H2o America · NASDAQ:HTO
H2o America — Q1 2023 Earnings Presentation
24 slides from H2o America's earnings presentation, May 1, 2023
Slide 1: Financial Results Presentation First Quarter 2023
Financial Results Presentation First Quarter 2023
Slide 2: On Today's Call
On Today’s Call Eric Thornburg Andrew Walters Chair, President Chief Financial Officer and CEO and Treasurer 2
Slide 3: Forward-Looking Statements
Forward-Looking Statements Safe Harbor This presentation contains forward-looking statements within the explosions, floods, ice storms, tornadoes, hurricanes, terrorist acts, meaning of the Private Securities Litigation Reform Act of 1995, as physical attacks, cyber-attacks, epidemic, or similar occ
Slide 4: Delivering on Our Growth Strategy in 1Q
Delivering on Our Growth Strategy in 1Q • Capital Expenditures (CapEx) Investment in water utility infrastructure and earning a return “of and on” that investment - $52.4 million invested, or 21%, of $255 million budgeted in 2023 • Constructive Regulatory Environment Experienced and highly regarded
Slide 5: Financial Results: 1Q 2023
Financial Results: 1Q 2023 • Quarter-over-quarter results are affected by the delay in San Jose Water Company’s 2022 to 2024 general rate case decision IN MILLIONS 1Q 2023 1Q 2022 CHANGE except for earnings per share (EPS) Revenue $137.3 $124.3 10% increase Net Income $11.5 $3.7 209% increase Dilute
Slide 6: 1Q 2023 Diluted EPS Bridge
1Q 2023 Diluted EPS Bridge Change in EPS ($): Q1 2023 - Q1 2022 $0.04 $0.07 Pe _ $(0.19) $0.37 1 Ler Gag, $(0.02) Revenue Increases Other Income Prior Year Gain on Sale Q1 2023 EPS Q1.2022 EPS Cupertino True-Up.. Lower Usage Water Supply Cost & Mix SWarup 6
Slide 7: Revenue Increased 10%
Revenue Increased 10% Change in Revenue ($M): Q1 2023 - Q1 2022 $17.4 $1.0 $1.0 $0.2 P| 137.3 Q1 2022 Revenue Revenue Increases Customer Growth Regulatory Mechanisms Other Lower Usage Q1 2023 Revenue SWaroup 7
Slide 8: Total Water Production Expenses Increased 2%
Total Water Production Expenses Increased 2% 8
Slide 9: Total Other Operating Expenses Increased 6%
Total Other Operating Expenses Increased 6% 9
Slide 10: 1Q23 Financing Activity
1Q23 Financing Activity • $42 million in equity issued At The Market • $278 million available on bank lines of credit, and $72 million drawn • 5.74% average borrowing rate on credit advances in 1Q23, 1.64% in 1Q22 10
Slide 11: California Updates
California Updates • Awaiting Cost of Capital decision - California Public Utilities Commission (CPUC) extended deadline for final decision to 3Q23 Water Supply Status - Proposed revenue increase reflects 10.3% return on equity and 5.48% cost of debt Lake Elsman at 101% of storage capacity - Request
Slide 12: Connecticut Updates
Connecticut Updates • Water Infrastructure and Conservation Adjustment (WICA) - Public Utilities Regulatory Authority authorized Connecticut Water WICA increase effective April 1, 2023 6.19% cumulative WICA as - 3.1% increase1 of April 1, 2023 - $3.3 million increase in annualized revenue - Covered
Slide 13: Maine Updates
Maine Updates • Step 3 filing for Biddeford-Saco Division filed on March 31 - Requests annualized revenue increase of $2.9 million Maine Water over two-years Contract Operator for - Reflects actual operating expense of new $60 million Berwick, Maine Water facility and increased financing costs Depar
Slide 14: Texas Updates
Texas Updates • System Improvement Charge (SIC) application filed on December 30, 2022 - Request for $14.8 million in completed projects of $33.6 million San Antonio Water System invested in SIC-eligible infrastructure since last GRC in 2014 (SAWS)/Texas Water Service Area Transfer - Generate $1.6 m
Slide 15: 2023 Guidance, Sensitivities
2023 Guidance, Sensitivities 2023 2023 Diluted EPS $2.40 - $2.501 Guidance 5-Year CapEx $1.4B Reaffirmed • Equity issuance of $40 million - $50 million in 2023, excluding acquisition growth ($42 million issued in 1Q) • Factors impacting 2023 guidance: - no significant rate cases expected in 2023 - c
Slide 16: EPS Growth Guidance
EPS Growth Guidance • Long-term growth rate 5% - 7% - Nonlinear - Anchored off of 2022 diluted EPS of $2.43 5% - 7% $2.43 16
Slide 17: PFAS Update
PFAS Update • US EPA proposed regulation of 6 per- and polyfluoroalkyl substances (PFAS) • Final standard expected by the end of 2023 • Initiated action to hold manufacturers/polluters accountable • Advocating that all affected water and wastewater utilities have access to available federal and stat
Slide 18: ESG Updates and Awards
ESG Updates and Awards • >2,000 kW in solar energy projects completed or under construction in 2023 • ESG scores from Institutional Shareholder Services (1 is best) - Governance – 2 - Social – 3; tied for first among U.S. water utility peers - Environment – 5; tied for second among U.S. water utilit
Slide 19: Thomas A. Hodge
Thomas A. Hodge • Vice President of Business Development and President of Texas Water Operation Services, LLC • Led team that quadrupled Texas Water customer base 19
Slide 20: Walter Bishop
Walter Bishop • Retired after 11 years of service on Board • Committed to sustainable water supplies, environmental stewardship and growth in Texas • First chair of Board’s sustainability committee 20
Slide 21: Drivers of Our Success
Drivers of Our Success • Passionate, dedicated employees serving: - 1.6 million people - Communities - Coworkers - Environment • Core Values - Integrity - Trust - Service - Compassion - Transparency - Teamwork - Straight Talk 21
Slide 22: Questions
= — = = a S/W Group 22
Slide 23: Appendix
= — = = a S/W Group 23
Slide 24: 2023 Rates and Surcharges
2023 Rates and Surcharges Revenue Requested/Approved State Docket# Type Status (annualized) California Advice Letter 586 GRC Authorized Increase for 2023 Effective January 1, 2023 $18.4M Maine 2022-00056 GRC Camden-Rockland Division Effective January 1, 2023 $233K Maine 2022-00057 GRC Freeport Divis