American Water Works IPO raises less than expected

LOS ANGELES Wed Apr 23, 2008 10:52am BST

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LOS ANGELES (Reuters) - American Water Works Co Inc (AWK.N), a unit of European utility RWE AG (RWEG.DE), on Tuesday raised a less-than-expected $1.25 billion with an initial public offering of shares that priced below a recently lowered range.

The 58-million-share offering priced at $21.50 per share, according to an underwriter. RWE had lowered the range at which it planned to sell the shares to $22 to $23 per share from an original range of $24 to $26 per share.

The offering was also originally intended to be 64 million shares and had been expected to raise at least $1.5 billion.

RWE initially planned to sell shares in the water utility company to the public last year, but suspended the offering in November because of poor market conditions.

One expert said investors were unlikely to get excited about a company with such low revenue growth.

"It's a slow-growth to no-growth company in terms of revenue," said Francis Gaskins, president of IPOdesktop.com. "It doesn't have any of the earmarks of a successful, dynamic IPO. To get excitement in terms of IPOs you need growth."

American Water Works' revenue rose 5.7 percent between 2006 and 2007, but fell 2 percent from 2005 to 2006.

The IPO is part of RWE's plan to focus on its primary European electricity and gas business by exiting its water activities in the United States.

American Water Works, which is based in Voorhees, New Jersey, reported a loss of $342.9 million in 2007. Revenue was $2.21 billion that year.

In a regulatory filing earlier on Tuesday, American Water Works said that if the offering price was below the low end of its original range, it would likely record an impairment charge to goodwill for the quarter ended March 31. It said it could not estimate the potential size of the charge.

Goldman Sachs & Co, Citi, Merrill Lynch & Co, Credit Suisse, JPMorgan, Morgan Stanley, UBS, Edward Jones, Janney Montgomery Scott, Societe Generale, Wachovia Securities, Boenning & Scattergood, Cabrera Capital Markets, HSBC, Stanford Group and Williams Capital Group are underwriting the IPO.

American Water Works shares are expected to begin trading on the New York Stock Exchange under the symbol "AWK" AWK.A.

(Reporting by Nichola Groom)

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