S&P could lower American Water

Standard & Poor's said it placed the A- corporate credit rating of American Water Works Co. Inc. and its funding subsidiary American Water Capital Corp. on CreditWatch with negative implications. The A-2 short-term ratings are not affected.

Also on watch are American Water Capital's senior unsecured debt rating of A- and preferred stock rating of BBB.

The watch follows parent RWE AG's (A+/negative/A-1) delay in the issuer's equity offering, which will put off financial improvements and likely result in a downgrade if the offering is not completed by the end of the first quarter of 2008, according to the agency.

Supporting the ratings are an excellent competitive position with high barriers to entry, supportive regulatory environment, above-average service territory and stable customer base, S&P said.

Concerns include a weak financial profile, uncertainties associated with the planned equity offering, capital spending for infrastructure replacement, increased compliance costs and reliance on acquisitions to provide growth, the agency said.

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