California Water Service Group · NYSE:CWT
California Water Service — Q4 2019 Earnings Presentation
22 slides from California Water Service's earnings presentation, Feb 27, 2020
Slide 1: Year-End and Fourth Quarter 2019 Earnings Call Presentation
Year - End and Fourth Quarter 2019 Earnings Call Presentation February 27, 2020
Slide 2: Forward-Looking Statements
Forward - Looking Statements This presentation contains forward - looking statements within the meaning established by the Private Securities Litigation Refor m Act of 1995 ("Act"). The forward - looking statements are intended to qualify under provisions of the federal securities laws for "safe har
Slide 3: Today's Participants
Today’s Participants Marty Kropelnicki President & CEO Tom Smegal Vice President, CFO & Treasurer Paul Townsley Vice President , Corporate Development and Chief Regulatory Officer Dave Healey Vice President, Controller
Slide 4: Presentation Overview
Presentation Overview • Our Operating Priorities • Financial Results, 2019 and Q4 • Financial Highlights, 2019 and Q4 • EPS Bridge, 2019 vs. 2018 • 2018 California General Rate Case (“GRC”) and 2020 Financial R eporting I mpacts • Capital Investment Update • Business Development Update • Wildfires a
Slide 5: Our Operating Priorities
SERVICE GROUP Our Operating Priorities ea. Enhanced Stockholder Value Strong Brand & Reputation ASfordable, Excelent Service High-Quality Water Wastewater
Slide 6: Financial Results: Full-Year
Financial Results: Full - Year (amounts are in millions, except for EPS) 2018 2019 Variance Operating Revenue $698.2 $714.6 2.3% Operating Expenses $587.7 $615.1 4.7% Net Interest Expense $37.9 $41.2 8.9% Net Income $65.6 $63.1 - 3.8% EPS $1.36 $1.31 - 3.7% Capital Investments $271.7 $273.8 0.8%
Slide 7: Financial Results: Fourth Quarter
Financial Results: Fourth Quarter (amounts are in millions, except for EPS) Q4 2018 Q4 2019 Variance Operating Revenue $167.4 $176.9 5.7% Operating Expenses $140.9 $156.5 11.1% Net Interest Expense $9.0 $10.5 16.3% Net In come $15.4 $11.3 - 26.2% EPS $0.32 $0.24 - 25.0% Capital Investments $58.8 $78
Slide 8: 2019 Financial Highlights
2019 Financial Highlights • Net income decreased by $2.5 million to $63.1 million; notable factors included: o Rate increases of $19.7 million were offset by asset - related costs of $7.6 million and increased expenses of $4.6 million for wages and $13.1 million for other operations o The company sa
Slide 9: Q4 Financial Highlights
Q4 Financial Highlights • Net income decreased by $4.1 million to $11.3 million; notable factors included: o $4.4 million of general rate increases were offset by asset related expense increases of $ 2.8 million and cost increases of $3.9 million for wages, uninsured losses, outside services, and ma
Slide 10: EPS Bridge 2018 to 2019
EPS Bridge 2018 to 2019 $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 $1.60 - $ 0.01 - $0.27 - $ 0.07 - $ 0.02 $1.36 $ 0.12 - $ 0.12 $0.32 $1.31
Slide 11: 2018 California General Rate Case
2018 California General Rate Case • On October 8, 2019 Cal Water and the California Public Utilities Commission (”CPUC”) Public Advocates Office filed a settlement covering the majority of issues in the case . The settlement must be approved by the CPUC. o Included in the settlement are $609 million
Slide 12: Cal Water Rate Case Delay and 2020 Interim Period Financial Reporting
Cal Water Rate Case Delay and 2020 Interim Period Financial Reporting • While Cal Water will be allowed to true - up a final decision back to January 1, 2020, a decision delayed beyond April could potentially affect our first quarter 2020 financial reporting. o Management is reasonably certain that
Slide 13: 2019 Capital Investment Update
2019 Capital Investment Update • Full Year company and developer - funded capital investments were $273.8 million, an increase of 0.8% compared to 2018. • Increased investments in the fourth quarter are attributable in part to improved progress on our Palos Verdes Water Supply Reliability Project an
Slide 14: Recent Business Development Activity
Recent Business Development Activity • Agreements we signed in 2019, when completed, will increase our customer base by 4.5% • On November 6, 2019 we announced an agreement to acquire Rainier View Water (”RVW”) in Washington state o RVW has approximately 18,000 service connections in close proximity
Slide 15: Wildfires and Public Safety Power Shutoffs
• California experienced a relatively mild fire season with early rains and no major fires affecting our water systems • Our preparation and response to Public Safety Power Shutoffs (“PSPS”) and potential wildfires was effective in 2019 but we remain vigilant o Multiple PSPS affected our service are
Slide 16: Update on Perfluorinated Compounds
Update on Perfluorinated Compounds • Media and regulatory attention on PFOS* and PFOA*, among other related compounds (collectively referred to as PFAS*), has accelerated in the last several months . PFAS are man - made substances found in industrial processes and consumer products such as fire - fi
Slide 17: Decoupling Balancing Account Update
Decoupling Balancing Account Update • Cal Water 2019 sales were 86% of adopted estimates • The net WRAM receivable balance is $62.6 million, up from $56.1 million at year - end 2018 • Adopted sales had been adjusted lower due to triggering the SRM, which allows for a true - up when annual sales are
Slide 18: Net WRAM Receivable Balance
Net WRAM Receivable Balance (in millions; end - of - year balance) $46.1 $46.3 $47.1 $42.0 $39.2 $69.1 $56.1 $62.6 $0 $10 $20 $30 $40 $50 $60 $70 $80 2012 2013 2014 2015 2016 2017 2018 2019
Slide 19: Capital Investment History and Projection
Capital Investment History and Projection (in millions) *2020 - 2021 include capital investments in the proposed settlement filed in the 2018 California GRC and subject to approval of the CPUC along with investments in other jurisdictions. $99 $108 $113 $111 $118 $116 $131 $177 $229 $259 $272 $274 $
Slide 20: Regulated Rate Base of CWT
Regulated Rate Base of CWT (in millions) * Rate Base at year - end, including $17.8 million of ratebase offset capital projects filed for recovery in late 2019. ** 2020 - 2022 bar chart represents the minimum and maximum estimated rate base from the table above. The settlement in Cal Water’s 2018 GR
Slide 21: Wrapping Up and Look Ahead
Wrapping Up and Look Ahead • Company focus is on concluding the California GRC and ensuring the settlement is adopted by the CPUC • First quarter potential 10 - Q “noise” related to reporting on balancing accounts • We look forward to welcoming Rainier View’s employees and customers to our company l
Slide 22: Discussion
WATER SERVICE GROUP ae WATER FOR LIFE Discussion a NYSE
California Water Service Group — Q4 2019 Earnings Presentation on 6ix