Slide 1: Our Compelling Story: 2021 Investor Day
Our Compelling Story: 2021 Investor Day February 25, 2021
Slide 2: Ed Vallejo
Ed Vallejo Vice President, Investor Relations 2
Slide 3: 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 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
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 5 Minute Break 6 Q&A Session 6
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
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 17 installations in current Regulated Oper
Slide 9: Our Compelling Story
Our Compelling Story 2021-2025 Plan 7-10%* EPS CAGR range Market-Based Businesses ~0.5% ~1% Regulated Acquisitions 2-3% 1.5-2.5% Regulated Investment CAPEX 5-7% *Anchored off 2020 EPS 9
Slide 10: Increase in Regulated Investment of $1.3 Billion Over the Next 5 Years
Increase in Regulated Investment of $1.3 Billion Over the Next 5 Years 2021 - 2025 Average Regulated Capital Plan ($ in billions) Capital Expenditures by Purpose 2021 – 2030 $22 - $25 4% 7% Infrastructure Renewal Regulated $3 - $4 Acquisitions Operational Efficiency, 8% Technology & 2021 – 2025 Inno
Slide 11: Balancing Investment Opportunity & Customer Bill Impact
Balancing Investment Opportunity & Customer Bill Impact What can help us do more O&M and capital efficiencies System investment Customer Regulatory support and needs bill impact constructive legislation Increase customer base 11
Slide 12: Strategic Approach to Managing Costs
Strategic Approach to Managing Costs TECHNOLOGY SUPPLY CHAIN CULTURE Leverage our scale Enabling employees More competitive Strong customer focus Enhancing customer pricing/buying power Embrace Innovation experience Access to supply Best-in-class operations Commitment to diverse Continuous execution
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* Click to add text Click to add text 2010 2012 2014 2016 2018 2019 2020 2025 Target 2025 O&M Adjusted O&M Expenses from Added ≈322,000*** Effici
Slide 14: Market-Based Businesses Provide Strategic Value
Market-Based Businesses Provide Strategic Value Military Services Group Homeowner Services 17 installations in current footprint ~3 million protection plan contracts serving Opportunity for infrastructure upgrades on ~1.5 million customers existing bases 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 Market-Based billion and expected ten-year plan of $22-$25 billion Businesses ~0.5% ~1% Accelerate growth through acquisitio
Slide 16: Bill Varley
Bill Varley Chief Growth Officer 16
Slide 17: Highly Fragmented Water Industry Creates Opportunity
Highly Fragmented Water Industry Creates Opportunity American Water footprint • Ideal for Industry consolidation opportunities • Target 5K-50K customer connections per acquisition • Wastewater focus (AWK customer connections mix- 93% water & 7% wastewater) Water Utilities Source: EPA SDWIS Electric
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 18
Slide 19: State Legislation Enables Growth
State Legislation Enables Growth Water Quality Fair Market Value 10 Consolidated Tariffs 12 Accountability Legislation 3 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 19
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 customer connections • Opportunity A – 78,000 ≈800,000 • Opportunity B – 50
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 Businesses 5,000 to 50,000 customers – and larger acquisitions ~0.5% ~1% where appropriate Regulated Acquisitions 2-3% 1.5-2.5% Leverage water f
Slide 22: Cheryl Norton
Cheryl 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 Stakeholder Advocacy Groups Engagement Industry Associations Employees Workforce The Journey ESG Customers of ESG engagement Board of Customers Directors Infrastructure Regulatory Agencies/ Environmental State Utility Communities 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 Energy & Emissions* Water Use & Efficiency Climate Variability & Reduce absolute scope 1 and By 2035, meet customer needs Water Supply Resilience scope 2 greenhouse gas emissions while saving 15% in water By 2030, increase our water by more than 40% by 2025 from a delivered per c
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 2015 2020 2035 › Environment › Energy Savings 4.3% reduction gained since 2015 › Avoided Capital › Reduce Non-Revenue Water 4.3% 3
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 › Customer, employee and public safety › Robust, compreh
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 Utility Improved Enhanced Resilient Capital Employee Asset Resiliency Resilience Emergency Resiliency Systems (
Slide 29: Susan Hardwick
Susan Hardwick Chief Financial Officer 29
Slide 30: 2020 Results
2020 Results Fourth Quarter EPS Contribution by Business 2020 Results Three Months Ended 12/31/2020 Three Months Ended 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 Full Year EPS Contribution b
Slide 31: 2021 EPS & Long-Term Guidance
2021 EPS & Long-Term Guidance 7-10%* 2021 EPS CAGR Range Guidance 2021 – 2025 LT 2020 EPS 7-10%* EPS CAGR Guidance 2020 EPS includes $0.07 per share of favorable $4.18 weather; $3.84 per share weather normalized $4.28 2021 EPS Guidance $3.91 $4.18 - $4.28 2020 2021 2025 * Anchored off 2020 EPS 31
Slide 32: Investment for Growth in Regulated Acquisitions
Investment for Growth in Regulated Acquisitions 2020-2024 Plan 2021-2025 Plan 7-10% EPS CAGR range 7-10% EPS CAGR range 32
Slide 33: Our Capital Plan Drives Rate Base Growth
Our Capital Plan Drives Rate Base Growth Capital Plan ($ in billions) $22 - $25 $20 - $22 $3 - $4 Regulated $2 - $3 Acquisitions $10.3 - $10.5 $8.8 - $9.4 $1.4 - $1.6 $0.6 - $1.2 $1.9 $0.3 $18 - $19 $19 - $21 Regulated System $8.2 $8.9 Investments $1.6 2021 2020 – 2024 2021 – 2025 2020 – 2029 2021 –
Slide 34: Investment in Rate Base is the Foundation of Our Growth
Investment in Rate Base is the Foundation of Our Growth ($ 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 CIAC - Contributions in Aid of Construction $1.4 Net Deferred income taxes $3.4 $5.1 Total Estimated Rate B
Slide 35: Financing $1.3 Billion Increase in Regulated Investment Over Prior Plan
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 Operating Cash Flows +$250 + Debt Issuances +$600 $1.3 billion = $
Slide 36: Rate Filings Completed & Awaiting Final Order
Rate Filings Completed & Awaiting Final Order ($ in millions) Rate Filings Requested Revenue in Completed* Pending Base Rate Effective since January 1, 2020 Proceedings** $9 $208 $199 $95 $151 $56 Rate Cases Infrastructure Total Rate Cases Infrastructure Total (Step Increases) Charges Charges *Annua
Slide 37: Balance Sheet Strength
Balance Sheet Strength AWK Long-Term Issuer Rating Debt to Total Capital* S&P Global Moody’s 2020 ** 5-year Plan 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% $2.15 $1.96 $1.78 103% $1.62 79% $1.47 $1.33 2015 2016 2017 2018 2019 2020 American Water PHLX Utility Sector S&P 500 Works Company *Future dividends are subject t
Slide 39: Walter Lynch
Walter Lynch President and Chief Executive Officer 39
Slide 40: Our Strengths
Our Strengths Safety Performance People Solutions ESG Provider Safety is both a Going beyond the Inclusion & ESG affirms the Growth enables strategy & core minimum requirement empowerment pave a values we have investment in company value. to solidify our position path for employee & upheld for decad
Slide 41: Demonstrating Leadership
Demonstrating Leadership Sustainability Ranked #9 on Corporate Knight’s American Water ranked S&P Global Ratings ESG Evaluation Ranked #75 on Newsweek’s list of Global 100 Most Sustainable #15 on Barron’s 100 (87 out of 100), the highest evaluation America’s Most Responsible Companies; Top ranked Wa
Slide 42: Our Compelling Story
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: 5 Minute Break
5 Minute Break 43
Slide 44: Q&A Session
Q&A Session 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 45
Slide 46: Appendix
Appendix 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 0.02 0.80 0.01 0.02 0.19 0.09 0.01 (0.01) 0.01 0.54 (0.04) (0.04) Regulated $0.01 MBB $0.22 Other $0.03 Dec QTD 2019 Revenue Weather in Weather in O&M Depreciation MSG Keystone Loss Other American Water 2019 O&M Dec QTD 2020 Actual * Q4 2019 Q4 2020 on Sale
Slide 50: Full Year 2020 EPS Detail by Business
Full Year 2020 EPS Detail by Business 0.07 0.03 0.63 0.19 0.01 ($0.03) 3.91 0.03 ($0.05) ($0.02) ($0.02) 0.04 ($0.25) ($0.15) 3.43 Regulated $0.33 MBB $0.26 Parent ($0.09) Dec YTD Revenue Weather Weather O&M Depreciation HOS MSG Keystone Sale of a American Interest, net Other Estimated Dec YTD 2019
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 Hawaii 1 - 200 200 Iowa 2 250 - 250 Illinois 11 6,500 18,500 25,000 Indiana 1 - 400 400 Missouri 1 - 100 100 New
Slide 52: Acquisitions Under Agreement as of January 31, 2020
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 Illinois 3 900 - 900 Indiana 2 100 100 200 Missouri 9 4,100 5,400 9,500 Pennsylvania 7 1,700 10,300 12,000 Wes
Slide 53: Timely Recovery Through Regulatory Mechanisms
Timely Recovery Through Regulatory Mechanisms Forward 64% Infrastructure Surcharge Test Years Mechanisms (36%) (28%) 36% Traditional Recovery 2021-2025 Capital Plan (average) 53
Slide 54: Rates Effective Since…
Rates Effective Since… January 1, 2020 January 1, 2021 Date Annualized Date Annualized Date Annualized Rate Cases & Step Increases Infrastructure Charges Infrastructure Charges Effective Revenue Increases Effective Revenue Increases Effective Revenue Increases California (Step Increase) 1/1/2020 $5
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 California Case No. A.19-07-004 7/1/2019 $26(a) $689 Docket R-2020-3019369 (W) & Pennsylvania 4/29/2020 92(b) 10.8% 3,975 R-2020-3019371 (WW) Missouri Case No. WR-2020-0344 6/3
Slide 56: Regulatory Information
Regulatory Information CALIFORNIA ILLINOIS INDIANA KENTUCKY MISSOURI Authorized Rate Base* $498,135 $883,386 $1,182,170 $443,654 $1,249,293(b) Authorized ROE 9.20%(a) 9.79% 9.80% 9.70% 10.00%(e) Authorized Equity 55.39%(a) 49.80% 53.41%(c) 48.90% 52.80%(d) Effective Date of Rate Case 1/1/2018(a) 1/1
Slide 57: Reconciliation Table: Regulated Segment O&M Efficiency Ratio
Reconciliation Table: Regulated Segment O&M Efficiency Ratio Regulated Segment O&M Efficiency Ratio FY FY FY FY FY FY FY (A Non-GAAP Unaudited Number) 2010 2012 2014 2016 2018 2019 2020 ($ in millions) Total operations and maintenance expense $1,291 $1,330 $1,350 $1,504 $1,479 $1,544 $1,622 Less: Op