American Water Works Company (AWK 1.89%) is the largest and most geographically diverse publicly traded water and wastewater utility in the United States. Between its regulated business -- which operates in 16 states -- and its non-regulated businesses, it provides services to approximately 15 million people in 47 U.S. states and Ontario, Canada.
American Water's stock has gushed returns that have whipped the market and its peers over the long term. Since its April 2008 IPO, the stock has returned 386%, through April 3 -- more than three-and-a-half times the S&P 500's 108% return and double the 185% return spewed out by Aqua America, the industry's second largest player operating in the U.S.
Here are four things you might not know about American Water Works Company or its winning stock.
Image source: Getty Images.
1. You can thank the Germans that you can invest in American Water's stock
American Water Works, founded in 1886, became publicly traded (again) in April 2008, when Germany-based electric utility powerhouse RWE Group, which had owned it since 2003, divested of it in an IPO on the New York Stock Exchange (NYSE). It was the largest utility IPO in U.S. history.
As an aside, I'd venture to guess that based on their surname, American Water's founders James S. and W.S. Kuhn's forbearers could have hailed from Germany, coincidentally enough. In any event, the two brothers from Pittsburgh, Pennsylvania, who eventually became investment bankers, operated a contracting company when they began focusing on building and operating new water systems and purchasing existing ones.
2. American Water has top-notch desalination chops
There's been a lot of chatter in recent years about building more desalination plants -- which convert seawater into drinkable water -- in California to help provide a solution to that state's epic drought, now in its sixth year, as well as to future droughts.
It seems to fly under some folks' radars that the Golden State isn't the only state that has desalination plants, and to fly under some investors' radars that American Water has solid expertise in this field. Through a joint venture, the company operates the Tampa Bay Seawater Desalination Plant in Florida, which, at the time that it was completed in 2009, was the largest desal plant in North America. Moreover, its California American Water subsidiary has a $322 million desalination project in progress in Monterey, California, that's expected to begin operating in late 2019 or early 2020.
American Water's experience in building and operating desalination plants could provide it with growth opportunities in the future.
Overhead schematic rendering (without roads) of the Monterey Peninsula Water Supply Project showing the pipeline layout and desalination plant. Image source: American Water.
3. One of its joint ventures provides about 30% of Seattle's water
American Water's only regulated business on the West Coast is its California American Water subsidiarity, which operates solely within its namesake state, so investors probably wouldn't expect the company to be involved in a joint venture that's responsible for providing about 30% of the water for Seattle. That's up to a whopping 120 million gallons of water per day!
The Tolt Water Treatment Facility, which is owned by the City of Seattle, was built and is maintained and operated by American Water-CDM, which is a a joint venture between American Water and Camp Dresser & McKee Inc. At the time of its inception in 1997, it was the largest design/build/operate (DBO) project in North America.
The project has reportedly so far saved the City of Seattle tens of millions of dollars. American Water's experience with this successful project could provide it with an advantage in bidding for other huge water supply public-private partnership projects.
4. It's the only publicly traded water utility that has a female CEO and CFO
American Water Works' strong financial performance and the stock's resultant outperformance provide a sparkling endorsement for the benefit of diversity in the C-suite. Both its CEO and CFO are women, making it the only water utility whose stock is listed in the U.S. to have this distinction.
Prior to being named CEO in May 2014, Susan Story served as American Water's CFO for one year. The company plucked her from Southern Company, where she spent 31 years and began her career as a nuclear power plant engineer. Her positions at the electric utility giant included CEO of Southern Company Services and CEO of Gulf Power Company.
CFO Linda Sullivan's background is also in the electric utility industry. Prior to taking over the financial helm at American Water in 2014, she held various leadership positions at the Edison International companies, including CFO of Southern California Edison.
