#100 0.00 0 00 00 AMERICAN WATER Investor Presentation August 2020#2Forward-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, including uncertainties, risks and other factors associated with the current novel coronavirus (COVID-19) pandemic, are discussed in the Appendix to this presentation, and in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, as filed with the SEC on August 5, 2020. 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. AMERICAN WATER 2#3American Water's COVID-19 Response Employees Suspended all work-related air and rail travel as of March 3 & suspended participation in sponsored events and public gatherings Employees who can work from home have been required to do so effective March 16 Implemented social distancing and enhanced safety measures for employees Paid leave for COVID-19 diagnosis, required quarantine and childcare Löl COVID-19 RESPONSE Customers and Communities Suspended billing-related service shutoffs and restored service to customers who were previously shut off for non- payment Suspended payment of late fees until further notice Working with customers who are experiencing a financial hardship by offering customer assistance programs and access to low income programs Implemented social distancing and enhanced safety measures for employees who engage with customers Made more than $400,000 in charitable contributions over the last 3 months to support our communities as they deal with the impacts of COVID-19 AMERICAN WATER Regulatory & Liquidity Implemented actions to ensure liquidity and access to capital Increased communications with public service commissions, customers, and public officials Actively engaged with state regulatory commissions to address COVID-19 financial impacts, with commission approval orders received in 10 out of 14 regulated jurisdictions as of August 5, 2020 3#4Our Strategy: Purpose Driven. People Powered. Customer Obsessed. Trusted Source of Everything Water Values The industry leader Strategies Safety Trust High Environmental Leadership Teamwork Performance Trusted Source of everything water "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 AMERICAN WATER 4#5We are the Largest and Most Geographically Diverse Water Utility in the United States American Water customer connections mix - 93% water & 7% wastewater Regulated Customer Connections As of December 31, 2019 (in Thousands) 2019 Regulated Revenues (in Millions) Other, Other, $400 507 West Virginia, Pennsylvania, 740 West Virginia, $159 167 Pennsylvania, $689 California, 180 Indiana, 316 AMERICAN WATER Illinois, 337 Missouri, 485 New Jersey, 702 California, $232 Indiana, $224 Illinois, $305 Missouri, $325 New Jersey, $760 5#6In This Environment, The Execution of Our Strategy Continues Long-term EPS growth expected in the 7-10%* target range EPS CAGR guidance through 2024 Market Based Businesses 1-2% Regulated Acquisitions 1-2% Clear investment thesis provides confidence in long-term strategy Decades of investment needed Line of sight to $20 - $22 billion of 10-year capital investment Fragmented national water and wastewater landscape Capital-light MBBS leverage core competencies, increase customer experience, and generate cash Regulated Investment CAPEX 5-7% 2020-2024 Dividend Growth projected at high end of 7-10% range** A leading Environmental, Social Responsibility and Governance investment AMERICAN WATER *Anchored off of 2018 Adjusted EPS (a non-GAAP measure) **Subject to American Water Board of Directors approval 6#7AMERICAN WATER Investment Thesis 7#8The Regulated Industry We Operate In... American Society of Civil Engineers Grades US Infrastructure Waste Water Report Card 2017 Grade D+ Drinking Water Report Card 2017 Grade D Not American Water pipes AMERICAN WATER 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... ¡!¡! Critical need for multi-decade investment 900 billion gallons of untreated sewage is discharged every year into U.S. rivers, streams and other waterways... 8#9Diversity Gives Us Key Competitive Advantages National regulated footprint provides regulatory and geographic diversity AMERICAN WATER EASTERN NY MI IA PA MID-ATLANTIC NJ IL IN CA мог WW MD VA KY SOUTHEAST TN GA MIDWEST HI CA & HI 9#10To Serve Our Regulated Customers, We Have... ASSETS as of December 31, 2019 • 52,500 miles of pipe. • 600 water treatment plants • 1,000 wells • 140 wastewater facilities • 1,300 water storage facilities ⚫ 1,500 pumping stations Employees more than 6,900 employees =6,000 Regulated Employees Research & Development 11 PhDs to address emerging contaminants and water quality AMERICAN WATER Our customers pay < $0.01 per gallon on average 10#11Growth Triangle Anchored on Multi Decades of Investment Needs 2020-2024 Plan 7-10%* EPS CAGR range Market Based Businesses 1-2% Regulated 1-2% Acquisitions Regulated Investment CAPEX 5-7% 2020 - 2029 Capital Plan $20-$22 $2-$3 2020-2024 2019-2023 Capital Plan Capital Plan $8.0-$8.6 $0.1 $0.6-$1.2 $8.8-$9.4 $0.6-$1.2 $18-$19 $8.2 $7.3 Industry leading growth with regulated risk profile supported by capital light Market-Based Businesses AMERICAN WATER *Anchored off of 2018 Adjusted EPS (a non-GAAP measure) 11#12Our Stable and Predictable Capital Plan Supports Rate Base Growth 2020-2024 Capital Plan $ in billions Rate Base Acceleration* $8.8- $9.4 $0.6-$1.2 Regulated Acquisitions $12.5 AMERICAN WATER $8.2 Regulated System Investments $13.7 7-8% Rate base CAGR 2018 2019 2020 2021 2022 2023 2024 *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 ** 12#13Our Investments Ensure Safe, Reliable, Affordable Water & Wastewater Services for our Customers Customer Affordability $226 Over the last five years, we have replaced pipe on about a 150-year cycle, and we anticipate replacing nearly 2,000 miles of mains and collection pipes between 2020-2024. 2020-2024 Capital Plan $ in billions 2020-2024 Average Regulated Capital Expenditures by Purpose $95 $8.8-$9.4 4% 6% $0.6-$1.2 Regulated Acquisitions 8% 8% 66% 8% $8.2 Regulated System Investments Infrastructure Renewal Resiliency Water Quality System Expansion Other AWK water & wastewater (Avg monthly bill) EPA Benchmark water & wastewater monthly bills* AMERICAN WATER 2020-2024 Capital Plan Operational Efficiency, Technology & Innovation * 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. 13#14Disciplined Focus on Expenses 46.1% 41.0% Regulated O&M Efficiency Ratio** 39.1% 36.6% 35.6% 35.2% 34.3% 2024 O&M Efficiency Target of 31.3%* Adjusted O&M Expenses from 2010-LTM 2020 increased only 0.8% CAGR** 2010 2012 2014 2016 2018 LTM 6/30/2019 LTM 6/30/2020 AMERICAN WATER Added 281,000*** customer connections since 2010 A reconciliation to a most comparable forward-looking GAAP measure is not available without unreasonable effort ** 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. Also, 2010-2016 adjusted for TCJA *** Includes organic customer connections & closed dispositions and acquisitions 14#15Timely Recovery through Regulatory Mechanisms 2020-2024 Capital Plan (average) AMERICAN WATER 59% Forward Test Years (27%) Infrastructure Surcharge Mechanisms (32%) 41% Traditional Recovery 15#16Timely Recovery of Revenues, Expense, and Investment Mechanisms Supports Our Customers 17 New Regulatory Mechanisms Across Our Footprint Since 2010 AMERICAN WATER 3 2 7 7 7 As of 2010 As of 12/31/2019 11 12 7 6 9 6 10 لولايا Infrastructure Revenue Stability Mechanisms Utility Plant Recovery Mechanisms Future Test Years Expense Mechanisms Replacement Surcharges CA CA IL IL F 27 PA TN IA NY KY VA IL NY IN JAN CA HI KY CA NY IA NJ WV NAN NY IL PA IL NY PA TN MD TN IN PA MO VA KY TN VA NJ MO VA Consolidated Tariffs CA MD VA IA MO WV GAN IL NJ IN NY KY PA 16#17Highly Fragmented Water Industry Creates Opportunity Water Utilities Electric Utilities Natural Gas Utilities Industry opportunity Water Wastewater 16% Investor owned 2% Investor owned 84% Public & other 98% Public & other AMERICAN WATER Water Utilities Source: EPA SDWIS Federal Reports Search www3.epa.gov/enviro/facts/sdwis American Water footprint • Ideal for Industry consolidation opportunities Target 3K-30K customer connections per acquisition Wastewater focus (AWK customer connections mix- 93% water & 7% wastewater) 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# 17#18State Legislation Across our Footprint Enables Consolidation AMERICAN WATER Fair Market Value 8 Consolidated Tariff 12 Emerging: Water Quality Accountability Legislation 2 CA MO IA NJ CA NJ IA MD IL NY IN PA IN MN NJ IN IL KY VA PA MO MD WV 18#19Regulated Acquisitions Update Under Agreement* ≈ 43,600** Customer Connections 28 Acquisitions Agreement Process CA: 4 IN: 2 PA: 7 IA: 1 IL: 7 MO: 4 NJ: 1 TN: 1 WV: 1 * As of 7/31/2020; does not reflect the announced pending sale of NYAW. ** This includes an IL acquisition, which represents 1,200 total customer connections, due to bulk contracts. Connections to the system will be approximately 100. ≈2 Regulatory Approval to Close Closed as of July 31, 2020 10,800 Customer Connections 13 acquisitions in 6 states Fruitridge Vista, CA Water ≈2 4,800 connections Hillview, CA Water 1,500 connections AMERICAN WATER Shiloh, IL Wastewater 1,500 connections Close & Customers Served at Existing Rates Rate Case Process to Fully Reflect Acquisitions & Inclusion into Rate Base As Communities face increasing challenges Opportunities grow to =800,000 Customer Connections American Water stands ready to provide solutions 19#20Market-Based Businesses provide Strategic Value Portfolio optimization leads to 2 capital light, cash flow positive business lines Capital light Builds relationships Enhances customer satisfaction AMERICAN WATER • HOS 1.5 million customers with 3 million protection plan contracts Over 40 different partnerships with municipal water, gas and electric utilities Cash flow positive Positive branding MSG ⚫16 bases in current footprint . Opportunity for infrastructure upgrades on existing bases Leverages core competencies 20#21Continued Strong Balance Sheet S&P Utility Credit Rating (stable outlook) 13 Moody's Utility Credit Rating (stable outlook) 11 12 10 2 2 2 3 1 BB (+/-) BBB (+/-) A- A Bal Baa3 Baa2 Baa1 A3 Debt to Total Capital $8.8 to $9.4 Billion 2020-2024 CapEx Range* Consolidated debt maturity profile 5 years as of December 31, 2019 $ in millions 63% 59-60% $473 $310 $159 $28 $14 6/30/2020 5-year Plan 2024 2020 2021 2022 2023 2024 *Includes both long term and short-term debt. AMERICAN WATER 21#22Delivering Value AWK Shareholder Value Adjusted Consolidated Return on Equity* 10.3% LTM June 30, 2019 10.7% LTM June 30, 2020 Dividend Growth ** Regulated Wt Avg authorized ROE is 9.8% $2.15 $1.96 $1.78 $1.62 $1.47 $1.33 Value Drivers Consistent Earnings Growth Smooth Capital Deployment Disciplined Approach to Acquisitions Strong Balance Sheet Five Consecutive years of dividend increase at the top of the range Top quartile dividend growth with a payout target of 50-60% 2015 2016 2017 2018 AMERICAN WATER 2019 2020 E Adjusted Return on Equity is a non-GAAP Measure. Please see appendix for reconciliation and further information. Future dividends are subject to approval of the American Water Board of Directors. 22#23AMERICAN WATER ESG Focus 23#24Our ESG Philosophy Companies Do Well by Doing Good Values matter Water is the most precious resource for life The "how" is just as important as the "what" for long-term financial sustainability • • • 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 AMERICAN WATER 24#25"E": Environment Energy Use • • 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 AMERICAN WATER 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: 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 25#26"S": Social Responsibility Our People • Training: During 2019, nearly 96,000 hours of annual employee safety training Employee engagement: Frequent surveys with formalized employee action teams Frontline employees: driving technology development Diverse job candidate pools: During 2019, 86% of job requisitions had a diverse candidate pool, with more than 57% of transfers/promotions filled by minority, female, veteran or disabled individuals Culture: Diverse, inclusive culture characterized by respect and dignity of every employee . • • • Our Customers 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 5/2020: You Tube 10,385,051views f 101,857fans 32,802 followers in 22,458 followers • • • Our Communities Community service: More than 5,000 hours in 2019 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: o Union sportsmen's alliance projects o Parks partnerships projects o Employee match program o Keep Communities Flowing AMERICAN WATER 26#27"G": Governance • • • Board & Committee Structure Ensuring independence: board is led by an independent, non- executive chair Safety, Environmental, Technology, Operations (SETO) Board Committee Engaging board sufficiently: board met 12 times in 2019 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 • • • Diverse Achieving gender parity: One of 10 S&P 500 companies with at least 50% female Board members in 2019 45.5% female board members as of April 2020 Average director tenure was approximately 5.5 years as of April 1, 2020 . • • • Demonstrated & Representative Expertise Utility experience and expertise Internationally recognized cyber security expert • Financial expertise Retired CEO experience Operational and manufacturing experience and expertise Global experience AMERICAN WATER 27#28Doing Well by Doing Good Notable ESG related indexes 2020 Bloomberg Gender-Equality Index FTSE4Good EURONEXT vigeœeiris INDICES ASON'S 100 Awards and Recognitions American Water ranked #22 on Barron's 100 Most Sustainable Companies S&P Global Ratings ESG Evaluation (87 out of 100), the highest evaluation score given by S&P in the U.S. and the 2nd highest globally BEST FO 2019 TIMES VETS American Water recognized among the top 100 CHAPLOYERS Best for Vets employers by Military Times MILITARY FRIENDLY 2020 GOLD EMPLOYER American Water earns 2020 Military FriendlyⓇ Gold Employer designation MSCI 2019 Constituent MSCI ESG Leaders Indexes American Water Earns Top Score on Disability Equality Index and listed among "Best Places to Work for Disability Inclusion" American Water ranked #16 on Corporate Knights' Global 100 Most Sustainable Corporations American Water Honored by Forum of Executive Women as a Champion of Diversity American Water employees log over 5,000 volunteer hours a cross U.S. during month of service MILITA RIENDLY 2020 EMPLOYER American Water earns 2020 Military FriendlyⓇ Spouse Employer designation SPOUSE American Water Joins Army Representatives to Accept U.S. Department of Energy Award Indiana American Water Wins American Water Works Association's Wendell R. La Due Utility Safety Award American Water Awarded LEED Platinum Certification for new Corporate Headquarters in Camden, NJ AMERICAN WATER For American Water, it is business as usual 28#29Investor Relations Contacts AMERICAN WATER Ed Vallejo Vice President, Investor Relations [email protected] Michael Tavani Senior Manager, Investor Relations [email protected] Abbey Barksdale Manager, ESG [email protected] 29#30AMERICAN WATER Appendix 30#31Forward-Looking Statements Certain statements in this presentation, including, without limitation, with respect to: long-term earnings growth; dividend amounts, growth and payout ratio; the timing and outcome of pending or future acquisition activity and the completion of the announced sale of New York American Water Company, Inc.; the Company's future financial performance, liquidity and cash flows; the Company's ability to finance current operations, capital expenditures and growth initiatives by accessing the debt and equity capital markets; the impacts to the Company of the current pandemic health event resulting from the novel cor onavirus (COVID-19); the amount and allocation of future capital investments and expenditures, including without limitation the type, amount or rate of future infrastructure renewal, expansion or replacement; estimated revenues and regulatory recovery from general rate cases and other governmental agency authorizations, including filings for infrastructure surcharges and to address regulatory lag; 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 Homeowner Services Group utility partnerships and Military Services Group utility privatization and capital upgrade opportunities; the Company's projected regulated operation and maintenance efficiency ratio; trends in the industries in which the Company operates, including macro trends 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 regulatory, legislative, tax policy or legal development 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 the Company'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, 2019, as filed with the SEC on February 18, 2020, and subsequent filings with the SEC, and because of factors including, with out limitation: the decisions of governmental and regulatory bodies, including decisions to raise or lower customer rates and regulatory responses to the COVID-19 pandemic; changes in customer demand for, and patterns of use of, water, such as may result from conservation efforts and impacts of the COVID-19 pandemic, or otherwise; a loss of one or more large industrial or commercial customers due to adverse economic conditions, the COVID-19 pandemic, or other factors; 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; limitations on the availability of the Company's water supplies or sources of water, or restrictions on its use thereof; changes in laws, governmental regulations and policies, including with respect to environmental, health and safety, consumer privacy, water quality and water quality accountability, 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, pandemics (including COVID-19) and epidemics, earthquakes, landslides, hurricanes, tornadoes, wildfires, electrical storms, sinkholes and solar flares; the outcome of litigation and similar governmental and regulatory proceedings, investigations or actions; risks associated with the Company's aging infrastructure and its ability to appropriately maintain and replace current infrastructure and systems; exposure or infiltration of the Company's technology and critical infrastructure systems through physical or cyber attacks or other means; the Company's ability to control operating expenses and to achieve efficiencies in its operations; the intentional or unintentional actions of a third party, including contamination of the Company's water supplies or water provided to its customers; the Company's ability to obtain adequate and cost-effective supplies of equipment, chemicals, electricity, fuel, water, other raw materials; 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 ability to successfully develop and implement new technologies and to protect related intellectual property; the Company's exposure to liabilities related to environmental laws and similar matters; changes in general economic, political, business and financial market conditions, including conditions and collateral consequences associated with the COVID-19 pandemic; access to sufficient debt and/or equity capital on satisfactory terms and when and as needed to support operations and capital expenditures; changes in federal or state general, income and other tax laws, including with respect to 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; and other factors as may be set forth in the Company's SEC filings. 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, quarterly and other 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 this presentation was first used or given. The Company does not have and does not 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. New factors emerge from time to time, and it is not possible for the Company to predict all such factors. 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. AMERICAN WATER 31#32COVID-19 Financial Impact Details Through June 30, 2020 0.05 Residential AMERICAN WATER ($0.05) Net EPS COVID-19 Impact (0.07) (0.02) (0.03) (0.01) (0.01) Commercial Industrial/Other Waived Disconnection and Late Fees O&M/Other HOS/Parent Base Revenue 0.04 Regulatory Treatment/Recovery 32#33COVID-19 Regulatory and Financial Summary Regulatory as of August 6, 2020 10 States with Approval to Defer Costs • Maryland • California • Hawaii ⚫ Illinois • ⚫ Indiana • Iowa • • New Jersey Pennsylvania • Virginia • West Virginia 4 States with Pending Proceedings New York • Kentucky . Missouri • Tennessee Regulated: Segment • Base Revenue - lower Commercial & Industrial, while Residential demand has increased • Incremental costs, including uncollectible expense and foregone fees deferred for recovery based on state orders Market-Based: • Military Services Group continues to execute • Homeowner Services experiencing some delays in new partner relationships and product launches Other No change to 2020 capital plan expected; increase driven by demand/opportunity No major disruptions to supply chain Strong Liquidity Position ($ in millions) $2,323 $569 $1,754 6/30/2020 Cash Balance Revolver Availability AMERICAN WATER 33#34Military Services Group - "Regulated like" Contract Contract State Years Remaining As of 3/31/2020 Fort Sill OK 33 Fort Leavenworth KS 34 Fort Rucker AL 34 Fort AP Hill VA 38 Scott AFB IL 38 Fort Hood TX 39 Fort Polk LA 39 Fort Belvoir VA 40 Fort Meade MD 40 Hill AFB UT 44 Picatinny Arsenal NJ 45 Vandenberg AFB CA 46 Wright-Patterson AFB OH 48 Fort Leonard Wood MO 49 Army Air Force Both Joint Base San Antonio TX 50 AMERICAN WATER U.S. Military Academy at NY 50 34 West Point, New York#352020 Closed Acquisitions* As of July 31, 2020 STATE NUMBER OF SYSTEMS WATER CUSTOMER CONNECTIONS WASTEWATER CUSTOMER CONNECTIONS TOTAL CUSTOMER CONNECTIONS 6,300 California 2 6,300 Hawaii 1 200 200 Iowa 1 100 100 Illinois 7 1,100 2,400 3,500 Indiana 1 400 400 West Virginia 1 300 300 Total 13 7,800 3,000 10,800 * Customer Connections are rounded and may not sum AMERICAN WATER 35#36Acquisitions* Under Agreement as of July 31, 2020 STATE NUMBER OF SYSTEMS WATER CUSTOMER CONNECTIONS WASTEWATER CUSTOMER CONNECTIONS TOTAL CUSTOMER CONNECTIONS California 4 6,300 6,300 Iowa 1 100 100 Illinois✶✶ 7 6,000 16,800 22,800 Indiana 2 100 100 200 Missouri st 4 1,000 1,000 New Jersey 1 2,800 2,800 Pennsylvania 7 1,700 8,200 9,900 Tennessee 1 100 100 West Virginia 1 400 400 Total 28 14,700 28,900 43,600 AMERICAN WATER *Customer Connections are rounded and may not sum. Does not reflect the announced pending sale of NYAW. ** This includes an IL acquisition, which represents 1,200 total customer connections, due to bulk contracts. Connections to the system will be approximately 100. 36#37How American Water Grows Earnings: Rate of Return Regulation in the United States Prudent Investment Drives Need for Rate Cases Weighted Average Cost Establish Rate Base X of Capital Allowed Return + Operating Expenses + Taxes, Depr & Amortization || || Allowed Return Revenue Requirement AMERICAN WATER Saving $1 in OpEx vs investing $8 in capital at allowed ROE, Keeps customer rates neutral and accelerates needed investment 37#38How 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 $1 Expense Savings =$8 Invested Capital a) Revenue Requirement $1.00 $1.00 Expense O&M 0.96 Depreciation Interest Expense Property & General Taxes 0.04 0.20" 0.19 0.08 IV b) Total Expenses $1.00 $0.47 c) Operating Income (=a-b) 0.53V d) Federal & State Income Taxes e) Net Income to Shareholder (=c-d) AMERICAN WATER 'Assumes 4% taxes on revenue (gross receipts e.g.) "Assumes 2.5% depreciation expense Il Assumes debt financing at 4.9% IV Assumes property taxes on invested capital of 0.5% and revenue taxes of 4% V Assumes effective income tax rate of 26.1%, based on federal tax rate of 21% VI Assumes authorized weighted average ROE of 9.8% 0.14 $0.39 VI 38#39Rate Base Calculation* ($ in millions) $10.7 $11.7 $12.5 $13.7 $14.4 Estimated Rate Base* Net Utility Plant As of 6/30/2020 $19.3 Less Advances for Construction $0.3 CIAC - Contributions in Aid of Construction $1.4 Net Deferred income taxes $3.3 $4.9 $14.4 As of 12/31/2016 As of 12/31/2017 As of 12/31/2018 As of 12/31/2019 As of 6/30/2020 Total Estimated Rate Base *An approximation of rate base, which includes Net Utility Plant not yet included in rate base pending rate case filings/outcomes. Amounts may not sum due to rounding **Anchored off of 2018 rate base AMERICAN WATER مممم ≈7-8%** | Expected Rate base CAGR through 2024 39#40Reconciliation Table: Rate Base AMERICAN WATER Estimated Rate Base (1) ($ in billions) Net Utility Plant $14.8 As of As of As of 12/31/2016 12/31/2017 12/31/2018 $16.0 As of 12/31/2019 $17.1 $18.6 Less Advances for Construction $0.3 $0.3 $0.3 $0.2 CIAC Contributions in Aid of Construction $1.2 $1.3 $1.3 $1.4 Net Deferred income taxes $2.6 $2.8 $3.0 $3.2 Rate Base Sub Total TOTAL $4.1 $4.3 $4.6 $4.8 $10.7 $11.7 $12.5 $13.7 (1) An approximation of rate base, which includes Net Utility Plant not yet included in rate base pending rate case filings/outcomes. 40#41Rates Effective Since... January 1, 2020 Rate Cases & Step Increases Date Effective Annualized Revenue Increases Effective in 2020 California (Step Increase) Indiana (Step Increase) 1/1/2020 5/1/2020 $5 13 (a) $18 Annualized Revenue Increases Infrastructure Charges Date Effective Effective in 2020 West Virginia (DSIC) Pennsylvania (W-DSIC) Pennsylvania (WW-DSIC) 1/1/2020 $3 1/1/2020 9 1/1/2020 1 Illinois (QIP) 1/1/2020 7 New Jersey (DSIC) 1/1/2020 10 Pennsylvania (DSIC) 4/1/2020 5 Tennessee (QIIP, EDI, SEC) 1/1/2020 2 Missouri (ISRS) 6/27/2020 10 New Jersey (DSIC) 6/29/2020 10 Kentucky (QIP) 7/1/2020 1 Pennsylvania (DSIC) 7/1/2020 4 Total $62 $80 (a) 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 became effective 5/1/2020 in the amount of $13.1 pending protest rights to the certified numbers. AMERICAN WATER 41#42Pending Rate Filings Rate Cases Filed Company Virginia California New Jersey Pennsylvania Missouri Infrastructure Charges Filed New York (SIC) West Virginia (DSIC) 41 Docket/Case Number Requested Revenue Date Filed Increase ROE Requested Rate Base Case No. PUR-2018-00175 Case No. A. 19-07-004 11/2/2018 $5(a) 10.8% $196 7/1/2019 26(b) 689 Case No. WR-19121516 Docket R-2020-3019369 (W) & R-2020-3019371 (WW) Case No. WR-2020-0344 12/16/2019 88(c) 10.5% 3,639 4/29/2020 92(d) 10.8% 3,975 6/30/2020 78(e) 10.5% 1,823 $289 $10,322 5/29/2020 $1 $7 6/29/2020 4 51 $5 $58 Total Awaiting Final Order: $294 (a) The requested increase filed for was $5.6 million, which includes $0.9 million from infrastructure filings. Interim rates we re effective on May 1, 2019, under bond and subject to refund. (b) On July 1, the company filed for a Test Year 2021 revenue requirement request of $26.0 million which excludes the escalation year and attrition year rate increases for 2022 and 2023 of $9.8 million and $10.8 million, respectively. The Company filed its 100 day update on October 11, 2019, requesting $27.3 million annualized incremental revenues for 2021, and increases of $9.5 million and $10.3 million in the escalation year of 2022 and the attrition year of 2023, respectively. (c) The requested increase is $87.8 million, which excludes $34.7 million from the DSIC. (d) On April 29, the company filed for a multiyear rate case. Rate year 1 requested $92.4 million with rate base of $3.98 billion and Rate Year 2 requested $46.2 million with rate base of $4.29 billion. (e) The requested increase is $78.1 million, which excludes $29.4 million from the ISRS. AMERICAN WATER 42#43Regulatory Information CALIFORNIA ILLINOIS INDIANA KENTUCKY MISSOURI Authorized Rate Base* $498,135 $883,386 $1,182,170 Authorized ROE 9.20% (a) 9.79% 9.80% Authorized Equity 55.39%(a) 49.80% Effective Date of Rate Case 1/1/2018(a) 1/1/2017 53.41% (c) 5/1/2020 48.90% 6/28/2019 $443,654 9.70% (e) $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 $3,162,597(b) $155,747 $652,900(h) Authorized ROE 9.60% 9.10% 10.00%(e) 9.25% 9.75% Authorized Equity 54.00% 46.00% 53.75%(d) 46.09% 48.40% (h) Effective Date of Rate Case 10/29/2018(g) 6/1/2017 1/1/2018 5/24/2017) 2/25/2019 *Rate Base stated in $000s (a) On March 22, 2018, Decision 18-03-035 set the authorized cost of capital for 2018 through 2020. CAW has a separate Cost of Capital case which sets the rate of return outside of a general rate proceeding. (b) The Rate Base listed is the Company's view of the Rate Base allowed in the case, the Rate Base was not disclosed in the Order or the applicable settlement agreement. (c) The Authorized Equity excludes cost-free items or tax credit balances at the overall rate of return which lowers the equity percentage as an alternative to the common practice of deducting such items from rate base. (d) The equity ratio listed is the Company's view of the equity ratio allowed in the case, the actual equity ratio was not disclosed in the Order or the applicable settlement agreement. (e) The ROE listed is the Company's view of the ROE allowed in the case; however, the ROE was not disclosed in the Order or the applicable settlement agreement. (f) Interim rates were effective April 1, 2016 and received final Order May 24, 2017. (g) Interim rates were effective June 15, 2018 and final rates effective October 29, 2018. (h) The Rate Base and equity ratio listed is the Company's view of what was allowed in the case, as there were multiple versions of each disclosed by the parties in the settlement agreement. AMERICAN WATER 43#44Reconciliation Table: Regulated Segment O&M Efficiency Ratio AMERICAN WATER Regulated Segment O&M Efficiency Ratio (A Non-GAAP Unaudited Number) ($ in millions) FY 2010 FY 2012 FY 2014 FY 2016 FY 2018 LTM LTM 6/30/2019 6/30/2020 Total operations and maintenance expense $1,291 $1,330 $1,350 $1,504 $1,479 $1,520 $1,581 Less: Operations and maintenance expense - Market-Based Operations Operations and maintenance expense - Other 257 256 289 372 362 387 384 (61) (56) (51) (44) (42) (48) Total operations and maintenance expense - Regulated Businesses Less: $1,095 $1,130 $1,112 $1,176 $1,159 $1,181 (17) $1,214 Regulated purchased water expense Allocation of non-operation and maintenance expenses 100 29 110 122 122 133 35 39 30 Impact of Freedom Industries activities - 10 65 31 (20) 132 33 142 30 Estimated impact of weather 5 (2) Adjusted operations and maintenance expense - Regulated Businesses (a) $966 $980 $943 $959 $1,015 $1,016 $1,042 Total operating revenues $2,555 $2,854 $3,011 $3,302 $3,440 $3,521 $3,690 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 Less: $2,286 $2,564 $2,674 $2,871 $2,984 $3,015 533 (20) $3,177 Regulated Purchased Water expense* 100 110 122 122 133 132 142 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 $3,035 Adjusted O&M efficiency ratio-Regulated Businesses (a)/(b) 44.2% 40.7% 36.7% 34.9% 35.6% 35.2% 34.3% Adjusted operations and maintenance expense - Regulated Businesses Less: $966 $980 $943 $959 Impact of adoption of ASU 2017-07** Adjusted operations and maintenance expense - 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 forma 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 ** 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. *** Calculation of Estimated tax reform = Revenue Requirement with new Effective Tax Rate (taxes grossed up) Revenue Requirement with old Effective Tax Rate 44#45Reconciliation Table: Adjusted Return on Equity AMERICAN WATER Net Income Adjustments: Keystone Sale Keystone Impairment Contract Services Gain on Sale Tax Impact for items above Re-measurement from Tax Reform Adjusted Net Income from Continuing Operations (a) Shareholders' equity Adjustments: Keystone Sale Keystone Impairment Contract Services Gain on Sale Tax Impact for items above Re-measurement from Tax Reform Adjusted Shareholders' Equity (b) Adjusted Return on Equity (a/b) LTM June 30, 2019 LTM June 30, 2020 $582 $638 44 54 (14) (11) (9) 12 $623 $673 $6,027 $6,243 54 (14) (11) 12 $6,068 44 $6,278 10.3% 10.7% 45