American Water Works Company, Inc. · NYSE:AWK
American Water Works — Investor Presentation (May 2022)
42 slides from American Water Works's investor presentation, May 2022
Slide 1: Investor Presentation May 2022
Investor Presentation May 2022
Slide 2: 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 3: Business Review
Business Review 3
Slide 4: Pure-Play Regulated Water and Wastewater Utility Business
Pure-Play Regulated Water and Wastewater Utility Business Regulated Customer Count* 3.4M Total Customer Connections * As of December 31, 2021 Regulated Operations* Military Services Group 52,500 miles of pipe Regulated-like earnings 560 water treatment plants Serves 17 military installations
Slide 5: Focused on Executing the Plan and Building on Our Strengths
Focused on Executing the Plan and Building on Our Strengths 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 solidify our po
Slide 6: Our Compelling Growth Outlook
Our Compelling Growth Outlook 7-9% EPS CAGR target 2022-2026 Plan Business Mix 100% Military Regulated and Services Group ~0.5% ~1% ≈0.2% Regulated-Like Earnings Regulated Acquisitions 2-3% 1.5-2.5% Regulated Regulated Investment Investment CAPEX 5-7% CAPEX 5-7% Regulated Investment CAPEX 6
Slide 7: Accelerating Capital Investment
Accelerating Capital Investment 2022-2031 Average Regulated Capital Plan ($ in billions) Capital Expenditures by Purpose 2022 – 2031 $28 - $32 Infrastructure Renewal $3 - $4 Regulated Resiliency Acquisitions 2022 – 2026 Water Quality 2022 $13 - $14 Operational Efficiency, Technology & $2.5 $1.5 - $2
Slide 8: Investment in Rate Base is the Foundation of Our Growth
Investment in Rate Base is the Foundation of Our Growth ($ 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 9: State Legislation & Regulation Enable Growth
State Legislation & Regulation Enable Growth Utility Valuation Water Quality Legislation & Regulation 12 Consolidated Tariffs 11 Accountability Legislation 3 CA IA CA MO IL IN IA NJ NJ KY MD IL PA IN MO NJ IN VA MO PA TN KY WV VA WV MD 9
Slide 10: Timely Recovery Through Regulatory Mechanisms
Timely Recovery Through Regulatory Mechanisms ≈65% Infrastructure Infrastructure Forward Forward Test Surcharge Surcharge Test Years Years Mechanisms Mechanisms ≈25% (25%) ≈40% (38%) ≈35% Traditional Recovery Traditional Recovery 2022-2026 Capital Plan (average) 10
Slide 11: 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 12: 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 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 M
Slide 14: 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 15: 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 16: 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 17: First Quarter 2022 Results
First Quarter 2022 Results 17
Slide 18: Executing the Plan
Executing the Plan Earnings Per Share Q1/YTD Highlights • Achieved 19% EPS growth vs. Q1 2021 driven by higher revenue on increased infrastructure investment • Invested $437 million of capital in regulated infrastructure improvements and acquisitions • Executed on our regulatory, rate case, and grow
Slide 19: First Quarter 2022 EPS Detail By Business
First Quarter 2022 EPS Detail By Business 19
Slide 20: 2022 Earnings Guidance and Long-Term Targets Affirmed
2022 Earnings Guidance and Long-Term Targets Affirmed 7-9% EPS CAGR Target 2022 EPS Guidance 2022 EPS Guidance 2021 EPS $4.39 - $4.49 2021 EPSEPS of of 2020 $3.84 $6.95 reflects share excludes $0.07 per $4.49 of favorable $2.70 gainweather on sale of HOS $4.39 $4.25 2026 2021 2022 & Beyond 20
Slide 21: Excellent Dividend Growth
Excellent Dividend Growth Long-Term Dividend Growth Target Target at High End of 7-10%* Dividend Payout Ratio 55-60% 21 * Future dividends are subject to approval of the American Water Board of Directors
Slide 22: ESG at AWK: Continued Focus on Transparency and Stakeholder Engagement
ESG at AWK: Continued Focus on Transparency and Stakeholder Engagement Publications in May 2022; Review of GHG Target Underway ESG Data Summary Inclusion, Diversity & Equity GHG Emissions Target • Published 2nd annual ESG Data Metrics Report • Updating Scope 1 and 2 GHG Disclosure with 2021 actuals
Slide 23: Strong Cap Ex Growth to Start 2022
Strong Cap Ex Growth to Start 2022 AWK Growth Outlook Capital Investments 7-9% EPS CAGR Target (2022-2026 Plan) ($ in millions) Military ~0.5% ~1% Services ≈0.2% Group Q1 2022 Regulated Acquisitions 2-3% 1.5-2.5% Q1 2021 Regulated Regulated $430 Regulated Regulated $336 5-7% Investment System 5-7% I
Slide 24: Legislative and Rate Case Updates
Legislative and Rate Case Updates Legislative Completed Rate Cases in 2022 • Step Increase Indiana • Additional authorized revenues of $20 million Senate Enrolled Act 272 Effective 7/1/2022 • Effective 1/1/2022 • Requires public reporting of a non-jurisdictional utility’s asset management program •
Slide 25: Rate Filings Summary
Rate Filings Summary ($ in millions) Rate Filings Requested Revenue in Completed* Pending Base Rate Effective since January 1, 2022 Proceedings 25 * Annualized revenue increase for rates effective since January 1, 2022; excludes agreed to revenue reductions for excess accumulated deferred income tax
Slide 26: Good Momentum in 2022 as Acquisitions Under Agreement now 77,300 Customers
Good Momentum in 2022 as Acquisitions Under Agreement now 77,300 Customers Growing Opportunity for Closed Over Five- Customer Connections Under Agreement As of March 31, 2022 As of March 31, 2022 Year Outlook By June 2022 ≈77,300 Customer Connections Expected Close ≈1,800 Customer Connections 4 Acqu
Slide 27: Experienced and Skilled Executive Management Team Additions
Experienced and Skilled Executive Management Team Additions John Griffith James Gallegos Executive Vice President Executive Vice President and Chief Financial Officer and General Counsel • Joined American Water on May 16, 2022. • Joined American Water on April 1, 2022. • Most recently served as a Ma
Slide 28: Appendix
Appendix 28
Slide 29: 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 30: 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 31: 2022 EPS Detail by Business
2022 EPS Detail by Business 31
Slide 32: Closed Acquisitions
Closed Acquisitions March 31, 2022 NUMBER WASTEWATER CUSTOMER CONNECTIONS TOTAL CUSTOMER STATE WATER CUSTOMER CONNECTIONS OF SYSTEMS CONNECTIONS Illinois 1 250 - 250 Missouri 3 400 1,150 1,550 Total 4 650 1,150 1,800 32
Slide 33: Acquisitions Under Agreement
Acquisitions Under Agreement March 31, 2022 NUMBER WASTEWATER CUSTOMER CONNECTIONS TOTAL CUSTOMER STATE WATER CUSTOMER CONNECTIONS OF SYSTEMS CONNECTIONS California 3 3,450 - 3,450 Iowa 3 100 850 1,000 Illinois 7 2,600 1,850 4,450 Missouri 9 4,750 4,650 9,400 New Jersey 3 1,600 4,300 5,900 Pennsylva
Slide 34: Rates Effective Since January 1, 2022
Rates Effective Since… ($ in millions) January 1, 2022 Date Annualized Date Annualized Rate Cases & Step Increases Infrastructure Charges Effective Revenue Increases Effective Revenue Increases Illinois (QIP) 1/1/2022 $6 Pennsylvania, Step Increase (a) 1/1/2022 $20 Missouri (WSIRA) 2/1/2022 12 Calif
Slide 35: Pending Rate Case Filings
Pending Rate Case Filings ($ in millions) Rate Cases Filed Docket/Case Number Date Filed Requested Revenue Increase ROE Requested Rate Base Hawaii (a) Docket No. 2021-0063 8/18/2021 $2 10.3% $40 Virginia (b) Case No. PUR-2021-00255 11/15/2021 15 10.9% 287 Kentucky Wastewater (c) Docket No. 2021-0043
Slide 36: 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 37: 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
Slide 38: Recent Stories of ESG at AWK
Recent Stories of ESG at AWK 38
Slide 39: MSG Constructs Net Zero Operations Center
MSG Constructs Net Zero Operations Center AWK Impact Our Military Services Group constructed a net zero operations center at Hill Air Force Base to enhance energy efficiency and reduce emissions that contribute to climate variability. • Reduced energy usage through decentralized heating and cooling
Slide 40: 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 41: Value of Resiliency Investments Demonstrated During Hurricane Ida
Value of American Water’s Resiliency Investments Demonstrated During Hurricane Ida • The river outside our Raritan-Millstone Plant in New Jersey crested at record height of 44.87’, three feet below the top of the recently heightened flood wall • Flood doors at our Norristown Water Treatment Plant in
Slide 42: Investor Relations: Contacts
Investor Relations: Contacts Aaron Musgrave, CPA Upcoming Events Senior Director, Investor Relations aaron.musgrave@amwater.com July 28, 2022 (projected) Q2 2022 Earnings Call Jack Quinn, CPA November 1, 2022 (projected) Q3 2022 Earnings Call Senior Manager, Investor Relations jack.quinn@amwater.com
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