American Water Works Company Inc

Previous wording

For the three months ended March 31, 2024, diluted earnings per share, prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), were $0.95, an increase of $0.04, as compared to the same period in the prior year. The increase was primarily driven by the implementation of new rates in the Regulated Businesses from its capital and acquisition investments, offset somewhat by increased production and employee related costs, higher financing costs to fund the capital investment plan, including the 2023 equity issuance, and $0.05 per share of net unfavorable one-time items year-over-year. Results for the three months ended March 31, 2024, include additional interest income of $0.02 per share, resulting from the early 2024 amendment to the secured seller note from the sale of the former HOS business.

Current wording

For the three and six months ended June 30, 2024, diluted earnings per share, prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), were $1.42 and $2.37, respectively, compared to $1.44 and $2.37 per share in the same periods in 2023. Results for the three and six months ended June 30, 2024, include the implementation of new rates in the Regulated Businesses from its capital and acquisition investments. Results also reflect some increased production and employee related costs and higher financing costs to fund the current capital investment plan. Results for the three and six months ended June 30, 2024, compared to the same periods in 2023, reflect a net unfavorable impact of weather of $0.04 per share, including an estimated $0.03 and $0.07 per share, respectively, of impact due to warm, dry weather in the second quarter of 2024, primarily in New Jersey, and in the second quarter of 2023 in the Northeast and Midwest. Results for the three and six months ended June 30, 2024, include additional interest income of $0.02 and $0.04 per share, respectively, resulting from the early 2024 amendment to the secured seller note from the sale of the former HOS business.

Previous wording

The Company continues to grow its businesses, with the substantial majority of its growth to be achieved in the Regulated Businesses through (i) continued capital investment in the Company’s infrastructure to provide safe, clean, reliable and affordable water and wastewater services to its customers, (ii) regulated acquisitions to expand the Company’s services to new customers and (iii) the addition of approximately 4,400 new customers through organic growth in existing systems. The Company plans to invest approximately $3.1 billion in these growth strategies in 2024. During the first three months of 2024, the Company invested $720 million, primarily in the Regulated Businesses, as discussed below.

Current wording

The Company continues to grow its businesses, with the substantial majority of its growth to be achieved in the Regulated Businesses through (i) continued capital investment in the Company’s infrastructure to provide safe, clean, reliable and affordable water and wastewater services to its customers, (ii) regulated acquisitions to expand the Company’s services to new customers and (iii) the addition of approximately 9,600 new customers through organic growth in existing systems. The Company plans to invest approximately $3.1 billion in these growth strategies in 2024. During the first six months of 2024, the Company invested $1.4 billion, in the Regulated Businesses, as discussed below.

Previous wording

•$634 million capital investment, primarily in the Regulated Businesses for infrastructure improvements and replacements; and

Current wording

•$1.3 billion capital investment in the Regulated Businesses for infrastructure improvements and replacements; and

Previous wording

•$86 million to fund the Company’s Illinois subsidiary’s acquisition of a wastewater treatment plant and related assets from Granite City, which treatment plant serves approximately 26,000 customers, including 15,500 customers indirectly in surrounding communities

Current wording

•$119 million to fund acquisitions in the Regulated Businesses, which added approximately 33,400 customers. This includes the acquisition by the Company's Illinois subsidiary of a wastewater treatment plant and related assets from Granite City on March 11, 2024, for a cash purchase price of $86 million, which added approximately 26,000 wastewater customers, including 15,500 customers indirectly in surrounding communities.

Previous wording

On October 11, 2022, the Company’s Pennsylvania subsidiary entered into an agreement to acquire the public wastewater collection and treatment system assets (the “System Assets”) from the Butler Area Sewer Authority. On November 9, 2023, the Pennsylvania Public Utility Commission (the “PaPUC”) approved a settlement agreement without modification with respect to the Company’s Pennsylvania subsidiary’s application to acquire the System Assets from the Butler Area Sewer Authority for a purchase price of $230 million, subject to adjustment as provided for in the asset purchase agreement. This system provides wastewater service for approximately 15,000 customer connections. On December 14, 2023, Center Township and Summit Township filed appeals with the Pennsylvania Commonwealth Court seeking to reverse the order entered by the PaPUC approving the sale of the System Assets. On December 29, 2023, the Company’s Pennsylvania subsidiary filed applications with the Commonwealth Court seeking to dismiss the appeals and requesting expedited consideration. By order dated February 1, 2024, the Commonwealth Court deferred deciding the application to dismiss the appeals and directed that the issues raised by the applications to dismiss are to be considered as part of the merits of the appeals and that the disposition of the appeals was to be expedited. Based on the court’s schedule, the Company estimates that the disposition of the appeals could occur as soon as the second quarter of 2024.

Current wording

On October 11, 2022, the Company’s Pennsylvania subsidiary entered into an agreement to acquire the public wastewater collection and treatment system assets (the “System Assets”) from the Butler Area Sewer Authority. On November 9, 2023, the Pennsylvania Public Utility Commission (the “PaPUC”) approved a settlement agreement without modification with respect to the Company’s Pennsylvania subsidiary’s application to acquire the System Assets from the Butler Area Sewer Authority for a purchase price of $230 million, subject to adjustment as provided for in the asset purchase agreement. This system provides wastewater service for approximately 15,000 customer connections. On December 14, 2023, Center Township and Summit Township filed appeals with the Pennsylvania Commonwealth Court seeking to reverse the order entered by the PaPUC approving the sale of the System Assets. On December 29, 2023, the Company’s Pennsylvania subsidiary filed applications with the Commonwealth Court seeking to dismiss the appeals and requesting expedited consideration. By order dated February 1, 2024, the Commonwealth Court deferred deciding the application to dismiss the appeals and directed that the issues raised by the applications to dismiss are to be considered as part of the merits of the appeals and that the disposition of the appeals was to be expedited. The Company awaits a decision from the Commonwealth Court to proceed with closing.

Previous wording

As of March 31, 2024, the Company had entered into 26 agreements with a total aggregate purchase price of $517 million for pending acquisitions in the Regulated Businesses, including the agreements discussed above, to add approximately 66,800 additional customers. Four of these 26 agreements, representing an aggregate purchase price of $251 million (including Butler Area Sewer Authority, discussed above) and serving approximately 18,800 customers, have received commission approval. The remaining pending acquisitions, including 13,400 customers under Act 12, require regulatory approval to complete.

Current wording

As of June 30, 2024, the Company had entered into 22 agreements with a total aggregate purchase price of $483 million for pending acquisitions in the Regulated Businesses, including the agreements discussed above, to add approximately 59,000 additional customers. Two of these 22 agreements, representing an aggregate purchase price of $236 million (including Butler Area Sewer Authority, discussed above) and serving approximately 16,000 customers, have received commission approval. The remaining pending acquisitions, including 13,400 customers under Act 12, require regulatory approval to complete.

Previous wording

On February 7, 2024, the PaPUC proposed the Tentative Supplemental Implementation Order which seeks to make certain changes to the process by which the PaPUC considers and decides applications to acquire water and wastewater assets under Pennsylvania’s existing utility valuation law, known as Act 12 of 2016 (“Act 12”). The Tentative Supplemental Implementation Order proposes, among other things, a reasonableness review ratio that would be applied to help guide the determination on the overall prudency of the transaction and reasonableness of the purchase price. The public comment period on the proposed Tentative Supplemental Implementation Order has ended and a final order is expected soon. Separately, draft legislation has also been proposed in the Pennsylvania House of Representatives that would amend Act 12 and establish new guidelines for evaluating applicable acquisitions. The Company cannot currently predict the outcome of these or other legislative initiatives, or their impacts, but the Company intends to continue to support outcomes that allow for consolidation and investment in water and wastewater infrastructure in Pennsylvania and in its other regulated jurisdictions.

Current wording

On February 7, 2024, the PaPUC proposed the Tentative Supplemental Implementation Order (“TSIO”) which seeks to make certain changes to the process by which the PaPUC considers and decides applications to acquire water and wastewater assets under Pennsylvania’s existing utility valuation law, known as Act 12 of 2016 (“Act 12”). The TSIO proposes, among other things, a reasonableness review ratio that would be applied to help guide the determination on the overall prudency of the transaction and reasonableness of the purchase price. On July 2, 2024, the PaPUC issued the Final Supplemental Implementation Order (“FSIO”) which largely adopts the provisions in the TSIO. The provisions of the FSIO are not retroactive and apply to acquisition applications filed after July 2, 2024. Separately, legislation has also been introduced in the Pennsylvania House of Representatives that would amend Act 12 and establish new guidelines for evaluating applicable acquisitions. The proposed bills were reported out of committee but have not yet been considered by the full House of Representatives. The Company cannot currently predict the outcome of these or other legislative initiatives, or their impacts, but the Company intends to continue to support outcomes that allow for consolidation and investment in water and wastewater infrastructure in Pennsylvania and in its other regulated jurisdictions.

Previous wording

The Company performed an initial review of the NPDWR, when it was proposed by the EPA in March 2023, to assess the MCL requirements for PFAS and the application of the Hazard Index approach for PFNA, PFBS, PFHxS, and GenX Chemicals. While the proposed MCLs were finalized without change, EPA also set MCLs for three of the four PFAS analytes included in the Hazard Index as part of the final rule. Subject to the Company’s continuing review of the NPDWR and the adoption of more stringent requirements by state environmental regulators, as previously disclosed, the Company estimates an investment of approximately $1 billion of capital expenditures to install additional treatment facilities over a five-year period in order to comply with the new regulations. Additionally, the Company estimates that it will incur annual operating expenses of up to approximately $50 million related to testing and treatment, with the majority of the operating expenses beginning after the April 2029 compliance deadline. The actual expenses may differ from these estimates and will be dependent upon the Company completing its review and analysis of the NPDWR.

Current wording

As previously disclosed, the Company estimates an investment of approximately $1.0 billion of capital expenditures to install additional treatment facilities over a five-year period in order to comply with the new regulations. Additionally, the Company estimates that it will incur annual operating expenses of up to approximately $50 million related to testing and treatment, with the majority of the operating expenses beginning after the April 2029 compliance deadline. The actual expenses may differ from these estimates and will be dependent upon market dynamics upon implementation of solutions to comply with the NPDWR.

Previous wording

Presented in the table below are annualized incremental revenues, including reductions for the amortization of the excess accumulated deferred income taxes (“EADIT”) that are generally offset in income tax expense, assuming a constant sales volume and customer count, resulting from general rate case authorizations that became effective during 2024:

Current wording

Presented in the table below are annualized incremental revenues, including reductions for the amortization of the excess accumulated deferred income taxes (“EADIT”) that are generally offset in income tax expense, assuming a constant sales volume and customer count, resulting from general rate case authorizations that are effective during 2024:

Previous wording

On March 4, 2024, the West Virginia Public Service Commission issued an order approving the adjustment of base rates requested in a rate case filed on May 1, 2023, by the Company’s West Virginia subsidiary. The general rate case order approved an $18 million annualized increase in water and wastewater system revenues, excluding previously recovered infrastructure surcharges of $7 million, based on an authorized return on equity of 9.8%, authorized rate base of $886 million, which reflects capital investments through February 2024, a common equity ratio of 50.1% and a long-term debt ratio of 49.9%. The increased water and wastewater revenues related to the base rate adjustment are being driven primarily by (i) $220 million of related water and wastewater system capital investments made since the completion of the West Virginia subsidiary’s previous rate case, (ii) higher pension and other postretirement benefit costs, and (iii) increases in production costs, including chemicals, fuel and power costs.

Current wording

On February 23, 2024, the West Virginia Public Service Commission issued an order approving the adjustment of base rates requested in a rate case filed on May 1, 2023, by the Company’s West Virginia subsidiary. The general rate case order approved an $18 million annualized increase in water and wastewater system revenues, excluding previously recovered infrastructure surcharges of $7 million, based on an authorized return on equity of 9.80%, authorized rate base of $886 million, which reflects capital investments through February 2024, a common equity ratio of 50.10% and a long-term debt ratio of 49.90%. The increased water and wastewater revenues related to the base rate adjustment are being driven primarily by (i) $220 million of related water and wastewater system capital investments made since the completion of the West Virginia subsidiary’s previous rate case, (ii) higher pension and other postretirement benefit costs, and (iii) increases in production costs, including chemicals, fuel and power costs.

Previous wording

On February 14, 2024, the Indiana Utility Regulatory Commission (“IURC”) issued an order approving the adjustment of base rates requested in a rate case filed on March 31, 2023, by the Company’s Indiana subsidiary. The general rate case order approved a $66 million annualized increase in water and wastewater system revenues, excluding previously recovered infrastructure surcharges, based on an authorized return on equity of 9.65%, authorized rate base of $1.84 billion, a common equity ratio of 56.15% and a debt ratio of 43.85%. For purposes of determining rates, the adjustment is based on an equity component of 48.19% due to the regulatory practice in Indiana of including certain zero-cost items or tax credit balances in the capital structure calculation. The annualized revenue increase will include three step increases, with $25 million of the increase to be included in rates in February 2024, $17 million in May 2024, and $24 million in May 2025. The increases are being driven primarily by (i) over $875 million of water and wastewater system capital investments since the completion of the Indiana subsidiary’s last rate case and through April 30, 2025, (ii) higher pension and other postretirement benefit costs, and (iii) increases in production costs, including chemicals, fuel and power costs.

Current wording

On February 14, 2024, the Indiana Utility Regulatory Commission (“IURC”) issued an order approving the adjustment of base rates requested in a rate case filed on March 31, 2023, by the Company’s Indiana subsidiary. The general rate case order approved a $66 million annualized increase in water and wastewater system revenues, excluding previously recovered infrastructure surcharges, based on an authorized return on equity of 9.65%, authorized rate base of $1.8 billion, a common equity ratio of 56.15% and a debt ratio of 43.85%. For purposes of determining rates, the adjustment is based on an equity component of 48.19% due to the regulatory practice in Indiana of including certain zero-cost items or tax credit balances in the capital structure calculation. The annualized revenue increase will include three step increases, with $25 million of the increase to be included in rates in February 2024, $23 million in May 2024, and $18 million in May 2025. The increases are being driven primarily by (i) over $875 million of water and wastewater system capital investments since the completion of the Indiana subsidiary’s last rate case and through April 30, 2025, (ii) higher pension and other postretirement benefit costs, and (iii) increases in production costs, including chemicals, fuel and power costs.

Previous wording

On May 1, 2024, the Company’s Iowa subsidiary filed a general rate case requesting approximately $21 million in additional annualized revenues, which is based on a proposed return on equity of 10.75% and a capital structure with an equity component of 52.57% and debt component of 47.43%. The requested annualized revenue increase is driven primarily by approximately $157 million in capital investments made and to be made by the Iowa subsidiary through March 2026.

Current wording

On May 1, 2024, the Company’s Iowa subsidiary filed a general rate case requesting approximately $21 million in additional annualized revenues, which is based on a proposed return on equity of 10.75% and a capital structure with an equity component of 52.57% and debt component of 47.43%. The requested annualized revenue increase is driven primarily by approximately $157 million in capital investments made and to be made by the Iowa subsidiary through March 2026. Interim rates became effective May 11, 2024, with the difference between interim and final approved rates subject to refund.

Previous wording

On January 25, 2024, the Company’s Illinois subsidiary filed tariffs for new water and wastewater rates. The request seeks a two-step rate increase consisting of aggregate annualized incremental revenue, based on a proposed return on equity of 10.75%, of (i) approximately $132 million, excluding infrastructure surcharges of $5 million, effective January 1, 2025, based on a future test year through December 31, 2025, with average rate base and a capital structure with an equity component of 52.27% and a debt component of 47.73%, and (ii) approximately $16 million effective January 1, 2026, based on a future test year to include end of period rate base and a capital structure with an equity component of 54.43% and a debt component of 45.57%. The requested increases are driven primarily by an estimated $557 million in capital investments to be made by the Illinois subsidiary from January 2024 through December 2025. The request also proposes a treatment and compliance rider to address recovery of future environmental compliance investments, and a modification to the existing volume balancing account mechanism to include full production cost recovery.

Current wording

On January 25, 2024, the Company’s Illinois subsidiary filed tariffs for new water and wastewater rates. The request seeks a two-step rate increase consisting of aggregate annualized incremental revenue, based on a proposed return on equity of 10.75%, of (i) approximately $132 million, excluding infrastructure surcharges of $5 million, effective January 1, 2025, based on a future test year through December 31, 2025, with average rate base and a capital structure with an equity component of 52.27% and a debt component of 47.73%, and (ii) approximately $16 million effective January 1, 2026, based on a future test year to include end of period rate base and a capital structure with an equity component of 54.43% and a debt component of 45.57%. The requested increases are driven primarily by an estimated $557 million in capital investments to be made by the Illinois subsidiary from January 2024 through December 2025. The request also proposes a treatment and compliance rider to address recovery of future environmental compliance investments, and a modification to the existing volume balancing account mechanism to include full production cost recovery. The requested increase was subsequently updated in the Illinois subsidiary’s June 20, 2024, rebuttal filing, with the first step request adjusted to $140 million in additional annualized revenues.

Previous wording

On March 1, 2024, the Company’s Missouri subsidiary filed an infrastructure surcharge proceeding requesting $20 million in additional annualized revenues.

Current wording

On June 28, 2024, the Company’s West Virginia subsidiary filed an infrastructure surcharge proceeding requesting $4 million in additional annualized revenues.

Previous wording

In September 2020, the CPUC released a decision under its Low-Income Rate Payer Assistance program rulemaking that required the Company’s California subsidiary to file a proposal to alter its water revenue adjustment mechanism in its next general rate case filing in 2022, which would have become effective upon receiving an order in the current pending rate case. On October 5, 2020, the Company’s California subsidiary filed an application for rehearing of the decision and following the CPUC’s denial of its rehearing application in September 2021, the Company’s California subsidiary filed a petition for writ of review with the California Supreme Court on October 27, 2021. On May 18, 2022, the California Supreme Court issued a writ of review for the California subsidiary’s petition and the petitions filed by other entities challenging the decision. Independent of the judicial challenge, California passed Senate Bill 1469, which allows the CPUC to consider and authorize the implementation of a mechanism that separates the water corporation’s revenue and its water sales. Legislation was signed by the Governor on September 30, 2022, and became effective on January 1, 2023. In response to the legislation, on January 27, 2023, the Company’s California subsidiary filed an updated application requesting the CPUC to consider a Water Resources Sustainability Plan decoupling mechanism in its pending 2022 general rate case, which, if adopted, will become effective upon receiving an order in the current pending rate case.

Current wording

In September 2020, the CPUC released a decision under its Low-Income Rate Payer Assistance program rulemaking that required the Company’s California subsidiary to file a proposal to alter its water revenue adjustment mechanism in its next general rate case filing in 2022, which would have become effective upon receiving an order in the current pending rate case. On October 5, 2020, the Company’s California subsidiary filed an application for rehearing of the decision and following the CPUC’s denial of its rehearing application in September 2021, the Company’s California subsidiary filed a petition for writ of review with the California Supreme Court on October 27, 2021. On May 18, 2022, the California Supreme Court issued a writ of review for the California subsidiary’s petition and the petitions filed by other entities challenging the decision. On July 8, 2024, the California Supreme Court issued a unanimous opinion concluding that the CPUC did not regularly seek to exercise its authority when it prohibited water utilities from proposing to continue their water revenue adjustment mechanisms. Accordingly, the California Supreme Court vacated the portion of the CPUC’s 2020 decision relating to this prohibition against continuation of such water revenue adjustment mechanisms.

Previous wording

For the three months ended March 31, 2024, operating revenues increased $68 million, primarily due to a $53 million increase from authorized rate increases, including infrastructure surcharges, principally to fund infrastructure investment in various states and an $8 million increase from water and wastewater acquisitions, as well as organic growth in existing systems. In addition, operating revenues were $6 million higher as a result of reduced amortization of EADIT, primarily in the Company’s Missouri subsidiary.

Current wording

For the three and six months ended June 30, 2024, operating revenues increased $52 million and $120 million, respectively, primarily due to increases of $42 million and $100 million, respectively, from authorized rate increases, including infrastructure surcharges, principally to recover infrastructure investment in various states. In addition, operating revenues increased $10 million and $18 million for the three and six months ended June 30, 2024, respectively, from water and wastewater acquisitions, as well as organic growth in existing systems. Also, operating revenues were $5 million and $10 million higher for the three and six months ended June 30, 2024, respectively, as a result of reduced amortization of EADIT, primarily in the Company’s Missouri subsidiary. These increases were partially offset by a $10 million estimated net decrease for the three and six months ended June 30, 2024, due to warm, dry weather in the second quarter of 2023.

Previous wording

For the three months ended March 31, 2024, operation and maintenance expense increased $21 million, primarily due to increased production costs from higher purchased water usage and increased fuel, power and chemicals costs. In addition, operation and maintenance expense was higher due to increased employee related costs, primarily from annual merit increases.

Current wording

For the three and six months ended June 30, 2024, operation and maintenance expense increased $11 million and $32 million, respectively, due to increased production costs from higher purchased water cost and usage, increased employee related costs to support growth and increases in other operating expenses.

Previous wording

For the three months ended March 31, 2024, depreciation and amortization increased $15 million, primarily due to additional utility plant placed in service from capital infrastructure investments.

Current wording

For the three and six months ended June 30, 2024, depreciation and amortization increased $17 million and $32 million, respectively, primarily due to additional utility plant placed in service from capital infrastructure investments.

Previous wording

For the three months ended March 31, 2024, other expenses increased $11 million, primarily due to higher interest expense from the issuance of incremental long-term debt in June 2023 and February 2024, as well as a decrease in allowance for funds used during construction in the current period. These increases were partially offset by a decrease in interest expense as a result of lower average commercial paper borrowings.

Current wording

For the three and six months ended June 30, 2024, other expenses increased $14 million and $25 million, respectively, primarily due to higher interest expense from the issuance of incremental long-term debt in June 2023 and February 2024. These increases were partially offset by decreases in interest expense as a result of lower average commercial paper borrowings and from the repayment of AWCC’s 3.850% Senior Notes in March 2024.

Previous wording

For the three months ended March 31, 2024, the Regulated Businesses’ provision for income taxes increased $7 million. The Regulated Businesses’ effective income tax rate was 22.3% and 20.9% for the three months ended March 31, 2024 and 2023, respectively. The increase was primarily due to the decrease in the amortization of EADIT pursuant to regulatory orders.

Current wording

For the three and six months ended June 30, 2024, the Regulated Businesses’ provision for income taxes increased $5 million and $12 million, respectively. The Regulated Businesses’ effective income tax rate was 22.2% for the three and six months ended June 30, 2024, and 20.8% for the three and six months ended June 30, 2023. The increase was primarily due to the decrease in the amortization of EADIT pursuant to regulatory orders.

Previous wording

For the three months ended March 31, 2024, interest income increased $8 million, primarily due to the increased interest rate on the amended secured seller promissory note from the sale of HOS. See Note 5—Acquisitions and Divestitures in the Notes to Consolidated Financial Statements for additional information.

Current wording

For the three and six months ended June 30, 2024, interest income increased $11 million and $19 million, respectively, primarily due to the increased interest rate on the amended secured seller promissory note from the sale of HOS. See Note 5—Acquisitions and Divestitures in the Notes to Consolidated Financial Statements for additional information.

Previous wording

•West Virginia passed House Bill 5617, which adopts standards and authorizes the Public Service Commission to promulgate rules for maintenance, flushing, flow testing, and marking of fire hydrants owned by water utilities. Also allows for rate recovery. Legislation was signed by the Governor on March 20, 2024, and will become effective on June 4, 2024.

Current wording

•West Virginia passed House Bill 5617, which adopts standards and authorizes the Public Service Commission to promulgate rules, and also allows for rate recovery, on maintenance, flushing, flow testing and marking of fire hydrants owned by water utilities. Legislation was signed by the Governor and became effective on June 4, 2024.

Previous wording

•Iowa passed House File 2101, which increases the threshold amount required for approval by the Iowa Utilities Board for water and wastewater utility acquisition filings from $0.5 million to $3 million. Legislation was signed by the Governor on April 10, 2024 and will become effective on July 1, 2024.

Current wording

•Iowa passed House File 2101, which increases the threshold amount required for approval by the Iowa Utilities Commission for water and wastewater utility acquisition filings from $0.5 million to $3 million. Legislation was signed by the Governorand became effective on July 1, 2024.

Previous wording

•Indiana passed Senate Bill 247, which establishes a 30-day filing with the IURC by a utility for an acquisition of utilities, with an appraised value and purchase price of less than $3 million under the offered utility statute. Legislation was signed by the Governor on March 11, 2024, and will become effective on July 1, 2024.

Current wording

•Indiana passed Senate Bill 247, which establishes a 30-day filing with the IURC by a utility for an acquisition of a utility with an appraised value and purchase price of less than $3 million. Legislation was signed by the Governor became effective on July 1, 2024.

Previous wording

On August 16, 2022, the Inflation Reduction Act of 2022 (the “IRA”) was signed into law. The IRA contains a 15% Corporate Alternative Minimum Tax (“CAMT”) provision on applicable corporations effective January 1, 2023. To determine if a company is considered an applicable corporation subject to CAMT, the company’s average adjusted financial statement income (“AFSI”) for the three consecutive years preceding the tax year must exceed $1 billion. An applicable corporation must make several adjustments to net income when determining AFSI. A corporation paying CAMT is eligible for a future tax credit, which can be utilized when regular tax exceeds CAMT. Based on current guidance, the Company is an applicable corporation subject to CAMT beginning in 2024 and expects to owe CAMT in excess of the regular tax liability. In the absence of an extension of the Internal Revenue Service (“IRS”) and the U.S. Treasury Notice 2023-42 (which provides relief of penalties related to the 2023 estimated tax payments associated with the CAMT liability), the Company will begin including the CAMT liability with its estimated cash payments in 2024. The Company will continue to evaluate the impacts of the IRA as the U.S. Treasury and the IRS issue additional guidance.

Current wording

On August 16, 2022, the Inflation Reduction Act of 2022 (the “IRA”) was signed into law. The IRA contains a 15% Corporate Alternative Minimum Tax (“CAMT”) provision on applicable corporations effective January 1, 2023. To determine if a company is considered an applicable corporation subject to CAMT, the company’s average adjusted financial statement income (“AFSI”) for the three consecutive years preceding the tax year must exceed $1.0 billion. An applicable corporation must make several adjustments to net income when determining AFSI. A corporation paying CAMT is eligible for a future tax credit, which can be utilized when regular tax exceeds CAMT. Based on current guidance, the Company is an applicable corporation subject to CAMT beginning in 2024 and expects to owe CAMT in excess of the regular tax liability. On June 13, 2024, the Internal Revenue Service (“IRS”) and the U.S. Treasury issued Notice 2024-47, allowing corporate taxpayers to exclude amounts attributable to the CAMT liability, without penalty, from estimated tax payments due on or before August 15, 2024. In the absence of a similar extension, the Company will include the CAMT liability in its estimated tax payments starting in the third quarter of 2024. The Company will continue to assess the impacts of the IRA as the U.S. Treasury and the IRS provide further guidance.

Previous wording

On February 23, 2024, AWCC completed a $1.4 billion debt offering, which included the sale of $700 million aggregate principal amount of its 5.150% senior notes due 2034 and $700 million aggregate principal amount of its 5.450% senior notes due 2054. At the closing of this offering, AWCC received, after deduction of underwriting discounts and before deduction of offering expenses, net proceeds of approximately $1,381 million. AWCC is using the net proceeds of the offering (1) to lend funds to American Water and the Regulated Businesses; (2) to repay at maturity AWCC’s 3.850% Senior Notes due 2024; (3) to repay AWCC’s commercial paper obligations; and (4) for general corporate purposes.

Current wording

On February 23, 2024, AWCC completed a $1.4 billion debt offering, which included the sale of $700 million aggregate principal amount of its 5.150% senior notes due 2034 and $700 million aggregate principal amount of its 5.450% senior notes due 2054. At the closing of this offering, AWCC received, after deduction of underwriting discounts and before deduction of offering expenses, net proceeds of approximately $1,381 million. AWCC used the net proceeds of the offering (1) to lend funds to American Water and the Regulated Businesses; (2) to repay at maturity AWCC’s 3.850% Senior Notes due 2024; (3) to repay AWCC’s commercial paper obligations; and (4) for general corporate purposes.

Previous wording

AWCC’s revolving credit facility provides $2.75 billion in aggregate total commitments from a diversified group of financial institutions. The revolving credit facility is used principally to support AWCC’s commercial paper program, to provide additional liquidity support, and to provide a sub limit for the issuance of up to $150 million in letters of credit. The maximum aggregate principal amount of short-term borrowings authorized for issuance under AWCC’s commercial paper program is $2.60 billion. The termination date of the credit agreement with respect to AWCC’s revolving credit facility is October 26, 2028. and permits AWCC to increase the maximum commitment by up to an aggregate of $500 million and to request extensions of its expiration date for up to two one-year periods, as to which one such extension request remains. As of March 31, 2024 and December 31, 2023, there were no borrowings under the revolving credit facility. As of March 31, 2024 and December 31, 2023, there were $75 million of outstanding letters of credit under its revolving credit facility. At March 31, 2024, there was no outstanding short-term debt as the net proceeds of the debt offering on February 23, 2024, were used to repay the outstanding short-term commercial paper obligations. At December 31, 2023, there was $180 million, or net of discount $179 million of outstanding short-term debt and the weighted-average interest rate on AWCC’s outstanding short-term borrowings was approximately 5.51%.

Current wording

AWCC’s revolving credit facility provides $2.75 billion in aggregate total commitments from a diversified group of financial institutions. The revolving credit facility is used principally to support AWCC’s commercial paper program, to provide additional liquidity support, and to provide a sub limit for the issuance of up to $150 million in letters of credit. The maximum aggregate principal amount of short-term borrowings authorized for issuance under AWCC’s commercial paper program is $2.6 billion. The termination date of the credit agreement with respect to AWCC’s revolving credit facility is October 26, 2028. Subject to satisfying certain conditions, the credit agreement permits AWCC to increase the maximum commitment by up to an aggregate of $500 million and to request extensions of its expiration date for up to two one-year periods, as to which one such extension request remains. As of June 30, 2024, and December 31, 2023, there were no borrowings under the revolving credit facility. As of June 30, 2024, and December 31, 2023, there were $75 million of outstanding letters of credit under the revolving credit facility.

Previous wording

Presented in the tables below is the aggregate credit facility commitments, commercial paper limit and letter of credit availability under the revolving credit facility as of March 31, 2024 and December 31, 2023, as well as the available capacity for each:

Current wording

Presented in the tables below is the aggregate credit facility commitments, commercial paper limit and letter of credit availability under the revolving credit facility, as well as the available capacity for each:

Previous wording

(a)Total remaining availability of $2.68 billion as of March 31, 2024, was accessible through revolver draws.

Current wording

(a)Total remaining availability of $2.7 billion as of June 30, 2024, was accessible through revolver draws.

Previous wording

(a)Total remaining availability of$2.50 billion as of December 31, 2023, was accessible through revolver draws.

Current wording

(a)Total remaining availability of$2.5 billion as of December 31, 2023, was accessible through revolver draws.

Previous wording

Presented in the table below is the Company’s total available liquidity as of March 31, 2024 and December 31, 2023, respectively:

Current wording

Presented in the table below is the Company’s total available liquidity:

Previous wording

No ineffectiveness was recognized on hedging instruments for the three months ended March 31, 2024 or 2023.

Current wording

No ineffectiveness was recognized on hedging instruments for the three and six months ended June 30, 2024 or 2023.

Previous wording

(b)Changes in working capital include changes to receivables and unbilled revenues, income tax receivable, accounts payable, accrued liabilities, accrued taxes and other current assets and liabilities, net.

Current wording

(b)Changes in working capital include changes to receivables and unbilled revenues, income tax receivable, accounts payable, accrued liabilities, accrued taxes and other assets and liabilities, net.

Previous wording

For the three months ended March 31, 2024, cash provided by operating activities increased $97 million, due to changes in working capital, which is mainly due to the utilization of an income tax receivable for the current year tax liability, as well as an increase to net income and other non-cash activities.

Current wording

For the six months ended June 30, 2024, cash provided by operating activities increased $13 million, due to an increase in net income and other non-cash activities, partially offset by changes in deferred income taxes and working capital, which is mainly due to a decrease in accounts payable due to the timing of payments.

Previous wording

For the three months ended March 31, 2024, cash used in investing activities increased $172 million, primarily due to increased payments for capital expenditures and acquisitions.

Current wording

For the six months ended June 30, 2024, cash used in investing activities increased $207 million, primarily due to increased payments for capital expenditures and acquisitions.

Previous wording

For the three months ended March 31, 2024, cash provided by financing activities increased $212 million, primarily due to the issuance of long-term debt in February 2024 and lower repayments of short-term commercial paper borrowings compared to the prior period. This was partially offset by the repayment of long-term debt in the current period and the proceeds from the common stock financing in March 2023.

Current wording

For the six months ended June 30, 2024, cash provided by financing activities decreased $779 million, primarily due to the repayment of long-term debt in the current period and the proceeds from the common stock financing in March 2023. These decreases were partially offset by a higher issuance of long-term debt and lower repayments of short-term commercial paper borrowings compared to the prior period.

Previous wording

Covenants in certain long-term notes and the revolving credit facility require the Company to maintain a ratio of consolidated debt to consolidated capitalization (as defined in the relevant documents) of not more than 0.70 to 1.00. On March 31, 2024, the Company’s ratio was 0.57 to 1.00 and therefore the Company was in compliance with the covenants.

Current wording

Covenants in certain long-term notes and the revolving credit facility require the Company to maintain a ratio of consolidated debt to consolidated capitalization (as defined in the relevant documents) of not more than 0.70 to 1.00. On June 30, 2024, the Company’s ratio was 0.56 to 1.00 and therefore the Company was in compliance with the covenants.