California Water Service Group · NYSE:CWT
California Water Service — Q1 2018 Earnings Presentation
20 slides from California Water Service's earnings presentation, Apr 26, 2018
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
Marty Kropelnicki President & CEO Today’s Participants Tom Smegal Vice President, CFO & Treasurer 3
Slide 3: Presentation Overview
Presentation Overview Our Operating Priorities Financial Results and Highlights California Adopted Revenue by Month EPS Bridge Q1 2017 to Q1 2018 California Cost of Capital Decision Tax Cuts and Jobs Act 2018 California General Rate Case Status of Regulatory Mechanisms and Water Conditions Other Not
Slide 4: Presentation Overview
i Presentation Overview + Our Operating Priorities + Financial Results and Highlights + California Adopted Revenue by Month + EPS Bridge Qi 2017 to Qi 2018 + California Cost of Capital Decision + Tax Cuts and Jobs Act + 2018 California General Rate Case + Status of Regulatory Mechanisms and Water Co
Slide 5: Financial Results: First Quarter
(amounts are in millions, except for EPS) Q1 2017 Q1 2018 Variance Operating Revenue $122.0 $132.2 8.4% Operating Expenses $111.5 $124.2 11.4% Net Interest $8.2 $8.7 5.9% Net Income (Loss) $1.1 ($2.5) Not Applicable EPS $0.02 ($0.05) Not Applicable Capital Investments $51.9 $70.7 36.3% Financial Res
Slide 6: First quarter leanest due to seasonality
First quarter always leanest of the year for earnings and revenue due to seasonality in our business First quarter earnings decrease of $3.6 million largely attributable to: Factors outside Company’s immediate control, including: $1.5 million reduction in unrealized income from certain benefit plan
Slide 7: California Adopted Revenue by Month (in Millions)
California Adopted Revenue by Month (in Millions) 8
Slide 8: California Adopted Revenue by Month
California Adopted Revenue by Month _- : {in Millions)
Slide 9: Notes on EPS Bridge Items
Notes on EPS Bridge Items Increased revenue includes California escalation increases net of California cost of capital revenue reduction effective January 1, 2018, as well as rate base offset rate relief and effect of Hawaii rate increases since corresponding period in 2017 Change in unbilled revenu
Slide 10: California Cost of Capital Decision
California Cost of Capital Decision On March 22, California Public Utilities Commission (CPUC) issued final decision in Company’s California cost of capital filing with three other water utilities Cal Water was authorized return on equity (ROE) of 9.20%, cost of debt of 5.51%, and capital structure
Slide 11: Tax Cuts and Jobs Act
Tax Cuts and Jobs Act In all four of our state operations, Commissions initiated procedures to ensure customers benefit from tax reform Cal Water will incorporate initial change in customer rates to reflect lower federal rate in operations and elimination of Section 199 deductions in second quarter
Slide 12: 2018 California General Rate Case
Cal Water will file its 2018 GRC in July Company anticipates requesting more capital than was awarded in last cycle, primarily due to replacement of aging infrastructure including transmission and distribution mains Company will begin to forecast preliminary capital investment and rate base growth f
Slide 13: Status of Regulatory Mechanisms and Water Conditions
Status of Regulatory Mechanisms and Water Conditions Along with escalation filing, Cal Water received adjustment in adopted sales volumes through Sales Reconciliation Mechanism of 9% Recorded sales volumes in first quarter were 101% of new adopted sales volumes and WRAM receivable balance declined b
Slide 14: Net WRAM Receivable Balance
Net WRAM Receivable Balance (in millions; end-of-year balance except 2018) 15
Slide 15: Other Notes for 2018
Other Notes for 2018 Through January 1, CPUC had approved advice letter projects totaling additional $2.8 million annual revenue out of authorization of up to $30 million through 2019 No additional advice letter projects included in rates in first quarter We estimate 2018 effective tax rate of 23-25
Slide 16: Capital Investment History and Projection
Capital Investment History and Projection (in millions) *2018 estimated capital investment is the midpoint in the Company’s stated range of $200-$220 million. CAGR = 12.9% (2007-2017) 17
Slide 17: Regulated Rate Base of CWT
Regulated Rate Base of CWT Regulated Rate Base of CWT (in millions) *Includes estimated cumulative additions in 2018 and 2019 of $96M and $197M for advice letters 18
Slide 18: Summary
Summary Q1 typically close to breakeven for Company given our rate designs and usage patterns in our service territories While California cost of capital decision will reduce rates this year, we are pleased that CPUC moved significantly from its initial proposal We are seeing positive effects of our
Slide 19: Summary
Q1 typically close to breakeven for Company given our rate designs and usage patterns in our service territories While California cost of capital decision will reduce rates this year, we are pleased that CPUC moved significantly from its initial proposal We are seeing positive effects of our regulat
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