RWE had previously announced in November last year its intention to divest American Water either through an IPO or by selling the company to a group of financial investors.
The IPO will result in American Water returning to the status of a publicly-traded company with a focus on water and waste in the US.
The sales process is expected to be initiated shortly. The IPO will require filing of a registration statement with the US Securities and Exchange Commission. The transaction will also be subject to the approval of the RWE board.
RWE said in a statement that it hopes to complete the IPO process during 2007.
