#1AMERICAN WATER 2019 Investor Day December 11, 2019 We keep life flowing® 5 OOT#2AMERICAN WATER Welcome Ed Vallejo Vice President, Investor Relations We keep life flowing#3★ AMERICAN WATER Safety Message A Ed Vallejo#4AMERICAN WATER Forward-Looking Statements Safe Harbor This presentation includes forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and the Federal securities laws. They are not guarantees or assurances of any outcomes, financial results of levels of activity, performance or achievements, and readers are cautioned not to place undue reliance upon them. The forward-looking statements are subject to a number of estimates and assumptions, and known and unknown risks, uncertainties and other factors. Actual results may differ materially from those discussed in the forward-looking statements included in this presentation. The factors that could cause actual results to differ are discussed in the Appendix to this presentation, in our Annual Report on Form 10-K for the year ended December 31, 2018, and subsequent filings with the SEC, including our Form 10-Q for the quarter ended September 30, 2019, as filed with the SEC on October 30, 2019. Non-GAAP Financial Information This presentation includes non-GAAP financial measures. Further information regarding these non-GAAP financial measures, including a reconciliation of each of these measures to the most directly comparable GAAP measure, is included in the Appendix to this presentation. 4#58:30 am 8:45 am 9:15 am AMERICAN WATER Investor Day Agenda Ed Vallejo: Welcome and Safety Message Susan Story: Overview and Strategy Walter Lynch: Addressing Water Quality Challenges 9:45 am 15 Minute Break 10:00 am Susan Hardwick: Focus on Capital Investment 10:30 am Walter Lynch & Susan Hardwick: Regulated Operations & Financial Overview 11:30 am Susan Story: Closing Remarks 11:45 am Q&A 12:30 pm Conference Wrap-Up 5 LO#6AMERICAN WATER Welcome Susan Story President and Chief Executive Officer We keep life flowing#7AMERICAN WATER Customer Macro Trends Technology Social Work Execution Economic Experience above all 24/7 Personalized Service on Demand Proactive Engagement Connectivity and Integration Water's impact on Environment and Health Al & machine learning rapidly penetrates and disrupts many core enterprise functions Smart City Initiatives on the Rise Self optimizing, software defined business models drives competitive business advantage More Physical Assets Integrated with Digital Technologies Social networks dominate as the primary communication channel Community groups leverage social networks to advance targeted agenda (environment, water, education, etc.) Social Enterprises & Supporting Regulations on the Rise Attracting and retaining employees will require shared company purpose and strong culture As aging work force retires, there will be fewer employees to execute workload Dynamic teams will replace fixed organization structures Automation & Digital will Transform Jobs New 'Normal' Interest Rate Environment Recession Risk is Mixed but Rising ESG Movement Accelerates Traction Technology enabled companies lead valuations 7#8AMERICAN WATER What Won't Change... Our Strategy: Purpose Driven. People Powered. Customer Obsessed. Trusted Source of Everything Water Values Safety Trust Strategies CUSTOMER OBSESSED The industry leader "Best in Class" execution of business fundamentals Highest in customer satisfaction SAFETY Set the bar for water quality, water source monitoring, and water technology across US Proven and predictable financial performance and growth ZERO INCIDENTS AND INJURIES / LIVE HEALTHY PEOPLE PURPOSE DRIVEN & PEOPLE POWERED CUSTOMERS CUSTOMER OBSESSED. TRUSTED SOURCE AND LEADER FOR EVERYTHING WATER INDUSTRY LEADERS IN CRITICAL INFRASTRUCTURE INVESTMENT AND CUSTOMER GROWTH GROWTH "BEST IN CLASS" EXECUTION OF BUSINESS AND OPERATION FUNDAMENTALS OPERATIONAL EXCE EXCELLENCE Environmental Leadership Trusted source of everything water Teamwork High Performance We keep life flowing 8#9AMERICAN WATER What We Must Do Differently/Accelerate Over Next Decade: Connect continuously with customers & provide personalized choices through technology and human touch Increase outreach and social integration around "Water as Health" Continue to address Leverage Al to improve Water Quality and Safety aging infrastructure through accelerated CapEx Leverage genetic engineering to improve water quality Improve efficiency of operations and back-office functions through technology Plan for evolution and transformation of existing jobs to new jobs using Al, robotics and reskilling training and development 9#10AMERICAN WATER What You Will Hear Today...Our Compelling Story 2020-2024 Plan 7-10%* EPS CAGR range Market Based Businesses 1-2% Regulated 1-2% Acquisitions Regulated Investment CAPEX 5-7% *Anchored off of 2018 Adjusted EPS (a non-GAAP measure) Continued industry leading growth Addressing Water Quality Challenges Regulated investment continues to be the foundation of our growth Highly fragmented water industry provides opportunity Disciplined equity used to support increased capital 10#11AMERICAN WATER Water Quality Walter Lynch Chief Operating Officer We keep life flowing#12AMERICAN WATER Water Quality Video We keep life flowing®#13AMERICAN WATER Water Quality is essential to our business Algal Contamination Chemical Spill in Water Supply Cross Connection Control Failure Movement of Groundwater Plume Ground Water Contamination Emerging Contaminants = Water Quality Challenges We keep life flowing Abnormal Weather Events 13#1400 AMERICAN WATER Walter Lynch Chief Operating Officer Cheryl Norton Senior Vice President, Eastern Division & President - NJ Kevin Kirwan Senior Vice President, Chief Environmental & Operational Excellence Officer We keep life flowing Dr. Lauren Weinrich Principal Scientist, Water Intelligence#15AMERICAN WATER What are the Water Quality Challenges? How is AW leading the way to ensure water is clean, safe & reliable? What is the value to Regulators, Investors and Customers? 15#16AMERICAN WATER 15 minute break 16#17AMERICAN WATER Susan Hardwick Chief Financial Officer Bruce Hauk Senior Vice President, Midwest Division & President - IL We keep life flowing David Choate Vice President, Engineering#18AMERICAN WATER Capital Investment Video We keep life flowing#19AMERICAN WATER A Focus on Capital Investment 1-year budget $1.7 B - $1.9 B 2020-2024 Capital Plan 2020-2029 Capital Plan Including $1.6B for regulated infrastructure 5-year plan 10-year plan Multiple Decades $8.8 B - $9.4 B $20 B - $22 B of Investment Needs Including $8.2B for regulated infrastructure 19#20AMERICAN WATER Decades Long Infrastructure Investment Drivers • Infrastructure renewal • Asset resiliency • Water quality • Regulatory compliance • Operational efficiency • Growth (acquisition and organic) • Long-term Planning Process Horizon 15-20 years • Local and centralized engineering team collaboration Standardized framework to assess operational risks Potential projects and solutions prioritized to most efficiently and effectively address risks / opportunities Customer Experience Customers at the center of everything we do • Affordability always considered when planning investment • Focused on capital efficiency • Procurement and project • delivery savings Prioritize projects that drives operational efficiency (every $1 saved in opex allows for $8 of capex investment) 20#21AMERICAN WATER Regulated Operations Walter Lynch Chief Operating Officer We keep life flowing#22AMERICAN WATER Our Regulated Business at a Glance National regulated footprint provides regulatory and geographic diversity ASSETS as of December 31, 2018 51,000 miles of pipe 621 water treatment plants 130 wastewater facilities 1,000 wells 80 Dams CA HI NY MI IA PA NJ IL IN MO VA MD KY TN GA 22#23AMERICAN WATER Our Leadership Reflects Our Communities Cheryl Norton Senior Vice President, Eastern Division & President - NJ Mike Doran Senior Vice President, Mid-Atlantic Division & President - PA Bruce Hauk Senior Vice President, Midwest Division & President - IL Nick Rowe Senior Vice President, Southeast Division & President - KY Richard Svindland President - California and Hawaii Lynda DiMenna President New York Robert Burton President West Virginia Deborah Dewey President Missouri Barry Suits President Virginia & Maryland 10 10 10 10 1909 נתכם Matthew Prine President Indiana & Michigan Randy Moore President Iowa TO 10 10 10 100000 Darlene Williams President Tennessee Q 23#24- - AMERICAN WATER Regulated investment is the Foundation of our growth 2020-2024 Plan: 7-10%* EPS CAGR range Market Based Businesses Regulated 1-2% 1-2% Acquisitions Regulated Investment CAPEX 5-7% *Anchored off of 2018 Adjusted EPS (a non-GAAP measure) 2020-2024 Capital Plan $ in billions $8.8 - $9.4 $0.6-$1.2 $8.2 Regulated System Investments 24#25- - AMERICAN WATER Wastewater Services For Our Customers Our Investments Ensure Safe, Reliable, Affordable Water & 2020 - 2024 Average Regulated Capital Expenditures by Purpose Regulated Capital Investment by year $ in billions 4% 6% $1-$2 $0.6-$1.2 8% $0.1 - $0.2 8% 66% $0.1 — $0.2 $0.1 - $0.2 $0.1 - $0.2 $0.1 - $0.2 $10 - $11 $8.2 8% $1.8 $1.7 $1.6 $1.6 $1.5 Infrastructure Renewal Resiliency Water Quality System Expansion Other Operational Efficiency, Technology & Innovation 2020 2021 Base Capital Investment 2022 2023 2024 Acquisition Capital Investment 2020-2024 2025 - 2029 25#26AMERICAN WATER Balancing Capital Needs & Customer Bill Impact Investing $8.2 billion in infrastructure over the next 5 years with a focus on customer bill impact What can help us Do More System investment Customer O&M and bill needs impact Capital efficiencies Regulatory support and constructive regulation 26#27AMERICAN WATER Timely Recovery Through Regulatory Mechanisms 59% Forward Test Years (27%) Infrastructure Surcharge Mechanisms (32%) 41% Traditional Recovery 2020-2024 Capital Plan (average) 27#28AMERICAN WATER 46.1% 41.0% 39.1% Disciplined Focus on Expenses Regulated O&M Efficiency Ratio* 36.6% 35.6% 35.0% 2018 9/30/2019 LTM Adjusted O&M Expenses* ($ in millions) »))) 2024 Target 31.3%** 2010 2012 2014 2016 2010 2012 2014 2016 2018 9/30/2019 LTM $966 $980 $943 $948 $1,015 $1,016 2010-2019 LTM 0.6% CAGR * Non-GAAP Measure - See appendix for reconciliation. O&M Efficiency Ratio = Adjusted Regulated O&M Expenses (O&M Expenses is most comparable GAAP measure) / Adjusted Regulated Operating Revenues (Operating Revenues is most comparable GAAP measure). This calculation assumes purchased water revenues approximate purchased water expenses and 2010-2016 adjusted for TCJA ** A reconciliation to a most comparable forward-looking GAAP measure is not available without unreasonable effort *** Includes organic customer connections While adding ≈450,000*** customer connections 28#29AMERICAN WATER Acquisition Video We keep life flowing#30AMERICAN WATER Regulated Acquisitions Provide Opportunity in a Highly Fragmented Industry 2020-2024 Plan: 7-10%* EPS CAGR range Market Based Businesses 1-2% Regulated 2020-2024 Capital Plan $ in billions $8.8 - $9.4 Acquisitions 1-2% $0.6 - $1.2 Regulated Investment CAPP 5-7% *Anchored off of 2018 Adjusted EPS (a non-GAAP measure) $8.2 Regulated Acquisitions 日 日 30 30#31AMERICAN WATER What Makes Us Different Water Utilities Highly fragmented industry Electric Utilities Natural Gas Utilities Water Utilities Source: EPA SDWIS Federal Reports Search www3.epa.gov/enviro/facts/sdwis Electric Utilities Source: Form EIA-861 detailed data files www.eia.gov/electricity/data/eia8 Gas Utilities Source: EPA F.L.I.G.H.T. Greenhouse Gas Emissions from Large Facilities Ghgdata.epa.gov/ghgp/main.do# 31#32AMERICAN WATER State Legislation Across our Footprint Enables Consolidation 6:0 Fair Market Value 8 Consolidated Tariff 12 Emerging: Water Quality Accountability Legislation 2 CA MO IA NJ CA NJ IL NY IA MD IN IL IN PA IN MN NJ KY VA PA MO MD WV 32#33AMERICAN WATER More than 50,000 Community Water & about 15,000 Wastewater Systems* 10,000 systems serving > 3,000 customers We Actively pursue Acquisitions Using a Disciplined Approach Opportunities over 5 years =650,000 Customer Connections 866 American Water Acquisitions** (Customer Connections) 82 *** closed deals in 10 states 173,000 customers From 2015-2019 Regulatory & Legislative climate Target A Target B Target C Target D Target E Under agreement =22,300 Selected Upcoming Acquisition Opportunities Included in Base Plan Approximate Customer Connections 43,500 36,500 30,000 26,900 20,000 * The number of water systems are available on the United States Environmental Protection Agency website and number of wastewater systems are included in the 2017 infrastructure report card. ** Excludes organic growth customer connections. *** Closed water and wastewater deals counted as separate transactions and includes for 2019 20 closed systems as of December 2, 2019. 33#34AMERICAN WATER Impact of AW on Communities Scranton, PA Ransom, IL Bel Air, MD 34 =4#35AMERICAN WATER Our Compelling Story 2020-2024 Plan 7-10%* EPS CAGR range Market Based Businesses 1-2% Regulated Acquisitions 1-2% Regulated Investment CAPEX 5-7% Largest and most geographically diverse water utility in the United States Regulated investment is the foundation of our growth Leveraging technology to enhance customer experience and O&M/Capital efficiency ✔ Our leadership reflects our communities Our highly fragmented industry provides opportunity Reliability and steady execution *Anchored off of 2018 Adjusted EPS (a non-GAAP measure) Purpose driven, delivering value to communities 35#36AMERICAN WATER Financial Overview Susan Hardwick Chief Financial Officer We keep life flowing#37AMERICAN WATER 2018 Adjusted EPS (GAAP EPS $3.15)** $3.30 2018 Continued Industry Leading EPS Growth 2020 EPS Guidance 2019 Adjusted EPS Guidance (GAAP RANGE $3.57 - $3.65)** $3.89 $3.79 $3.64 $3.56 2019 2020 7-10%* CAGR Range 2024 * Anchored off of 2018 Adjusted EPS (a non-GAAP measure). ** Adjusted EPS is a Non-GAAP measure. Please see appendix for reconciliation and further information. The GAAP range does not reflect any impact of the transactions announced on November 20, 2019 37#38AMERICAN WATER Growth Triangle anchored on multi decades of investment needs 2020-2024 Plan 7-10%* EPS CAGR range 2020 - 2029 Capital Plan $20 - $22 Market Based Businesses 1-2% $2 - $3 2020 - 2024 2019-2023 Regulated 1-2% Acquisitions Capital Plan $8.0 - $8.6 Capital Plan $8.8 - $9.4 $0.1 $0.6 - $1.2 $0.6 - $1.2 $18 - $19 Regulated Investment CAPEX 5-7% $8.2 $7.3 Industry leading growth with regulated risk profile supported by capital light Market-Based Businesses *Anchored off of 2018 Adjusted EPS (a non-GAAP measure) 88#39AMERICAN WATER Regulated Contribution Increases from Previous Plan Previous 5-year Plan 2023 New 5-year Plan 2024 86% 14% 88% Market-based Regulated 12% 39#40AMERICAN WATER Capital Plan $ in billions $8.8 - $9.4 $0.6-$1.2 $8.2 Regulated Acquisitions Regulated System Investments Our Stable and Predictable Capital Plan Supports Rate Base Growth $12.5 $13.2 Rate Base Acceleration* 2018 9/30 2019 2020 2021 2022 =7-8%** Rate base CAGR 2023 2024 2020-2024 Multi decade long need for infrastructure investment *An approximation of rate base, which includes Net Utility Plant not yet included in rate base pending rate case filings/outcomes **Anchored off of 2018 rate base 40#41AMERICAN WATER Market-Based Businesses Provide Strategic Value Portfolio optimization leads to 2 capital light, cash flow positive business lines Cash flow positive Capital light Builds relationships Enhances customer satisfaction . HOS 1.5 million customers with 3 million protection plan contracts Over 40 different partnerships with municipal water, gas and electric utilities Integration of Pivotal Home Solutions progressing well MSG 16 bases in current footprint Opportunity for infrastructure upgrades on existing bases Positive branding Leverages core competencies 41#42AMERICAN WATER Focus on Financing Proceeds from New York American and Keystone Transactions Plan Assumes Supports additional Issuance $500 + million in = regulated capital 3 equity Investment 42#43AMERICAN WATER Continued Strong Balance Sheet S&P Utility Credit Rating (stable outlook) Moody's Utility Credit Rating (stable outlook) Baal 61% BBB (+/-) A- 12 11 BB (+/-) A A+ Ba2 Ba1 Baa3 2 2 1 Debt to Total Capital $8.8 to $9.4 Billion 2020-2024 CapEx Range* 61-62% 2019 E Previous 5-year Plan 2023 *Includes both long term and short term debt. 15 Baa2 8 A3 A2 Consolidated debt maturity profile 5 years as of September 30, 2019 $ in millions $473 59-60% $310 $159 $28 $14 New 5-year Plan 2024 2020 2021 2022 2023 2024 43#44AMERICAN WATER Top Leader in Dividend Growth 6 consecutive years of ≈10% dividend growth ≈10.4%** 5-year CAGR $1.96 $1.78 $1.62 $1.47 $1.33 2015 2016 2017 2018 2019 2020 Target long term dividend growth CAGR at High End of 7-10% range* *Future dividends are subject to approval of the American Water Board of Directors **Anchored off of 2014 dividend paid S 2024 44#45AMERICAN WATER Our Compelling Story 2020-2024 Plan 7-10%* EPS CAGR range Market Based Businesses 1-2% Regulated Acquisitions 1-2% Regulated Investment CAPEX 5-7% *Anchored off of 2018 Adjusted EPS (a non-GAAP measure) Grow EPS long-term CAGR of 7-10%*... ... One of the fastest growing utilities in the nation Grow dividends at high end of 7-10%* EPS range... *** Top quartile utility dividend growth Payout ratio between 50-60% of earnings Maintain our predominantly regulated risk profile... ... Market based businesses represent 12% of EPS in 2024 " Invest over $20 billion in capital over the next 10 years... To ensure water quality and infrastructure growth Top leader in the utility sector... ... Combined EPS + dividend growth delivers superior total shareholder return 45#46AMERICAN WATER Closing Remarks Susan Story President and Chief Executive Officer We keep life flowing#47AMERICAN WATER Our ESG Philosophy Companies Do Well by Doing Good Values matter The "how" is just as important as the "what" for long-term financial sustainability Water is the most precious resource for life. We aren't just a water utility; we're in the health and safety business . . How we implement ESG principles Keeping employees safe and injury-free, and developing each person to his or her fullest potential Being a leader in environmental sustainability, caring for the planet, and leading the nation in outstanding water safety and quality Delivering the best, most personalized customer service with empathy and care Making communities better because we're there; and being transparent, accessible and well-governed for our shareholders 47#48BARRON'S 100 NOST 20SAMAR AMERICAN WATER Doing Well while Doing Good #23 on Barron's 100 Most Sustainable Companies; Highest ranked Utility New in 2019 Bloomberg Gender Equality Index Top 100 Best for Vets Employers by Military Times Members of NAACP MSCI 2019 Constituent MSCI ESG Leaders Indexes Equity Inclusion and Empowerment Index FTSE4Good 51 DEI BEST PLACE TO WORK FOR DISABILITY INCLUSION 100% DISABILITY EQUALITY INDEX EURONEXT vigeqiris INDICES 2019 = Bloomberg Gender-Equality Index West Virginia American Water's Kanawha Valley Plant Wins 1st Place in the WV-AWWA Tap Water Taste Test "American Water Receives 9 Directors Awards from the EPA's Partnership for Safe Water for Excellence in Water Quality" Philadelphia Inquirer Lists American Water as a Top-ranked Company on Diversity, Governance & Transparency United Way Awards American Water Employees the 'Leading the Way Award' for generosity American Water commits to further diversity in leadership through a partnership with Paradigm for Parity American Water awards grants to local firefighters to support the safety of local communities Environmental Business Journal Recognizes American Water for Business Achievement Young artists earn funds for their schools through Illinois American Water's "Imagine a day Without Water" art contest MILITARY American Water employees contribute 4,800 volunteer hours across U.S. during month of service FRIENDLY MF'19 AWARD EMPLOYER MILITARY Peter Drucker Institute & Wall Street Journal Management Top 250 has American Water as the highest ranked utility company FRIENDLY M 2020 SPOUSE EMPLOYER American Water earns 2019 Military FriendlyⓇ Bronze Employer designation American Water earns 2020 Military FriendlyⓇ Spouse Employer designation 48 2019#49AMERICAN WATER Doing Well... AWK Daily Stock Price "Doing Well... by Doing Good" 8.2% Historical EPS Growth Historical Dividend Growth 2018-2019 EPS Growth (b) 2018-2019 Dividend Growth 11.2% 4.0% 3.2% 5.9% 5.6% $140 $120 $100 $80 $60 $40 $20 $0 IPO Date Nov-2019 AWK 9.1% AWK UTY 2014-2019 EPS Growth (a) 1.8% UTY (d) (d) Average Water Peers AWK UTY Average Water Peers 2014-2019 Dividend Growth 10.4% 5.6% (d) Average Water Peers AWK a) Source Factset: 2014 GAAP EPS - 2019 Estimate Comparable Adjusted EPS for three quarters actuals plus fourth quarter FactSet consensus estimates b) Source Factset: 2018 Estimate Comparable Adjusted EPS - 2019 Estimate Comparable Adjusted EPS for three quarters actuals plus fourth quarter FactSet consensus estimates c) Source Factset Historical DPS (2014-2018) d) Water peers include: AWR, CTWS, CWT, MSEX, SJW, WTR, YORW 5.9% 6.0% (d) UTY Average Water Peers 49#50AMERICAN WATER Our Strategy: Key takeaways The world is changing rapidly. We must adapt or we will cease to exist Our Purpose and Values don't change-but our strategies and how we execute will Safety will always be our top focus-for our employees, our customers, and our communities Our Customers are why we exist. We have to act on that in everything we do Our People are the heart and soul of our company and we must develop them to their fullest potential and top expertise Companies are either Growing or Declining-there is no staying the same. We must grow to survive Those who execute the best on the Fundamentals will win 50 50#51AMERICAN WATER Q&A Session#52AMERICAN WATER ילס Investor Relations Contacts Ed Vallejo Vice President, Investor Relations [email protected] Ralph Jedlicka Director, Investor Relations [email protected] We keep life flowing Abbey Barksdale Manager, ESG [email protected]#53AMERICAN WATER Appendix#54AMERICAN WATER Forward-Looking Statements Certain statements in this presentation including, without limitation, with respect to 2019 adjusted earnings guidance; 2020 earnings guidance; dividend growth guidance; the outcome of pending or future acquisition activity; the size and timing of any future equity offerings by the Company to support its capital expenditures; the amount of proceeds to be received by the Company from its previously announced sale of New York American Water Company, Inc. and Keystone Clearwater Solutions, LLC; the amount and allocation of future capital investments and expenditures; estimated revenues and regulatory recovery from rate cases and other governmental agency authorizations; estimates regarding the Company's projected rate base, growth, results of operations and financial condition; the projected growth and size of the regulated businesses; the potential growth, size, income and cash flows of the market-based businesses (individually or in the aggregate); the ability to capitalize on existing or future utility privatization opportunities; the Company's projected regulated operation and maintenance efficiency ratio; macro trends, including with respect to the Company's efforts related to customer, technology and work execution; the Company's ability to execute its business and operational strategy; and projected impacts of the Tax Cuts and Jobs Act (the "TCJA"), are forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and the Federal securities laws. In some cases, these forward-looking statements can be identified by words with prospective meanings such as "intend," "plan," "estimate," "believe," "anticipate," "expect," "predict," "project," "propose," "assume," "forecast," "outlook," "future," "pending," "goal," "objective," "potential,” "continue," "seek to," "may," "can," "will," "should" and "could" and or the negative of such terms or other variations or similar expressions. These forward-looking statements are predictions based on management's current expectations and assumptions regarding future events. They are not guarantees or assurances of any outcomes, financial results of levels of activity, performance or achievements, and readers are cautioned not to place undue reliance upon them. The forward-looking statements are subject to a number of estimates and assumptions, and known and unknown risks, uncertainties and other factors. Actual results may differ materially from those discussed in the forward-looking statements included in this presentation as a result of the factors discussed in the Company's Annual Report on Form 10- K for the year ended December 31, 2018, and subsequent filings with the SEC, including the Company's Form 10-Q for the quarter ended September 30, 2019, as filed with the SEC on October 30, 2019, and because of factors including, without limitation: the decisions of governmental and regulatory bodies, including decisions to raise or lower customer rates; the timeliness and outcome of regulatory commissions' actions concerning rates, capital structure, authorized return on equity, capital investment, system acquisitions and dispositions, taxes, permitting and other decisions; changes in laws, governmental regulations and policies, including with respect to environmental, health and safety, water quality and emerging contaminants, public utility and tax regulations and policies, and impacts resulting from U.S., state and local elections; weather conditions and events, climate variability patterns, and natural disasters, including drought or abnormally high rainfall, prolonged and abnormal ice or freezing conditions, strong winds, coastal and intercoastal flooding, earthquakes, landslides, hurricanes, tornadoes, wildfires, electrical storms and solar flares; the outcome of litigation and similar governmental proceedings, investigations or actions; the Company's ability to control operating expenses and to achieve efficiencies in its operations; the Company's ability to successfully meet growth projections for its businesses and capitalize on growth opportunities, including its ability to, among other things, acquire, close and successfully integrate regulated operations and market-based businesses, enter into contracts and other agreements with, or otherwise obtain, new customers in the Company's market-based businesses, and realize anticipated benefits and synergies from new acquisitions; the Company's exposure to liabilities related to environmental laws and similar matters; the use by municipalities and private landowners of the power of eminent domain or other similar authority against one or more of the Company's utility subsidiaries; the Company's access to sufficient capital on satisfactory terms and when and as needed to support operations and capital expenditures; and changes in federal or state general, income and other tax laws, including any further rules, regulations, interpretations and guidance by the U.S. Department of the Treasury and state or local taxing authorities related to the enactment of the TCJA, the availability of tax credits and tax abatement programs, and the Company's ability to utilize its U.S. federal and state income tax net operating loss carryforwards. These and other forward-looking statements are qualified by, and should be read together with, the risks and uncertainties set forth above and the risk factors and cautionary statements included in the Company's annual and quarterly SEC filings, and readers should refer to such risks, uncertainties, risk factors and statements in evaluating such forward-looking statements. Any forward-looking statements speak only as of the date of this presentation. The Company does not have or undertake any obligation or intention to update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, except as otherwise required by the Federal securities laws. Furthermore, it may not be possible to assess the impact of any such factor on the Company's businesses, either viewed independently or together, or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. The foregoing factors should not be construed as exhaustive. 54 .....#55AMERICAN WATER Non-GAAP Financial Information This presentation includes adjusted earnings per share ("Adjusted EPS") both as the Company's 2019 adjusted earnings guidance and as the 2018 earnings per share ("EPS") compound annual growth rate anchor, both of which constitute "non-GAAP financial measures" under SEC rules. These non-GAAP financial measures are derived from the Company's consolidated financial information but are not presented in the Company's consolidated financial statements prepared in accordance with GAAP. Adjusted EPS as 2019 adjusted earnings guidance is defined as GAAP EPS excluding the impact of previously-reported settlement activities related to the Freedom Industries chemical spill in West Virginia. Adjusted EPS as the 2018 EPS compound annual growth rate anchor is defined as 2018 GAAP EPS, excluding the impact of (1) the gain recognized in the third quarter of 2018 on the sale of the majority of the Contract Services Group's operation and maintenance ("O&M") contracts; (2) a goodwill and intangible asset impairment charge related to the narrowing of the scope of the business of Keystone Clearwater Solutions in the third quarter of 2018; and (3) the June 2018 insurance settlement related to the Freedom Industries chemical spill in West Virginia. Management believes that these non-GAAP financial measures are useful to investors because they provide an indication of the Company's baseline performance excluding items that are not considered by management to be reflective of the Company's ongoing operating results. Management believes that these non-GAAP financial measures will allow investors to understand better the operating performance of the Company's businesses and will facilitate a meaningful year-to-year comparison of its results of operations. Although management uses these non-GAAP financial measures internally to evaluate the Company's results of operations, management does not intend results excluding the items to represent results as defined by GAAP, and investors should not consider them as indicators of performance. These non-GAAP financial measures are derived from the Company's consolidated financial information but are not presented in its consolidated financial statements prepared in accordance with GAAP, and thus they should be considered in addition to, and not as a substitute for, measures of financial performance prepared in accordance with GAAP. In addition, the Company's definition of Adjusted EPS may not be comparable to the same or similar measures used by other companies, and, accordingly, they may have significant limitations on their use. This presentation also includes adjusted regulated segment O&M efficiency ratios, both historical and forward-looking, which, in addition to the pro forma adjustment for the impact of the Tax Cuts and Jobs Act (the "TCJA"), excludes from its calculation (i) estimated purchased water revenues and purchased water expenses, (ii) the impact of the Freedom Industries chemical spill in 2014 and certain related settlement activities recognized in 2016, 2018 and 2019, (iii) the estimated impact in 2012 and 2014 of weather, and (iv) the allocable portion of non-O&M support services costs, mainly depreciation and general taxes. Also, an alternative presentation of this ratio has been provided for each of 2010, 2012, 2014 and 2016 which includes the pro forma adjustment for the impact of the TCJA and includes for 2012, 2014 and 2016 the impact of the Company's implementation of Accounting Standards Update 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-retirement Benefit, on January 1, 2018. These adjusted O&M efficiency ratios constitute "non-GAAP financial measures" under SEC rules. These ratios are derived from the Company's consolidated financial information but are not presented in its consolidated financial statements prepared in accordance with GAAP. These non-GAAP financial measures supplement and should be read in conjunction with the Company's GAAP disclosures but should not be considered an alternative to the GAAP measures. Management believes that the presentation of the Company's adjusted O&M efficiency ratios is useful to investors because it provides a means of evaluating the Company's operating performance without giving effect to items that are not reflective of management's ability to increase efficiency of the Company's regulated operations. In preparing operating plans, budgets and forecasts, and in assessing historical and future performance, management relies, in part, on trends in the Company's historical results and predictions of future results, exclusive of these items. The Company's definition of these ratios may not be comparable to the same or similar measures used by other companies, and, accordingly, these non-GAAP financial measures may have significant limitations on their use. Management is unable to present a reconciliation of adjustments to the components of the forward-looking O&M efficiency ratio without unreasonable effort because management cannot reliably predict the nature, amount or probable significance of all the adjustments for future periods; however, these adjustments may, individually or in the aggregate, cause the non-GAAP financial measure component of the forward-looking ratio to differ significantly from the most directly comparable GAAP financial measure. Set forth in this appendix are tables that reconcile Adjusted EPS as 2019 adjusted EPS guidance and as the 2018 EPS compound annual growth rate anchor, each to GAAP EPS, and each of the components of its historical O&M efficiency ratios to its most directly comparable GAAP financial measure. All references throughout this presentation to EPS refer to diluted EPS attributable to common shareholders. 55 55#56AMERICAN WATER Energy Use "E": Environment Water Use Water Policy Leadership • • . GHG emissions: Goal of reducing 40% by 2025 from 2007 baseline, after achieving approximately 31% reduction through 2018 Design for efficiency: enhanced pump, lighting and process design standards Construct for efficiency: sustainable construction standards and methods Operate for efficiency: enhanced best operating practices, leak detection and repair procedures Maintain for efficiency: computerized maintenance management systems and preventive maintenance systems • San Clemente dam: Deconstruction to restore "run of river" Monterey Peninsula Water Supply Project: Recycling, reuse and desalination using marine life friendly slant wells . Customer conservation: residential customers have saved about 1,100 gallons per customer per year-or 3.3 billion gallons annually, about 12.5 million cubic meters- through conservation and efficiency measures • Capital investment: Expect 10- year $20.0 billion to $22.0 billion total capital investment to address aging infrastructure, reduce/eliminate leaks, improve cyber/physical security, and increase resiliency of critical assets due to climate variability Research & Development: scientists dedicated to research and partnering with water research foundations, on water quality and technology-water source monitoring • Collaboration: EPA, CDC, state DEPS and other agencies to support effective environmental, health and safety, and water quality standards and regulations 56#57AMERICAN WATER Our People "S": Social Responsibility Our Customers Our Communities . • • Training: During 2018, nearly 80,000 hours of annual employee safety training Employee engagement: Frequent surveys with formalized employee action teams Frontline employees: driving technology development Union representation: As of December 31, 2018, 49% of workforce in jobs represented by unions Diverse job candidate pools: During 2018, 86% of job requisitions had a diverse candidate pool, with more than 52% of transfers/promotions filled by minority, female, veteran or disabled individuals Culture: Diverse, inclusive culture characterized by respect and dignity of every employee You Tuba Customer data protection: we do not share or sell personal customer data Technology development: ensuring a personalized positive experience Customer satisfaction: Top Quartile in the water industry Online communities as of 10/2019: 7,610,976 views f 87,058 fans 32,076 followers in 17,911 followers • • Community service: More than 5,000 hours in 2018 for company-sponsored events Charity support: Sponsored national workplace giving campaigns with the United Way and Water For People, as well as supporting our employees' own charitable endeavors through the American Water Charitable Foundation American Water Charitable Foundation: - Union sportsmen's alliance projects - Parks partnerships projects - Employee match program - Keep Communities Flowing 57#58AMERICAN WATER "G": Governance • • Board & Committee Structure Diverse Demonstrated & Representative Expertise Ensuring independence: board is led by an independent, non- executive chair Safety, Environmental, Technology, Operations (SETO) Board Committee Engaging board sufficiently: board met 13 times in 2018 Board engages directly with front-line employees: Off-site board meetings twice a year, external stakeholder receptions, dinners and meetings with "high potential" leaders periodically • Achieving gender parity: highest proportion of female board members among S&P 500 companies in 2017 54.5% female board members as of July 2019 6 of 11 directors <4 years on board as of July 2019 Utility experience and expertise Internationally recognized cyber security expert • Financial expertise Retired CEO experience Operational and manufacturing experience and expertise Global experience • Engaging investors: robust program for management and board engagement 58 58#59AMERICAN WATER Rates Effective Since January 1, 2019 Rate Cases & Step Increases Date Effective Annualized Revenue Increases Effective in 2019 Maryland West Virginia New York California 4/1/2019 2/5/2019 $1(a) 2/25/2019 19(b) 4(c) 5/11/2019 4(d) Kentucky Indiana 6/28/2019 13 7/1/2019 4(e) $45 Infrastructure Charges Illinois (QIP) 1/1/2019 $8 West Virginia (DSIC) 1/1/2019 2 Pennsylvania (DSIC) 4/1/2019 2 Missouri (ISRS) 6/24/2019 9 New Jersey (DSIC) 7/1/2019 15 Pennsylvania (DSIC) 7/1/2019 3 New York (SIC) 8/1/2019 2 Tennessee (QIIP, EDI, SEC) 9/1/2019 1 Pennsylvania (DSIC) 10/1/2019 Total $48 $93 (a) On February 5, 2019, the Maryland Public Service Commission issued an Order authorizing an increase of $1.45 million effective February 5, 2019. (b) On February 8, 2019, the West Virginia Public Service Commission issued an Order authorizing an increase of $19 million effective February 25, 2019, this excludes $4 million in DSIC revenues. (c) Total Rate award for this rate case was $20.9 million with increases of $3.6, $4.8, $4.6 and $7.9 million effective 6/1/2017, 4/1/2018, 4/1/2019 and 4/1/2020, respectively. The Rate award for the rate case was adjusted to $17.9 million with increases of $2.8, $4.1, $3.9 and $7.1 million effective 6/1/2017, 4/1/2018, 4/1/2019 and 4/1/2020, respectively, to reflect an adjustment to property taxes. (d) 2019 step rate increases approved effective May 11, 2019. On August 23rd, 2019 CAW filed a tier 2 advice letter to request a true-up of interim rates. This interim rate true-up included differences between interim rates and adopted rates from the beginning of test year 2018 through the 2019 escalation year up to the May 11, 2019 effective date of step rates. If authorized, the relief requested would become effective on September 22, 2019. (e) The overall increase is $17.5 million in revenues combined over two steps, the first step is effective 7/1/2019 in the amount of $4.4 million and the second step should be effective 5/1/2020 in the amount of $13.1. 59 59#60AMERICAN WATER Rate Filings Awaiting Final Order Rate Cases Filed Company Virginia California California Infrastructure Charges Filed West Virginia (DSIC) Missouri (ISRS) New Jersey (DSIC) Tennessee (QIIP, EDI, SEC) Docket/Case Number Requested Revenue Date Filed Increase Case No. PUR-2018-00175 Case No. A. 19-07-004 11/2/2018 $5(a) ROE Requested 10.80% Rate Base $196 7/1/2019 26(b) 689 Case No. A. 16-07-002 11/12/2019 5 $36 601 $1,486 6/28/2019 $4 (c) $41 8/26/2019 6 55 11/15/2019 11/15/2019 10 80 2 21 Total Awaiting Final Order: $22 $58 $197 (a) The requested increase filed for was $5.6 million, which includes $0.9 million from infrastructure filings. Interim rates were effective on May 1, 2019, under bond and subject to refund. (b) Test Year 2021 revenue requirement requests an increase of $26.0 million. This excludes the step rate and attrition rate increase for 2022 and 2023 of $9.8 million and $10.8 million, respectively. The total revenue requirement request for the three year rate case cycle is $46.6 million. (c) The DSIC revenue requirement is $3.7 million increase which is offset by $0.1 million related to Boone-Raleigh Acquisition Settlement adjustment. 60 60#61AMERICAN WATER Regulatory Information CALIFORNIA ILLINOIS INDIANA KENTUCKY MISSOURI Authorized Rate Base* $498,135 $883,386 $1,061,192 $443,654 Authorized ROE 9.20% (a) 9.79% 9.80% 9.70% (e) Authorized Equity 55.39% (a) 49.80% Effective Date of Rate Case 1/1/2018(a) 1/1/2017 53.41% (c) 7/1/2019 48.90% 6/28/2019 $1,249,293(b) 10.00%(e) 52.80% (d) 5/28/2018 NEW JERSEY NEW YORK PENNSYLVANIA VIRGINIA WEST VIRGINIA Authorized Rate Base* $2,950,471 $275,463 Authorized ROE 9.60% 9.10% Authorized Equity 54.00% Effective Date of Rate Case 10/29/2018(g) 46.00% 6/1/2017 $3,162,597(b) 10.00%(e) 53.75% (d) 1/1/2018 $155,747 $652,900(h) 9.25% 9.75% 46.09% 48.40% (h) 5/24/2017 (f) 2/25/2019 *Rate Base stated in $000s (a) On March 22, 2018, Decision 18-03-035 set the authorized cost of capital for 2018 through 2020. CA has a separate Cost of Capital case which sets the rate of return outside of a general rate proceeding. (b) The Rate Base listed is the Company's view of the Rate Base allowed in the case, the Rate Base was not disclosed in the Order or the applicable settlement agreement. (c) The Authorized Equity excludes cost-free items or tax credit balances at the overall rate of return which lowers the equity percentage as an alternative to the common practice of deducting such items from rate base. (d) The equity ratio listed is the Company's view of the equity ratio allowed in the case, the actual equity ratio was not disclosed in the Order or the applicable settlement agreement. (e) The ROE listed is the Company's view of the ROE allowed in the case, the ROE was not disclosed in the Order or the applicable settlement agreement. (f) Interim rates were effective April 1, 2016 and received final Order May 24, 2017. (g) Interim rates were effective June 15, 2018 and final rates effective October 29, 2018. (h) The Rate Base and equity ratio listed is the Company's view of what was allowed in the case, there were multiple versions disclosed by the parties in the applicable settlement agreement. 61#62AMERICAN WATER 2019 Closed Acquisitions* as of December 2, 2019 Number of State Systems Water Customer Connections Wastewater Customer Total Customer Connections Connections California 1 500 500 Illinois** 500 29,700 30,200 Indiana 2 6,200 6,200 Kentucky 2 400 200 600 Missouri 4 100 100 200 New Jersey 1 1,800 1,800 Pennsylvania 5 2,700 10,400 13,100 West Virginia 1 500 500 Total 20 10,900 42,200 53,100 * Customer Connections are rounded ** This includes the Alton, IL acquisition, which represents 23,000 customer connections, due to bulk contracts. Connections to the system will be approximately 11,000 62#63AMERICAN WATER Pending Acquisitions* as of December 2, 2019 State Number of Systems Water Customer Connections Wastewater Customer Connections California 6 12,500 Hawaii 1 200 Total Customer Connections 12,500 200 Iowa 1 100 100 Illinois 1,100 2,400 3,500 Indiana 1 500 500 Missouri 3 100 100 New Jersey 2,800 2,800 Pennsylvania 2 2,100 2,100 Tennessee 1 200 200 West Virginia 1 300 300 Total 25 14,200 8,100 22,300 * Customer Connections are rounded 63 83#64AMERICAN WATER American Water's Historical Adjustments to GAAP Recurring transactions typically included in our annual guidance, * some of which can result in quarterly variability: Acquisition related expenses Five Year History of Adjustments, where material, to GAAP results for reporting purposes: Gain on Sale of a Business Line or Segment * Compensation adjustments which are typically timing and driven by accounting standards * Impairments of a Business Line or Segment * Legal settlements and associated activities * Debt Extinguishments * Insurance expense variability primarily driven by claims activity * Land sales within the regulated footprint * Legal expense variability * Tax adjustments which are largely timing in nature, driven by accounting standards * Certain Regulatory outcomes that are not unusual or precedent setting * Material tax law changes Consolidated Adjusted EPS Diluted earnings per share (GAAP): Net income attributable to common shareholders Adjustments: Gain on sale of portion of Contract Services Group contracts Income tax impact Net adjustment Keystone Impairment Income tax impact Net loss attributable to noncontrolling interest Net adjustment Freedom Industries Settlement Activities Income tax impact Net adjustments For the Nine Months Ended September 30, For the Twelve Months Ended December 31, 2019 2018 2017 2016 2015 2014 2013 $2.89 $3.15 $2.38 $2.62 $2.64 $2.39 $2.07 (0.08) 0.02 (0.06) 0.31 (0.08) (0.01) 0.22 (0.02) (0.11) (0.12) 0.01 0.03 0.05 0.36 (0.14) 0.06 (0.02) (0.01) (0.08) (0.07) 0.22 0.04 Early Debt Extinguishment at Parent Income tax impact Net adjustments 0.03 (0.01) 0.02 0.19 (0.05) 0.14 Impact of re-measurement from the TCJA 0.07 0.70 Total net adjustments (0.01) 0.15 0.65 0.22 0.04 0.14 Adjusted diluted earnings per share (non-GAAP) $2.88 $3.30 $3.03 $2.84 $2.64 $2.43 $2.21 64#65AMERICAN WATER Reconciliation Table: Adjusted Earnings Per Share Guidance Range* 2019 EPS Guidance Range Diluted earnings per share: Low High End End * Earnings guidance range (GAAP) $ 3.57 $ 3.65 Adjustment: Freedom Industries liability reduction Income tax impact Net adjustment (0.02) (0.02) 0.01 0.01 (0.01) (0.01) Adjusted earnings guidance range (non-GAAP) $ 3.56 $ 3.64 * The GAAP range does not reflect any impact of the transactions announced on November 20, 2019 65#66AMERICAN WATER Reconciliation Table: Regulated Segment O&M Efficiency Ratio Regulated Segment O&M Efficiency Ratio FY (A Non-GAAP Unaudited Number) 2010 FY 2012 FY 2014 FY 2016 FY LTM 2018 9/30/2019 ($ in millions) Total operations and maintenance expense $1,291 $1,330 $1,350 $1,504 $1,479 $1,526 Less: Operations and maintenance expense - Market Based Operations Operations and maintenance expense - Other 257 256 289 372 362 398 (61) (56) (51) (44) (42) (49) Total operations and maintenance expense - Regulated Businesses $1,095 $1,130 $1,112 $1,176 $1,159 $1,177 Less: Regulated purchased water expense 100 110 122 122 133 133 Allocation of non-operation and maintenance expenses 29 35 39 30 31 32 Impact of Freedom Industries activities - - 10 65 (20) (4) Estimated impact of weather 5 (2) Adjusted operations and maintenance expense - Regulated Businesses (a) $966 $980 $943 $959 $1,015 $1,016 Total operating revenues $2,555 $2,854 $3,011 $3,302 $3,440 $3,558 Less: Operating Revenues - Market Based Operations 295 307 355 451 476 540 Operating Revenues - Other (26) (17) (18) (20) (20) (22) Total pro forma operating revenues-Regulated Businesses Less: $2,286 $2,564 $2,674 $2,871 $2,984 $3,040 Regulated Purchased Water expense* 100 110 122 122 133 133 Plus: Freedom Industries chemical spill in West Virginia 1 Estimated impact of weather (47) 17 Adjusted pro forma operating revenues-Regulated Businesses (b) $2,186 $2,407 $2,570 $2,749 $2,851 $2,907 Adjusted O&M efficiency ratio-Regulated Businesses (a)/(b) 44.2% 40.7% 36.7% 34.9% 35.6% 35.0% Adjusted operations and maintenance expense - Regulated Businesses Less: $966 $980 $943 $959 Impact of adoption of ASU 2017-07 Adjusted operations and maintenanc***pense - Regulated Businesses (c) $966 39 $941 (8) $951 12 $947 Adjusted operating revenues-Regulated Businesses $2,186 $2,407 $2,570 $2,749 Less pro form a adjustment: Pro forma adjustment for impact of the TCJA** 89 Adjusted pro forma operating revenues-Regulated Businesses (d) $2,097 112 $2,294 137 $2,433 161 $2,588 Adjusted O&M efficiency ratio-Regulated Businesses (c)/(d) 46.1% 41.0% 39.1% 36.6% *Calculation assumes purchased water revenues approximate purchased water expenses **Calculation of Estimated tax reform = Revenue Requirement with new Effective Tax Rate (taxes grossed up) - Revenue Requirement with old Effective Tax Rate *** Includes the impact of the Company's adoption of ASU 2017- 07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post- retirement Benefit, on January 1, 2018. 66