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RWE Unloads American Water on Wall Street Cheaper Than Expected

Food & Water Watch Cites Public Discontent With Private Water Companies
as Main Reason

Washington, DC – Today, just seven years after boldly acquiring the largest private water utility in the United States, international utility giant RWE announced that it was getting out of the water business, issuing a public offering of American Water on Wall Street. The Germany-based company had to lower the price of the opening shares by 10%, likely due to lack of interest among investors.

“RWE is finding out that market conditions will never be favorable to the privatization of public water services,” stated Food & Water Watch Executive Director Wenonah Hauter. “More people and communities around the country are discovering that water utilities offer better services and operate more responsibly when they are publicly and locally controlled.”

According to RWE Supervisory Board minutes obtained by Food & Water Watch in 2007, the economic, infrastructure, and community opposition to privatization in the United States made profitability difficult. Form S-1 from the SEC filing indicates the likelihood that some communities, such as Felton, California, which currently receives water from American Water, will use the power of eminent domain to purchase their water system and restore local, public control. In November 2007, RWE announced it would delay its controversial sale of American Water, citing “unfavorable” market conditions in the United States.

“The board minutes demonstrate that RWE doesn’t believe that private water companies in the United States are a good investment,” stated Hauter. “There is no room in water for profit. What RWE means by ‘unfavorable market conditions’ is that they have not been allowed to jack up rates, skim on service and cut jobs.”

Food & Water Watch has followed and supported local privatization fights in communities looking to break ties to American Water and instead opt for public ownership of their water services. Faced with rate increases of 20% and even 74% in some cases, inoperable fire hydrants, declining customer service, and a lack of accountability, some of these communities have explored leaving American Water by purchasing their local water system and investing in local control of their water. American Water has spent more than $7 million on public relations campaigns in towns like Lexington, Kentucky, Monterey, California, and Chattanooga, Tennessee. 

Jim Graham, a spokesperson from Felton FLOW, a community group from Felton, California working to acquire their system back from American Water, has followed this issue closely over the years.

"The American public knows it’s a bad idea and private water companies will soon realize they can’t dump their bad investment on Wall Street investors and American ratepayers,” Graham stated. “Ultimately it's their customers who suffer because the management team that failed to meet RWE’s expectations will now be under even greater pressure to extract profits from their water systems.”

“Communities across the country have experimented with privatization and found that it does not solve their water woes and that efficiencies promised by the private sector never materialize,” continued Hauter. “Water is a public trust and a public responsibility. The future of American water lies not in further privatization but in a renewed commitment to safe and affordable public water.”