Press Release

HARRISBURG - The Pennsylvania Public Utility Commission (PUC) today voted to approve the merger of Pennsylvania-American Water Company and Thames Water Aqua Holdings, provided the companies agreed to certain conditions, including not charging customers for costs associated with the merger.

With the merger, Pennsylvania-American Water Company will continue to exist as a Pennsylvania corporation subject to the jurisdiction and regulation of the PUC. Pennsylvania-American will remain a subsidiary of American Water Works Company (AWWC). The merger will only affect the ownership of AWWC, which will become a wholly owned subsidiary of Thames, headquartered in Germany. The corporate identities, corporate structures and assets of AWWC and Pennsylvania-American will be unaffected.

In approving the merger, the Commission stated that it must be beneficial to both Pennsylvania-American ratepayers and Pennsylvania.

Pennsylvania-American can not include any costs associated with the merger in its rates. This includes costs associated with the retention bonus program for Pennsylvania-American staff; the difference between the acquisition price of the company and its book value; or any other affiliated costs of the merger. The company must report any downgrading of bonds of Thames, AWWC, or any of the subsidiaries within 30 business days of the decrease in the bond rating.

Also, Pennsylvania-American and Thames must submit all documents to the PUC in English and certify the accuracy of the translations. All financial statements to the Commission are required to be provided in U.S. dollars. PAWC also will keep its books and records at a location within the United States.

As another condition of the merger, the PUC has stated that Pennsylvania-American must continue to protect and safeguard the condition of its watershed land holdings surrounding its reservoirs and well fields in Pennsylvania. The company will also maintain its existing watershed protection program arising out of a Commission-approved settlement.

The PUC determined that the merger would provide substantial benefits to customers. Thames provides access to European capital markets, which is not currently available to Pennsylvania-American. Another advantage is in the area of research and development, where each company can benefit from expertise in different areas.

The two companies submitted their merger application in December 2001. PUC Administrative Law Judge Wayne L. Weismandel held two public input hearings in April 2002, where 24 witnesses provided testimony. In his initial decision issued on June 21, 2002, Weismandel ruled in favor of the merger with specific conditions.

Pennsylvania-American currently provides service to 604,000 water and 12,500 sewer customers in 35 counties in Pennsylvania. Thames is the largest water/sewer utility in the United Kingdom, where it provides service to 12 million people, and the third largest water/sewer company in the world, serving over 43 million people worldwide. Within the United States, Thames owns E’town Corporation of New Jersey, one of the nation’s largest investor-owned water and wastewater utilities.

The Pennsylvania Public Utility Commission ensures safe, reliable and reasonably priced electric, natural gas, water, telephone and transportation service for Pennsylvania consumers, by regulating public utilities and by serving as responsible stewards of competition.