10-KPeriod: FY2023

American Water Works Company, Inc. Annual Report, Year Ended Dec 31, 2023

Filed February 14, 2024For Securities:AWK

Summary

American Water Works Company, Inc. (AWK) reported a strong performance in its 2023 10-K filing, demonstrating robust growth in its Regulated Businesses segment. The company continues to execute its long-term capital investment plan, focusing on infrastructure renewal and upgrades to ensure reliable service. Regulatory approvals for rate increases across various states are supporting the recovery of these investments and providing a foundation for future growth. The company's diversified customer base and strategic acquisitions further bolster its market position. Looking ahead, AWK plans significant capital investments totaling $34 billion to $38 billion over the next decade, aimed at modernizing its extensive water and wastewater infrastructure. While the company faces ongoing regulatory scrutiny and potential cost pressures related to environmental compliance, its established regulatory relationships and proactive approach to infrastructure investment and operational efficiency position it well for sustained performance. Investors can look to AWK's consistent dividend payments and strategic growth initiatives as key drivers of long-term value.

Financial Highlights

49 data points
Beta

Revenue

$4.22B

Net Income

$944.00M

22.4% Net Margin

EPS (Diluted)

$4.90

Total Assets

$30.30B

Cash & Equivalents

$330.00M

Free Cash Flow

-$701.00M

Financial Statements
Beta
Revenue$4.22B
Operating Expenses$2.73B
Operating Income$1.50B
Net Income$944.00M
EPS (Basic)$4.90
EPS (Diluted)$4.90
Shares Outstanding (Basic)193.00M
Shares Outstanding (Diluted)193.00M

Key Highlights

  • 1American Water is the largest publicly-traded water and wastewater utility in the U.S., serving over 14 million people in 24 states.
  • 2The company plans to invest between $34 billion and $38 billion over the next 10 years for capital improvements, largely for pipe replacement and upgrading aging facilities.
  • 3Regulated Businesses accounted for 93% of total operating revenues in 2023, demonstrating the core of the company's business.
  • 4The company is actively pursuing acquisitions to expand its regulated footprint, adding approximately 18,100 customers in 2023 through acquisitions.
  • 5AWK is focused on addressing environmental regulations, including significant planned capital expenditures for PFAS treatment facilities.
  • 6The company's Board of Directors has a robust oversight structure for ESG principles, involving multiple committees.
  • 7As of December 31, 2023, the company had $2.825 billion in total available liquidity, indicating strong financial health.

Frequently Asked Questions

American Water's primary business is its Regulated Businesses segment, which encompasses the ownership of water and wastewater utilities serving residential, commercial, industrial, and public authority customers. This segment accounted for 93% of the company's total operating revenues in 2023, highlighting its core operations. Revenue is generated through the delivery of water and wastewater services, which are subject to regulation by Public Utility Commissions (PUCs) in the states where they operate. These PUCs approve the rates charged to customers, allowing for the recovery of operating expenses and a return on invested capital.

American Water has a significant long-term capital investment plan, projecting investments between $34 billion and $38 billion over the next 10 years. The majority of this investment, between $30 billion and $33 billion, is allocated to infrastructure renewal, with additional investments in resiliency, water quality improvements (including compliance with emerging regulations like PFAS), operational efficiency, and system expansion. The company also plans to invest between $4 billion and $5 billion in regulated acquisitions over the same decade to expand its customer base.

American Water operates in a regulated environment where Public Utility Commissions (PUCs) approve rates. The company actively engages with PUCs through rate case filings to recover costs associated with capital investments, operating expenses, and inflation. To mitigate 'regulatory lag' (the delay between incurring costs and rate recovery), AWK utilizes various regulatory mechanisms approved in different states, such as infrastructure replacement surcharges, future test years, hybrid test years, and revenue stability mechanisms. The company believes that most compliance costs related to environmental mandates are recoverable through these rate-setting processes.

A fundamental aspect of American Water's growth strategy is pursuing acquisitions of water and wastewater systems, particularly those in proximity to its existing operations. This allows for integration using existing management and operational efficiencies. The company also sees strategic opportunities in adding wastewater customers where it already serves water customers, given its current water-dominant customer mix. Increasingly stringent environmental regulations and the aging infrastructure landscape are expected to drive more municipalities to consider selling their water and wastewater assets, presenting further acquisition opportunities.