California Water Service Group · NYSE:CWT
California Water Service — Q2 2023 Earnings Presentation
24 slides from California Water Service's earnings presentation, Jul 27, 2023
Slide 1: Second Quarter 2023 Results Presentation
Second Quarter 2023 Results Presentation July 27, 2023 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 David Healey Greg Milleman President & CEO Vice President, CFO & Treasurer Vice President, Rates & Regulatory Affairs INVESTOR RELATIONS 2
Slide 4: Presentation Overview
Presentation Overview • Our Values and Priorities • Second Quarter Financial Results and Unrecorded Regulatory Mechanisms • Year-to-Date Financial Results and Unrecorded Regulatory Mechanisms • PFAS Regulation Update • California Regulatory Update • Business Development Status • CapEx and Rate Base
Slide 5: Investor Board Relations Update
INVESTOR BOARD RELATIONS UPDATE 44
Slide 6: Second Quarter Financial Highlights
Second Quarter Financial Highlights Operating revenue decreased $12.2M • $13.8M decrease in billed and unbilled metered revenue, mostly due to 10.4% decrease in customer usage • Total operating expenses decreased $0.8M o $2.5M reduction in deferred revenue o $1.7M decrease in bad debt expense o $1.1
Slide 7: Financial Results: Second Quarter 2023
Financial Results: Second Quarter 2023 (Amounts are in millions, except for EPS) Q2 2022 Q2 2023 Variance Operating Revenue $206.2 $194.0 (5.9%) Operating Expenses $178.9 $178.1 (0.5%) Net Interest Expense $11.0 $12.7 15.5% Net Income Attributable to CWT $19.5 $9.6 (51.0%) Diluted EPS $0.36 $0.17 (5
Slide 8: Unrecorded California Regulatory Mechanisms
Due to delayed California 2021 General Rate Case (GRC) filing, we did not record certain regulatory mechanisms in 2Q 2023 and YTD 6/30/23: Interim Rate Memorandum Account (IRMA)*: Tracks difference between interim rates and final rates authorized by California Public Utilities Commission (CPUC) in o
Slide 9: Unrecorded California Regulatory Mechanisms in Q2 2023
Unrecorded California Regulatory Mechanisms in Q2 2023 Based on current positions of parties to 2021 GRC filing, we estimated understatement of operating revenue during 2Q 2023 to be in $19M – $29M range ($0.28 to $0.43 EPS)*: 2023 IRMA operating revenue range *IRMA value will depend on final 2021 G
Slide 10: Additional Q2 2023 Highlights
Additional Q2 2023 Highlights Cal Water’s water production costs will increase in second half of 2023; we filed advice letter in July Invested $95.2M in capital improvements during 2023 to increase annual operating revenues $24.6 Q2 2023, a 25.1% increase over Q2 2022 million to offset known 2023 in
Slide 11: EPS Bridge Q2 2022 to Q2 2023
EPS Bridge Q2 2022 to Q2 2023 $0.50 $0.40 $0.36 $0.30 $0.03 $0.20 $0.07 $0.17 -$0.18 $0.10 -$0.06 -$0.05 $0.00 INVESTOR RELATIONS 10
Slide 12: Year-to-Date 2023 Financial Highlights
Year-to-Date YTD 2023 Financial Highlights Operating revenue decreased $54.1M • Increase in deferred revenue of $21.8M • Decrease in billed and unbilled metered revenue of $38.1M, mostly due to 9.7% decrease in customer usage Total operating expenses decreased $16.1M • Deferred revenue costs decreas
Slide 13: Financial Results: Year-to-Date 2023
Financial Results: Year-to-Date 2023 YTD YTD (Amounts are in millions, except for EPS) Variance June 30, 2022 June 30, 2023 Operating Revenue $379.2 $325.1 (14.3%) Operating Expenses $342.8 $326.7 (4.8%) Net Interest Expense $21.9 $24.7 12.6% Net Income (Loss) Attributable to CWT $20.6 ($12.7) (161.
Slide 14: Unrecorded California Regulatory Mechanisms Year-to-Date
Unrecorded California Regulatory Mechanisms Year-to-Date 2023 Based on current positions of parties to 2021 GRC filing, we estimated understatement of operating revenue YTD 6/30/23 to be in $43M – $63M range ($0.65 to $0.95 EPS)*: 2023 IRMA operating revenue range *IRMA value will depend on final 20
Slide 15: Additional Year-to-Date 2023 Highlights
Additional Year-to-Date 2023 Highlights • Invested $177.2M in capital improvements during first six months of 2023, 22.5% increase over same period last year • At-the-market (ATM) program increased cash and cash equivalents $112.7M YTD 6/30/23 to fund capital expenditures and general corporate purpo
Slide 16: EPS Bridge YTD 2022 to YTD 2023
EPS Bridge YTD 2022 to YTD 2023 $0.40 $0.38 $0.30 $0.20 $0.10 $0.00 -$0.10 -$0.49 -$0.20 -$0.06 $0.15 -$0.30 -$0.23 -$0.40 -$0.10 -$0.11 -$0.50 INVESTOR RELATIONS 15
Slide 17: California Cost of Capital Update
California Cost of Capital Update CPUC adopted Cost of Capital decision on 6/29/23 to be implemented prospectively within 30 days of decision; Cal Water filing advice letter to implement decision on 7/31/23 Decision approved Decision also approved WCCM triggered in October 2022; return on equity of
Slide 18: California General Rate Case Update
California General Rate Case Update In April 2023, Cal Water In June 2023, CPUC On 7/13/23, CPUC granted approval to extended 2021 GRC co-assigned second increase most customer completion date to Administrative Law Judge rates by 4%, effective 12/31/23 (ALJ) to Cal Water’s 2021 5/5/23; expected 2023
Slide 19: PFAS Regulation Update
PFAS Regulation Update • In March, USEPA published draft Maximum Contaminant Levels (MCLs) for PFAS compounds • Based on current information, if regulation is adopted in current form, we estimate capital investments of approximately $200M needed to comply o Draft regulation, if unchanged, would requ
Slide 20: Business Development Project Updates
Business Development Project Updates System Water Wastewater Total Status Connections Connections Bethel Green Acres 200 200 Closed March 2023 (WA) Skylonda (CA) 176 176 CPUC Approved June 2022* HOH Utilities (HI) 1,800 EDUs 1,800 EDUs HPUC Approved June 2022* Stroh’s Water (WA) 900 900 Closed July
Slide 21: Capital Investment and Depreciation
Capital Investment and Depreciation (in millions) 2015-2022 TOTAL $400 CapEx Capital Investment Depreciation 3x $360 $365 $350 $328 $299 $293 $300 DEPRECIATION $259 $272 $274 $250 $229 $200 $177 $177 YTD $150 $131 $118 $116 $133 $109 $115 $124 $100 $99 $84 $89 $77 $58 $61 $61 $64 $50 $55 $0 2012 201
Slide 22: Estimated Regulated Rate Base of CWT
Estimated Regulated Rate Base of CWT (in billions) $3.0 $2.74 $2.49 $2.5 $2.24 $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 23: In Summary
In Summary Results inline given delayed 2021 GRC Revenue shortfall in 2023 due to temporary absence of regulatory mechanisms; we anticipate potential future recognition of these mechanisms would result in additional revenue in a future period once proposed decision is approved While we wait for regu
Slide 24: Discussion
CALIFORNIA WATER SERVICE GROUP La i VEsTING FOR LIFE ¥
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