n Proceeds from salen Avoid future capital expendituresn Line extensionsn Compliancen Full-timestaffingn Professional managementn Singletariffpricing (water)

PUBLIC-PRIVATEPARTNERSHIPSBENEFITS OFASSET PURCHASE

CONTACT Chuck Johnston (717) 531-3219

RegionalSolutionstoWaterSupplyNeeds

CLARION COUNTYCLARION COUNTY, PENNSYLVANIARegionalization provides tailored solutionsfor several communities.

About Pennsylvania American Water:PennsylvaniaAmericanWater,asubsidiaryofAmericanWater(NYSE:AWK),isthelargestinvestor-ownedwaterutilityinthestate,providinghigh-qualityandreliablewaterand/orwastewaterservicestoapproximately2.2millionpeople.

Project: PennsylvaniaAmericanWaterprovidesregionalsolutiontowatersupplyneedsfor15,000peoplethroughacquisitionsandmainextensions.Systeminvestmentsincludednew4MGD(milliongallonsperday)watertreatmentplant,pipelineinstallation,newtechnologyandstoragefacilities.Thesystemexpandedfroma2,100-customersys-temtoasystemthatserves4,800customersin12communities.Key Attributes:Costsavingsformunicipali-ties,systemsbroughtintocompliance,customersreceivingqualitywaterserviceandlower water rates for some customers

Project Type:Acquisitions,interconnectionandpipelineextensions,low-interestfinancing,watermainreplacements.

Project Timeline: 1997 - Present

Challenge: In1997,PennsylvaniaAmericanWaterownedandoperateda2,100-customerwatersysteminClarionCounty.Thecountywasfragmented,withanumberofwaterserviceproviders,comeofwhichweretroubledwatersystemsthatwereunabletoreplaceaginginfrastruc-tureorkeeppacewithnewormorestringentdrinkingwaterstandards.

Solution: Throughpublic-privatepartnerships,PennsylvaniaAmericanWaterbroadeneditsscopeofoperationsinClarionCounty.Throughacquisitionsandpipelineextensions,webroughttogetherfiveuniquesystemsthatunderstoodthevalueofreceivinghigh-qualitywaterservice.

Clarion TownshipTheregionalizationeffortinClarionCountybeganin1998,whenPennsylvaniaAmerican

WateracquiredthewaterassetsofClarionTownshipGeneralAuthority.Fundedwitha$2.2millionlow-interestPennsylvaniaInfrastructureInvestmentAuthority(PENNVEST)loan,waterservicewasextendedto150homesinthetownship.Oncethesalewasfinal,waterrateswereloweredforexistingAuthoritycustomers.

Strattanville Borough StrattanvilleBoroughowneditsownwatersystemandpurchasedwaterfromPennsylvaniaAmericanWater.InApril2000,theboroughsolditswaterassetstothecompany,whichprovedtobeasuccessfortheresidentsandcommunityalike.Strattanville’s1,000residentsbenefittedfromimprovementstotheexistingwatersystemsandaccesstoourcustomerserviceprograms,whileenjoyingthesamehigh-qualitywaterservicetheywereusedto.Theboroughbenefittedfinanciallythroughtheproceeds from the sale as well as the addi-tionalsavingsofnolongerhavingtomaintainawatersystem.

Continued on reverse

n Forsystems adjacentto AmericanWater systemsn Noneedtobuild treatment facilitiesn Nohassleswith treatment facilities

Toexplorewhichpublic-privatepartnershipmakes most sense foryourcommunityinPennsylvania,contactChuck Johnson at(717)531-3219.

Qualitywatersupplyisthekeytogrowthandeconomicdevelopment.Itwasquicklybecomingapparent that there was a need for more capac-itytoservegrowthandinsomecasesexistingcommunitiesthatdidnothaveaccesstopublicwater.

Withthat,PennsylvaniaAmericanWaterbeganplanstobuildanewwatertreatmentfacility.Thenewplantwouldexpandthedailyproductioncapacityfrom1.5MGD(milliongallonsaday)to4MGD.Itboastedstate-of-the-artequipmentforwatertreatmentandsystemcontrolanddataacquisitionsystemsthatallowourcertifiedoperatorstomonitorplantopera-tionsandthedistributionsystemfromacentralizedlocation.

Farmington TownshipAsthenewplantwasbeingconstructed,region-alizationeffortscontinued.CommunitieslikeFarmingtonTownshipwereinneedofqualitywaterservice.InNovember2002,PennsylvaniaAmericanWatersecureda$2.86millionlow-interestPENNVESTloantoextenditswaterlines12milestoserveFarmingtonTownship.Completedin2005,thecompanywelcomedapproximately120newcustomersalongtheroutebeforeitreachedtheFarmingtonTownshipline.ThemunicipalitywasthenabletoconstructitsowndistributionsystemandpurchaseitswatersupplyfromPennsylvaniaAmericanWater.

Sligo and ShippenvilleIn2005,PennsylvaniaAmericanWater,withtheaidofa$9.3-millionlow-interestloan,acquiredtheSligoandShippensvillewatersystems,whichcombinedservedapproximately1,500residents.Uponcompletionoftheacquisition,thetwosystemswereinterconnectedwithPennsylvaniaAmericanWater’sexistingwatersystem,providinghigh-qualitywaterserviceto

thearea.ThecompanywasthenabletoextendawaterlinetoElkTownship.

Where we are todayThe4MGDplantwascompletedin2005.Inaddition,thecompanybuilta500,000-gallonelevatedstoragetankandpipelinethatcrossedtheClarionRiver,whichfurtherenhancedsys-temreliabilityandcapacity.

Today,theplantserves4,800customersin12communities.In2008,theplantwasnationallyrecognizedwithaDirectorsAwardfromtheUSEnvironmentalProtectionAgency’sPartnershipforSafeWater.Ourwaterqualityteam,certifiedoperatorsandstaffatthefacilityearnedtheprestigiousawardforvoluntarilysurpassingfed-eralandstatedrinkingwaterstandards.

Bottom LineRegionalizationworks.ClarionCounty’sregionalizationeffortsshowthatsuccessfulpublic-privatepartnershipscancomeinmanyforms.Frommunicipalacquisitionstolineextensionstobulkwatersales,weworkedwith the communities to choose a solutionthatbenefittedthecustomers,communityandthecompany.Asaresultofthesuccessesonthewaterside,onOctober30,PennsylvaniaAmericanWateralsobecametheregionalwastewaterserviceproviderinClarion.

BULK WATERSALES ANDWHOLESALEWASTEWATERTREATMENT

06/13