater.com15 Officer Regulated Overview
Slide 16: Our Regulated Footprint
The Our (in WV Other $129 5% IL $206 IN 7% $198 CA $270 16 10% 1$269 December NYSE: Billion Regulated Millions) Leading Regulated PA 26% $353NJ MO22% 13%$704 $614 AWK Gallons 2016 Investor States www.amwater.com Footprint of 1,600 Water Owned Communities Treated 2015 Water Regulated 16 and Utility D
Slide 17: Regulated Infrastructure Investment
Total– Regulated: 4% Regulated December NYSE: 6% AWK Investment Infrastructure 2016www.amwater.com 5%-8% Investment—the 17 Foundation of our Growth
Slide 18: Regulated Investment: Five-Year Plan
Regulated Investment A Our 1tax Budget $1.2 Billion Total capex: $1.5B, including $1.2B infrastructure regulated Confronting approximately NYSE: Year Look policies 5-Year 2017–2021 2017 for $5.9 $6.7-$7.3B, including AWK Into 5Billion Plan $5.9B regulated Year Infrastructure capex: Need Plan $15 and
Slide 19: Capital Expenditures 2017-2021 by Purpose
$6.7B-$7.3B (In $6.7—$7.3 $0.2 $0.6 $1.2 System Regulated 56% 8% 12% Asset 7% Investments $5.9 Capacity Reliability/Quality December 2017-2021 NYSE: $Acquisition Strategic —Regulated Billions) Renewal AWK 13% Expansion 2016 Capital 2017—2021 of www.amwater.com Capital Asset Investments 4%Expenditure
Slide 20: Lead Service Line Replacement
Regulated AW 0.7 0.8 0.9 0.07 0.4 0.5 0.71 0.65 0.3 0.62 020.56 0.1 0.2 Lead NYSE: American Less Challenge Estimated Goal www.amwater.com 0120.07 0.82 0.6 Historic 0.07 0.74 0.65 0.52 than is service 2013 AWK to0.07 0.6 0.66 5% fully Water’s cost Infrastructure 2014 vs. line 0.07 lead for address Pr
Slide 21: Balancing System Needs and Customer Bill Impact
Regulated Balancing System Investment Needs What Regulatory O&M Efficiency December NYSE: Can and AWK Impacts Customer Help Infrastructure Capital 2016 Regulation Support Bill www.amwater.com UsNeeds Constructive Do andMore…. Investment: & Customer 21 Customer Bills Bill Impact is Key to Capital Pro
Slide 22: O&M Efficiency Ratio Stretch Target
Regulated Stretch 2010 32.5 34.9 36.7 40.7 44.2 O&M Note: further NYSE: Driving New American reverse conducted auctions reduce costs, million years, our December www.amwater.com customers. Jersey 2012 saving benefiting Efficiency electricity information. Target AWK energy for Efficiencies toWater In
Slide 23: Capital Efficiency Helps Deploy Infrastructure Investment
Regulated Help Deploying mains, Value Negotiations capital $2.7 end December NYSE: of million Us Engineering 2016 saving costs AWK DoInfrastructure 2016 a More by variety on www.amwater.com $5the pipes the ofand design trenchless Investment: meters of apipe are 23 million Capital expected lining on
Slide 24: Regulatory Mechanisms Supporting Investment
Regulated Investment 16 #D of States NYSE: ecember NewAWK Regulatory Infrastructure 2016 Supports www.amwater.com Mechanisms Customers’ Investment: Best Across 24 Timely Interests Our Return Footprint on Since 2010
Slide 25: Regulated Acquisitions: Fragmented Water Industry
Regulated Creates Investor 2% tions lated 84% Public The 98% NYSE:majority &AWK Opportunity Owned Other Acquisitions: of www.amwater.com water 16%Wastewater 2% Water systems HighlyinFragmented the 25 US are Water ownedIndustry by capital constrained entities
Slide 26: Consolidation Legislation Enabling Growth
Regulated 1997 CA NJ Requirement Consolidation MO IN Fair Value Systems Stormwater Combined Clarifying PA Expansion *see Wastewater NYSE: IL Water Market IN appendix 2012 Value Revenue PA AWK as& Acquisitions: 2013 Waste Fair Fair Acquisition www.amwater.com Deferrals for Post 2015 Market Market det
Slide 27: Acquisition Process and Timeline
Regulated 6-12 Process Agreement Rate Due Signing Negotiations Local Two December NYSE:RFP’s to Case months Approvals Five AWKwww.amwater.com27 Pending /Acquisitions: 2016 RegulatoryCustomers Diligence Years / Bids 6-9from CloseInitial months12-36 Approval RFP Approximate to Rates Full months &Close
Slide 28: Customer Growth Through Acquisitions
Regulated Customer Selected Acquisitions 45,000 50,000 55,000 54,943 60,000 40,000 35,000 18,200Target 30,000 25,000 20,000 15,000 10,000 2,4001,869 5,000 012,57112,862 Target 2012 Organic We with *(68,500 for December NYSE: 2012 the 3,099 also Scranton D8,000 H5,000 last 2013201420152016 Excludes A
Slide 29: Regulated Operations Summary
Regulated Committed 2017—2021 Invest Pursue Leverage and *Excluding December NYSE: capital $5.9B $0.6-$1.2B constructive legislative AWKtechnology Operations 2016 spend to: CA over www.amwater.com policies 5over regulatory years toSummary: 5enhance years in to our enable mechanisms inassets, custome
Slide 30: Missouri American Water
Missouri “H2O By: Terrance Serenade” American Green Water Missouri American Water
Slide 31: Charting Our Growth: Market Based Businesses Overview
Charting Market Linda Chief Officer Enterprises December NYSE: Financial Sullivan AWK Based Our American 2016 Solutions Growth: www.amwater.com Business Deb President Water Degillio Overview Keystone President Dan31Dalton Clearwater and CEO
Slide 32: Why Market-Based Businesses?
Why Market ~2% Businesses Build on Capitalize Capital-Light Additional, Competencies Growth December NYSE: Our We Relationships Businesses? Core AWK Based Pursue Talent 2016 www.amwater.com Attract Why Market-Based Market-based Businesses 32
Slide 33: Market-Based Businesses Portfolio
American Homeowner Warranty Partnerships Fastest 9.1% O&M Services Contract Public-private Minimal Strategic Short Military Operate 50 Identify Acquisition Steady New 12 > Aging December www.amwater.com 800,000 1.6 40 1,700 year bases water contracts Bases million estimated to contracts infrastructu
Slide 34: Military Services and Home Owner Services Strategy
American Military Pursue Enhance Mitigate Leverage Home Expand Product Geographic Optimize Contract Targeted Strategic Portfolio NYSE: December www.amwater.com Owner New AWK Partnerships Diversification Services external our Services O&M public-private optimization potential Core Water 2016 Expansio
Slide 35: Keystone Market Overview
Keystone Key Increased Natural Rig Well •Current in Largest December NYSE: $3.00+/MMBtu 50+ Increased 2017 Count Business Completions Rigs AWK % Gas Market Appalachian Business Market of 2016 in Well Price Natural Appalachia Drivers www.amwater.com Conditions Completions Natural Share Update—Current
Slide 36: Keystone: Core Business Expansion Strategy
Keystone: Core Expansion December NYSE:Business AWKOur 2016 Services www.amwater.com Strategy Municipal Ownership for Asset Growth36
Slide 37: Market Based Businesses
MarketOwner Home Military December NYSE: AWK Based Services 2016 www.amwater.com Keystone Businesses Contract Services Services 37
Slide 38: Charting Our Growth: Corporate Development Overview
Charting Corporate Mark Senior December Development NYSE: Strauss Vice AWK Our Business 2016 President—Corporate Growth: www.amwater.com Development 38 Overview Strategy and Business
Slide 39: Corporate Development: What We Do
Corporate Research Survey Monitor water Evaluate opportunities modeling and leadership on transactions velop strategy company overall manage Provide cycle planning Due Deal Integration Post December www.amwater.com major Diligence Acquisition Tracking IOU and the a& potential new industry acquisitio
Slide 40: Evaluating New States: Three Gates
Evaluating Line December NYSE:of AWK Sight 2016 Newto www.amwater.com 50,000 States –Regulatory Three Gates 40Business Customers Climate Climate within Five Years
Slide 41: Bringing It All Together: Our Financial Plan
Bringing Linda Chief December NYSE: Financial Sullivan AWK It2016 Allwww.amwater.com Together: Officer Our Financial 41 Plan
Slide 42: A Top Performing Water Investment
American Top One growing in 7-10% Target A Dividend Regulated ratio payout target 50%-60% of 85-90% Strong “A” ~ CAGR *Higher •Decades Superior Shareholder AWK 193% 179% 302% 474% S&P DJUA FactSet: December www.amwater.com Fragmented Regulatory 7% Top the earnings Shareholder Rated of 500 CAGR na Wa
Slide 43: Fastest Growing Water Utility in the Nation
One GAAP $2.59-$2.64 $4.75 Revised /$2.75-$2.85—$4.25 7-10% Non-GAAP* (G $3.75 2017 Earnings original $2.64 •Diluted 2016 *Revised **Anchored NYSE: 8% 7%$4.00 of growth Guidance Share revised GAAP) the AWK 2015 2016 $2.75 2016 Fastest GAAP from over non-GAAP AAP 2016 guidance Non-GAAP $4.50 EPS $3.5
Slide 44: Regulated Risk Characteristics and Market Diversity
We Will Estimated 0% *Approximate. Regulated Geographic Decades Mechanisms Smooth Fair Market Portfolio Capital Significant Leverage Provide Attracts December NYSE: www.amwater.com 10% Market AWK Based Light Strategic Capital Talent Continue of 20% of Core Earnings 90% 85% Risk 2016 Market Capital F
Slide 45: Regulated Capital and Rate Base Growth
Regulated Consolidation Our (in $0.6—$1.2 $0.2 $1.5 $5.9 Uniquely economies financial water We Rate December NYSE: $Billions) have Forecasted billion Base quality AWK additional strength Positioned Growth Operations: 2016 of $6.7—$7.3 ofand scale www.amwater.com Needed capital Capital innovations an
Slide 46: Regulated Acquisitions Process
Regulated 6-12 /Agreement Approval Pending Signed Interim Begin 37,500 with (68,500 Rate Authorized Process Long-term Collect December NYSE: www.amwater.com Scranton Case base months operations Customers agreement AWK revenue financing; customers &Served Signing authorized Acquisitions: 2016 financi
Slide 47: Additional Debt Capacity Under Financial Plan
We2015 $1.4 Additional Strategic Regulated Investments Current *Estimated NYSE: II. Have Billion AWK Plan Financial Additional Acquisitions System Debt based Additional $5.9 $6.7—$7.3 www.amwater.com Capacity Regulated on Plan: Debt FFODebt $1.2 Regulated Billion Capital Capacity toSystem Debt Capac
Slide 48: Potential Interest Rate Impacts on Earnings Per Share
Potential Key 50 O&M Interest Pension $Allowed -$ 0.50% Short December NYSE: basis 0.10 0.08 0.06 0.04 0.02 0.00 Assumptions: 0.02 0.04 0.06 0.08 0.10 term costs Interest AWK cost discount point ROE Interest 20172018201920202021 2016 interest impacted recovered www.amwater.com increase increases rat
Slide 49: Potential Corporate Tax Reform Impacts
Corporate 100% Loss *Reflects NYSE: Isolated Regulated Potential Market-Based Higher Remeasurement All Grows Delays Rate Increase Lower Increased Until www.amwater.com base of actual Bonus tax cash earnings federal earnings federal AWK Tax Potential tax Treatment to potential rate loss impact Income
Slide 50: Strong Credit Profile and Debt Maturity Schedule
Strong Credit 14 8C 10 12 of 2N B Debt $574 80% $478 $22 20% $166 30% 40% 50% $457 2017 0% *Includes December NYSE: ompanies umber B+ 4AWK 10% Maturity 70% 60% 2018 BB- Rating Balance AWK 0Rating both BB 56% 2016 2019 6 www.amwater.com of BB+ Schedule fixed Sheet 58% Utility 2020 BBB- rate 2021 Comp
Slide 51: Strong Federal Cash Flow from Operations
Strong Federal $2.0 $1.5 Billions $0.0 2015 Cash A December NYSE: denotes CAGR $1.5 $0.0 A Flows Cash AWK Net $1.0 2016 actual; 2016 Operating from ~Flow Billions www.amwater.com 7% E 2017 E Operations $2.0 from denotes $1.0 Loss EOperations 2018 inestimated (NOL) inEFederal $2019 51 $0.5 Strong E$N
Slide 52: Dividend Growth Leader
A Top7-10% 10.2% with Current Target American earnings $1.80 $0.80 2011 $0.00 *The dividend December NYSE:2012 dividend CAGR $0.60 Leader to payout Dividend AWK dividend has grow Water 2016 *EPS $0.40 2013 been 10.2% www.amwater.com in ratio normally dividends Dividend Dividends CAGR growth $0.375 *
Slide 53: Financial Plan Overview and Targets
Financial -Continuing Grow Targets: Plan One Maintain Market of Decades Target Payout Strong Deliver Combined December NYSE: 2021 earnings ofEPS to balance the ratio AWK based superior of grow our Overview: 2016 EPS fastest long regulated Delivery between predominantly www.amwater.com businesses div
Slide 54: Wrap Up
Wrap Up Susan December NYSE: Story AWK2016 President www.amwater.com and Chief Executive 54 Officer
Slide 55: Shareholder Return and Customer Satisfaction Leader
American EPS AWK UTY Proxy DJUA Other 2% Water 13x than 1) 2) Source: NYSE: December www.amwater.com 4% better Total CAGR national Growth water Quality Companies AWK 6% Other Bloomberg AWKAWK Proxy shareholder Water Quartile 2016 for companies (1) of 8% Water Customer 2013 CompaniesOther 9/30/16 –10
Slide 56: Key Takeaways
American Industry from Track executing converging technology novation superior service, December NYSE: infrastructure record AWK customer leading, towaterquality our Water 2016 and people, deliver ofstrategies www.amwater.com56 Key multi-decade Differentiated investment Takeaways andstrategy efficie
Slide 57: Investor Relations Contacts
Investor Ed Vice Melissa Director– Tel: New December NYSE: Vallejo 856-566-4005 President website AWK Schwarzell Relations Investor 2016 design www.amwater.com – Investor Contacts: Relations Fax: at www.amwater.com 856-782-2782 Relations Melissa.Schwarzell@amwater.com 57Edward.vallejo@amwater.com co
Slide 58: Appendix
AMERICAN WATER NYSE: AWK i
Slide 59: Non-GAAP Financial Information
Non-GAAP with Industries items American limitations This purchased support financial GAAP Management Water’s forecasts, definition Water probable significantly Set historical December NYSE: forth GAAP. presentation that isdisclosures AWK services operating unable in measures” information significanc
Slide 60: How American Water Earns Allowed Return
How American Prudent Allowed Establish AllowedOperatingTaxes, Base Step American promoting December NYSE: 1AWK 2 Investment RatexWACC=Return Return+Expenses+Amortization=Requirement Water 2016 constructive www.amwater.com Water hasDrives experience grows regulatory Depr Need Earnings: &Revenue infor
Slide 61: 2016 to 2017 EPS Growth Drivers
GrowthAWK $0.08—$0.09 *Revised reconciliation NYSE: www.amwater.com Drivers: 2016and $2.98—$3.08 EPS 2016 other 61 GAAP Adjusted further guidance $0.12—$0.16 information. EPS Guidance $2.59-$2.64. $2.81—$2.86—$0.03 December $2.81-$2.86* Revised 20162016 to 2017 Non-GAAP GAAP EPS EPSGuidance guidance
Slide 62: 2017 Guidance and Major Variables
2017 Guidance $2.98—$3.08 WEATHER *Fluctuations NYSE: AWK$(0.07) www.amwater.com outside diluted and Major $0.07 earnings this range REGULATED Variables per could 62 share Included cause $(0.03) results in the $0.03 to Range vary MARKET-BASED $(0.02) $0.01 KEYSTONE $(0.01) $0.01
Slide 63: Rate Base Growth
Decades Wastewater Based CAGR $10.0 $10.5 Billions 2014 Rate A December NYSE: denotes Base A$9.4 on ~AWK 2015 $of 5-6% Capital In actual; Growth 2016 Investment Infrastructure Awww.amwater.com 2016 Plan E~5-6% denotes Q3of Needed A$6.7—$7.3 through 2017 estimated inE63 U.S. 2021 2018 Billion Water E
Slide 64: How O&M Savings Translate to Shareholder Value
How Saving Expense $1$7 a) O&M Expenses Depreciation Interest 14 Property b) c) d) 654321e) December NYSE: Assumes Revenue Operating Net Total Federal $7O&M of Income $1 AWK Expense Expenses capital, Savings 0.96$- &in & 2016 4% 2.5% 50% property effective authorized General Requirement Efficiency I
Slide 65: 2016 Closed and Pending Acquisitions
2016ofYork Closed Kentucky Pennsylvania Pending No. Sate California Iowa Illinois Missouri New Pennsylvania* West Total *This customer approximately December NYSE: Jersey Virginia Closed includes Acquisitions Acquisitions 18 AWK 1730730 2869869 131,8699,21211,081 Acquisitions WaterWastewaterTotal eq
Slide 66: Regulated Rate Base and Authorized ROE
Regulated Equity Last Authorized Effective *Rate CA Notes: proceeding Regulatory Information The *Rates December NYSE: Not received Rate equity ROE Rate Under updated Base as AWKBase Date of Case listed Utilities: 2016 ratio and capital Rate ROE Equity stated pertains December D.15-04-007 Bond www.a
Slide 67: Pending Rate Cases
Rate A. Company AnnualizedROE Virginia Illinois New California B. $96.9$1,941.8 Tennessee (a) $1.7$18.4 subject $49.5 Iowa For *million, December NYSE: Not The this Infrastructure Rate Cases York rates million. updated Case to AWK rate final respectively. Docket Cases refund Case 2016 were Awaiting
Slide 68: Rate Increases Effective 2016
Rate Rates 2016* Date Annualized C. California D. $1.9 Tennessee Illinois Pennsylvania New E. $61.4 Indiana West Missouri Kentucky The $31.1 Michigan An *KY December NYSE: Not increase PSC revenues Rate Step Infrastructure Cases York EffectiveRevenue Jersey Virginia Effective updated (QIP) AWK (DSIC
Slide 69: System Consolidation Legislation
System California: 1997: 2012: Illinois: 2013 Missouri: New 2015: 2016: Indiana: Pennsylvania: December NYSE: Jersey: AWK Consolidation Water Acquisition Sale (SB Acquisition 2016 Public Water 257) of www.amwater.com Act Systems Nonsurplus Water 11 12 154 Infrastructure of (HB of Legislation (SB Dis
Slide 70: O&M Efficiency Ratio Reconciliation
Reconciliation Efficiency (A ($ Market Operations Allocation Operating Total Less: Impact Plus: Estimated Adjusted Regulated *Calculation NYSE: in Non-GAAP millions) Operations Operating Regulated of AWK Based Regulated West Freedom Revenues impact Segment Purchased O&M Ratio of andassumes non-O&M O
Slide 71: 2014 Adjusted EPS Reconciliation
Reconciliation (Non-GAAP) Earnings 2014 Income Less: Diluted Freedom Add: Tax Adjusted from December NYSE: Impact continuing AWK /EPS Earnings (Loss) Per Industries diluted 2016 from Share www.amwater.com (0.02) Table: from operations EPS Per continuing GAAP Chemical Common discontinued Previous (no
Slide 72: 2016 Guidance Reconciliation
GAAP) Reconciliation Low Adjustment Revised December NYSE: EndAWK with Guidance GAAP 2016 High for Adjustments www.amwater.com Table: of Tax Freedom Guidance End 2016 with Impact Revised Revised Adjustments Industries of $2.59$2.64 Freedom 2016 Earnings 72Binding EPS (Non-GAAP) Industries Guidance G
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