American Water Works (AWK) risk factors, FY2025 10-K

Risks Related to Our Industry and Business Operations

1. 01Limitations on availability of water supplies or restrictions on our use of water supplies because of government regulation or action may adversely affect our access to sources of water, our ability to supply water to customers or the demand for our water services
2. 02Service disruptions caused by severe weather conditions, climate variability patterns or natural or other disasters may disrupt our operations or reduce the demand for our water and wastewater services, which could adversely affect our financial condition, results of operations, cash flows and liquidity
3. 03Climate variability may cause increased weather volatility and may impact water usage and related revenue or require additional expenditures, all of which may not be fully recoverable in rates or otherwise
4. 04Changes in laws and regulations can significantly and materially affect our business, financial condition, results of operations, cash flows and liquidity
5. 05Regulatory and environmental risks associated with the collection, treatment and disposal of wastewater may impose significant costs and liabilities
6. 06A loss of one or more large industrial or commercial customers could have a material adverse impact upon the results of operations of one or more of our Regulated Businesses24% rewritten
7. 07Our Regulated Businesses require significant capital expenditures and may suffer if we fail to secure appropriate funding to make investments, experience increases in short- and long-term interest rates or if we experience delays in completing major capital expenditure projects
8. 08Aging infrastructure may lead to service disruptions, property damage and increased capital expenditures and O&M expenses and other costs, all of which could negatively impact our financial results
9. 09Seasonality could adversely affect the volume of water sold and our revenues
10. 10We are subject to adverse publicity and reputational risks, which make us vulnerable to negative customer perception and could lead to increased regulatory oversight or sanctions
11. 11The failure of, or the requirement to repair, upgrade or dismantle, any of our dams may adversely affect our financial condition, results of operations, cash flows and liquidity
12. 12Any failure of our network of water and wastewater pipes, water mains and water reservoirs could result in losses and damages that may affect our financial condition and reputation
13. 13An important part of our growth strategy is the acquisition of water and wastewater systems, which involves risks, including competition for acquisition opportunities from other regulated utilities, governmental entities and other buyers, which may hinder or limit our ability to grow our business40% rewritten
14. 14Our Regulated Businesses are subject to condemnation and other proceedings through eminent domain or other similar authorized process, which could materially and adversely affect their results of operations and financial condition
15. 15We have been, and may in the future be, subject to physical and cyber attacks42% rewritten
16. 16We rely on technology to facilitate the management of our business as well as our customer and supplier relationships, and a failure or disruption of implemented technology could materially and adversely affect our business
17. 17An inability to successfully develop and implement new technologies poses substantial risks to our business and operational excellence strategies, which could have a material adverse effect on our business and financial results
18. 18Our inability to efficiently upgrade and improve our operational and technology systems, or implement new systems, could result in higher than expected costs or otherwise adversely impact our internal controls environment, operations and profitability
19. 19Disruptions in our supply chain related to goods, such as pipe, chemicals, power and other fuel, equipment, water and other raw materials, and services, could adversely impact our operations and our ability to serve our customers, as well as our financial results
20. 20Our business has inherently dangerous work sites. If we fail to maintain safe work sites, we may experience workforce or customer injuries or loss of life, and be exposed to financial losses, including penalties and other liabilities
21. 21Work stoppages and other labor relations matters could adversely affect our results of operations and the ability to serve our customers

Financial, Economic and Market-Related Risks

1. 22Our indebtedness could adversely affect our business and limit our ability to plan for or respond to changes in our business, and we may be unable to generate sufficient cash flows to satisfy our liquidity needs35% rewritten
2. 23risk associated with these instruments, that could negatively and materially affect our financial condition, results of operations and cash flowsNew
3. 24Our inability to access the debt or equity capital or financial markets or other events could affect our ability to meet our long-term commitments or liquidity needs at reasonable cost, which could adversely affect our financial condition and results of operations
4. 25Settlement provisions contained in our forward sale agreements subject us to risks if certain events occur, which could have an effect on our results of operations and liquidity, and could cause the price of our common stock to declineNew
5. 26settlement of the relevant forward sale agreement. We will not be able to control the manner in which the forward purchasers unwind their hedge positionsNew
6. 27In certain bankruptcy or insolvency events, the forward sale agreements will automatically terminate, and we would not receive the expected proceeds from the forward sales of our common stockNew
7. 28Our shareholders may experience dilution as a result of the issuance of shares upon physical or net share settlement of the forward sale agreements, which may impact our earnings per share and the book value and fair value of our common stockNew
8. 29The conditional exchange feature of the Exchangeable Notes, if triggered, may adversely affect our liquidity and financial condition and may dilute the ownership interest of our shareholders or may otherwise depress the price of parent company’s common stock47% rewritten
9. 30Parent company may be unable to meet its ongoing and future financial obligations and to pay dividends on its common stock if its subsidiaries are unable to pay upstream dividends or repay funds
10. 31We have a significant amount of goodwill and other assets measured and recorded at fair value on a recurring basis, and we may be required to record impairments or changes in fair value to these assets, which may negatively affect our financial condition and results of operations
11. 32Market volatility and other conditions may impact the value of benefit plan assets and liabilities, as well as assumptions related to the benefit plans, which may require us to provide significant additional funding

Risks Related to the Proposed Merger with Essential

1. 33The proposed Essential merger may cause suppliers, strategic partners, certain customers or others to delay or defer decisions regarding our business, and may adversely affect our ability to effectively manage our businessNew
2. 34We may be the target of securities class action and derivative lawsuits which could result in substantial costs and may delay or prevent the proposed Essential merger from being completedNew
3. 35If completed, the proposed Essential merger may not achieve its anticipated results, and we may be unable to integrate Essential’s operations and/or operate the combined company in the manner expectedNew
4. 36The proposed Essential merger may not be accretive to our earnings and may adversely affect our earnings per share, which may negatively affect the market price of our common stockNew
5. 37The combined company’s financial condition, results of operations and cash flows could be adversely affected by unknown or unexpected events, conditions or actions that occur prior to the closing of the proposed Essential mergerNew
6. 38We cannot assure that we will be able to continue paying quarterly dividends at the current rate, or to propose and/or maintain future quarterly dividend increases as plannedNew
7. 39We may incur substantial and/or unexpected transaction fees and merger-related costs in connection with the proposed Essential mergerNew
8. 40Current shareholders will have reduced ownership and voting interests after the proposed Essential mergerNew
9. 41Members of our management and our Board of Directors have interests in the proposed Essential merger that may be different from, or in addition to, those of other shareholdersNew
10. 42Completion of the Essential merger may trigger change in control or other provisions in certain agreements to which we or Essential or their respective subsidiaries are a party, which may have an adverse impact on the combined company’s business and results of operationsNew
11. 43The future results and market value of the combined company may be adversely impacted if the combined company does not effectively manage its expanded operations following the completion of the merger or the combined company fails to successfully execute its business strategy and objectivesNew
12. 44Parent company provides performance guarantees with respect to certain of the obligations of our Other businesses (primarily MSG), including financial guarantees or deposits, which may adversely affect parent company if the guarantees are successfully enforced
13. 45MSG’s operations are subject to various risks associated with doing business with the U.S. government
14. 46New accounting standards or changes to existing accounting standards could materially impact how we report our results of operations, cash flows and financial condition
15. 47Undetected errors in internal controls and information reporting could result in the disallowance of cost recovery and noncompliant disclosure
16. 48Our continued success is dependent upon our ability to attract, hire and retain highly qualified and skilled employees
17. 49Our business may be adversely affected by the intentional or other misconduct of our employees and contractors45% rewritten