California Water Service Group · NYSE:CWT
California Water Service — Q2 2018 Earnings Presentation
23 slides from California Water Service's earnings presentation, Jul 26, 2018
Slide 1: Forward-Looking Statements
Forward-Looking Statements This presentation contains forward-looking statements within the meaning established by the Private Securities Litigation Reform Act of 1995 ("Act"). The forward-looking statements are intended to qualify under provisions of the federal securities laws for "safe harbor" tr
Slide 2: Today's Participants
Marty Kropelnicki President & CEO Today’s Participants Tom Smegal Vice President, CFO & Treasurer 3
Slide 3: Presentation Overview
Presentation Overview Our Operating Priorities SJW Update Financial Results and Highlights EPS Bridge Q2 2017 to Q2 2018 EPS Bridge YTD 2017 to YTD 2018 2018 California General Rate Case (GRC) Update on Cost of Capital and Tax Reform Regulatory Balancing Account Update Other Rate Filings Capital Inv
Slide 4: Presentation Overview
' Presentation Overview + Our Operating Priorities SJW Update + Financial Results and Highlights + EPS Bridge Q2 2017 to Q2 2018 + EPS Bridge YTD 2017 to YTD 2018 2018 California General Rate Case (GRC) + Update on Cost of Capital and Tax Reform Regulatory Balancing Account Update + Other Rate Filin
Slide 5: SJW Update: Reaffirming Our Commitment
SJW Update: Reaffirming Our Commitment 6 March 14, 2018 SJW and CTWS announce agreement to merge in all-stock transaction 1 April 4, 2018 California Water sends letter to SJW Board of Directors with an all-cash acquisition proposal for $68.25 per share 2 April 25, 2018 SJW informs California Water t
Slide 6: Financial Results: Second Quarter
(amounts are in millions, except for EPS) Q2 2017 Q2 2018 Variance Operating Revenue $171.1 $172.6 0.9% Operating Expenses $144.5 $147.6 2.2% Net Interest Expense $8.5 $9.8 15.4% Net Income $18.5 $13.0 -29.7% EPS $0.39 $0.27 -30.8% Capital Investments $56.9 $63.3 11.2% Financial Results: Second Quar
Slide 7: Financial Results: Year-to-Date
(amounts are in millions, except for EPS) YTD 2017 YTD 2018 Variance Operating Revenue $293.2 $304.9 4.0% Operating Expenses $255.9 $271.8 6.2% Net Interest Expense $16.7 $18.5 10.8% Net Income $19.7 $10.5 -46.7% EPS $0.41 $0.22 -46.3% Capital Investments $108.7 $133.9 23.2% Financial Results: Year-
Slide 8: Q2 Financial Highlights
Q2 Financial Highlights Second quarter earnings decrease of $5.5 million largely attributable to: Business development costs of $3.6 million Decrease in revenue from the cost of capital decision for California Water Service Company (Cal Water) of $1.7 million Changes in expenses for the quarter that
Slide 9: EPS Bridge Q2 2017 to Q2 2018
EPS Bridge Q2 2017 to Q2 2018 10
Slide 10: EPS Bridge YTD 2017 to YTD 2018
EPS Bridge YTD 2017 to YTD 2018 11
Slide 11: Notes on EPS Bridge Items
Notes on EPS Bridge Items Increased revenue includes California escalation increases net of California cost of capital revenue reduction effective January 1, 2018, as well as rate base offset rate relief and effect of Hawaii rate increases since corresponding period in 2017 Change in unbilled revenu
Slide 12: 2018 California General Rate Case
Cal Water filed its 2018 GRC on July 2, 2018, requesting $828.5 million in capital investments over the period 2019-2021 Main replacement program increases replacement rate from 200 year cycle to 120 year cycle Other proposed investments are routine, for replacement infrastructure, security, water q
Slide 13: GRC Details
GRC Details Proposed revenue increase is $50.7 million in 2020, $31.5 million in 2021, and $33.0 million in 2022 Requested 9-year amortization of $108 million change in deferred income taxes generated by tax reform Estimated $12 million annual cash outflow with corresponding rate base increase in 20
Slide 14: Update on Cost of Capital and Tax Reform
Update on Cost of Capital and Tax Reform Effect of cost of capital decision for Cal Water was previously reported in first quarter financials Total estimated annual effect is a reduction in revenue of $6.9 million Tax Cuts and Jobs Act effect was also reported in first quarter financials Revenue red
Slide 15: Regulatory Balancing Account Update
Regulatory Balancing Account Update Cal Water year to date sales are 95% of adopted estimates Change in adopted sales due to triggering the Sales Reconciliation Mechanism, which allows for a true-up when annual sales are above or below adopted sales by more than 5% The current WRAM receivable balanc
Slide 16: Net WRAM Receivable Balance
Net WRAM Receivable Balance (in millions; end-of-year balance except 2018) 17
Slide 17: Other Rate Filings
Other Rate Filings Hawaii Waikoloa rate cases, filed in December 2017 requesting increases of $3.8 million in annual revenue Proceedings are ongoing and the Company anticipates a Commission decision by year-end Washington Water general rate case was filed on July 2, 2018 requesting $1.6 million annu
Slide 18: Updated Capital and Rate Base Projections
Updated Capital and Rate Base Projections Company is presenting its estimated capital investment program through 2021 and estimated regulated rate base through 2022 The last three years of each projection are dominated by requests made in the recent 2018 California GRC. These are requests subject to
Slide 19: Capital Investment History and Projection
Capital Investment History and Projection (in millions) *2018 estimated capital investment is the midpoint in the Company’s stated range of $200-$220 million. **2019-2021 include capital investments proposed to the CPUC and subject to change based on regulatory outcome and other factors. CAGR = 11.2
Slide 20: Regulated Rate Base of CWT
Regulated Rate Base of CWT Regulated Rate Base of CWT (in millions) *Includes estimated cumulative additions in 2018 and 2019 of $96M and $197M for advice letters 21 **2020-2022 reflect rate base proposed in California GRC plus estimated rate base in other subsidiaries and are subject to change base
Slide 21: Summary
Summary Focus is on the 2018 California GRC filing On track to invest $200-$220 million in water system infrastructure in 2018 to provide safe, reliable service to our customers Company remains committed to pursuing SJW acquisition Common-sense combination would create opportunities for stockholders
Slide 22: Summary
* Focus is on the 2018 California GRC filing * On track to invest $200-$220 million in water system infrastructure in 2018 to provide safe, reliable service to our customers * Company remains committed to pursuing SJW acquisition © Common-sense combination would create opportunities for stockholders
Slide 23: Discussion
Sk DISCUSSION
California Water Service Group — Q2 2018 Earnings Presentation on 6ix