Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - American Water Works Company, Inc. | d842703d8k.htm |
| EX-99.1 - EX-99.1 - American Water Works Company, Inc. | d842703dex991.htm |
 NYSE: AWK
2015 Guidance Call
December 15, 2014
Exhibit 99.2 |
 NYSE: AWK
Ed Vallejo
Vice President of Investor Relations |
 NYSE:
AWK www.amwater.com
3
December 2014
Cautionary Statement Concerning Forward-Looking
Statements
Certain statements in this presentation including, without limitation, American
Water’s estimate of 2015 earnings per share from continuous operations,
continued investments, long term earnings per share growth, 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
American
Water’s
current
expectations
and
assumptions
regarding
future
events.
Actual
results
could
differ
materially
because
of
factors
such
as
the
decisions
of
governmental
and
regulatory
bodies,
including
decisions
to
raise
or
lower
rates;
the
timeliness
of
regulatory
commissions’
actions
concerning
rates;
changes
in
laws,
governmental
regulations
and
policies,
including
environmental,
health
and
water
quality,
and
public
utility
regulations
and
policies;
the
outcome
of
litigation
and
government
action
related
to
the
Freedom
Industries
chemical
spill
in
West
Virginia;
weather
conditions,
patterns
or
events,
including
drought
or
abnormally
high
rainfall,
strong
winds
and
coastal,
intercoastal
flooding
and
cooler
than
normal
temperatures;
changes
in
customer
demand
for,
and
patterns
of
use
of,
water,
such
as
may
result
from
conservation
efforts;
American
Water’s
ability
to
appropriately
maintain
current
infrastructure
and
manage
the
expansion
of
its
business;
its
ability
to
obtain
permits
and
other
approvals
for
projects;
changes
in
its
capital
requirements;
its
ability
to
control
operating
expenses
and
to
achieve
efficiencies
in
its
operations;
its
ability
to
obtain
adequate
and
cost-effective
supplies
of
chemicals,
electricity,
fuel,
water
and
other
raw
materials
that
are
needed
for
its
operations;
its
ability
to
successfully
acquire
and
integrate
water
and
wastewater
systems
that
are
complementary
to
its
operations;
its
ability
to
successfully
expand
its
business,
including
concession
arrangements
and
agreements
for
the
provision
of
water
services
to
facilitate
hydraulic
fracking
in
shale
regions;
cost
overruns
relating
to
improvements
or
the
expansion
of
its
operations;
changes
in
general
economic,
business
and
financial
market
conditions;
access
to
sufficient
capital
on
satisfactory
terms;
fluctuations
in
interest
rates;
the
effect
of
restrictive
covenants
or
changes
to
credit
ratings
on
its
current
or
future
debt
that
could
increase
its
financing
costs
or
affect
its
ability
to
borrow,
make
payments
on
debt
or
pay
dividends;
fluctuations
in
the
value
of
benefit
plan
assets
and
liabilities
that
could
increase
financing
costs
and
funding
requirements;
migration
of
customers
into
or
out
of
its
service
territories;
difficulty
in
obtaining
insurance
at
acceptable
rate
s and
on
acceptable
terms
and
conditions;
its
ability
to
retain
and
attract
qualified
employees;
labor
actions
including
work
stoppages
and
strikes;
the
incurrence
of
impairment
charges;
and
civil
disturbance,
terrorist
threats
or
acts,
or
public
apprehension
about
future
disturbances
or
terrorist
threats
or
acts.
For
further
information
regarding
risks
and
uncertainties
associated
with
American
Water’s
business,
please
refer
to
American
Water’s
annual
and
quarterly
SEC
filings.
American
Water
does
not
undertake
to
update
its
forward-looking
statements. |
 NYSE: AWK
www.amwater.com
4
December 2014
Today’s Agenda and Speakers:
Strategy
Overview:
Susan Story
Regulated
Operations:
Walter Lynch
Market Based
Operations:
Sharon Cameron
2015 Earnings
Guidance:
Linda Sullivan |
 NYSE: AWK
Strategy Overview
Susan Story
President and Chief Executive Officer |
 NYSE: AWK
www.amwater.com
6
December 2014
American Water: The Premier Water Services Provider
in North America
The largest publicly traded water and wastewater
service provider in the United States
~ $9.5 Billion Market Capitalization
Our Business lines:
Regulated Business
o
~90% of Total Revenues
o
Provide water and wastewater services
in 16 U.S. states
o
3.2 million customer connections, 12
million people served
Market Based Business
o
~ 10 % of Total Revenues (Reg. like
risk profile)
o
Provide services to 43 states and parts
of Canada
o
2 million people served |
 NYSE: AWK
www.amwater.com
December 2014
7
Our Past: Strong performance over the past 5 years (2010–2014)
2010-2014
~15% EPS Growth
*O&M Efficiency ratio comparison of 2010 vs LTM Sep 2014
**Source: Thomson Reuters, Time Period: 2009 –
2013 Dividend Paid CAGR
Peer companies include: AWR, WTR, CWT, ATO, GAS, WGL, GXP, WR, OGE, AEE, POR, LNT,
EDE, SCG, POM, HE, IDA, TE, CMS, UNS, PNM. ** |
 NYSE: AWK
www.amwater.com
December 2014
Our Present: FY 2015 Guidance from continuing operations
8
*Adjusted
non-GAAP
measure
excluding
$0.14
EPS
impact
of
debt
tender
offer
in
2013
**Adjusted 2014 guidance excludes Freedom Industries chemical spill EPS
impact of $0.04 in West Virginia |
 NYSE: AWK
www.amwater.com
December 2014
9
*Anchored from FY 2013
Our Future : Our commitment over the next 5 years |
 NYSE: AWK
II. Regulated Operations
Walter Lynch
President and Chief Operating Officer
Regulated Operations |
 NYSE: AWK
www.amwater.com
11
December 2014
American Water’s Regulated Presence
Every day we operate and manage:
•
47,000
miles of distribution and
collection mains
•
80
surface water treatment plants
•
500
groundwater treatment plants
•
1,000
groundwater wells
•
100
wastewater treatment facilities
•
87
dams
* Data as of year end 2013
We manage more than 370
individual water systems
across the country*
16 regulated states |
 NYSE: AWK
www.amwater.com
12
December 2014
Infrastructure
Investment
Regulated Business: Focus Areas
Efficiency &
Water Energy
Nexus
Growth
Constructive
Regulatory
Frameworks |
 NYSE: AWK
www.amwater.com
13
December 2014
Regulatory Capital Investment of $5.2 billion over next
five years
Note
(1) Regulatory Mechanisms include DSIC, SIC and Future Test Years
Investments covered by Regulatory Mechanisms
2015 –
2019 Average Capital
Expenditures by Purpose |
 NYSE: AWK
www.amwater.com
December 2014
Cost containment and timely return on our investments will
drive added Capital Expenditures
14
Note:
O&M Efficiency Ratio -
Non GAAP Measure –
See appendix for
reconciliation
Incremental Revenue Requirement*
-Increases Attributable to Opex vs. Capex-
Note:
*
Approximation
in
states
where
we
received
black
box
award
**
For
general
rate
cases
effective
in
2014,
the
incremental
revenue
requirement was reduced by 25% due to lower Operating
expenditures.
O&M Efficiency Ratio
Stretch Target of 34% by 2020
** |
 NYSE: AWK
III. Market-Based Operations
Sharon Cameron
President, American Water Enterprises |
 NYSE: AWK
www.amwater.com
16
December 2014
Lines of Business
•
Homeowner Services
(HOS)
•
Contract Operations
•
Military Services Group
(MSG)
•
Municipal/Industrial
(CSG)
“Regulated Like”
•
Capitalizes on AW strengths
•
Strong/consistent margins
•
Controllable risk
•
Growing markets
Market based businesses generate complementary
opportunities for growth
Note:
MBB
segment
also
includes
two
non-regulated
contracts
for
NJ
concessions
which
are
not
included
in
this
presentation
*2011
and
2012
figures
include
Terratec |
 NYSE: AWK
www.amwater.com
17
December 2014
Homeowner Services
•
Protect homeowners from unexpected
high repair costs
•
Manage approximately 700k customers
and 1.4m contracts
•
Municipal partnerships
•
New York City
•
Nashville, TN
•
Burlington, IA
•
Orlando, FL
•
Current warranties:
•
Water Line
•
Sewer Line
•
In Home Plumbing
•
In Home Electric
•
HVAC (Test)
Under-penetrated Market Opportunity as large Municipal
Players are Increasingly Open to Partnerships |
 NYSE: AWK
www.amwater.com
December 2014
18
Military Services: Overall Growth Strategy |
 NYSE: AWK
IV. 2015 Earnings Guidance: Summary
Linda Sullivan
Senior Vice President
and Chief Financial Officer |
 NYSE: AWK
www.amwater.com
20
December 2014
Note:
*Adjusted 2014 guidance excludes $0.04 EPS impact of Freedom industries chemical
spill in West Virginia **Regulated investment category includes $0.02
projected EPS impact due to Freedom industries chemical spill in West Virginia
Earnings guidance for 2015 is $2.55 -
$2.65 per share
(Diluted EPS from continuing operations) |
 NYSE: AWK
www.amwater.com
21
December 2014
2015 growth largely driven by regulated investment
•
Capital investment of $1. 2
billion in 2015; regulated
investment $1.1 billion
•
Continued growth strategy in
2014; closing of recently
announced acquisitions
expected mid-2015
•
Steady and significant growth
continues in Market Based
•
Shale opportunities developing |
 NYSE: AWK
www.amwater.com
22
December 2014
FY 2015 Initial Guidance: $2.55 -
$2.65
Cents per Share variation
2015 Guidance and Major Variables
•
Guidance range includes a certain
amount of variability, with weather
representing the largest variable
•
Guidance range expected to
cover normal weather
variability; weather extremes
outside of the band are not
included
•
Weather impacts will be
quantified and disclosed for
transparency
•
Guidance range includes $5 million
for potential legal costs related to
the WV event |
 NYSE: AWK
www.amwater.com
23
December 2014
Drivers:
•
Market demand
•
Environmental Regulations
•
Investment Risk Profile
Drivers:
•
Timing of Acquisitions
•
Legislation
•
Regulatory Treatment
Drivers:
•
Market Penetration rate: HOS
•
Military Award Timing
•
New Regulated Like products
and services
Drivers:
•
Capital Investment
•
Authorized ROE’s
•
Reduction of Regulatory Lag
•
O&M efficiency
•
Consumption Decline
Long Term Plan: Consistent growth drivers with additional regulated
investment upside as we increase capital investment from $5.8B to $6B
*7-10 % Long term EPS growth target anchored from FY 2013
|
 NYSE: AWK
www.amwater.com
24
December 2014
Why American Water is the right investment for you
*Source : Thomson Reuters
**Source: Thomson Reuters, Time Period: 2009 –
2013 Dividend Paid CAGR
Peer companies include: AWR, WTR, CWT, ATO, GAS, WGL, GXP, WR, OGE, AEE, POR, LNT,
EDE, SCG, POM, HE, IDA, TE, CMS, UNS, PNM. |
 NYSE: AWK
In Summary
Susan Story
President and Chief Executive Officer |
 NYSE: AWK
www.amwater.com
26
December 2014
Our future results are anchored on 5 central themes
with customers at the center of all we do
SAFETY
PEOPLE
TECHNOLOGY &
OPERATIONAL
EFFICIENCY
GROWTH
CUSTOMERS
•
Very satisfied customers
•
Know our customers’
needs and deliver value
•
Proud and engaged people
who are always improving
•
Diverse teams making a
difference
•
Zero accidents and injuries
•
Live healthy
•
Grow existing businesses
•
Buy and build
complementary
businesses
•
Long-term environmental
leadership
•
Industry-leading
operational efficiency,
driven by technology |
 NYSE: AWK
www.amwater.com
27
December 2014
Investor Relations Team:
Durgesh Chopra
Director –
Investor Relations
Durgesh.chopra@amwater.com
Ed
Vallejo
Vice President –
Investor Relations
Edward.vallejo@amwater.com
Tel: 856-566-4005
Fax: 856-782-2782 |
 NYSE: AWK
Appendix |
 NYSE: AWK
www.amwater.com
29
December 2014
Reconciliation Table –
Regulated O&M Efficiency Ratio
Regulated O&M Efficiency Ratio
(A Non-GAAP Unaudited Number)
FY
FY
FY
FY
LTM Ended
Sep
($ in thousands)
2010
2011
2012
2013
2014
Total Operations and Maintenance Expense
$1,290,941
$1,301,794
$1,350,040
$1,312,724
$1,330,605
Less:
Operations and Maintenance Expense –
Market Based Operations
256,633
278,375
276,809
264,253
272,386
Operations and Maintenance Expense –
Other
(61,138)
(69,192)
(56,755)
(56,973)
(53,606)
Total Regulated Operations and Maintenance Expense
$1,095,446
$1,092,611
$1,129,986
$1,105,444
$1,111,825
Less:
Allocation of internal non-O&M costs to Regulated O&M expense
29,414
30,590
35,067
34,635
37,975
Regulated Purchased Water Expense
99,834
99,008
110,173
111,119
119,692
Impact of West Virginia Freedom Industries Chemical Spill
10,302
Estimated impact of weather (mid-point of range)
4,289
(1,514)
(1,762)
Adjusted Regulated Operations and Maintenance Expense (a)
$966,198
$963,013
$980,457
$961,204
$ 945,618
Total Operating Revenues
$2,555,035
$2,666,236
$2,876,889
$2,901,858
$2,986,192
Less:
Operating Revenues –
Market Based Operations
294,723
327,815
330,329
325,463
334,647
Operating Revenues –
Other
(25,344)
(30,470)
(17,874)
(17,523)
(17,594)
Total Regulated Operating Revenues
$2,285,656
$2,368,891
$2,564,434
$2,593,918
$2,669,139
Less:
Regulated Purchased Water expense*
99,834
99,008
110,173
111,119
119,692
Plus:
Impact of West Virginia Freedom Industries Chemical Spill
1,012
Estimated impact of weather (mid-point of range)
(42,885)
15,137
16,785
Adjusted Regulated operating revenues (b)
$2,185,822
$2,269,883
$2,411,376
$2,497,936
$2,567,244
Regulated O&M Efficiency Ratio (a)/(b)
44.2%
42.4%
40.7%
38.5%
36.8%
*Calculation assumes purchased water revenues approximate purchased water
expenses |