Aqua America Investor Presentation NYSE: WTR Christopher Franklin, President and CEO November 2, 2017
Forward Looking Statement This presentation contains in addition to historical information, forward looking statements based on assumptions made by management regarding future circumstances over which the company may have little or no control, that involve risks, uncertainties and other factors that may cause actual results to be materially different from any future results expressed or implied by such forward-looking statements. These factors include, among others, the following: general economic and business conditions; weather conditions affecting customers’ water usage or the company’s cost of operations; costs arising from changes in regulations; regulatory treatment of rate increase requests; availability and cost of capital; the success of growth initiatives, including pending acquisitions; the ability to generate earnings from capital investment; and other factors discussed in our Form 10-K for the fiscal year ended December 31, 2016, which is on file with the SEC. We undertake no obligation to publicly update or revise any forward-looking statement. Non-GAAP Reconciliation For reconciliation of non-GAAP financial measures, see the Investor Relations section of the company’s Web site at www.aquaamerica.com NYSE: WTR 2
Mission: Protecting and Providing Earth’s Most Essential Resource Sustainability Customers Communities Employees Shareholders • Concern for Work • Regulatory • Compliance • Above Industry Life Balance Innovation Average Long- • Near 100% term Growth • Ensure a Safe • Civic Reliability Working • Stable (Utility) Involvement Environment • Responsible Rate Risk Profile • Steward of • Demonstrate Fair Increases • Above Average Environment Pay / Benefits • Trusted Partner Dividend Growth • Rebuild • Growth and • Top of Class • Buyback Infrastructure Development Opportunities Customer Service Opportunities • Promote • Utilize Technology to Economic Improve Efficiency Growth • Labor/ Mgmt. Partnership NYSE: WTR 3
Company Overview • Large multi-state water & wastewater company • Strong balance sheet • Proven growth model • History of industry leading profitability • Above average dividend growth NYSE: WTR 4
Growth in Income from Continuing Operations per Share Adjusted Income from Continuing Operations per Share (diluted) $1.40 $1.32 $1.30 $1.26 $1.20 $1.20 $1.15 $1.10 $1.04 $1.00 $0.90 $0.80 2012 2013 2014 2015* 2016 Source: Aqua Annual Reports *2015: Income from Continuing Operations adjusted for Joint Venture Impairment Charge (a Non-GAAP Financial Measure) 2015 Income from Continuing Operations per Share was $1.14 NYSE: WTR 5
Dividend History 7.0% Increase to Annualized Dividend Rate of $0.8188 Effective 9/1/2017 Dividend per Share (annualized) $0.85 0.8188 $0.80 0.7652 $0.75 0.7120 $0.70 0.6600 $0.65 0.6080 $0.60 0.5600 $0.55 $0.50 $0.45 $0.40 2012 2013 2014 2015 2016 2017 Stock Split NYSE: WTR 6
Infrastructure Footprint as-of December 31, 2016 187 +860 +12,500 21 +3,000 +1,100 Wastewater Miles of Surface Wells Water Vehicles Treatment Water Main Water Storage (50 powered Plants Tanks Filtration by CNG) Plants $3.75 Billion in Total Rate Base NYSE: WTR 7
U.S. Regulated Water and Wastewater Industry Overview Water Wastewater • 53,000 systems • 16,000 systems • 85% of population served • 97% of population served by municipalities by municipalities • Aqua serves 1% of U.S. • Aqua serves 0.1% of U.S. population population NYSE: WTR 8
EPA’s Estimate of the National Need for Infrastructure Investment Water Wastewater American Society of Civil Engineers Grade for Drinking Water and Wastewater Infrastructure = D NYSE: WTR 9
Building for the Future Regulated Operations Average Annual Capital Investment ($thousands) $450,000 $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 2000-2003 2004-2007 2008-2011 2012-2015 2016-2019* *2017 to 2019: forecasted annual capital investments +$1.2 Billion Planned for Next 3 Years NYSE: WTR 10
States with Infrastructure Surcharges State Allowed Surcharge 12.75% water OH 9% wastewater IN 10% 7.5% water PA 5% wastewater NJ* 5% IL** 2.5% NC 5% *Water only **The average percentage amount allowed each year NYSE: WTR 11
Capitalizing on Our Competencies Capital Regulatory Operational Growth Investment Affairs Excellence NYSE: WTR 12
Avenues for Acquisition Growth Municipal Acquisitions We see three primary avenues for Strategic M&A acquisition growth Market-based Activities (MBA) NYSE: WTR 13
Valuation Legislation Illinois – appraisal value legislation effective August 2013 Indiana – legislation to facilitate acquisition of distressed utilities approved May 2015 New Jersey – legislation to facilitate acquisition of “troubled systems” effective February 2015 Pennsylvania – fair market valuation approved April 2016 NYSE: WTR 14
Top 70 Prospects As of July 24, 2017 On this Top 70 list, ~94% of prospective customers are from systems serving more than 2,500 customers, thus demonstrating that the shift toward larger targets has largely taken hold. 160,000 11 140,000 120,000 Cumulative Customer Connections 3 100,000 12 4 80,000 16 60,000 40,000 12 12 20,000 0 < 1,000 1,000 - 2,499 2,500 - 4,999 5,000 - 9,999 10,000 - 14,999 15,000 - 24,999 ≥ 25,000 System Size (# of connections) Total of ~500K connections 15 NYSE: WTR
2017 Acquisitions As of October 31, 2017 Acquisitions Purchase Price State Customers Closed ($thousands) PA 2 741 $5,640 IN 2 262 $220 Total 4 1,003 $5,860 0.8% Total Customer Growth 78% of Acquired Customers from LEGEND Wastewater Systems Aqua State with 2017 Acquisition (as of 10/31/2017) Aqua State Expected 2017 total customer growth of 1.5 to 2 percent NYSE: WTR 16
Pending and Completed Municipal Acquisition Activity As of October 31, 2017 Municipal Acquisitions Purchase Price System Type Customers ($thousands) System A WW 5,400 $75,100 System B WW 2,100 $29,500 System D W 600 $3,600 System E W/WW 2,987 $12,300 System F (Signed Q3) WW 3,838 $25,200 Total 14,925 $145,700 Closed Tobyhanna, PA (System C) WW 740 $5,545 Total 740 $5,545 NYSE: WTR 17
Market-Based Activities Decisions by Segment Segment Outcome Transportation Services Divested Construction Contract Ended Tri-State Grouting Divested Field Services Divested Cross-connection Divested Consulting/Training Divested Limited O&M Maintain Home Services Maintain $35M of Revenue in 2015 vs. $4M Annual Contribution, with a Positive Contribution to Net Income NYSE: WTR 18
2017 Guidance Earnings • Full-year earnings per share between $1.34 – $1.39 Operations and Maintenance • Same-system O&M increase of less than 2% for full year Expense • More than $450 million in 2017 Capex • More than $1.2 billion through 2019 in existing operations • Rate base growth of approximately 6 – 7% • Aqua Pennsylvania, as expected, filed and initiated a distribution system improvement charge effective Rate Activity October 1, 2017 and a rate case filing remains likely in 2018, with resolution expected in 2019 Customer • 1.5 – 2% year-over-year customer growth Growth NYSE: WTR 19
What Aqua Represents to the Investor • Aqua is one of the largest publicly traded water and wastewater companies, poised to address the nation’s significant infrastructure needs • Aqua is a balanced growth investment with a long track- record of dividend growth and strong performance • Aqua’s commitment to a strategic approach to growth • Strong Balance Sheet • Capital structure 50:50 • Substantial Debt Capacity • Room on balance sheet for growth NYSE: WTR 20
Differentiators • • More than 95% of revenue derived Scarcity of publicly traded water from regulated operations utilities of size • • Long-term earnings growth history Strong regulatory relations • • Consistent long-term dividend DSIC – limits regulatory lag • growth Capital spend is discretionary • • Monopoly status/Regulated model No fuel or commodity expense • • Strong metric comparisons Customer & market share growth • Success of acquisition strategy potential • • Nominal goodwill on books Footprint in 8 states NYSE: WTR 21
For more information contact: Brian Dingerdissen Vice President, Chief of Staff and Investor Relations 610.645.1191 BJDingerdissen@AquaAmerica.com NYSE: WTR 22
Appendix NYSE: WTR
2017 Third Quarter Highlights Operations and Maintenance Expense ($ millions) • New 3,800-connection municipal system under agreement Net Income per Common Share • 0.8% customer growth from organic growth and acquisitions • Continues to be in line with expected 1.5-2% growth NYSE: WTR 24
2017 Third Quarter Financial Results In millions Q3 2017 Q3 2016 Variance except per share Revenue $215.0 $226.6 (5.1%) Regulated Segment Revenue $214.0 $222.2 (3.7%) Operations and Maintenance Expense $68.0 $79.8 (14.8%) Regulated Segment Operations and $70.8 $73.1 (3.1%) Maintenance Expense Net Income $76.2 $73.2 4.2% Net Income per Share $0.43 $0.41 4.9% Favorable Change Unfavorable Change NYSE: WTR 25
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