American Water Works Company, Inc. (NYSE:AWK) Q4 2017 Earnings Conference Call - Final Transcript

Feb 21, 2018 • 09:00 am ET


American Water Works Company, Inc. (NYSE:AWK) Q4 2017 Earnings Conference Call - Final Transcript


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Susan Story


Every year, our country loses about 2 trillion gallons of treated water through more than 240,000 main breaks, with an economic cost in the billions of dollars and about 900 billion gallons of untreated sewage is discharged into our rivers and streams every year, further stressing our environment, water quality in communities. Addressing these infrastructure issues is compounded by fragmented industry with approximately 53,000 water and 17,000 wastewater systems, the majority of which are run by small to medium sized municipalities with multiple competing critical needs for their investment dollars. American Water will invest $8 billion to $8.6 billion over the next five years, with more than $7.2 billion spent to improve our existing systems.

Additionally, the lower federal tax rate which Linda will cover in more detail, means we can make these capital investments without increasing customers build as much. We will always make needed investment to ensure safe and reliable water services, which are critical to human life and healthy communities, but we are constantly mindful of what our customers must take for their services.

Our portfolio of market-based businesses provides strong growth by leveraging our core competencies, using little to no capital and generating healthy cash flows. The successful execution of our strategies has enabled us to achieve a five-year total shareholder return of 275% with a 29% TSR in 2017.

Today, we are affirming our 7% to 10% long-term EPS growth and our 2018 EPS guidance range of $3.22 to $3.32 per share, the same that we provided to you in December. Our conservative financial approach has resulted in our current A credit rating and strong balance sheet, providing us optionality going forward under tax reform.

We continue to pursue efficiencies in O&M and capital deployment to further ensure that our decades of investment needs are affordable for our customers. From a capital project risk endpoint, we're different from most utilities who focus on just a few large projects per year for the majority of their capital spend.

Our annual capital is spent on around 500 discrete investment projects per year along with 2,500 smaller and more routine capital efforts. In 2018, this spend is rejected to be $1.4 billion to $1.5 billion. And these investment projects are planned for multiple years out so if it is right which could cause delays we simply move that project into a future year and full forward other projects which are already in the key.

Given our size and scale as a nation's largest water utility we've benefit from our geographic diversity reducing both regulatory and weather risk to earnings. And this is further enhanced by our small but important portfolio of market-based businesses. All of our efforts are driven by our commitment to our customers communities and those who invest in us.

For the fifth year in a row our board of directors approved a quarterly dividend increase that is at the top end of our 7% to 10% EPS CAGR. But none of our results matter