California Water Service Group · NYSE:CWT
California Water Service — FY2017 Earnings Presentation
21 slides from California Water Service's earnings presentation, Mar 1, 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: Presentation Overview
Presentation Overview Our Operating Priorities Financial Results Financial Highlights 2016 - 2017 EPS Bridge Cost of Capital Update Tax Cuts and Jobs Act Outlook for 2018 2018 California GRC California Drought regulatory mechanisms Cap Ex 2007 Recorded to 2018 Projected Rate Base 2014 recorded to 20
Slide 3: Presentation Overview
1 Presentation Overview + Our Operating Priorities + Financial Results + Financial Highlights + 2016 - 2017 EPS Bridge + Cost of Capital Update + Tax Cuts and Jobs Act + Outlook for 2018 + 2018 California GRC + California Drought regulatory mechanisms + Cap Ex 2007 Recorded to 2018 Projected + Rate
Slide 4: Financial Results: Full Year
(amounts are in millions, except for EPS) 2016 2017 Variance Operating Revenue $609.4 $666.9 9.4% Operating Expenses 533.2 572.3 7.3% Income from Operations 76.2 94.6 24.2% Other Income 3.0 6.5 117.5% Net Interest 30.5 33.9 11.2% Net Income $48.7 $67.2 38.0% EPS $1.01 $1.40 38.6% Financial Results:
Slide 5: Financial Results: Fourth Quarter
(amounts are in millions, except for EPS) Q4 2016 Q4 2017 Variance Operating Revenue $150.9 $162.0 7.3% Operating Expenses 129.6 141.9 9.5% Income from Operations 21.3 20.1 -5.7% Other Income 1.6 2.2 34.5% Net Interest 7.8 8.6 9.7% Net Income $15.1 $13.7 -9.4% EPS $0.31 $0.28 -9.7% Financial Results
Slide 6: 2017 Financial Highlights
Net income increase of $18.5 million, largely attributable to: Increased revenue from the December 2016 California General Rate Case decision Increased Other Income due to recognition of Equity AFUDC Elimination of drought expenses Lower effective tax rate - driven by state repairs deductions for ma
Slide 7: 2017 Financial Highlights
2047 Financial Highlights. eee * Net income increase of $18.5 million, largely attributable to: Increased revenue from the December 2016 California General Rate Case decision Increased Other Income due to recognition of Equity AFUDC Elimination of drought expenses Lower effective tax rate - driven b
Slide 8: Notes on EPS Bridge Items
Notes on EPS Bridge Items Increased Revenue includes California General Rate Case and rate base offset rate relief. Change in unbilled revenue accrual is also included within revenue increases. The change in unbilled revenue accrual added $4.5 million in 2017 as compared to an addition of $2.0 milli
Slide 9: California Cost of Capital Update
California Cost of Capital Update On February 6, 2018, the California Public Utilities Commission issued the assigned administrative law judge’s proposed decision (PD) in the company’s California cost of capital filing with three other water utilities The PD rejects all the positions of the utility
Slide 10: Return on Equity Comparison
Return on Equity Comparison Natl. avg. authorized ROE for water utilities in 2017 9.56% Authorized ROE for major CA energy utilities in 2017 10.05-10.3% Current Cal Water authorized ROE 9.43% Proposed Cal Water ROE 2018-2020 8.22% Lowest 2017 authorized water ROE in U.S. (Suez New York) 9.0%
Slide 11: Cost of Capital, continued
Cost of Capital, continued Company management disagrees strongly with the proposed decision Applicant companies have filed comments and met with Commissioner advisors to point out the severe punitive nature of the PD. The PD would cut Cal Water’s estimated revenue by around $13 million (range of $0.
Slide 12: Tax Cuts and Jobs Act
Tax Cuts and Jobs Act All four of our regulatory commissions initiated procedures to ensure customers benefit from tax reform Tax expense included in rates will decline Customers will likely see a 1-2% rate reduction on average monthly bills Utilities lose several important tax deductions including
Slide 13: Outlook for 2018
Outlook for 2018 2018 capital investment range of $200-220 million, due to front-loading in 2016-2017 of California 3-year approved budget Cal Water received approval for $15.9 million escalation increase in California effective January 1, 2018 Depreciation expense anticipated to be $6-7 million hig
Slide 14: 2018 General Rate Case Filing
California Water will file its 2018 GRC in July Company anticipates requesting more capital than was awarded in the last cycle, primarily due to replacement of aging infrastructure Company will begin to forecast preliminary cap ex and rate base growth for 2019 through 2022 after the rate case is fil
Slide 15: California Drought Recovery and Regulatory Mechanisms
California Drought Recovery and Regulatory Mechanisms California continues to be decoupled, but the net receivable balance in the Water Revenue Adjustment Mechanism (WRAM) grew to $69.1 million in 2017 California sales increased 6.7% but were only 82% of adopted volumes Along with escalation filing,
Slide 16: Net WRAM Receivable Balance
Net WRAM Receivable Balance (in millions) (End of Year balance) California water volumes were 82% of adopted for 2017 and 6.7% higher than 2016
Slide 17: Capital Investment History and Projection
Capital Investment History and Projection (in millions) *2018 amounts are based upon Company projections including 2015 California Rate Case decision CAGR = 12.9% (2007-2017)
Slide 18: 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.
Slide 19: Summary
Summary 2017 was a solid year incorporating rate increases from the last California GRC decision Record capital spending in 2017, however, there are fewer remaining approved projects in 2018 – we expect $200-220 million in 2018 with a GRC request for higher cap ex in 2019-2021 Received escalation in
Slide 20: Summary
2017 was a solid year incorporating rate increases from the last California GRC decision Record capital spending in 2017, however, there are fewer remaining approved projects in 2018 = we expect $200-220 million in 2018 with a GRC request for higher cap ex in 2019-2021 Received escalation increase w
Slide 21: Discussion
Discussion
California Water Service Group — FY2017 Earnings Presentation on 6ix