Pennsylvania American Water Closes Acquisition of McKeesport Wastewater System

First transaction completed under commonwealth’s Fair Market Value
legislation

MCKEESPORT, Pa.–(BUSINESS WIRE)–#Act12–Pennsylvania American Water, a wholly owned subsidiary of American
Water, announced today that it has completed the acquisition of the
wastewater system assets of the Municipal Authority of the City of
McKeesport (MACM). The purchase price is approximately $159 million.

The transaction marks the first acquisition completed under
Pennsylvania’s Act 12 of 2016, which allows municipalities to sell water
and wastewater systems for a price based on the fair market value of the
system.

“As the first finalized sale under Pennsylvania’s Fair Market Value
legislation, this acquisition establishes a strong example for other
communities to consider,” said Pennsylvania American Water President
Jeffrey McIntyre. “Prior to the passage of Act 12, the depreciated cost
of this system might have prevented the City of McKeesport from the
opportunity for financial stability.”

The MACM wastewater system provides service to approximately 22,000
customers, including those served under bulk contracts, in 13
municipalities in Allegheny County.

“The crux of this transaction is bringing financial stability to the
City of McKeesport and saving our taxpayers from Act 47 municipal
bankruptcy,” Mayor Michael Cherepko said. “When we think about it, the
privatization of local sewage services truly makes sense. The City isn’t
involved in other utility businesses – gas, electric, water – and this
is a final step in providing consistent, regulated utility services to
our community.”

The transaction’s closing follows a regulatory review and approval
process by the U.S. Environmental Protection Agency (EPA), Pennsylvania
Department of Environmental Protection (DEP), the Pennsylvania Public
Utility Commission (PUC) and Allegheny County Health Department.

The PUC recognized Pennsylvania American Water’s ability to provide much
needed investment in the system, enhanced customer service and
assistance program for low-income customers when the commission approved
the acquisition on October 26, 2017.

McIntyre added that long-term rate stability is one of the most
important benefits for these wastewater customers. Under the purchase
agreement, Pennsylvania American Water will not increase base wastewater
rates any earlier than one calendar year after the closing. The
company’s rates are regulated by the PUC and any future rate changes
would have to be reviewed and approved by the PUC.

He also pointed out that low-income wastewater customers in McKeesport
are eligible to apply for assistance through Pennsylvania American
Water’s H2O Help to Others Program, which offers grants and discounts on
bills for those customers who qualify.

All MACM workers who operate the wastewater system have been offered
employment, subject to standard pre-employment screening. The employees
gain immediate access to the training, development and career
opportunities in any of the operations of Pennsylvania American Water or
its parent company.

This acquisition adds to the company’s series of municipal wastewater
transactions. In 2016, Pennsylvania American Water acquired the
wastewater assets of the Scranton Sewer Authority in Lackawanna County
and the Borough of New Cumberland in Cumberland County.

Pennsylvania American Water now operates wastewater systems in Adams,
Allegheny, Beaver, Chester, Clarion, Cumberland, Lackawanna, Monroe,
Northumberland, Pike, Washington and York counties.

Pennsylvania American Water, a subsidiary of American Water (NYSE: AWK),
is the largest water utility in the state, providing high-quality and
reliable water and/or wastewater services to approximately 2.3 million
people. Founded in 1886, American Water is the largest publicly traded
U.S. water and wastewater utility company. Marking its 130th anniversary
this year, the company employs more than 6,700 dedicated professionals
who provide regulated and market-based drinking water, wastewater and
other related services to an estimated 15 million people in 47 states
and Ontario, Canada. More information can be found at www.amwater.com.

Contacts

Pennsylvania American Water
Gary Lobaugh
T: 724-873-3674
M:
724-944-5148
[email protected]