Middlesex Water Company · NASDAQ:MSEX
Middlesex Water — Shareholder Meeting (May 2016)
45 slides from Middlesex Water's shareholder meeting presentation, May 25, 2016
Slide 1: Welcome to our Annual Meeting of Shareholders
Welcome to our Annual Meeting of Shareholders May 24, 2016 IDDLESEX ATER COMPANY
Slide 2: Forward Looking Statement
FORWARD LOOKING STATEMENT As an introduction to the information we will be discussing, please be aware that some of our comments can be considered forward - looking statements as defined by the federal securities laws and as outlined in the Company’s SEC filings. As such, any forward - looking state
Slide 3: A Key Focus
A KEY FOCUS Continue strengthening our water distribution infrastructure for ongoing service reliability, resiliency and water quality
Slide 4: Company Overview
Incorporated: 1897 Market Cap: $576 Million 52 - Week Range: $21.24 - $38.68 3 Month Avg. Volume: 75,134 Shares Outstanding: 16.2 Million Dividend Yield: 2.24% Annual Dividend: $0.7952 Institutional Ownership: 41% COMPANY OVERVIEW
Slide 5: Our Strategy for Growth
OUR STRATEGY FOR GROWTH Acquisitions of investor or municipal water/waste water utilities Timely and adequate recovery of prudent utility plant investments Investment in products, services and opportunities that leverage our water and wastewater competency Municipal and industrial water and wastewat
Slide 6: Leveraging Our Core Utility Expertise
Public Private Partnerships Acquisitions Contract O perations Military Base Water System Acquisitions Industrial Applications Our Services LEVERAGING OUR CORE UTILITY EXPERTISE Renewable Energy
Slide 7: Change in MSEX Share Price Relative to Peer Group
70.0% Change in MSEX Share Price Relative to Peer Group {Compared to Base Month Ended April 2015) 60.0% Jul Dec Jan Feb Mar May Jun Aug Sep Oct Nov Apr
Slide 8: Change in MSEX Share Price Relative to Average of Peer Group
70.0% Change in MSEX Share Price Relative to Average of Peer Group 60.0% ny ae 50.0% 40.0% 35.5% ——MSEX Peer Avg. 22.1% ae ae Jul Aug Sep Od Jan Apr
Slide 9: Protecting Public Health
PROTECTING PUBLIC HEALTH The Flint crisis has raised awareness of the critical role utilities play in ensuring public health protection. x We are in compliance with the USEPA’s Lead & Copper Rule. x We eliminated company - owned lead service lines more than 25 years ago. x Our treatment process incl
Slide 10: Financial Highlights
FINANCIAL HIGHLIGHTS ——
Slide 11: Net Income
13.4 14.4 16.6 18.5 2011 2012 2013 2014 2015 20.0 11 NET INCOME ($Millions)
Slide 12: Earnings Per Share
$0.84 $0.90 $1.03 $1.13 2011 2012 2013 2014 2015 12 $1.22 EARNINGS PER SHARE
Slide 13: Return on Equity
7.6% 8.0% 8.9% 9.5% 9.9% 2011 2012 2013 2014 2015 13 RETURN ON EQUITY
Slide 14: Revenues
$102 $110 $115 $117 $126 2011 2012 2013 2014 2015 14 REVENUES ($Millions)
Slide 15: Operating Revenues by Segment
OPERATING REVENUES 88% 12% By Segment Regulated Non-Regulated Regulated Non - Regulated Regulated Business: Water and wastewater customers in NJ, DE and PA. Non - Regulated Contract Services: Operation and maintenance of water and wastewater systems in NJ and DE.
Slide 16: Regulated Revenue Concentration
REGULATED REVENUE CONCENTRATION 39% 12% 19% 13% 17% 58% 12% 7% 10% 13% 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% Residential Commercial Industrial Fire Protection Contract Sales 1991 2015 Revenue Shift Over 25 Years
Slide 17: First Quarter 2016 Results
FIRST QUARTER 2016 RESULTS ($Millions except per share amounts) First Quarter Ended March 31, 2016 2015 Operating Revenues $30.6 $28.8 O & M Expenses $15.8 $16.1 Net Income $ 4.8 $3.6 Diluted Earnings Per Share $ 0.29 $ 0.22
Slide 18: Rate Activity
RATE ACTIVITY Effective Revenues Middlesex August 2015 $ 5.0M Tidewater DSIC January 2016 $ 0.1M Pinelands May 2016 $0.4M Twin Lakes June 2016 $0.1M Tidewater DSIC July 2016 $ 0.1M Middlesex PWAC September 2016 $ 0.1M
Slide 19: 2016 Construction Program
19 2016 CONSTRUCTION PROGRAM $49 MILLION $3.4 $4.1 $8.1 $ 33.4 Technology Other Infrastructure Needs Plant Improvements Distribution System
Slide 20: Capital Expenditures
CAPITAL EXPENDITURES (in $Millions) $20M $22M $26M $24M $49M $45M $67 M 0 10 20 30 40 50 60 70 80 2012 2013 2014 2015 2016 2017 2018 20
Slide 21: Utility Plant
UTILITY PLANT (In $Millions) 21 $332 $347 $359 $371 $385 $424 $461 $518 $183 $188 $198 $212 $222 $232 $240 $250 0 100 200 300 400 500 600 700 800 900 2011 2012 2013 2014 2015 2016 2017 2018 Delaware New Jersey
Slide 22: Capital Funding
CAPITAL FUNDING » Cash Flow From Operations » Dividend Reinvestment Plan Proceeds » Short - term Lines of Credit » Long - term Debt » Common Stock Offering
Slide 23: 2016 Long-Term Debt
2016 LONG - TERM DEBT » Qualified Projects F inanced Under State Revolving Loan Programs. » Interest Rates Below Market. » 20 Year F inal M aturity. » 2016 – Delaware Project Loan, $1.2 Million @ 2.0%. » 2016 – New Jersey (3 Projects) Loan, $16.0 Million, Estimated @ 1.5%
Slide 24: Dividend Payout Ratio
DIVIDEND PAYOUT RATIO 87.30% 82.60% 73.10% 67.5% 63.6% 2011 2012 2013 2014 2015
Slide 25: Dividends
DIVIDENDS $0.68 $0.69 $0.70 $0.71 $0.72 $0.73 $0.74 $0.75 $0.76 $0.77 $ 0.795 $0.62 $0.64 $0.66 $0.68 $0.70 $0.72 $0.74 $0.76 $0.78 $0.80 $0.82 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Slide 26: Operations Highlights
OPERATIONS HIGHLIGHTS
Slide 27: RENEW 2016 Infrastructure Investment
RENEW 2016 INFRASTRUCTURE INVESTMENT RENEW targets unlined and/or undersized mains for replacement. Improves water quality. Enhances fire flows. Minimizes future service disruptions. x Areas for investment: Edison and South Amboy x $12.0 Million Project x 8 Miles of Main x Replacement of mains, valv
Slide 28: Meter Pit Installation
METER PIT INSTALLATION INFRASTRUCTURE INVESTMENT Benefits No Need for Customer Appointments Unrestricted & Convenient access to Meter Compliance with NJBPU markout regulations Faster Access for Emergency Turnoffs Elimination of Meter Related Claims
Slide 29: Air Relief Valve Replacement
AIR RELIEF VALVE REPLACEMENT Valves were prioritized for replacement based on GIS, operations data, hydraulic modeling and inspections. This proactive measure helped reduce the probability of disruption on this major water transmission main in central NJ. INFRASTRUCTURE INVESTMENT Replacing valves (
Slide 30: Air Relief Valve Replacement
AIR RELIEF VALVE REPLACEMENT INFRASTRUCTURE INVESTMENT
Slide 31: Replacement of Aging & Underperforming Infrastructure
REPLACEMENT OF AGING & UNDERPERFORMING INFRASTRUCTURE INFRASTRUCTURE INVESTMENT Replaced 11,500 ft. of distribution mains in NJ & DE. Replaced 800 ft. of 20” transmission main at key locations in our NJ system. Upgraded operational and administrative support technology to better serve our customers.
Slide 32: Improvements in Remote Monitoring Capability
IMPROVEMENTS IN REMOTE MONITORING CAPABILITY INFRASTRUCTURE INVESTMENT Many of our wellfields and pump stations are controlled and operated remotely through our Supervisory Control and Data Acquisition System. Operators can view and monitor processes and adjust treatment parameters as required.
Slide 33: Improved Capacity for Fire Protection & Water Supply Needs
IMPROVED CAPACITY FOR FIRE PROTECTION & WATER SUPPLY NEEDS INFRASTRUCTURE INVESTMENT Tidewater’s newest elevated tank serves approx. 800 residential units in the Americana Bayside community near Selbyville, DE. Tidewater owns the 400,000 gallon elevated storage facility but branded the tank with the
Slide 34: Improved Reliability & Redundancy
IMPROVED RELIABILITY & REDUNDANCY INFRASTRUCTURE INVESTMENT To mitigate the effects of extreme weather on our operations and acting on our Post - Hurricane Sandy Action Plan, we upgraded our emergency water interconnections and enhanced electrical backup power generation.
Slide 35: Increasing Our Focus on Cybersecurity
INCREASING OUR FOCUS ON CYBERSECURITY “As cyber - attacks against utility systems nationwide continue to increase in number and sophistication, addressing cyber security is a top priority in enhancing the security and reliability of utility service in New Jersey and across the nation.” NJBPU Preside
Slide 36: Continued Service Reliability, Resilience and Water Quality
36 Continued Service Reliability, Resilience and Water Quality NOW and for the FUTURE
Slide 37: Large Scale Infrastructure Investments for Reliability and Resiliency
LARGE SCALE INFRASTRUCTURE INVESTMENTS FOR ADDED RELIABILITY AND RESILIENCY Through 2017, Middlesex Water expects to prudently invest over $100 million on capital projects that will include : Plant Upgrades Main Replacement Residuals Processing Booster Upgrades Disinfection By - Products Remediation
Slide 38: Benefits to Customers
BENEFITS TO CUSTOMERS ▪ Enhanced water quality and water pressure ▪ More reliable fire protection ▪ Additional backup power in weather events ▪ Greater storage capacity to help sustain supplies during emergencies ▪ Fewer disinfection by - products ▪ Stabilized pressure and supply throughout our 770
Slide 39: Dover Air Force Base Update
DOVER AIR FORCE BASE UPDATE ▪ One Year Operations Anniversary of privatization contract ▪ Air Force conducted a first year performance assessment RESULTS: “ All operations and maintenance requirements are being MET OR EXCEEDED by Tidewater Utilities.”
Slide 40: Delaware Customer Growth
3,000 4,500 5,100 6,000 6,600 10,100 11,300 12,700 15,700 19,100 21,300 23,600 26,000 28,300 30,100 38,000 43,100 43,400 44,175 42,500 44,180 45,249 45,717 47,418 64,995 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 DELAWARE CUSTOMER GROWTH
Slide 41: Employee Professional Development
EMPLOYEE PROFESSIONAL DEVELOPMENT We applied and were approved for a state training grant that will provide for further training in the following areas: ▪ Customer Service Management ▪ Office Management ▪ Leadership ▪ PC Computer Skills ▪ Supervision and Management ▪ Computer Science ▪ Communication
Slide 42: Honors and Awards
HONORS AND AWARDS Dennis Doll Honored by Woodbridge Chamber as 2015 Citizen of the Year. Director of Distribution Robert Fullagar Named Operator of the Year by AWWA - NJ. Pinelands Water Company Earns Best Tasting Water. General Counsel Jay Kooper Honored by NJBIZ and NYSE in 2016. TUI’s Southern Su
Slide 43: Giving Back to the Communities We Serve
GIVING BACK TO THE COMMUNITIES WE SERVE
Slide 44: Reaching Potential Retail Investors
REACHING POTENTIAL RETAIL INVESTORS Objectives: x Build Name Recognition x Educate potential investors about investing in water x Increase base of “buy and hold” investors x DRP provides long term, low cost capital Dennis Doll served as a Guest Panelist at the Orlando MONEYSHOW addressing how “Inves
Slide 45: Welcoming New Board Expertise
WELCOMING NEW BOARD EXPERTISE Kim C. Hanemann Senior Vice President – Delivery Projects and Construction, PSE&G. Key Qualifications » Construction, engineering and service delivery background. » Leadership record in a regulated electric and gas utility company. » Responsible for execution of large t