American Water locks in US$1bn from forward stock sale
American Water Works funded a portion of its planned capex for next year by raising US$1bn from a stock sale overnight on Monday, structuring the offering as a forward sale to mitigate earnings dilution in the near term.
Wells Fargo, JP Morgan and Mizuho priced 7.04m shares at US$142, the lower half of the US$141.85–$143.35 marketing range and a 3.3% discount to Monday's US$146.92 close. The banks wall-crossed a select group of investors before publicly launching the offering.
The shares slipped to US$141.50 in Tuesday's trading session.
In reporting second-quarter results, the regulated wastewater utility said at the end of July it planned to raise US$1bn from the sale of debt in the second half of 2025 but downplayed the need to issue equity, having spent US$1.3bn of the US$3.3bn planned for capex for this year.
“Obviously, we keep all options on the table and are always evaluating the options that we have to issue, but our plan is take proceeds in 2026 and issue the equity in 2026,” CFO David Bowler said on a results call when asked about the potential for forward issuance of stock.
In addition to capex, the utility is using its highly valued shares to make acquisitions, including the purchase of Nexus Water for US$315m that was announced in May and is expected to close later in August.
American Water has locked in funding for that acquisition, as well as for a portion of the US$3.3bn capex in 2026 as part of a planned US$16bn–$17bn spend from 2024 to 2028.
American Water has until December 31 2026 to settle the forward, either by delivering stock for cash or cash to settle the borrowed shares, avoiding dilution recognition until it settles.
As an added investor incentive, the utility is paying a second-quarter dividend of 83 cents on September 3 to shareholders of record August 12, effectively providing investors with five dividend payments over the next year. The rub is that proceeds realised will be reduced by the amount paid out.
Although second-quarter earnings per share of US$1.48 fell slightly below the US$1.50 analyst consensus, American Water narrowed full-year 2025 EPS guidance to US$5.70–$5.75 from US$5.65–$5.75.