American Water Works still growing, not so much in WV

On Thursday, West Virginia American Water’s parent company, American Water Works, held its second quarter earnings call for investors. The parent company continues to do well, and its dividend payouts to its investors continue to increase – this quarter, American Water Works announced a 10% increase in dividend payments. Anyone who bought stock in American Water back when it was spun off in 2008 has seen the value of their investment increase by 70%.

The good financial news from American Water Works overall highlights its fundamental problems in West Virginia. American Water Works has been successful through a growth strategy that includes: investing money in its regulated utilities, where it is allowed to earn rates of return established by state public service commissions; acquiring more water and wastewater systems; and acquiring non-utility water businesses, including a company supplying water to the shale drilling industry that was acquired earlier this year. So far this year, American Water Works has made four acquisitions and has 17 more pending, none of which are in West Virginia.

In West Virginia, these strategies haven’t worked so well. WV American Water tried a strategy of growth through acquisitions; population decline and falling industrial demand have more than offset new additions to the water system, and sales have been declining since the late 1990s. West Virginia American Water’s relatively low profit rate means that it is less attractive for the parent company to invest money in West Virginia, relative to other subsidiaries. We pay the price in failing infrastructure.

West Virginia American Water held its second annual “WaterFest” in Charleston yesterday. But its PR show doesn’t hide the fact that American Water Works’ business model hasn’t worked out in West Virginia.

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