IPO of American Water

In April 2008, RWE sold 58 million shares in American Water on the New York Stock Exchange at a price of US$21.50 per share. Trading commenced on April 23, 2008. The placement represented 36.25% of the shares in the US water utility. The underwriters of the IPO partially exercised the “greenshoe option,” which allowed them to purchase additional shares. This increased the size of the offering to 63.17 million shares, or 39.5%. RWE’s total proceeds from the initial public offering amounted to about US$1.3 billion. Since the issue price was below the shares’ carrying amount, we recognized a capital loss. In addition, we had to make a downward adjustment to the value of our remaining stake in American Water. These two facts had an adverse effect on our net income. Due to the unexpected intensification of the financial market crisis, we did not conduct a further placement to divest the majority of the shares in the company by the end of 2008. But we still intend to sell our holding in American Water in full. The delay of the sale of American Water does not affect our dividend proposal for fiscal 2008, which anticipates an increased payout ratio of 71% of recurrent net income. This is far above our usual ratio of 50 to 60%. We had originally made this subject to the condition that we sell the majority of the shares in American Water by the end of 2008.