American Water is good to the last drop

Kelly Dawson
January 9, 2018
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Here’s something that many Americans don’t think about in their day-to-day lives: water.

This basic necessity is simply there, a part of our routines that is so inherent that we use it freely unless specifically told otherwise. We run the faucet as we brush our teeth, flush before washing our hands, jump in the shower when we know it’s just hot enough — and that’s only our typical morning routine. In all, the United States Geological Survey estimates that the average American uses about 80 to 100 gallons of water per day.

And if you’re one of the 15 million people who are serviced by the American Water Works Company, then you have it to thank for this privilege. For more than a century, American Water has been providing its namesake resource to customers across the nation, including our Canadian neighbor, Ontario.

Its position within 1,600 communities nationwide allows American Water to have the relative confidence that it is making an impact on the average person. Without it, those communities wouldn’t have this necessity in a clean, safe form; nor would it have the vital systems that make a running faucet possible: 81 dams, 100 wastewater treatment centers, 500 groundwater treatment plants, almost 50,000 miles of pipes, and more. It’s a scope that’s simultaneously public and personal since the water used in those places affects businesses, homes, and bodies. When it’s done well, those communities don’t have to think about it. That’s how it should be.

And yet, as much as Americans may take water for granted, our national conversation is also becoming more in tune with the fact that such a necessity is still not a given. In California, for instance, a recent severe drought made conservation a regular habit. In so doing, the plan ultimately resulted in a cumulative statewide savings of about 23 percent from June 2015 to February 2017. It’s enough water for 13 million people to use over the course of a year.

American Water Works is taking the same initiative to instill a conservational mindset throughout the nation. It recognizes that water is finite and knows that our systems for transporting water need some serious upgrades. So, with educational and technological resources — as well as a commitment to reclaiming, recycling, and reusing water — this company is ensuring that we’ll have water for generations to come.

Go with the flow

Picture this: it’s a year after the Civil War ended, and the country is still recovering. Cities are rebuilding and expanding, and vast construction is taking place. The need for water and its systems become vital to this civic push, and two brothers — James S. Kuhn and W.S. Kuhn — see an opportunity for their business. They realize that Kuhn Brothers & Company should focus on the construction and management of new water systems, and as they arise, purchase others within the same objective. By 1886, the American Water Works and Guarantee Company is formed in McKeesport, Pennsylvania to encompass the new waterworks and businessmen behind them.

By the end of the decade, the company owns subsidiaries in a few states, including Alabama, West Virginia, and Pennsylvania. As the company grew, the businessmen also decided to guarantee the payment of interest and principal on American Water bonds. This created a viable market, and soon, American Water was one of the largest public utility holding companies in the country. In the same year that the first World War is underway, it changes its name to the American Water Works and Electric Company. At that time, it owned about 80 local water entities in most of the country — with outposts in the Midwest, South, and East — and continued to expand. It wasn’t until the Great Depression, and President Roosevelt’s New Deal, that things got interesting.

The Public Utility Holding Act of 1935 required holding companies like American Water to be broken up into smaller, independent businesses. Obviously, this wasn’t ideal for something like American Water. The company went at it with the Supreme Court to get the law declared as unconstitutional, but it didn’t work: in 1937, American Water had to streamline its companies and divest its California real estate holdings — a move that cost $60 million. Nevertheless, American Water wasn’t pleased with the outcome and fought in court for the next nine years. Here’s the biggest reason why this is interesting, even if you’re not into law. By 1946, the government still got its way, while John H. Ware, Jr., a self-made millionaire who had his eye on purchasing the company for years, also got his. Ware bought American Water as a failing business, changed it to the name we know today, and ushered in the company’s reemergence into the national landscape.

Plenty of things occurred in the last half of the 20th century for a business that could only improve. Ware bought, sold, and acquired companies throughout the country like moves on a Monopoly board in the early 1950s, ever looking for places where American Water could step in and thrive. Smaller businesses were acquired as new water facilities were constructed, all as older systems were being renovated. This was happening at a time of another American building boom, and Ware was ensuring that the company was a part of it.

In fact, that process of buying, consolidating, and construction never left the company: it’s part of what helped American Water continue to build upon itself to today. From the consolidations of the 1970s — which included a headquarters move to its current New Jersey location in 1976 — to its 1998 announcement of $1 billion in revenues, a lot of what made American Water expand was its ability to find ways into a variety of markets. Since going public in 2008, American Water is the largest investor-owned water utility company in the country, servicing millions of people through water quality and wastewater operations.

And because millions of lives are impacted by the work it does — not to mention, public, industrial, and commercial businesses that also depend on its services — American Water is now setting its sights on a new mission: conservation and renewal.

A drop in the bucket

Of all the water in the world, humans can only drink about a percentage of it. That’s right: one percent of the Earth’s water is available for our use. So, contrary to our free-flowing morning routines, water isn’t something we can take for granted.

And if that wasn’t alarming enough, here’s another bit of news: the American Society of Civil Engineers released its report card on the American infrastructure this year and ranked it a solid D. Yes, America’s passageways aren’t even passing their tests. The report notes that many of the pipes used to deliver drinking water were built in the early to mid-20th century to last 75 to 100 years. And because 90 percent of Americans receive their drinking water from public systems, the need to upgrade these pipes is highly necessary.

American Water predicts that the system will need $1 trillion in order to be maintained for the next quarter century. So, it’s investing about a billion dollars each year in capital investment and structural improvements that’ll keep our water safe, while informing customers on ways they can conserve in the process. The company is also working on implementing recycling systems in buildings throughout the country, from residential addresses to Gillette Stadium. Lastly, it’s studying avenues to expand the desalination of ocean water for everyday use, and has a facility in Florida that’s already working for thousands of customers.

The issues that American Water is facing aren’t easy: when your product is a basic necessity but its future depends on overcoming tough challenges, the path ahead can be unclear. Nevertheless, American Water’s history as a steadfast company is leading it into the future. As it focuses on renewable resources and upgrades to our infrastructure, we can hope that clean, safe water will continue to be a part of our daily lives. Because it not only should be, but it has to be.

There are more than 250 companies in our combined portfolios, and they are all making amazing advancements. From names you know, like Tesla, to those little gems you haven’t heard of yet, like Xylem, we want you to know all about what your holdings are up to. These ‘deep dives’ will help you understand what you’re invested into and how your dollars are making the world a better place.

American Water Water Works Company is part of our Clean Water portfolio.

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