DESCRIPTION OF THE NOTES
The 2030 notes and the 2050 notes will each be a series of our senior debt securities issued under an indenture, dated as of April 23,
2019 (as amended and supplemented to date, the base indenture) between Essential Utilities, as issuer, and U.S. Bank N.A., as trustee (the trustee), and a related supplemental indenture, between Essential Utilities, as
issuer, and the trustee, to be dated the date of first issuance of the notes (collectively referred to herein as the indenture). In this section and under the caption Description of Debt Securities in the accompanying
prospectus, references to Essential Utilities (or, in the accompanying prospectus, to Aqua America), the Company, we, us and our mean Essential Utilities, Inc. excluding its
subsidiaries and affiliates, unless otherwise expressly stated or the context otherwise requires.
The summary of selected provisions of
the notes and the indenture appearing below supplements, and to the extent inconsistent, supersedes and replaces, the description of the general terms and provisions of the senior debt securities and the indenture contained in the accompanying
prospectus. This summary is not complete and is qualified by reference to provisions of the notes and the indenture. Forms of the notes and the indenture have been or will be filed with the SEC as an exhibit to a current report on Form 8-K in connection with this offering, and you may obtain copies as described under Where You Can Find Additional Information; Incorporation of Certain Documents by Reference in this prospectus
supplement.
Interest Rate and Maturity
The 2030 notes will bear interest at the rate of 2.704% per year and the 2050 notes will bear interest at the rate of 3.351% per year, in each
case computed on the basis of a 360-day year of twelve 30-day months. Interest on the notes of each series will accrue from April 15, 2020 and will be payable
semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2020, to the holders of record at the close of business on the immediately preceding April 1 and October 1, respectively.
The 2030 notes will mature on April 15, 2030 and the 2050 notes will mature on April 15, 2050.
If any interest payment date, redemption date or the maturity date of the notes of a series is not a business day at any place of payment,
then payment of the principal, premium, if any, and interest may be made on the next business day at that place of payment. In that case, no interest will accrue on the amount payable on the notes of such series for the period from and after the
applicable interest payment date, redemption date or maturity date, as the case may be, to the date of such payment on the next business day.
Ranking
The notes will be our general unsecured senior obligations and will rank equally in right of payment with all of our other existing
and future unsecured senior indebtedness and guarantees and will be structurally subordinated to the indebtedness and other liabilities of our subsidiaries. The notes will rank senior to all of our existing and future indebtedness, if any, that is
subordinated to the notes. The notes will be effectively subordinated to any of our secured indebtedness (to the extent of the collateral securing that indebtedness).
The notes are our obligations exclusively, and are not the obligations of any of our subsidiaries. We conduct our operations primarily through
our subsidiaries and substantially all of our consolidated assets are held by our subsidiaries and, therefore, we depend on the cash flow of our subsidiaries to meet our obligations, including our obligations under the notes. Many of our
subsidiaries, including certain of LDC and its subsidiaries, are limited in their ability to pay dividends or make loans or distributions to us, including, without limitation, as a result of legislation, regulation, court order, contractual
restrictions and other restrictions or in times of financial distress. As a result, we may not be able to cause such subsidiaries and other entities to distribute funds or provide loans sufficient to enable us to meet our debt and other obligations,
including obligations under the notes. See Risk FactorsRisks Related to this Offering and the NotesOur ability to meet our debt obligations largely depends on the performance of our subsidiaries and the ability to utilize the cash
flows from those subsidiaries.
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