Water Utility IPO: American Water Works

American Water Works (AWK) provides water and waste water services to 32 states in US plus Ontario, Canada.

All quotations are from the company’s most recent S-1 filing with links provided.

Business Overview (from prospectus)

Founded in 1886, American Water Works Company, Inc., which we refer to, together with its subsidiaries, as American Water or the Company, is the largest investor-owned United States water and wastewater utility company, as measured both by operating revenue and population served. Our nearly 7,000 employees provide approximately 15.6 million people with drinking water, wastewater and other water-related services in 32 states and Ontario, Canada.

Our primary business involves the ownership of regulated water and wastewater utilities that provide water and wastewater services to residential, commercial and industrial customers, treating and delivering over one billion gallons of water per day. Our subsidiaries that provide these services are generally subject to economic regulation by state Public Utility Commissions, which we refer to as state PUCs, in the states in which they operate. In 2007, we generated $2,214.2 million in total operating revenue, representing approximately four times the operating revenue of the next largest investor-owned company in the United States water and wastewater business, $15.1 million in operating income, which includes $509.3 million of impairment charges relating to continuing operations, and a net loss of $342.8 million. Our Regulated Businesses, operating in 20 states in the United States, generated 89.8% of our total operating revenue in 2007.

Offering: 64 million shares at $24 - $26 per share. All of the shares of common stock offered by this prospectus are being sold by the selling stockholder. We will not receive any of the proceeds from the shares of common stock sold by the selling stockholder

IPO Underwriters: Goldman Sachs, Citi, Merrill Lynch

Financial Highlights:

On September 28, 2007, Thames US Holdings was merged with and into American Water, with American Water as the surviving entity. American Water is an indirect wholly owned subsidiary of RWE. The historical consolidated financial statements of American Water represent the consolidated results of the Company, formerly issued under the name Thames Water Aqua US Holdings, Inc. and Subsidiary Companies.

Top Competitors:

In our Regulated Businesses, we generally do not face direct or indirect competition in providing services in our existing markets because (i) we operate within those markets pursuant to certificates of public convenience and necessity (or similar authorizations) issued by state PUCs and (ii) the high cost of constructing a new water and wastewater system in an existing market creates a barrier to market entry. Our Regulated Businesses do face competition from governmental agencies, other investor-owned utilities and strategic buyers in connection with entering new markets and making strategic acquisitions.

Consolidation is changing the competitive landscape as small local utilities struggle to meet their capital spending requirements and look to partner with investor-owned utilities. We also face competition in offering services to new real estate developers, where we compete with others on the basis of the financial terms we offer for our services, the availability of water and our ability to commence providing services on a timely basis. Our largest investor-owned competitors are Aqua America Inc. (ATW), United Water (owned by Suez), American States Water Co (AWR). and California Water Services Group (CWT)

Additional Resources:

• Company website
• Online roadshow
• IPO Scoop : 'IPO Buzz: Size matters.'
• 24/7 Wall Street : 'American Water Works Sets IPO Terms... $1.6 Billion For Starters’
• J. Christoph Amberger: ’Upcoming IPOs: Slim Pickings Make Penthouse Look Like a Winner’
• Wall Street Transcript: ’Why Is Water So Hot?’

Comments

[Mosh]

A correction -
Aqua America is WTR not ATW

[Realistic]

As a former managment employee who still has regular contacts with America employees, I would be very hesitant to invest in this comany. Too many experienced supervisors and managers were shown the door in 2004 when an RWE ordered reorganization took place. Now because of repaid growth in infrastructure replacement and PUC mandated practices, too many unqualified and inexperienced people are responsible for the day to day operations that are necessary to deliver a quality product and prevent incidents like Joplin, MO. In Joplin recently, the entire city was under a boil order because there were bad decisions made on how to handle treatment at their plant when the supply source experienced a surge in water due to heavy rains. Coincidently, the former plant manager, a 20+ year employee, had been layed off during another reorganization. Now the Missouri Public Service Commission is investigating.