H2o America · NASDAQ:HTO
H2o America — Q2 2023 Earnings Presentation
27 slides from H2o America's earnings presentation, Jul 31, 2023
Slide 1: Financial Results Presentation Second Quarter 2023
Financial Results Presentation Second 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 (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, 1995, as amend
Slide 4: Delivering on Our Growth Strategy in 2023
Delivering on Our Growth Strategy in 2023 • Constructive regulatory outcomes • California Cost of Capital decision is balanced between the needs of customers and capital providers • Connecticut Water Infrastructure and Conservation Adjustment effective April 1 • Texas KT Water Resources acquisition
Slide 5: Financial Results: 2Q 2023
Financial Results: 2Q 2023 • Quarter-over-quarter results comparison was impacted by the delay in San Jose Water Company’s 2022 to 2024 general rate case decision • Revenues were impacted by lower usage in California, Maine and Texas • Texas drought conservation measures in place will further reduce
Slide 6: 2Q 2023 Diluted EPS Bridge
2Q 2023 Diluted EPS Bridge Change in EPS ($): Q2 2023 - Q2 2022 $0.04 $0.04 = hadi Ye — $(0.18) ZZ $(0.13) il $0.58 $(0.06) $0.38 202022 ‘Revenue Increases. Income Tax Regulatory Other Water Supply Costs Lower Usage, Net Interest Expense 20 2023 Reserve Release Mechanisms & Mix GWerup 6
Slide 7: Revenue Increased 5% From 2Q 2022
Revenue Increased 5% From 2Q 2022 7
Slide 8: Water Production Expenses Increased 4% From 2Q 2022
Water Production Expenses Increased 4% From 2Q 2022 8
Slide 9: Other Operating Expenses Increased 1% From 2Q 2022
Other Operating Expenses Increased 1% From 2Q 2022 9
Slide 10: Financial Results: YTD 2023
Financial Results: YTD 2023 • Year-to-date results comparison was impacted by the delay in San Jose Water Company’s 2022 to 2024 general rate case decision • Revenues were impacted by lower usage in California, Maine and Texas IN MILLIONS YTD 2023 YTD 2022 CHANGE except for earnings per share (EPS)
Slide 11: YTD 2023 Diluted EPS Bridge
YTD 2023 Diluted EPS Bridge 11
Slide 12: 2023 YTD Financing Activity and Income Tax Rate
2023 YTD Financing Activity and Income Tax Rate • $65.0 million in equity issued at the market – $23.3 million in 2Q – Raised $50 million target for general corporate purposes – Additional amount raised for acquisitions expected to close in 3Q23 • $266.7 million available on bank lines of credit, an
Slide 13: California Updates
California Updates • Cost of Capital decision for years 2022 - 2024 – California Public Utilities Commission (CPUC) final decision issued on June 29, 2023 2023 WCCM – Prospective decision maintains previously authorized Water Cost of Capital Mechanism (WCCM) adjustment of 51 basis – Establishes capi
Slide 14: California Updates
California Updates • Drought – End of mandatory conservation on April 11, 2023 – End of temporary revenue protections: Water Conservation Water Supply Status Memorandum Account (WCMA) and Water Conservation Expense Memorandum Account (WCEMA) as of June 30, 2023 – 20 bps ROE reduction related to WCMA
Slide 15: Connecticut Updates
Connecticut Updates • Water Infrastructure and Conservation Adjustment (WICA) – Filed for a 1.19% increase in WICA with Public Connecticut Water WICA Utilities Regulatory Authority on July 27, 2023 6.19% cumulative WICA as – $11.5 million in completed projects of June 30, 2023 – $1.3 million increas
Slide 16: Maine Updates
Maine Updates • Filed with Maine Public Utilities Commission for a temporary rate increase of $1.5 million in the Biddeford Saco division on July 3, 2023 Maine Water WISC – Related to the step three rate filing on March 31, 2023 Water Infrastructure – Requests annualized revenue increase of $2.9 mil
Slide 17: Texas Updates
Texas Updates • KT Water Development acquisition approved by Public Utilities Commission of Texas (PUCT) on July 24, 2023 – 570 connections, fair market value and applied rate doctrine treatments San Antonio Water System requested (SAWS)/Texas Water – Closing expected in 3Q23, final decision in 4Q23
Slide 18: Guidance
Guidance Guidance 2023 Diluted EPS $2.40 - $2.501 5-Year CapEx $1.6B2 Equity Issuance, excluding acquisition growth $40 - $50 million • Equity issuance of $65 million YTD, includes equity raised for acquisitions • Factors underlying 2023 guidance: – No significant rate cases expected in 2023 – Conti
Slide 19: 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 20: ESG Updates and Awards
ESG Updates and Awards • Fleet vehicle electrification and EV charges • Battery storage to replace diesel generator • Expanded use of biodiesel fuel • ESG scores from Institutional Shareholder Services (1 is best) • Environment – 5; tied for second among U.S. water utility peers • Social – 4; third
Slide 21: Committed to Being a Force for Good
Committed to Being a Force for Good Providing an essential service with integrity and reliability • Miami Beach water system, Old Lyme, Connecticut – 118 customers – Acquired by Connecticut Water in September 2022 – System out of compliance with drinking water regulations since 2016 – Brought into f
Slide 22: Appendix
Appendix 22
Slide 23: 2023 Regulatory Filings Pending and Approved
2023 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 06/29/23 Effective 07/31/23 ($400K) ($4
Slide 24: 2023 Regulatory Filings Pending and Approved cont'd
2023 Regulatory Filings Pending and Approved cont’d Order Revenue Revenue State Docket # Type* Filing Date Date Status Requested Approved Comments (annualized) (annualized) CT 20-12-30WI05 WICA 01/26/23 03/22/23 Effective 04/01/23 $3.3M $3.3M $27.8M of investment CT 20-12-30WI04 2022 WICA Rec. 01/25
Slide 25: YTD Revenue Increased 8%
YTD Revenue Increased 8% Change in Revenue ($M): YTD 2023 - YTD 2022 $32.1 $2.4 $1.9 $0.1 — sa $273.3 YTD 2022 Revenue Increases Regulatory Mechanisms Customer Growth Other Lower Usage YTD 2023 SW Group 25
Slide 26: YTD Water Production Expenses Increased 3%
YTD Water Production Expenses Increased 3% 26
Slide 27: YTD Other Operating Expenses Increased 4%
YTD Other Operating Expenses Increased 4% 27