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CEO Message

At American Water, our vision for the future is simple – to be the trusted steward of your precious resource – water.

Dear Readers,

It is with great pleasure that I welcome you to our 2010 Corporate Responsibility Report at a time when American Water celebrates its 125th anniversary. This milestone is an opportunity to reflect on past successes as we prepare the company to deliver what we aspire to achieve. Our consistent ability to ensure the quality and reliability of the services we provide gives us a strong foundation to build upon—but it will be our capacity to innovate that will drive our future. The challenges facing the entire water industry have never been more demanding and we are focused on taking strategic steps today to help the country meet the water needs of tomorrow.

Today, our nation’s massive water infrastructure, including a network of pipes spanning 700,000 miles, is in dire need of replacement and repair. While upgrading this system is costly, the consequences of delaying infrastructure investments put the quality of our nation’s water and wastewater services at serious risk. Growing populations in areas facing limited water supply, aging pipes, and antiquated wastewater systems all factor into the U.S. EPA estimate that it will cost upwards of $1 trillion over the next 20 years to replace and repair our water and wastewater infrastructures.

Responding to these and other challenges such as increasing demand on a finite amount of source water will determine our continued success in delivering our mission to provide safe, reliable water and wastewater services to our customers. It means creating new solutions for the communities we serve. It means strategically directing our business to ensure we operate in areas where we can the best apply our technology and expertise. And it means investing in our people and our partnerships with the communities we serve. All of this is within our reach.

We are investing significant capital—between $800 million and $1 billion dollars in each of the last three years—as part of our commitment to strengthening our nation’s infrastructure. In 2010, this included several large infrastructure projects in New Jersey, Pennsylvania, and Indiana to ensure we can deliver long-term reliable service. In Kentucky, we put into place a new $164 million dollar water treatment plant and pipeline to ensure adequate water supply to that region, which has been severely challenged by drought and increased demand for a number of years.

We are increasingly using technologies that make more efficient use of our scarce water resources. In New York City, American Water designed, managed construction, and now operates the water reuse systems for five “green” high-rise condominiums, which together, save approximately 56 million gallons of water per year. In California, American Water’s partnership with the City of Fillmore won top honors from the National Council for Public-Private Partnerships for designing, building, and now operating the city’s new state-of-the-art, zero-discharge water recycling plant. This plant provides one million gallons of treated water per day for irrigation and groundwater recharge.

We also continue to review our business direction and growth to ensure we are operating in areas where we are best positioned to provide high quality service to customers and meet our business objectives. Our strategic decisions are guided by creating value—specifically, by investing capital where we can drive operational excellence and leverage the strength of our larger operations. A prime example of this is the recent decisions we made to divest of operations in Arizona, New Mexico, and Texas as we acquire systems in Missouri.

As we prepare for the future, it is critical that we continue to invest in our people. Our employees are the key to addressing water challenges of the future and delivering strong business performance. By investing in their careers, talents, and capabilities, we enable them to innovate, to deliver high quality service to our customers, and to make the kinds of connections that are necessary for us to reach our vision “to be the trusted steward of your most precious resource - water.”

This report is part of continuing to build that trust. In it, we describe our priorities, our policies and approaches, and report on our performance. We thank you for your interest and invite you to share your concerns, opinions, and ideas.

One hundred and twenty-five years ago our predecessors created a company to meet the water challenges of a growing nation. We are determined to continue that tradition and we will continue to share progress with you in this report.

Jeffry Sterba
President and Chief Executive Officer