H2o America · NASDAQ:HTO
H2o America — Q4 2023 Earnings Presentation
30 slides from H2o America's earnings presentation, Feb 22, 2024
Slide 1: 2023 Financial Results Presentation
2023 Financial Results Presentation
Slide 2: On Today's Call
On Today’s Call Eric W. Andrew Walters Thornburg Chief Financial Officer Chair, President and Treasurer and CEO 2
Slide 3: Forward-Looking Statements
Forward-Looking Statements Safe Harbor This presentation contains forward-looking statements within (9) catastrophic events such as fires, earthquakes, explosions, the meaning of the Private Securities Litigation Reform Act of floods, ice storms, tornadoes, hurricanes, terrorist acts, physical 1995,
Slide 4: Delivered on Our Earnings Growth Strategy in 2023
Delivered on Our Earnings Growth Strategy in 2023 • Constructive Regulatory Outcomes • California Cost of Capital and Water Conservation Memorandum Account • Connecticut Water Infrastructure and Conservation Adjustment (WICA) charges • Maine Water Biddeford-Saco Division general rate case • Customer
Slide 5: Driving Future Growth
Driving Future Growth • Substantially Invest in CapEx: • $1.6 billion in next 5 years • Water and wastewater infrastructure • Optimizing OpEx through capital investment • Advanced leak detection • Advanced Metering Infrastructure in California • Solar generation • Battery energy storage systems • El
Slide 6: Financial Results: 4Q 2023
Financial Results: 4Q 2023 • Quarter-over-quarter results comparison was impacted by the delay in San Jose Water Company’s 2022 to 2024 general rate case decision that came in October 2022 • Reimplementation of the Water Conservation Memorandum Account (WCMA) and the Water Conservation Expense Memor
Slide 7: Financial Results: 2023
Financial Results: 2023 IN MILLIONS YTD 2023 YTD 2022 CHANGE except for EPS Revenue $670.4 $620.7 8% increase Net Income $85.0 $73.8 15% increase Diluted EPS $2.68 $2.43 10% increase 7
Slide 8: 2023 Diluted EPS Bridge
2023 Diluted EPS Bridge Change in EPS ($): YTD 2023 - YTD 2022 $0.11 $0.14 0.14 | el $0.14 paula = $1.30 — $(0.93) || $(0.23) = — $(0.17) $0.11) — a $2.68 $2.43 . $(0.10) $(0.04) YTD 2022 Revenue Income Tax —_Lower Usage& Customer Water Interest Prior Year Depreciation Allowance Other YTD 2023 Incre
Slide 9: 2023 Revenue Increased 8%
2023 Revenue Increased 8% Change in Revenue ($M): YTD 2023 - YTD 2022 $46.5 $5.7 $3.8 $0.3 $670.4 $620.7 | $(6.6) YTD 2022 Revenue Increases Regulatory Mechanisms Customer Growth Other Lower Usage YTD 2023 GWerup 9
Slide 10: 2023 Water Production Expenses Increased 10%
2023 Water Production Expenses Increased 10% 10
Slide 11: 2023 Other Operating Expenses Increased 3%
2023 Other Operating Expenses Increased 3% 11
Slide 12: 2023 Financing Activity and Income Tax Rate
2023 Financing Activity and Income Tax Rate • $83 million in equity issued at the market • $5.7 million in 4Q • Raised $50 million target for general corporate purposes • Additional amount raised for acquisitions that closed 3Q • $350 million bank lines of credit, $171.5 million drawn leaving $178.5
Slide 13: California Updates
California Updates • 2025 – 2027 GRC application filed with the California Public Utilities Commission (CPUC) on January 2, 2024 • Proposes 3-year $540 million CapEx program GRC Schedule ▪ Addresses PFAS Application filed with CPUC on ▪ Reduces operating expense and greenhouse gas emissions through
Slide 14: California Updates
California Updates • Water Cost of Capital Mechanism (WCCM) adjustment effective January 1, 2024 • Return on Equity (ROE) increase of 70 basis points (bps) to WCCM Adjustment 10.01%, less 20 bps for reimplementation of the WCMA, for a Change in Moody’s Aa bond new ROE of 9.81% index of plus or minus
Slide 15: Connecticut Updates
Connecticut Updates • Filed GRC with Public Utilities Regulatory Authority (PURA) on October 3, 2023 • Requesting $21.4 million, or 18.1%, annualized revenue Connecticut Water WICA increase • Proposing expansion of customer assistance programs 7.38% cumulative WICA as of October 1, 2023 • Decision e
Slide 16: Maine Updates
Maine Updates • In March 2023, Maine Water Company requested a $2.9 million revenue increase in the Biddeford-Saco Division (BSD) to reflect actual operating expenses of new $60 Biddeford-Saco Division million treatment facility and increased financing costs GRC • On January 5, 2024, the Maine Publi
Slide 17: Texas Updates
Texas Updates • Strong developer interest in our service area • Outstanding development units (potential connections) increased 47% in 2023 to 22,000 units1 Texas had the highest population growth of any U.S. • Serves three of the five fastest-growing counties in the state in the 2020 Census. United
Slide 18: 2024 Guidance
2024 Guidance Guidance 2024 2024 Diluted EPS $2.68 - $2.78 EPS Forecast Equity issuance, excluding acquisition $55M to $65M $2.68 to growth $2.781 5-Year CapEx $1.6B2 • Factors underlying 2024 guidance: • A Return on Equity (ROE) increase in California from 9.31% to 9.81% (net of a 20 bps reduction
Slide 19: Meeting Long-Term Investment Needs
Meeting Long-Term Investment Needs $1.6 billion in infrastructure investment planned for 2024 - 2028 Timely Recovery 2024 Budgeted CapEx Through Regulatory Mechanisms in 20241 in millions ~65% Texas $49 California Maine $169 $20 $3322 Connecticut $94 ~35% 1 Based on budgeted investments or filings t
Slide 20: 2024 Infrastructure Projects
2024 Infrastructure Projects • Pipeline to bring new water supply from the recently acquired KT Water to our customers in Texas • Cambrian Station Tanks in California • Heritage Village water treatment facility in Southbury, Connecticut • Construction of solar arrays at the Saco River Drinking Water
Slide 21: Force for Good
Force for Good • Employee Safety • Good Place to Work Index - world class • Gender Balanced Board1 • 12% of the Russell 3000 have gender balanced boards • Diverse Supplier Spend • National Association of Clean Water Agencies’ recognition for watershed stewardship in California • MSCI Rating: ‘A’ • N
Slide 22: Questions
Questions 22
Slide 23: Appendix
Appendix 23
Slide 24: PFAS Update
PFAS Update • Supporting U.S. EPA’s proposed standard for per- and polyfluoroalkyl substances (PFAS) in drinking water • Part of class action settlements against PFAS manufacturers for approximately $11.5 billion • Advocating that all affected water and wastewater utilities have access to available
Slide 25: 2023/24 Regulatory Filings Pending and Approved
2023/24 Regulatory Filings Pending and Approved Order Revenue Revenue State Docket # Type* Filing Date Date Status Requested Approved Comments (annualized) (annualized) CA AL 586 GRC 11/18/22 Effective 01/01/23 $18.4M $18.4M CA A2105004 Cost of Capital 05/03/21 6/29/23 Effective 07/31/23 ($0.4M) ($0
Slide 26: 2023/24 Regulatory Filings Pending and Approved cont'd
2023/24 Regulatory Filings Pending and Approved cont’d Order Revenue Revenue State Docket # Type* Filing Date Date Status Requested Approved Comments (annualized) (annualized) ME 2023-00065 GRC Biddeford-Saco 3 03/31/23 01/05/24 Effective 01/01/24 $2.9M $2.6M Retroactive to 01/01/24 ME 2022-00056 GR
Slide 27: 4Q 2023 Diluted EPS Bridge
4Q 2023 Diluted EPS Bridge Change in EPS ($): Q4 2023 - Q4 2022 $0.17 oo $1.09 $(0.55) — $(0.32) (0.04) Soon — $0.59 . . — ‘ (0.02) 5(0.02) $(0.02) 40 2022 Revenue Regulatory -»«2022GRC_—Water Supply -—Interest. «= Taxes Other Depreciation Prior Year Gain Other 40 2023 Increases Mechanisms Interim T
Slide 28: Revenue Compared to 4Q 2022
Revenue Compared to 4Q 2022 28
Slide 29: Water Production Expenses Increased 22% From 4Q 2022
Water Production Expenses Increased 22% From 4Q 2022 29
Slide 30: Other Operating Expenses Increased 3% From 4Q 2022
Other Operating Expenses Increased 3% From 4Q 2022 30