California Water Service Group · NYSE:CWT
California Water Service — FY2015 Earnings Presentation
20 slides from California Water Service's earnings presentation, Feb 25, 2016
Slide 1: Forward-Looking Statements
Forward-Looking Statements This presentation contains forward-looking statements within the meaning established by the Private Securities Litigation Reform Act of 1995 ("Act"). The forward-looking statements are intended to qualify under provisions of the federal securities laws for "safe harbor" tr
Slide 2: Today's Participants
Today’s Participants Marty Kropelnicki President & CEO Tom Smegal Vice President, CFO & Treasurer 3
Slide 3: Presentation Overview
Presentation Overview Financial Results Financial Highlights 2014-2015 EPS Bridge Drought Update Regulatory Update Rate Base and ROE 2016 Potential Items of Interest 4
Slide 4: Financial Results
Financial Results 5 (amounts are in millions, except for EPS) 2015 2014 Variance Operating Revenue $588.4 $597.5 -1.5% Operations Expense 517.2 515.7 0.3% Income from Operations 71.2 81.8 -13.1% Other Income 1.1 1.8 -38.3% Net Interest 27.3 26.9 1.2% Net Income $45.0 $56.7 -20.7% EPS $0.94 $1.19 -20
Slide 5: Financial Highlights
Financial Highlights Accrued unbilled revenue is excluded from revenue decoupling mechanisms- WRAM and MCBA Accrued unbilled revenue represents water used by customers but not yet billed to them. Accrued unbilled revenue is calculated by multiplying the number of days since the last bill times the a
Slide 6: EPS Bridge 2014 to 2015
EPS Bridge 2014 to 2015 -$0.06 -$0.10 -$0.10 -$0.02 $0.03 7
Slide 7: Financial Highlights
Financial Highlights Over $177 million capital improvements, exceeding 2014 by 34%. Resulting rate base growth will drive an increase in net income over the long term Despite significant reductions in sales, WRAM receivable declined 10.2% to $40.6 million thanks to drought rate design The Company co
Slide 8: Return on Equity Reconciliation
Return on Equity Reconciliation 2015 California Adopted* Return on Equity 9.43% GAAP ROE Achieved 7.10% Regulatory ROE Achieved (Excludes equity-funded CWIP**) 8.45% Adjusted Regulatory ROE (Excludes drought expenses) 8.98% *Other states adopted ROEs vary but do not affect overall CWT adopted ROE **
Slide 9: Drought Update
Drought Update California potentially entering 5th year of drought Strong precipitation in December 2015 and January 2016 followed by dry February Rainy season lasts through April - El Nino conditions may yet help Mandatory conservation expected to continue at least through October 2016 Cal Water ha
Slide 10: Drought – Financial Effects Muted by Regulatory Mechanisms
Drought – Financial Effects Muted by Regulatory Mechanisms Cal Water’s customers achieved a net water use reduction of 28.6% in 2015, exceeding the state’s 25% target Cal Water has been “decoupled” (sales and production cost changes effects on covered earnings are minimized) since 2008 with WRAM Cha
Slide 11: General Rate Case 2015
General Rate Case 2015 Requested Rate Increases $94.8 million in 2017 $23 million in 2018 $22.6 million in 2019 80% of rate increase is due to capital investments Proposed CapEx of $693M over three years 18 month process – Ratepayer Advocate reports findings in Q1 2016 12
Slide 12: General Rate Case 2015 Capital Expenditure Detail
General Rate Case 2015 Capital Expenditure Detail Cal Water owns more than 6,000 miles of main Proposing to strengthen main replacement program 300 year cycle 200 year cycle Most CA peers at 100-150 year cycle Water supply reliability (tanks, wells, brackish desalination study) Policy Change Request
Slide 13: Capital Investment History and Projection
Capital Investment History and Projection in millions *2016-2018 amounts are based upon Company projections including 2015 California Rate Case filing estimates. Actual capital investment will vary depending on the outcome and timing of the GRC. CAGR = 12% (2007-2018) 14 See the Forward-Looking Stat
Slide 14: Regulated Rate Base of CWT
Regulated Rate Base of CWT Amounts in Millions *2016 figure reflects adopted rate base at the beginning of the year, which may change due to regulatory filings. 2017 and 2018 estimates reflect values from the 2015 California GRC filing and will change based on regulatory outcomes. 15 See the Forward
Slide 15: Regulatory Authorized Earnings
Regulatory Authorized Earnings The table demonstrates the maximum allowable earnings under the regulatory framework This does not represent an estimate of future earnings due to other factors such as: Regulatory lag Cost recovery Other income and expense Regulatory tax differences 2017 and 2018 rate
Slide 16: What to Look for in 2016
What to Look for in 2016 Continued drought conditions and mandatory restrictions Delays in recovering incremental drought costs may impact net income Pattern of water use may continue to affect accrued unbilled revenue Based on current conditions we expect drought expenses to reduce EPS by $0.05-$0.
Slide 17: What to Look for in 2016
to Look for in 2016 * Continued drought conditions and mandatory restrictions © Delays in recovering incremental drought costs may impact net income o Pattern of water use may continue to affect accrued unbilled revenue © Based on current conditions we expect drought expenses to reduce EPS by $0.05-
Slide 18: Exhibit A: Explanation of Use of Certain Unaudited non-GAAP Measures
Exhibit A: Explanation of Use of Certain Unaudited non-GAAP Measures The Company’s management uses certain non-GAAP measures to evaluate the Company’s performance. Management believes these measures provide useful information and are a better indicator of the Company’s core operating activities. Reg
Slide 19: Exhibit A: Non-GAAP reconciliation
Exhibit A: Non-GAAP reconciliation 20 See the Forward-Looking Statements for factors which could cause actual results to differ materially from the expectations presented here. Net Income for the Year Ended December 31, 2015 (In Thousands) December 31, 2015 Return on Average Common Stockholders’ Equ
Slide 20: Netincome
Netincome forthe Year Ended December 31, 2015 GAAP (as reported) $ 45017 710% «$634,301, Excluding special item: 2015 and 2014 average California construction work i-progress (CWP) net of short-term borrowings $ 1014e Approved Regulatory Calculation (Excluding equity funded CWIP) $ 45017 845% $532,9
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