California Water Service Group · NYSE:CWT
California Water Service — Q4 2023 Earnings Presentation
25 slides from California Water Service's earnings presentation, Feb 29, 2024
Slide 1: 2023 Year and Fourth Quarter Earnings Results Presentation
2023 Year and Fourth Quarter Earnings Results Presentation February 29, 2024 0
Slide 2: 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 ("PSLRA"). The forward-looking statements are intended to qualify under provisions of the federal securities laws for "safe harbor"
Slide 3: Today's Participants
Today’s Participants Marty Kropelnicki James Lynch Chairman & CEO Sr. Vice President, CFO & Treasurer David Healey Greg Milleman Vice President, Rates & Principal Financial officer Regulatory Affairs INVESTOR RELATIONS 2
Slide 4: Presentation Overview
Presentation Overview • Our Values and Priorities • 2023 Year Financial Results • 2023 Fourth Quarter Financial Results • California Regulatory Update • PFAS Regulation Update • Business Development Status • CapEx and Rate Base Tables • In Summary INVESTOR RELATIONS 3
Slide 5: Investor Relations Update
INVESTOR BOARD RELATIONS UPDATE 44
Slide 6: Full Year 2023 Highlights
Full Year 2023 Highlights (Given the delay in regulatory approval of Cal Water’s 2021 GRC) The $44.1 million decrease in net income in 2023 compared to the prior year, was primarily due to the delayed final decision from the California Public Utilities Commission (“CPUC”) on California Water Service
Slide 7: 2023 Year Financial Highlights
2023 Year Financial Highlights (Given the delay in regulatory approval of Cal Water’s 2021 GRC) Operating revenue decreased $51.8M • $66.9M decrease in WRAM and MCBA revenue as the mechanisms concluded on December 31, 2022. • $23.1M decrease in customer usage revenue. • $7.7M revenue decrease from a
Slide 8: Financial Results: Year 2023
Financial Results: Year 2023 (Given the delay in regulatory approval of Cal Water’s 2021 GRC) YTD YTD (Amounts are in millions, except for EPS) Variance Dec 31, 2022 Dec 31, 2023 Operating Revenue $846.4 $794.6 (6.1%) Operating Expenses $718.8 $717.5 (0.2%) Net Interest Expense $44.3 $49.8 12.4% Net
Slide 9: Additional Full Year 2023 Highlights
Additional Full Year 2023 Highlights (Given the delay in regulatory approval of Cal Water’s 2021 GRC) California Water Service Group (Group) Invested $383.7M in capital improvements in 2023, a 17.1% increase over 2022. The 2023 increase in income tax benefit of $18.5 million compared to the prior ye
Slide 10: Capital Investment and Depreciation
Capital Investment and Depreciation (in millions) 2015-2023 TOTAL CapEx Capital Investment Depreciation $384 3x $400 $365 $350 $328 $299 $293 $300 DEPRECIATION $272 $274 $259 $250 $229 $200 $177 $150 $131 $121 $118 $116 $109 $133 $115 $100 $99 $84 $89 $77 $58 $61 $61 $64 $50 $55 $0 2012 2013 2014 20
Slide 11: Estimated Regulated Rate Base of CWT
Estimated Regulated Rate Base of CWT (in billions) $3.0 $2.76 $2.50 $2.5 $2.25 $1.95 $2.0 $1.82 $1.61 $1.5 $1.26 $1.24 $1.06 $1.12 $1.0 $0.5 $0.0 2016 2017 2018 2019 2020 2021 2022 *2023 *2024 *2025 *2023-2025 Rate base estimates include filed proposal in 2021 California General Rate Case plus estim
Slide 12: EPS Bridge Full Year 2022 to 2023
EPS Bridge Full Year 2022 to 2023 (Given the delay in regulatory approval of Cal Water’s 2021 GRC) $2.00 $1.77 $1.50 $0.24 $0.29 $0.91 $1.00 $0.21 -$0.23 $0.50 -$1.10 -$0.27 $0.00 2022 EPS Decrease in Rate Increases, A&G Expense, Water Net Other Income Tax 2023 EPS WRAM and Decrease in Other Product
Slide 13: Fourth Quarter 2023 Financial Highlights
Fourth Quarter 2023 Financial Highlights (Given the delay in regulatory approval of Cal Water’s 2021 GRC) Operating revenue increased $13.6M • $13.8M revenue increase from rate increases. • $12.3M revenue increase from a decrease in deferred revenue. • $3.3M increase in customer usage revenue. • Par
Slide 14: Financial Results: Fourth Quarter 2023
Financial Results: Fourth Quarter 2023 (Given the delay in regulatory approval of Cal Water’s 2021 GRC) Fourth Fourth (Amounts are in millions, except for EPS) Quarter Quarter Variance 2022 2023 Operating Revenue $200.9 $214.5 6.8% Operating Expenses $174.7 $179.3 2.6% Net Interest Expense $11.1 $12
Slide 15: Additional Fourth Quarter 2023 Highlights
Additional Fourth Quarter 2023 Highlights (Given the delay in regulatory approval of Cal Water’s 2021 GRC) Group’s collection process improvements reduced December Strong liquidity. As of December 31, 2023, Group 31, 2023 customer accounts receivable balances more than 60 maintained $85.0 million of
Slide 16: EPS Bridge Fourth Quarter 2022 to 2023
EPS Bridge Fourth Quarter 2022 to 2023 (Given the delay in regulatory approval of Cal Water’s 2021 GRC) $0.70 $0.60 $0.20 $0.52 $0.50 $0.08 $0.40 $0.35 $0.30 $0.05 $0.30 $0.20 -$0.16 $0.10 -$0.30 $0.00 Fourth Quarter Decrease in Rate Increases, A&G Expense, Water Net Other Income Tax Fourth Quarter
Slide 17: California 2021 General Rate Case Update
California 2021 General Rate Case Update On January 24, 2024, the On February 13, 2024, Cal Water assigned CPUC ALJs issued completed a CPUC filing. In our a PD on the fully litigated filing, Cal Water stated support 2021 GRC, and for the ALJs PD, recommended concurrently, the assigned significant c
Slide 18: California 2021 General Rate Case Update, Continued
California 2021 General Rate Case Update, Continued On February 13, 2024, California Water Association, a party to the 2021 GRC, completed a filing with the CPUC expressing concerns that the APD departs from standard CPUC practice and precedent on capital projects and early retirements of capital in
Slide 19: California 2021 General Rate Case Update, Continued
California 2021 General Rate Case Update, Continued We are unable to determine which of the proposed decisions will be adopted by the CPUC, or if a second alternate proposed decision will be issued by the CPUC. Once approved by the CPUC, the Cal Water 2021 GRC cumulative adjustment plus interest, wh
Slide 20: California 2021 General Rate Case Update: Focus on Decoupling
California 2021 General Rate Case Update Focus on Decoupling Cal Water’s 2021 GRC contains provisions designed to mitigate the absence of a decoupling program: • Lower estimated sales, factoring in continued conservation efforts. • Rates designed to reduce revenue volatility but still send price sig
Slide 21: Cal Water's Cost of Capital Proceeding Update
Cal Water’s Cost of Capital Proceeding Update CPUC granted Cal Water’s request to postpone the May 1, 2024 Water Cost of Capital proceeding to May 1, 2025. As a result of the 2023 adjustment from the Water Cost of Capital Mechanism (WCCM), Cal Water’s authorized return on equity (ROE) is 10.27% in 2
Slide 22: PFAS Regulation Update
PFAS Regulation Update • In March 2023, USEPA published draft Maximum Contaminant Levels (MCLs) for PFAS compounds. • Based on current information, if regulation is adopted in the current proposed form, we estimate capital investments of approximately $215M needed to comply. These capital investment
Slide 23: Business Development Project Updates
Business Development Project Updates 2023 Acquisitions Water Wastewater System Connections Connections Total Status Bethel Green Acres 200 200 Closed March 2023 (WA) Stroh’s Water (WA) 900 900 Closed July 2023 Skylonda (CA) 176 176 Closed August 2023 HOH Utilities (HI) 1,800 EDUs 1,800 EDUs Closed D
Slide 24: In Summary
In Summary 2023 Full Year and Fourth Quarter earnings results were in line with expectations given the delayed proposed decision on Cal Water’s 2021 GRC, which had an adverse impact on earnings results. The issuance of a PD and APD on January 24, 2024 is expected to result in a final decision during
Slide 25: Discussion
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California Water Service Group — Q4 2023 Earnings Presentation on 6ix