#1AMERICAN WATER Investor Presentation August 2019 = We keep life flowing®#2AMERICAN 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 June 30, 2019, as filed with the SEC on July 31, 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. 2#3AMERICAN WATER Macro Trends in the US Water Sector CUSTOMER TRENDS Customers offered personalized services with minimal touch points Seamless customer experience across the enterprise Empathy considerations supersede transactional experience Proactive issue management is fundamental TECHNOLOGY TRENDS Al & machine learning rapidly penetrates and disrupts many core enterprise functions High speed computing and integrated devices accelerate the pace of technological innovation Self optimizing, software defined business models drives competitive business advantage Robotics become mainstream SOCIAL TRENDS Social networks dominate as the primary communication channel Facts, opinions and "alternate facts" equally dominate social networks Community groups leverage social networks to advance targeted agenda (environment, water, education, etc.) Heightened emotion about environmental and political policies WORK EXECUTION TRENDS As aging work force retires, there will be less employees to execute workload Work will be planned and executed, from perspective customers Dynamic teams will replace fixed organization structures 30-50% of work will be automated Technology enabled companies lead valuations Source: McKinsey & Company, Wall Street Journal & Deloitte "Several articles" FINANCIAL TRENDS Increasing market volatility and recession concerns יו יו יו ESG Principles increasingly mainstream 3#4AMERICAN WATER Values Safety Trust Our Strategy: Purpose Driven. People Powered. Customer Obsessed. Trusted Source of Everything Water Strategies CUSTOMER OBSESSED The industry leader "Best in Class" execution of business fundamentals Highest in customer satisfaction Set the bar for water quality, water source monitoring, and water technology across US Proven and predictable financial performance and growth SAFETY 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 EXCELLENCE OPERATIONAL EXCE Environmental Leadership Trusted source of everything water Teamwork High Performance = We keep life flowing® 4#5AMERICAN WATER Why Invest in American Water? • • • • Clear, Transparent Story into the Future Decades of investment needed Line of sight to $8-$8.6 billion of 5 year capex Fragmented national water and wastewater landscape Capital-light MBBS leverage core competencies, increase customer experience, and generate cash • • Demonstrated Execution of Strategy Five year Total Shareholder Return (2013-2018) of 140% Long-term growth expected in top half of 7-10%* target EPS CAGR guidance through 2023 2018 adjusted EPS near 9% growth • "A" S&P credit rating reduces our cost of capital • • 23% improvement in O&M efficiency ratio since 2010 Focus on capital efficiency . • Low Risk, Regulated Water Utility Multi-decade infrastructure investment; with a fragmented market acquisitions adding to capital needs Hundreds of water projects per year reducing risk of large scale single projects • Multiple state regulatory jurisdictions reduce both weather and regulatory risks • Industry specific fair market value legislation • Water Quality legislation becoming a focus . Regulatory mechanisms support infrastructure investment • Predominantly Regulated risk profile representing 85% by 2023 Commitment to Shareholders Five year dividend growth (2013-2018) CAGR of 10% 2019-2023 Dividend Growth at high end of 7-10%* EPS growth CAGR A leading Environmental, Social Responsibility and Governance investment ESG • • 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 personalized customer service with empathy and care Making communities better because we're there; and being transparent, accessible and well-governed for our shareholders and investors Anchored off of 2017 Adjusted EPS (a non-GAAP measure) - See appendix for reconciliation 5#6"AMERICAN WATER Our Strategy Continues to Drive Growth 2019-2023 Plan 7-10%* EPS CAGR top half of range Market Based Businesses 1-2% Regulated Acquisitions 1-2% Regulated Investment CAPEX 5-7% Grow EPS long-term CAGR at top half of 7-10%* through 2023... One of the fastest growing utilities in the nation Invest $8.0-8.6 billion in capital investment... 2019 Capital Plan of $1.8 – $1.9 billion continued focus on customer affordability ... Rate growth CAGR of 7-8% through 2023 Continuing to improve O&M and Capital efficiency... through technology, supply chain, and cost management Grow dividends at high end of 7-10%* EPS range**... Top quartile utility dividend growth ... Payout ratio between 50-60% of earnings No equity needed under current plan... *Anchored off of 2017 Adjusted EPS (a non-GAAP measure) - See appendix for reconciliation **Subject to board approval 6#7AMERICAN WATER Regulated The Latest News AW environmental leadership strengthened by nation wide interest in PFOS/PFOAS and Emerging Contaminants • Enabling Legislation helps Business Development efforts Large rate cases resolved; weighted average authorized ROE remains at 9.8% • Market-Based HOS increased Partnerships • MSG - 7 RFPs outstanding; expect US government to award 3 bases by year end Parent • S&P company rating: A* Moody's company rating: Baa1* Issued $1.1 billion of notes in May 2019 o $550m 10 yr. @ 3.45% o $550m 30 yr. @ 4.15% * Neither of these ratings is a recommendation to buy, sell or hold securities. Each rating may be subject to revision or withdrawal at anytime, and should be evaluated independently of any other rating. 7#8AMERICAN WATER Investment Thesis We keep life flowing' 8#9AMERICAN WATER The The Industry we Operate in... American Society of Civil Engineers Grades US Infrastructure Waste Water Report Card 2017 Grade D+ Resiliency investments to manage climate variability Approximately 50,000 water systems, 15,000 wastewater systems By 2020, 44% of U.S. pipe infrastructure to be classified as poor, very poor, or life elapsed... In the U.S., over 20%-or 2 trillion gallons-of treated water is lost each year... 900 billion gallons of untreated sewage is discharged every year into U.S. rivers, streams and other waterways... Drinking Water Report Card 2017 Grade Not American Water pipes D ¡!¡! Critical need for multi-decade investment 9#10AMERICAN WATER To serve our Regulated Customers, we have... >>> ASSETS as of December 31, 2018 51,000 miles of pipe 621 water treatment plants 1,000 wells 130 wastewater facilities 1,300 water storage facilities 1,400 pumping stations more than 7,100 employees ≈5,900 Regulated Employees 11 PhDs to address emerging contaminants and water quality Our customers pay < $0.01 per gallon on average רן 10#11AMERICAN WATER Diversity gives us Key Competitive Advantages National regulated footprint provides regulatory and geographic diversity NY MI IA PA i!i! NJ IL IN WW MD CA MO VA KY TN GA HI CA & HI MIDWEST SOUTHEAST MID-ATLANTIC EASTERN 11#12AMERICAN WATER Customer Affordability $95 $226 Our investments ensure safe, reliable, affordable water & wastewater services for our customers Capital Plan $ in Billions $8.0 - $8.6 $0.1 Other $0.6 - $1.2 Regulated Acquisitions Over the last five year our pipe renewal rate has averaged about 150 year replacement cycle, and anticipate to replace nearly 2,000 miles of mains & collection pipes between 2019 - 2023 2019-2023 Average Regulated Capital Expenditures by Purpose 6% 7% 8% 8% 62% 9% AWK water & wastewater (Avg monthly bill) $7.3 Regulated System Investments EPA Benchmark water & wastewater 2019-2023 monthly bills* * Source: U.S. Census Bureau, 2017 American Community Survey 1-Year Estimates average household income is $60,336. EPA benchmark for water & wastewater affordability: 4.5% of median annual household income ($60,336). Water & Wastewater monthly amount = $226. Water monthly amount = $101. Infrastructure Renewal Resiliency System Expansion Other Water Quality Operational Efficiency, Technology & Innovation 12#13AMERICAN WATER 46.1% 41.0% Efficiency through Technology Regulated O&M Efficiency Ratio* 39.1% 36.6% 35.6% 35.4% 31.5%** 2010 2012 2014 2016 2018 6/30/2019 LTM Adjusted O&M Expenses* ($ in millions) 6/30/2019 2010 2012 2014 2016 2018 LTM $966 $980 $943 $948 $1,015 $1,020 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 2023 Target 13#14AMERICAN WATER Timely Recovery through regulatory mechanisms 57% Forward test years (25%) Infrastructure Surcharge Mechanisms (32%) 43% Traditional Recovery 2019-2023 Capital Plan (average) 14#15AMERICAN WATER Timely Recovery of Revenues, Expense, and Investment Mechanisms Supports Our Customers 17 New Regulatory Mechanisms Across Our Footprint Since 2010 3 2 As of 2010 As of 6/30/2019 10 7 7 7 6 9 12 11 7 6 Revenue Stability Mechanisms Utility Plant Recovery Mechanisms Future Test Years Expense Mechanisms Infrastructure Replacement Consolidated Tariffs Surcharges CA PA CA IL F IL TN 7 HI IA KY VA NY IL NY IN JAN CA NAN KY CA NY IL PA MD TN MO VA WANN NY IA NJ PA IL TN IN KY TN VA NJ MO VA MANA WV CA MD VA NY IA PA IL NJ IN NY 물을 글로 WV KY 15#16AMERICAN WATER Highly Fragmented Natural Gas Utilities American Water footprint • Ideal fit for industry consolidation opportunities Target 3K-30K customer connections per acquisition Wastewater focus (AWK customer connections mix 94% water & 6% wastewater) " 3 Water Industry Creates Opportunity Water Utilities Electric Utilities Gas Utilities Source: EPA F.L.I.G.H.T. Greenhouse Gas Emissions from Large Facilities Ghgdata.epa.gov/ghgp/main.do# Highly fragmented industry Electric Utilities Source: Form EIA-861 detailed data files www.eia.gov/electricity/data/eia8 Industry opportunity Water 16% Investor owned 84% Public & other Wastewater 2% Investor owned 98% Public & other Water Utilities Source: EPA SDWIS Federal Reports Search www3.epa.gov/enviro/facts/sdwis 16#17State Legislation Across our Footprint AMERICAN WATER Enables Opportunities Iowa Fair market value Indiana Fair market value Water Quality Accountability • Bi-partisan: Passes unanimously in the IN Senate & Assembly California Fair market value Missouri Fair market value Illinois Fair market value Kentucky Consolidation/Regionalization • • Pennsylvania Fair market value (Act 12) Water & wastewater revenue requirement consolidation (Act 11) New Jersey Fair market value Water Quality Accountability Act Bi-partisan: Passes unanimously in the NJ Senate & Assembly Maryland Fair market value Virginia Water rate consolidation Wastewater rate consolidation 17#18AMERICAN WATER We actively pursue acquisitions using a Disciplined Approach More than 50,000 Community Water & about 15,000 Wastewater Systems* Opportunities over 5 years ≈500,000 10,000 systems serving > 3,000 customers Regulatory & Legislative climate American Water Acquisitions** From 2015-2019 *** closed deals in 74 10 states 110,000 Customer connections * 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 12 closed systems as of July 31, 2019. 18#19AMERICAN WATER Our Acquisition Strategy Delivers Steady Growth START Agreement Process Signed & Pending ≈ 38,200 Customer Connections Regulatory Approval 117 Close & Customers Served at Initial Rates 29 Signed/Pending Acquisitions CA: 5 HI: 1 IA: 1 IL: 10 IN: 2 MO: 5 PA: 3 WV: 2 2019 Closed* ≈ 30,700** Customer Connections Alton, IL Wastewater 2019 Highlights Mt Ephraim Borough, NJ Wastewater Sadsbury Township, PA Wastewater Charlestown, IN Water *As of 7/31/2019 ** 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 Rate Case Process 19#20AMERICAN WATER Alton (IL) Wastewater System acquired June 27, 2019 Acquisition overview Largest acquisition utilizing Systems Viability Act ("SVA") in Illinois to date; consistent with corporate strategy to promote use of fair market value for water and wastewater system acquisitions Acquisition consistent with American Water's strategy to grow its regulated business by acquiring wastewater systems in its water footprint - Illinois American Water has provided water in Alton for the company's entire 133-year history Purchase price of $55 million Illinois American Water is committed to partnering with Alton in constructing a resource recovery facility to convert wastewater sludge into a re-usable energy source - leveraging American Water's market based expertise Study prepared by the University of Illinois found the sale to have a regional economic benefit of over $65 million during the first five years of ownership American Water financed this acquisition with debt allocated to Illinois American Water Will operate as a part of Illinois American Water; all employees were offered employment Key facts Customers Miles of collection & interceptor sewers Treatment plant capacity (MGD) Service Area Godfrey Alton Granite City East St Louis Belleville ILLINOIS AMERICAN WATER Alton Wastewater - Proposed Existing ILAW Service Areas 23,000 205 26.25 (peak) 20#21AMERICAN WATER Market-Based Businesses provide Strategic Value Portfolio optimization leads to 3 capital light, cash flow positive business lines HOS 3.0 million contracts serving 1.5 million customers Capital light, cash flow positive 9 point increase in customer satisfaction 2018 Partnership Wins: Philadelphia, Ft. Wayne, San Francisco, Toledo, Pinellas Co., FL Drives better customer service MSG 14 bases in current footprint Opportunity for infrastructure upgrades on existing bases Leverages core competencies Focus on water transfer only Keystone Capital light and cash flow positive Builds relationships and positive branding Attracts talent 21#22AMERICAN WATER ESG Focus -We keep life flowing' 22#23AMERICAN 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 = 23#24AMERICAN WATER Energy Use • • . GHG emissions: Goal of reducing 40% by 2025 from 2007 baseline, after achieving 31% reduction through 2017 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 Environment • • • Water Use Water Policy Leadership 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: Proactive measures in 8 of our states Recycle and reuse: 3.5 billion gallons per year • Capital investment: Expect 5 year $8.0 billion to $8.6 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: 15 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 24#25AMERICAN WATER " Social Responsibility "S": Our People 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 50% 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 05/2019: 6,296,008 views f 76,387 fans 39,052 followers in 16,083 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 4 25#26AMERICAN 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 Achieving gender parity: highest proportion of female board members among S&P 500 companies in 2017 50% female board members as of May 2019 3 of 8 directors <4 years on board as of March 2019 Utility experience and expertise Internationally recognized cyber security expert • Financial expertise 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 • Engaging investors: robust program for management and board engagement Retired CEO experience Operational and manufacturing experience and expertise Global experience 26#27AMERICAN WATER BARRON'S 100 MOST SUSTAINABLE COMPANIES Doing Well while Doing Good New in 2019 • #23 on Barron's 100 Most Sustainable Companies; Highest ranked Utility Bloomberg Gender Equality Index Top 100 Best for Vets Employers by Military Times 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 DEI BEST PLACE TO WORK FOR DISABILITY INCLUSION 100% DISABILITY EQUALITY INDEX 2019 2019 MILITARY Bloomberg EURONEXT vigeqiris INDICES FRIENDLY MF19 AWARD EMPLOYER American Water earns 2019 Military FriendlyⓇ Bronze Employer designation Peter Drucker Institute & Wall Street Journal Management Top 250 has American Water as the highest ranked utility company American Water employees contribute 4,800 volunteer hours across U.S. during month of service L West Virginia American Water's Kanawha Valley Plant Wins 1st Place in the WV-AWWA Tap Water Taste Test Gender-Equality Index FTSE4Good "American Water Receives 9 Directors Awards from the EPA's Partnership for Safe Water for Excellence in Water Quality" A 2019 Constituent MSCI MSCI ESG Leaders Indexes. NAACP Equity Inclusion and Empowerment Index Young artists earn funds for their schools through Illinois American Water's "Imagine a day Without Water" art contest 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 Environmental Business Journal Recognizes American Water for Business Achievement 27#28AMERICAN WATER In Summary - AWK Creates ongoing Shareholder Value Dividend Growth (b) (c) 10.1% 5-year CAGR $1.62 $1.78 $1.96 $1.21 $1.33 $1.47 Target dividend growth CAGR at High End (d) of 7-10% with a Payout Target of 50-60% 2014 2015 2016 2017 2018 2019 E- AWK Shareholder Value Adjusted Consolidated Return on Equity 9.8% LTM June 30, 2018 (a) Regulated Wt Avg 10.2% authorized ROE is 9.8% LTM June 30, 2019 2023 Total Shareholder Return (Price + Dividend) as of 6/30/2019 One Year Three Year Five Year American Water 38.6% 45.8% 161.2% UTY Index 19.5% 27.9% 62.8% S&P 500 10.3% 48.9% 66.3% (a) Adjusted return on equity (includes both Regulated and Market-based Businesses) is a non-GAAP measure. Please see reconciliation table in appendix. (b) Future dividends are subject to approval of the American Water Board of Directors. (c) Anchored off of 2014 dividends paid. (d) Anchored off of 2017 Adjusted EPS (a non-GAAP measure). 28#29AMERICAN WATER Investor Relations Contacts Ed Vallejo Vice President, Investor Relations [email protected] Ralph Jedlicka Director, Investor Relations [email protected] = Abbey Barksdale Manager, ESG [email protected] We keep life flowing 29#30AMERICAN WATER Appendix 30#31AMERICAN WATER Forward-Looking Statements Certain statements in this presentation including, without limitation, with respect to dividend growth guidance; the outcome of pending or future acquisition activity; 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 our projected rate base, growth, results of operations and financial condition; our projected regulated operation and maintenance efficiency ratio; macro trends; our ability to execute our 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 our 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 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 June 30, 2019, as filed with the SEC on July 31, 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, 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; our ability to control operating expenses and to achieve efficiencies in our operations; our ability to successfully meet growth projections for our business and capitalize on growth opportunities, including our 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 our market-based businesses, and realize anticipated benefits and synergies from new acquisitions; future results and growth from Keystone Clearwater Solutions' narrowed business focus; 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 our ability to utilize our 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 our 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. We do 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 our 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. 31#32AMERICAN WATER We are the Zargest and most Geographically Diverse Water Utility in the United States West Virginia, 167 California, 179 Regulated Customer Connections As of December 31, 2018 (in Thousands) Indiana, 307 Other, Illinois, 321 503 Pennsylvania, 725 West Virginia, $144 Missouri, 483 New Jersey, 697 California, $221 Indiana, $219 2018 Regulated Revenues (in Millions) Other, $372 Illinois, $297 Missouri, $319 Pennsylvania, $689 New Jersey, $723 American Water customer connections mix - 94% water & 6% wastewater 32#33AMERICAN WATER American Water's Debt Profile Debt/ Total Capitalization ratio* 61-62% 59% 59% 58% 56% 55% 55% No equity needed under current plan... S&P company rating: A* Moody's company rating: Baa1* Consolidated debt maturity profile 5 years as of December 31, 2018 $ in millions $304 $162 $69 $29 $25 Dec. '13 Dec. '14 Dec. '15 Dec. '16 Dec. '17 Dec. '18 Estimated 2019 2020 2021 2022 2023 Dec. '23 * Neither of these ratings is a recommendation to buy, sell or hold securities. Each rating may be subject to revision or withdrawal at anytime, and should be evaluated independently of any other rating ** Based on $8.0 to $8.6 Billion CapEx Range and Includes both long term and short term debt 33#34AMERICAN WATER Homeowner Services Group... Organized around Our Customers and delivering value to Our Regulated partners Increased satisfaction of regulated customers 9 point increase on average • • 2018 Partnership Wins Philadelphia Ft. Wayne San Francisco . Toledo Pinellas Co., FL Peace of mind Affordable HOS + Pivotal provide Scale From 0.9M to 1.5M customers Convenient Satisfied Free Cash Flow for increased capital investment Diversifies Product Suite Predominantly water & sewer, expanded utility service lines + HVAC New Utility Partnership Opportunities 34#35AMERICAN WATER Military Services Group - "Regulated like" Contract State Contract Years Remaining As of 12/31/2018 Fort Sill OK 34 Fort Leavenworth KS SC 35 Fort Rucker AL 35 Fort AP Hill VA 39 OH NJ UT IL Scott AFB IL 39 CA KS MO VA Fort Hood TX 40 Fort Polk LA 40 OK Fort Belvoir § VA 41 AL TX LA Fort Meade VA 42 Hill AFB UT 46 Picatinny Arsenal NJ 46 Vandenberg AFB CA J 47 Wright-Patterson OH 49 AFB ○ Army Air Force ◆ Fort Leonard Wood MO 50 35#36National Inclusion & Diversity Recognitions AMERICAN WATER Recognized as a 2019 top-scoring company on the Disability Equality Index (DEI),earning the recognition of "Best Places to Work for Disability American Water is recognized as a 2019 member of the Bloomberg Gender Equity Index American Water founding member of NYSE Board Advisory Council to Advance Board Diversity "Featured employer" on GI Jobs website, www.gijobs.com/employers-for-veterans/american-water/ Black Journal America's Leading African-American Business and Career Magazine diversity in ★ U.S. VETERANS STEAM MAGAZIN E science | tech engineering arts math HISPANIC A Latino Business & Employment Magazine networkl G.I. YOUR GUIDE TO CIVILIAN SUCCESS JOBS PROUD TO BE A champion OF BOARD DIVERSITY AS RECOGNIZED BY THE FORUM OF EXECUTIVE WOMEN AND PwC DOWNLOAD THE 2018 WOMEN IN LEADERSHIP SPORT AT FOENCOM forum pwc • • Named NAACP Equity, Inclusion and Empowerment Index Awarded 2019 Bronze level Military Friendly Employer Awarded 2018 Military Times Best Vets Employer U.S. Veterans Magazine recognized American Water as a veteran-friendly company and for having a veteran-friendly supplier diversity program Awarded Military Spouse Employment Partnership by the Department of Defense 2019 DEI BEST PLACE TO WORK FOR DISABILITY INCLUSION 100% DISABILITY EQUALITY INDEX NAACP 2019 MILITAR FRIENDLY MILITARY FRIENDLY MF19 BRONZE MF'18 AWARD EMPLOYER EMPLOYER Bloomberg Gender-Equality Index → NAACP Equity Inclusion and Empowerment Index קון PARADIGM FOR PARITY CALIFORNIA LEGISLATIVE DIVERSEǝbility LGBT CAUCUS BEST FOR VETS 2018 MILITARY TIMES PLOYERS EMP MILITARY SPOUSE EMPLOYMENT PARTNERSHIP ILS VETERIN BEST OF THE BEST 2018 36#37AMERICAN WATER Rate Base Calculation* ($ in millions) $10.0 $10.7 $11.7 Estimated Rate Base* $13.0 $12.5 As of 12/31/2015 As of 12/31/2016 As of 12/31/2017 As of 12/31/2018 As of 6/30/2019 *An approximation of rate base, which includes Net Utility Plant not yet included in rate base pending rate case filings/outcomes **Anchored off of 2017 rate base *** Includes the regulatory liability established to normalize the impact of tax rate changes under the Tax Cuts and Jobs Act As of 6/30/2019 Net Utility Plant $17.6 Less Advances for Construction $0.2 CIAC - Contributions in Aid of Construction $1.3 Net Deferred income taxes* *** $3.1 $4.6 Total Estimated Rate Base $13.0 ≈7-8%** Expected Rate base CAGR through 2023 37#38How American Water Grows Earnings: AMERICAN WATER Rate of Return Regulation in the United States Prudent Investment Drives Need for Rate Cases Establish Rate Base X Weighted Average Cost of Capital Allowed Return + Operating Expenses + Taxes, Depr & Amortization || || Allowed Return Revenue Requirement Saving $1 in OpEx vs investing $8 in capital at allowed ROE, Keeps customer rates neutral and accelerates needed investment 38#39AMERICAN WATER How O&M Efficiency Translates to Investment Growth Saving $1 in OpEx vs investing $8 in capital at allowed ROE, Keeps customer rates neutral and can create $0.39 in sustainable earnings a) Revenue Requirement Expenses O&M Depreciation Interest Expense Property & General Taxes b) Total Expenses c) Operating Income (=a-b) $1 Expense Savings $ 1.00 $ -$8 Invested Capital 1.00 0.96 d) Federal & State Income Taxes e) Net Income to Shareholder (=c-d) $ Assumes 4% taxes on revenue (gross receipts e.g.) 2 Assumes 2.5% depreciation expense 3 Assumes debt financing at 4.9% 4 Assumes property taxes on invested capital of 0.5% and revenue taxes of 4% 5 Assumes effective income tax rate of 26.1%, based on federal tax rate of 21% Assumes authorized weighted average ROE of 9.8% 1 0.04 1.00 SSSSSSSSA 0.20 2 3 0.19 $ 0.08 4 $ 0.47 0.53 5 0.14 6 0.39 39#40AMERICAN WATER Rates Effective since January 1, 2019 Rate Cases & Step Increases Date Effective Annualized Revenue Increases Effective in 2019 Maryland West Virginia 2/5/2019 $1(a) 2/25/2019 19(b) New York 4/1/2019 4(c) California 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 Pennsylvania (DSIC) Missouri (ISRS) New Jersey (DSIC) Pennsylvania (DSIC) 4/1/2019 6/24/2019 9 7/1/2019 82221 15 7/1/2019 3 Total (a) On February 5, 2019, the Maryland Public Service Commission issued an Order authorizing an increase of $1.45 million effective February 5, 2019. $39 $84 (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. A tier 2 advice letter will be filed within 90 days of the effective date to implement a surcharge to true-up the interim rates. The surcharge shall include differences between interim rates and adopted rates through the 2019 escalation year up to the effective date of May 11, 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. 40#41AMERICAN WATER Rate Cases Filed Company Virginia California Infrastructure Charges Filed Tennessee (QIIP, EDI, SEC) New York (SIC) West Virginia (DSIC) Rate Filings Awaiting Final Order Docket/Case Number Requested Revenue Date Filed Increase ROE Requested Rate Base Case No. PUR-2018-00175 11/2/2018 $5(a) 10.80% $196 Case No. A. 19-07-xxx 7/1/2019 26(b) $31 689 $885 11/16/2018 $2(c) $19 5/30/2019 2 18 6/28/2019 4 (d) Total Awaiting Final Order: $8 $39 41 $78 (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 $2 million revenue increase requested is proposed to be offset with savings from the Tax Cuts and Jobs Act savings. (d) The DSIC revenue requirement is $3.7 million increase which is offset by $0.1 million related to Boone-Raleigh Acquisition Settlement adjustment. 41#42AMERICAN WATER Regulated Utilities: Rate Base & Authorized Return on Equity CALIFORNIA ILLINOIS INDIANA KENTUCKY MISSOURI Authorized Rate Base* $498,135 $883,386 $1,061,192 $443,654 Authorized ROE Authorized Equity 9.20% (a) 9.79% 9.80% 9.70% (e) 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. 42#43AMERICAN WATER 2019 Closed Acquisitions* as of July 31st State California Number of Systems Water Customer Connections Wastewater Customer Connections Total Customer Connections 1 500 500 Illinois ** 1 23,000 23,000 Indiana 1 2,900 2,900 Kentucky 2 400 200 600 Missouri 3 100 100 200 New Jersey 1 1,800 1,800 Pennsylvania 3 300 1,400 1,700 Total 12 4,200 26,500 30,700 * 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 43#44AMERICAN WATER Pending Acquisitions* as of July 31st State Number of Systems Water Customer Connections Wastewater Customer Connections Total Customer Connections California 5 11,500 Hawaii 1 200 11,500 200 Iowa 1 100 100 Illinois 10 1,600 8,800 10,400 Indiana 2 3,300 500 3,800 Missouri 5 100 100 Pennsylvania 3 2,300 9,000 11,300 West Virginia Total 29 22 800 800 19,600 18,600 38,200 * Customer Connections are rounded 44#45AMERICAN WATER Reconciliation Table: Consolidated Adjusted Earnings Per Share* *Amounts may not sum due to rounding Consolidated Adjusted EPS Diluted earnings per share (GAAP): For the Twelve Months Ended December 31, 2018 2017 2018 vs. 2017 Percentage Net income attributable to common shareholders $ 3.15 $ 2.38 0.77 Adjustments: Contract Services Gain on Sale (0.08) Income tax impact Net adjustment 0.02 (0.06) (0.08) 0.02 (0.06) Keystone Impairment 0.31 0.31 Income tax impact (0.08) (0.08) Net loss attributable to noncontrolling interest (0.01) (0.01) Net adjustment 0.22 0.22 Freedom Industries Insurance Settlement (0.11) (0.12) 0.01 Income tax impact 0.03 0.05 (0.02) Net adjustment (0.08) (0.07) (0.01) Early Debt Extinguishment at Parent 0.03 (0.03) Income tax impact (0.01) 0.01 Net adjustment 0.02 (0.02) Re-measurement from Tax Reform 0.07 0.70 (0.63) Total net adjustments 0.15 0.65 (0.50) Adjusted diluted earnings per share (non-GAAP) $ 3.30 $ 3.03 $ 0.27 8.9% 45#46AMERICAN WATER *Amounts may not sum due to rounding Reconciliation Table: Adjusted Return on Equity LTM LTM June 30, 2018 June 30, 2019 Net Income Adjustments: Freedom Industries activities Early Debt Extinguishment at Parent Keystone Impairment Contract Services Gain on Sale $470 $582 (42) (4) 6 54 (14) Tax Impact for items above Re-measurement from Tax Reform 11 (11) 125 12 Adjusted Net Income from Continuing Operations (a) $570 $619 Shareholders' equity $5,736 $6,027 Adjustments: Freedom Industries activities (42) (4) Early Debt Extinguishment at Parent 6 Keystone Impairment 54 Contract Services Gain on Sale (14) Tax Impact for items above Re-measurement from Tax Reform 11 (11) 125 12 Adjusted Shareholders' Equity (b) $5,836 $6,064 Adjusted Return on Equity (a/b) 9.8% 10.2% 46#47AMERICAN WATER Reconciliation Table: Regulated Segment O&M Efficiency Ratio Regulated Segment O&M Efficiency Ratio (A Non-GAAP Unaudited Number) FY 2010 FY 2012 FY 2014 FY 2016 FY LTM 2018 6/30/2019 ($ in millions) Total operations and maintenance expense $1,291 $1,330 $1,350 $1,504 $1,479 $1,520 Less: Operations and maintenance expense - Market Based Operations Operations and maintenance expense - Other 257 256 289 372 362 387 (61) (56) (51) (44) (42) Total operations and maintenance expense - Regulated Businesses Less: $1,095 $1,130 $1,112 $1,176 $1,159 (48) $1,181 Regulated purchased water expense 100 110 122 122 133 132 Allocation of non-operation and maintenance expenses 29 35 39 30 31 33 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 $1,020 Total operating revenues $2,555 $2,854 $3,011 $3,302 $3,440 $3,521 Less: Operating Revenues - Market Based Operations 295. 307 355 451 476 528 Operating Revenues - Other (26) (17) (18) (20) (20) (22) Total pro forma operating revenues-Regulated Businesses $2,286 $2,564 $2,674 $2,871 $2,984 $3,015 Less: Regulated Purchased Water expense* 100 110 122 122 133 132 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 $2,883 Adjusted O&M efficiency ratio-Regulated Businesses (a)/(b) 44.2% 40.7% 36.7% 34.9% 35.6% 35.4% Adjusted operations and maintenance expense - Regulated Businesses Less: $966 $980 $943 $959 *** Impact of adoption of ASU 2017-07 39 (8) 12 Adjusted operations and maintenance expense - Regulated Businesses (c) $966 $941 $951 $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. 47