California Water Service Group · NYSE:CWT
California Water Service — Q3 2020 Earnings Presentation
22 slides from California Water Service's earnings presentation, Nov 6, 2020
Slide 1: Third Quarter 2020 Results Call Presentation
Third Quarter 2020 Results Call Presentation November 6, 2020
Slide 2: 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 3: Today's Participants
Today’s Participants Marty Kropelnicki Tom Smegal Paul Townsley Dave Healey President & CEO Vice President, CFO & Treasurer Vice President, Corporate Vice President, Controller Development and Chief Regulatory Officer 3
Slide 4: Presentation Overview
Presentation Overview • Our Operating Priorities • Recognition of 2018 GRC • Financial Results, Q3 and YTD • Financial Highlights, Q3 and YTD • EPS Bridges • Note on the Company’s Earnings Power • Continuing COVID-19 Impacts • California Regulatory Update • Capital Investment Update • Business Devel
Slide 5: Our Operating Priorities
CALIFORNIA WATER SERVICE GROUP a Vv ESTING FOR LIFE Our Operating Priorities ) Affordable, Excellent Service Enhanced Stockholder Value + Safe workplace & healthy lifestyles + Professional development * Effective, transparent High-Quality Water ld} Strong Brand & | & Wastewater Ss resnecrn Reputatio
Slide 6: Recognition of the 2018 California GRC
Recognition of the 2018 California GRC • On October 14th, the California Public Utilities Commission (“CPUC”) published a proposed decision in California Water Service Company’s (“Cal Water’s”) delayed 2018 General Rate Case (“GRC”), approving the settlement and proposing to adopt Cal Water’s positi
Slide 7: Financial Results: Third Quarter
Financial Results: Third Quarter (amounts are in millions, except for EPS) Q3 2019 Q3 2020 Variance Operating Revenue $232.5 $304.1 30.8% Operating Expenses $181.0 $198.0 9.4% Net Interest Expense $9.3 $10.5 13.4% Net Income $42.4 $96.4 120.6% EPS $0.88 $1.94 120.5% Capital Investments $73.0 $84.7 1
Slide 8: Financial Results: Year-to-Date
Financial Results: Year-to-Date (amounts are in millions, except for EPS) YTD 2019 YTD 2020 Variance Operating Revenue $537.7 $605.2 12.5% Operating Expenses $458.6 $493.5 7.6% Net Interest Expense $30.7 $30.8 0.3% Net Income $51.8 $81.3 57.1% EPS $1.08 $1.66 53.7% Capital Investments $194.9 $221.3
Slide 9: Q3 Financial Highlights
Q3 Financial Highlights Net income increased by $54.0 million to $96.4 million due to the recognition of the California GRC regulatory assets and lower effective tax rates, including $43.0 million which would have been attributable to prior quarters if a timely proposed decision had been issued. In
Slide 10: YTD Financial Highlights
YTD Financial Highlights Net income increased by $29.5 million to $81.3 million due primarily to the recognition of the interim rates memorandum account regulatory assets and lower estimated effective tax rate which we concluded was the probable outcome of the 2018 General Rate Case. In addition: •
Slide 11: EPS Bridge Q3 2019 to Q3 2020
EPS Bridge Q3 2019 to Q3 2020 - $0.04 -$0.02 $1.94 - $0.05 $0.02 $2.00 $1.80 $0.80 - $0.19 $1.60 $0.54 $1.40 $1.20 $0.88 $1.00 $0.80 $0.60 $0.40 $0.20 $0.00 * IRMA is the interim rate memorandum account, representing rate increases which the company will recover for that time 11 period
Slide 12: EPS Bridge YTD 2019 to 2020
EPS Bridge YTD 2019 to 2020 $2.00 $0.68 $1.80 $0.17 $1.66 - $0.03 - $0.04 -$0.05 $1.60 -$0.03 -$0.12 $1.40 $1.20 $1.08 $1.00 $0.80 $0.60 $0.40 $0.20 $0.00 12
Slide 13: Note on the Company's Earnings Power
Note on the Company’s Earnings Power • California General Rate Case, if the proposed decision is adopted, allows for net income from regulated operations in that state of $76 million in test year 2020, reflecting the authorized equity return on approximately $1.5 billion in rate base. • The company’
Slide 14: Continuing Impacts from COVID-19 Pandemic
Continuing Impacts from COVID-19 Pandemic • We continue to operate with enhanced safety protocols to protect customers and employees from infection. • We have seen increased customer account aging from the suspension of collection activity. o Bills outstanding more than 90 days increased to $5.4 mil
Slide 15: California Regulatory Update
California Regulatory Update • As discussed above, the CPUC issued a proposed decision in Cal Water’s 2018 GRC adopting the settlement and Cal Water’s positions on monetary disputed items. The Commission cannot vote on the proposed decision until November 19, 2020. • As previously disclosed, the CPU
Slide 16: YTD Capital Investment Update
YTD Capital Investment Update • Company and developer-funded capital investments were $221.3 million in the first three quarters of 2020, an increase of 13.5% compared to the same period in 2019. • The Company has previously estimated it would spend $260-290 million on capital in 2020. • On October
Slide 17: Business Development Q3 Update
Business Development Q3 Update • On October 5, 2020, the company announced it had signed an agreement to acquire the Animas Valley water system in northwest New Mexico, subject to government approvals and a number of closing conditions. Animas Valley serves approximately 2,000 water service connecti
Slide 18: YTD Development Activity Matrix 2020
YTD Development Activity Matrix 2020 System Water Wastewater Total Status Connections Connections Rainier View Water (WA) 18,500 18,500 Closed June 1, 2020 Kalaeloa Water (HI) 140 80 220 Closed November 3, 2020 Kapalua Water and Wastewater (HI) 500 500 1,000 Pending Regulatory Approval/Est close Q1
Slide 19: Capital Investment History and Projection
Capital Investment History and Projection (in millions) $350 $300 $290 CAGR = 9.7% $272 $274 $275 $259 (2008-2019) $250 $229 $200 $177 $150 $131 $113 $111 $118 $116 $108 Q3 $99 $221.3M $100 $50 $0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 *2020 *2021 *2020-2021 are the midpoints of
Slide 20: Estimated Regulated Rate Base of CWT
Estimated Regulated Rate Base of CWT (in millions) 2020 2021 2022 CA Proposed Decision Rate Base + Other States $ 1,607 $ 1,749 $ 1,892 $2,500 Advice Letters Included in Proposed Decision $ 150 $ 150 Potential Rate Base including all Advice Letters $ 1,607 $ 1,899 $ 2,042 $2,000 $1,500 $1,241 $1,263
Slide 21: Wrapping Up and Look Ahead
Wrapping Up and Look Ahead • Finish line is in sight for the 2018 California GRC. We’ll be working to confirm it is completed consistent with the Proposed Decision. • Company operators are providing a high level of service to our customers during COVID-19 mitigation while keeping our employees safe.
Slide 22: Discussion
6” WATER SERVICE GROUP Mar inyestine FOR LIFE Discussion GERnEE NYSE
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