Company: AWK
Filing Date: 2025-12-17
Form Type: S-4
Source: 0001193125-25-321389
Chunk: 143

Company: American Water Works Company, Inc.
Filing Date: 2025-12-17
Form: S-4
Chunk 143
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 the Essential Financial Projections for Essential and the American Water Financial Projections for American Water, Moelis performed a discounted cash flow, which is referred to as DCF, analysis of each of Essential and American Water, respectively, to calculate the present value of the estimated future unlevered free cash flows projected by their respective managements to be generated by Essential and American Water and the present value of the estimated terminal value of each of Essential and American Water. Essential Based on its professional judgment and experience, Moelis performed its DCF analysis of Essential on a sum-of-the-partsbasis to reflect the different business and financial characteristics of the Water Segment and Gas Segment of Essential. The parent holding company, which is referred to as Parent Segment, for Essential has miscellaneous operating expenses included in EBITDA and miscellaneous capital requirements included in capital expenditures. As such, Moelis performed separate DCF analyses of each respective segment of Essential and summed the results of such analyses to determine the implied equity value and implied per share value range for the Essential common stock, as further discussed below. Moelis calculated the unlevered free cash flows projected to be generated by each of the Water Segment, the Gas Segment and the Parent Segment as EBITDA (i) less taxes, (ii) plus deferred income taxes, (iii) less capital expenditures, (iv) plus sale of assets (net proceeds), (v) less acquisitions and (vi) less change in working capital. Stock-based compensation expense was treated as a cash expense and was not added back when calculating the unlevered free cash flows. Moelis utilized a range of discount rates of (i) 5.25% to 6.25% for the Water Segment, (ii) 5.50% to 6.75% for the Gas Segment and (iii) 5.35% to 6.45% for the Parent Segment. The range of discount rates for the Water Segment and the Gas Segment were based on an estimated range of each respective segment’s weighted average cost of capital, which is referred to as the WACC. The estimated WACC range for the Water Segment and the Gas Segment reflected a derived cost of equity range using the capital asset pricing model, which is referred to as CAPM. The range of discount rates for the Parent Segment represented blended discount rates informed by the implied TEV contributions of the Water Segment and Gas Segment based on their respective DCF analyses. Moelis used the foregoing ranges of discount rates to calculate estimated present values