California Water Service Group · NYSE:CWT
California Water Service — Q4 2022 Earnings Presentation
22 slides from California Water Service's earnings presentation, Mar 2, 2023
Slide 1: Fourth Quarter and Year End 2022 Results Presentation
Fourth Quarter and Year End 2022 Results Presentation March 2, 2023 0
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 ("PSLRA"). The forward-looking statements are intended to qualify under provisions of the federal securities laws for "safe harbor"
Slide 3: Today's Participants
Today’s Participants Marty Kropelnicki Tom Smegal President & CEO Vice President, CFO & Treasurer Tom Scanlon Greg Milleman Corporate Controller Vice President, Rates & Regulatory Affairs INVESTOR RELATIONS 2
Slide 4: Presentation Overview
o Our Values and Priorities o Financial Results o Financial Highlights and Earnings Bridges o California Regulatory Update o California Drought Update o Capital Update o Business Development Status Presentation Overview o CapEx and Rate Base Tables o Looking Forward INVESTOR RELATIONS 3
Slide 5: Investor Relations Update
INVESTOR BOARD RELATIONS UPDATE 44
Slide 6: Financial Results: Full Year 2022
Financial Results: Full Year 2022 (Amounts are in millions, except for EPS) 2021 2022 Variance Operating Revenue $790.9 $846.4 7.0% Operating Expenses $664.1 $718.8 8.2% Net Interest Expense $43.2 $44.3 2.6% Net Income attributable to CWT $101.1 $96.0 (5.1%) Diluted EPS $1.96 $1.77 (9.8%) Capital In
Slide 7: Full Year Financial Highlights
Full Year Financial Highlights NET INCOME ATTRIBUTABLE TO CWT DECREASED $5.1M PRIMARILY DUE TO AN $11.0M UNREALIZED CHANGE IN THE VALUATION OF NONQUALIFIED RETIREMENT PLAN ASSETS AND A $1.1M INCREASE IN INTEREST EXPENSE, OFFSET BY A $1.7M INCREASE IN UNBILLED REVENUE AS EXPECTED, THE THIRD YEAR OF A
Slide 8: Financial Results: Fourth Quarter 2022
Financial Results: Fourth Quarter 2022 (Amounts are in millions, except for EPS) Q4 2021 Q4 2022 Variance Operating Revenue $173.3 $200.9 15.9% Operating Expenses $162.9 $174.7 7.2% Net Interest Expense $11.3 $11.1 (1.8%) Net Income Attributable to CWT $3.5 $19.6 458.6% Diluted EPS $0.07 $0.35 438.6
Slide 9: Fourth Quarter Financial Highlights
Fourth Quarter Financial Highlights NET INCOME ATTRIBUTABLE TO CWT INCREASED $16.1M UNBILLED REVENUE INCREASED $11.1M AND WE RECORDED A $0.5M INCREASED CHANGE IN VALUATION OF THE COMPANY’S NONQUALIFIED RETIREMENT PLAN ASSETS AS COMPARED TO Q4 2021. $11.8M INCREASED TOTAL OPERATING EXPENSES DUE MAINL
Slide 10: EPS Bridge Q4 2021 to Q4 2022
EPS Bridge Q4 2021 to Q4 2022 $0.80 $0.70 $0.60 $0.50 $0.02 $0.35 $0.40 $0.01 $0.20 $0.14 -$0.09 $0.30 $0.20 $0.07 $0.10 $0.00 INVESTOR RELATIONS 9
Slide 11: EPS Bridge Full Year 2021 to 2022
EPS Bridge Full Year 2021 to 2022 $0.51 -$0.43 $2.50 $1.96 -$0.11 -$0.14 $2.00 $1.77 -$0.02 $1.50 $1.00 $0.50 $0.00 INVESTOR RELATIONS 10
Slide 12: California Cost of Capital Update
California Cost of Capital Update • Once again, no new updates in the quarter from the Administrative Law Judge on the open cost of capital case. It is not clear to the parties when a proposed decision will be issued, but as of today the earliest a final decision could be approved is April 2023. • B
Slide 13: California General Rate Case Update
California General Rate Case Update • No update on timing of a proposed decision. • The ALJ assigned to our case is also assigned to Golden State Water’s GRC, which is currently delayed over 15 months. • Cal Water and the Public Advocates Office filed a settlement on September 2, 2022 covering issue
Slide 14: Focus on Decoupling for 2023
Focus on Decoupling for 2023 • Starting in 2023, Cal Water will no longer be decoupled and expects again to experience revenue (sales) and production cost (source mix) variability. • The 2021 General Rate Case settlement and stipulations contain provisions designed to mitigate the absence of a decou
Slide 15: CA Tracker Status for 2023
CA Tracker Status for 2023 • Mechanisms we should be able to estimate prior to a GRC decision: • Incremental Cost Balancing Account (ICBA) covers changes in unit prices for production costs. • Conservation Balancing Account covers conservation expenses • Mechanisms which are in effect, but which we
Slide 16: California Drought Update
California Drought Update A SERIES OF “ATMOSPHERIC RIVER” STORMS IN JANUARY 2023 AND A WET, COLD FEBRUARY HAS DRAMATICALLY IMPROVED CONSERVATION CONTINUES – WATER SUPPLY CONDITIONS FOR CALIFORNIA’S REGIONAL CALIFORNIA CUSTOMER USAGE IN SURFACE WATER SYSTEMS Q4 2022 WAS 8.2% LOWER THAN 2021 AND 17% L
Slide 17: Capital Investment Update
• We invested a record amount in capital in 2022, in part due to growth in spending in all subsidiaries • Q4 capital spending increased due to good weather conditions during the quarter and previous planning efforts to improve materials availability • 2023 target capital spending will still be in a
Slide 18: Business Development Project Updates
Business Development Project Updates System Water Wastewater Total Status Connections Connections Animas Valley (NM) 2,000 2,000 Closed April 2022 Railyard (TX) – BVRT 350 (up to 1,500 at 350 (up to 1,500 Closed June 2022 Utility buildout) at buildout) Keahou (HI) 1,500 Equivalent 1,500 EDUs Closed
Slide 19: Capital Investment and Depreciation
Capital Investment and Depreciation (in millions) 2015-2022 TOTAL 2008-2019 Capital Investment Depreciation CapEx $400 $350 CAGR $360 $365 3x $328 9.7% $299 $293 $300 $272 $274 $259 $250 DEPRECIATION $229 $200 $177 $150 $131 $118 $116 $133 $124 $115 $100 $99 $109 $84 $89 $77 $58 $61 $61 $64 $50 $55
Slide 20: Estimated Regulated Rate Base of CWT
Estimated Regulated Rate Base of CWT (in billions) $3.0 $2.74 $2.49 $2.5 $2.24 $1.95 $2.0 $1.82 $1.61 $1.5 $1.26 $1.24 $1.06 $1.12 $1.0 $0.5 $0.0 2016 2017 2018 2019 2020 2021 2022 *2023 *2024 *2025 *2023-2025 Rate Base Estimates include filed proposal in 2021 California General Rate Case plus estim
Slide 21: Looking Forward
o Short-term regulatory uncertainty remains in California as we await two significant case outcomes. Over the long-term, we remain optimistic about the CPUC regulatory compact and our long- term capital investment growth o Our quarterly financial results will not include the potential effects of Loo
Slide 22: Discussion
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