AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-2: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 6/6 · 18/10/2026
Moat50
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 2/4 · Installed infrastructure, easements and a substantial utility asset base support replication barriers. Exclusive rights and the economics of potential competing networks are not disclosed.
durability · 2/4 · Continuing infrastructure deployment and approved investment-related revenue support persistence. Project recovery uncertainty and missing franchise-duration evidence constrain confidence.
customer dependency · 2/4 · Water delivery through installed treatment and distribution systems supports recurring physical dependence. This is indirect operating evidence; customer alternatives and retention rates are not disclosed.
erosion resilience · 2/4 · Revenue and operating income grew across 2023–2025, and regulators approved additional revenues. Financing dependence and uncertain project recovery remain meaningful vulnerabilities; no realized competitive erosion is established.
Pricing power50
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
realized pricing · 2/4 · The Maryland order places part of an approved increase into effective rates, while California discloses a multiyear revenue framework. These demonstrate regulated pricing outcomes, but annualized approvals and estimates do not establish the amount actually collected.
retention · 2/4 · Physical service infrastructure and recurring multiyear revenues indirectly support repeat demand and switching friction. Revenue growth may also reflect rates or acquisitions; no retention rate or renewal record is supplied.
margin resilience · 3/4 · Reported operating income kept pace with revenue over 2023–2025 despite rising operating costs, demonstrating operating margin resilience. Higher interest expense limits bottom-line protection. Expected cost recovery remains conditional, and 2026 costs continued rising.
contractual freedom · 1/4 · Rate increases require regulatory orders, may be phased and are tied to investment review. Uncertain recovery of project costs demonstrates restricted pricing discretion rather than an inability to obtain any increases.
Predictability61
Five consecutive annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 75.00
- Revenue growth volatility (pp)
- 6.40
- Positive FCF years (%)
- 0.00
- FCF margin volatility (pp)
- 7.56
Financial strength5
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, or reported pretax profit plus reported interest expense when operating income is unavailable. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 0.00
- netDebtEbitGrade
- 0.00
- interestCoverageGrade
- 18.68
- currentRatioGrade
- 0.00
- Net debt / operating income (x)
- 8.38
- Interest coverage (x)
- 3.06
- Current ratio (x)
- 0.46
Capital allocation46
Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income or, if unavailable, EBIT calculated from reported pretax profit plus reported interest expense; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. Nonpositive invested capital has no defined return and remains unavailable. Does not establish acquisition quality or buyback timing.
- 3-year pre-tax operating return (%)
- 7.34
- 3-year average dilution (%)
- 2.36
- 3-year average SBC / revenue (%)
- 0.66
- cashConversionGrade
- 0.00
Management69
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · Operating cash flow increased to $907 million in first-half 2026, but $1.519 billion of capital expenditures and $346 million of acquisitions required additional funding. Seller-note collection and $476 million of stock issuance helped finance activity; shares outstanding increased. Completed infrastructure supports productive deployment, while project recovery uncertainty prevents a stronger assessment of returns.
incentive alignment · 3/4 · Existing disclosed practices include performance stock units, ownership and retention requirements, clawbacks and no change-of-control excise-tax gross-ups. Actual PSU grants, vesting and forfeitures demonstrate an operating incentive program. Ownership compliance and detailed performance calibration are unavailable; proposed amendments are excluded.
execution · 3/4 · Multiyear revenue and earnings growth, completed investments supporting rate approvals, and additional plant placed in service demonstrate financial and capital execution. Service-quality execution is assessed only indirectly; comparative efficiency and water-quality outcome measures are absent.
governance · 3/4 · Nine of ten directors are disclosed as independent, the chair is independent and non-executive, and actual average board attendance was 95%. Management reported effective financial controls and disclosed an external audit. These support strong governance practices, without proving exceptional oversight outcomes.
Evidence
ITEM 2. PROPERTIES The Company’s properties consist primarily of (i) water and wastewater treatment plants, (ii) mains and pipes used for transmission, distribution and collection of water and wastewater, (iii) wells and other sources of water supply, such as reservoirs, (iv) water and wastewater pumping stations, (v) meters and fire hydrants, (vi) general structures, including buildings, dams and treated water storage facilities, (vii) land and easements, (viii) vehicles, (ix) software rights, and (x) other equipment and facilities, the majority of which are used directly in the operation of its systems.
Item 2—Properties: operating infrastructure and easements · Filed 18/02/2026
and Subsidiary Companies Consolidated Balance Sheets (Unaudited) (In millions, except share and per share data) June 30, 2026 December 31, 2025 ASSETS Property, plant and equipment $ 39,544 $ 37,955 Accumulated depreciation (7,627) (7,379) Property, plant and equipment, net 31,917 30,576 Current assets: Cash and cash equivalents 191 98 Restricted funds 18 21 Accounts receivable, net of allowance for uncollectible accounts of $65 and $58, respectively 432 395 Income tax receivable 122 9 Unbilled revenues 512 433 Materials and supplies 110 112 Secured seller promissory note from the sale of the Homeowner Services Group — 795 Other 324 328 Total current assets 1,709 2,191 Regulatory and other long-term assets: Regulatory assets 1,176 1,132 Operating lease right-of-use assets 81 85 Goodwill 1,282 1,156 Other 288 302 Total regulatory and other long-term assets 2,827 2,675 Total assets $ 36,453 $ 35,442 The accompanying notes are an integral part of these Consolidated Financial Statements.
Consolidated Balance Sheets: June 30, 2026 utility property · Filed 29/07/2026
The general rate case order approves a consolidated annualized increase in water revenues of approximately $2 million, with approximately $1 million of the increase to be included in rates effective concurrently with the date of the general rate case order, and the remainder effective January 1, 2027.
Maryland general rate case: approved revenue increase and effective dates · Filed 29/07/2026
The annualized incremental revenue is driven primarily by approximately $22 million of capital investments completed by the Maryland subsidiary since its last general rate case approval in 2019.
Maryland general rate case: completed investment underlying incremental revenue · Filed 29/07/2026
Incorporating the then currently effective return on equity of 10.20%, the decision provides incremental annualized water and wastewater revenues of $21 million in the 2024 test year, and an estimated $16 million in the 2025 escalation year and $16 million in the 2026 attrition year.
California general rate case: approved and estimated annualized revenue increments · Filed 29/07/2026
Consolidated Results of Operations Presented in the table below are the Company’s consolidated results of operations: For the Years Ended December 31, (In millions) 2025 2024 2023 Operating revenues $ 5,140 $ 4,684 $ 4,234 Operating expenses: Operation and maintenance 2,019 1,858 1,720 Depreciation and amortization 894 788 704 General taxes 348 320 307 Other — — (1) Total operating expenses, net 3,261 2,966 2,730 Operating income 1,879 1,718 1,504 Other income (expense): Interest expense (615) (523) (460) Interest Income 90 94 73 Non-operating benefit costs, net 16 28 32 Other, net 52 42 47 Total other income (expense) (457) (359) (308) Income before income taxes 1,422 1,359 1,196 Provision for income taxes 311 308 252 Net income attributable to common shareholders $ 1,111 $ 1,051 $ 944 Segment Results of Operations The Company’s operating segments are comprised of its businesses which generate revenue, incur expense and have separate financial information which is regularly used by the chief operating decision maker to make operating decisions, assess performance and allocate resources.
Consolidated Results of Operations: 2023–2025 revenues, expenses and earnings · Filed 18/02/2026
This proceeding is now closed. While Cal Am believes that its expenditures to date have been prudent and necessary to comply with the Orders, as well as relevant final decisions of the CPUC related thereto, Cal Am cannot currently predict its ability to recover all of its costs and expenses associated with the Water Supply Project and there can be no assurance that Cal Am will be able to recover all of such costs and expenses in excess of the $123 million in previously approved aggregate construction costs, plus applicable AFUDC, previously approved by the CPUC in the 2016 Final Decision, the 2018 Final Decision, the 2022 Final Decision (as amended in its March 2023 rehearing decision), and its May 2025 Final Decision.
Water Supply Project: uncertainty over recovery beyond previously approved costs · Filed 29/07/2026
and Subsidiary Companies Consolidated Statements of Cash Flows (Unaudited) (In millions) For the Six Months Ended June 30, 2026 2025 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 511 $ 494 Adjustments to reconcile to net cash flows provided by operating activities: Depreciation and amortization 477 437 Deferred income taxes and amortization of investment tax credits 294 51 Provision for losses on accounts receivable 22 19 Pension and non-pension postretirement benefits (4) (2) Other non-cash, net (32) (36) Changes in assets and liabilities: Receivables and unbilled revenues (132) (146) Income tax receivable (113) — Pension contributions (22) (22) Accounts payable and accrued liabilities (77) (59) Accrued taxes (46) (42) Other assets and liabilities, net 29 (62) Net cash provided by operating activities 907 632 CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (1,519) (1,281) Acquisitions, net of cash acquired (346) (13) Proceeds from secured seller promissory note from the sale of the Homeowner Services Group 795 — Removal costs from property, plant and equipment retirements, net (89) (71) Purchases of available-for-sale fixed-income securities — (35) Proceeds from sales and maturities of available-for-sale fixed-income securities 32 60 Net cash used in investing activities (1,127) (1,340) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from long-term debt, net of discount 1,293 876 Repayments of long-term debt (1,061) (606) Proceeds from the issuance of common stock 476 — Net short-term (repayments) borrowings with original maturities less than three months (89) 710 Advances and contributions in aid of construction, net of refunds of $15 and $16 for the six months ended June 30, 2026 and 2025, respectively 37 35 Debt issuance costs (9) (7) Dividends paid (336) (311) Other, net (2) 6 Net cash provided by financing activities 309 703 Net increase (decrease) in cash, cash equivalents and restricted funds 89 (5) Cash, cash equivalents and restricted funds at beginning of period 139 140 Cash, cash equivalents and restricted funds at end of period $ 228 $ 135 Non-cash investing activity: Capital expenditures acquired on account but unpaid as of the end of period $ 278 $ 299 Acquisition financed by treasury stock $ — $ 7 Non-cash financing activity: Settlements of long-term debt $ — $ 27 The accompanying notes are an integral part of these Consolidated Financial Statements.
Consolidated Statements of Cash Flows: first-half spending, financing and seller-note proceeds · Filed 29/07/2026
and Subsidiary Companies Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) (In millions) Common Stock Paid-in-Capital Retained Earnings Accumulated Other Comprehensive Income Treasury Stock Total Shareholders' Equity Shares Par Value Shares At Cost Balance as of December 31, 2025 200.6 $ 2 $ 8,642 $ 2,575 $ 6 (5.4) $ (388) $ 10,837 Net income attributable to common shareholders — — — 196 — — — 196 Common stock issuances (a) 0.2 — 10 — — (0.1) (8) 2 Net other comprehensive income — — — — 2 — — 2 Balance as of March 31, 2026 200.8 $ 2 $ 8,652 $ 2,771 $ 8 (5.5) $ (396) $ 11,037 Net income attributable to common shareholders — — — 315 — — — 315 Common stock issuances (a) 3.4 — 488 — — — — 488 Dividends ($0.8950 declared per common share) — — — (175) — — — (175) Balance as of June 30, 2026 204.2 $ 2 $ 9,140 $ 2,911 $ 8 (5.5) $ (396) $ 11,665 (a)Includes stock-based compensation, employee stock purchase plan and dividend reinvestment and direct stock purchase plan activity.
Statements of Changes in Shareholders’ Equity: 2026 common stock issuances · Filed 29/07/2026
Completion of the proposed merger is subject to certain customary conditions, including, among others, the receipt of required approvals from all applicable PUCs on such terms and conditions that would not, individually or in the aggregate, result in a Burdensome Effect (as defined in the Essential Merger Agreement), and the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
Essential merger: regulatory and other closing conditions · Filed 18/02/2026
84 Table of Contents The Company’s risks associated with price increases for chemicals, electricity and other commodities are reduced through contractual arrangements and the expected ability to recover price increases through rates, in the next general rate case proceeding or other regulatory mechanism, as authorized by each regulatory jurisdiction.
Commodity price risk: contractual arrangements and expected regulatory recovery · Filed 18/02/2026
Presented in the table below is information regarding the main components of the Regulated Businesses’ operation and maintenance expense: For the Three Months Ended June 30, For the Six Months Ended June 30, (In millions) 2026 2025 2026 2025 Employee-related costs $ 149 $ 140 $ 302 $ 289 Production costs 128 117 245 223 Operating supplies and services 72 84 148 156 Maintenance materials and supplies 19 26 47 55 Customer billing and accounting 19 22 43 42 Other 22 17 41 36 Total operation and maintenance expense $ 409 $ 406 $ 826 $ 801 For the three and six months ended June 30, 2026, operation and maintenance expense increased $3 million and $25 million, respectively, due to increased production costs from higher purchased water cost and usage, increased purchased power, increased chemical costs and increased waste disposal costs.
Regulated Businesses: first-half 2026 operation and maintenance cost increases · Filed 29/07/2026
vi AMERICAN WATER | 2026 PROXY STATEMENT Table of Contents AMERICAN WATER EXECUTIVE COMPENSATION HIGHLIGHTS We have summarized below key named executive officer, or NEO, compensation highlights for 2025: • Compensation program is highly correlated to performance and focused on long-term value creation • Since 2017, executive equity compensation does not include stock options • Considerable portion of pay is variable, rather than fixed, and is earned solely based on performance without incentivizing excessive risk-taking • Perquisites and other personal benefits to NEOs are limited principally to executive physicals, Company-paid life insurance benefits and relocation benefits • Formal chief executive officer (CEO) goal setting and performance assessment process utilized throughout each year • Double-trigger change-in-control provision in the 2017 Omnibus Equity Compensation Plan, or the 2017 Omnibus Plan, complements existing provision in Change of Control Severance Policy • Long-Term Performance Plan, or LTPP, is weighted significantly toward performance stock units • The ED&CC was advised by an independent compensation consultant throughout 2025 • Representative, relevant peer group is evaluated annually and used for performance and compensation benchmarking, as well as to compute relative total shareholder return, or TSR • NEOs have reasonable severance arrangements without excise tax gross-ups in the context of a change of control • All NEO incentive-based compensation is subject to clawback provisions that exceed the requirements of applicable SEC and NYSE rules • Annual shareholder advisory vote held on executive compensation, and management has adopted shareholders’ last recommendation in 2023 to continue this practice • Executive stock ownership guidelines and retention requirements support alignment with shareholders’ interests by requiring long-term retention of equity ownership • Our cash-based annual performance plan, or APP, includes metrics related to safety and environmental leadership, highlighting our commitment to sustainability principles ELECTRONIC DELIVERY OF PROXY MATERIALS We encourage you to help us conserve natural resources and to reduce our annual meeting printing and mailing costs by electing to receive your proxy materials electronically via email.
2025 executive compensation highlights: existing incentives, ownership requirements and clawbacks · Filed 24/03/2026
Presented in the table below is PSU activity for the year ended December 31, 2025: Shares (in thousands) Weighted Average Grant Date Fair Value (per share) Non-vested total as of December 31, 2024 322 $ 130.04 Granted 211 128.59 Vested (74) 147.45 Forfeited (81) 106.41 Non-vested total as of December 31, 2025 378 $ 130.93 As of December 31, 2025, $8 million of total unrecognized compensation cost related to the non-vested PSUs is expected to be recognized over the weighted average remaining life of 0.85 years.
Stock-based compensation: actual 2025 PSU grants, vesting and forfeitures · Filed 18/02/2026
AMERICAN WATER | 2026 PROXY STATEMENT 5 Table of Contents BOARD OF DIRECTORS AND CORPORATE GOVERNANCE THE BOARD OF DIRECTORS As of the date of this proxy statement, the Board is comprised of 10 members, consisting of nine independent directors and John C.
Board of Directors: current board composition and independence · Filed 24/03/2026
The average attendance during 2025 for all Board members was 95.0 percent.
Board of Directors: actual 2025 average meeting attendance · Filed 24/03/2026
Our independent, non-executive Board Chair presides over these sessions.
Board of Directors: independent non-executive chair · Filed 24/03/2026
Based on the Company’s evaluation under the framework in Internal Control—Integrated Framework (2013), its management concluded that its internal control over financial reporting was effective as of December 31, 2025.
Internal control over financial reporting: management’s effectiveness conclusion · Filed 18/02/2026
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2025, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report appearing in Item 8—Financial Statements and Supplementary Data of this Annual Report on Form 10-K.
Internal control over financial reporting: disclosure of external audit · Filed 18/02/2026
Depreciation and Amortization For the three and six months ended June 30, 2026, depreciation and amortization increased $21 million and $42 million, respectively, primarily due to additional utility plant placed in service from capital infrastructure investments.
Depreciation and amortization: additional utility plant placed in service · Filed 29/07/2026
If the Amended 2017 Omnibus Plan is approved by shareholders, it will terminate on December 31, 2036, unless terminated earlier by the Board or extended by the Board with the approval of our shareholders.
Proposed amended equity plan: effectiveness conditional on shareholder approval · Filed 24/03/2026
