S&P rates American Water debt A-

Standard & Poor's said it affirmed the A- corporate credit rating on American Water Works Co. Inc. and its funding subsidiary American Water Capital Corp. The ratings were removed from CreditWatch with negative implications.

The outlook is negative.

The rating action reflects the issuer's standalone credit quality, which has received all regulatory approvals necessary for its parent RWE AG (A+/negative/A-1) to sell the company in an initial public offering late this year. The rating action also reflects S&P's reassessment of the company's financial risk profile, based on the company's post-IPO business plan and proposed capital structure.

S&P also assigned an A- senior unsecured debt rating to AWCC's proposed $1.5 billion debt and BBB preferred stock rating to its $500 million proposed equity unit offering.

The ratings reflect the company's excellent competitive position with high barriers to entry, supportive regulatory environment, service territory and stable customer base, the agency said.

These strengths are partly offset by a weak financial profile, planned IPO and debt offerings, elevated capital-spending requirements for infrastructure replacement, increased compliance costs with water quality standards and reliance on acquisitions to provide growth, S&P said.

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