8-KRegulation FDOther EventsExhibits & Filings

American Water Works Company, Inc. 8-K Report, Regulation FD Disclosure (Apr 7, 2021)

Filed April 7, 2021For Securities:AWK

Summary

American Water Works Company, Inc. (AWK), through its subsidiary Pennsylvania-American Water Company (PAWC), announced on April 7, 2021, that it has entered into an Asset Purchase Agreement to acquire the public wastewater collection and treatment system assets of the York Sewer Authority and the City of York. This transaction, valued at approximately $235 million in cash plus an amount for average daily revenue from closing to meter reading, significantly expands AWK's wastewater service footprint, serving an estimated 45,000 customer connections. The acquisition is structured under Pennsylvania's Act 12, which facilitates the sale of municipal water and wastewater systems at fair market value. Investors should note that the closing of this significant acquisition is subject to customary conditions, including the approval of the Pennsylvania Public Utility Commission (PaPUC), with an anticipated closing date between the end of 2021 and the first quarter of 2022. The company has paid a deposit of $20 million, which is refundable under certain termination scenarios. The potential for delays or failure to secure regulatory approvals, as well as the determination of fair market value, are key risks to monitor.

Key Highlights

  • 1Pennsylvania-American Water Company (PAWC), a subsidiary of AWK, is acquiring wastewater system assets from the York Sewer Authority and City of York.
  • 2The total purchase price is approximately $235 million in cash, plus an adjustment for average daily revenue between closing and the final meter reading.
  • 3The acquired system serves approximately 45,000 customer connections in York and seven surrounding municipalities.
  • 4The transaction is being conducted under Pennsylvania's Act 12, which allows for the sale of municipal utility assets at fair market value.
  • 5A $20 million deposit has been paid by PAWC, which is refundable if the agreement is terminated prior to closing.
  • 6The closing of the acquisition is contingent upon obtaining prior approval from the Pennsylvania Public Utility Commission (PaPUC).
  • 7The anticipated closing timeframe is between the end of 2021 and the first quarter of 2022.

Frequently Asked Questions

This acquisition represents a significant expansion of American Water Works' wastewater service area in Pennsylvania, adding approximately 45,000 customer connections. It aligns with the company's strategy to grow its regulated business through acquisitions and strengthens its market position in the region.

The primary risks include obtaining the necessary approval from the Pennsylvania Public Utility Commission (PaPUC), the final determination of the fair market value of the assets under Act 12, and satisfying other closing conditions. There's also a risk of delays or the potential for termination of the agreement if approvals are not secured within a specified timeframe.

The acquisition involves a substantial cash outlay of approximately $235 million, plus revenue adjustments. While the filing does not provide specific pro forma financial impacts, the addition of a new regulated wastewater system is expected to contribute to future revenue and earnings growth once closed and integrated.

American Water Works anticipates closing the acquisition between the end of 2021 and the first quarter of 2022, subject to obtaining the required regulatory approvals and satisfying other customary closing conditions.