Essential Utilities, Inc. · NYSE:WTRG
Essential Utilities — Aqua America — Q1 2019 Earnings Presentation
35 slides from Essential Utilities's earnings presentation, May 3, 2019
Slide 1: Earnings Call First Quarter 2019
Earnings Call First Quarter 2019 May 3, 2019
Slide 2: Forward Looking Statement
Forward Looking Statement Brian Dingerdissen Vice President, Chief of Staff and Investor Relations AQUA NYSE: WTR 6
Slide 3: Forward Looking Statement
Forward Looking Statement This presentation contains in addition to historical information, forward looking statements based upon, among other things, our current assumptions, expectations, plans and beliefs concerning future events and their potential effect on us. These forward-looking statements
Slide 4: Introduction
Introduction Chris Franklin Chairman, Chief Executive Officer and President AQUA NYSE: WTR 6
Slide 5: Revenue Growth and EPS Growth
Peoples Financing Complete Revenue Growth (millions) • Revenue Growth • Progress Towards Peoples Regulatory Infrastructure Investment Approval EPS Growth (millions) • •
Slide 6: Summary of Financial Results
Summary of Financial Results Dan Schuller Executive Vice President, CFO AQUA NYSE: WTR 6
Slide 7: First Quarter
First Quarter As of March 31, 2019 In millions Highlights Favorable Change BH Unfavorable Change except per share Q1 2019 Q1 2018 Variance Revenue $2014 A | $1943 3.5% Operations and Maintenance $79.3 A | $739 7.3% Expense Net Income 0 (GAAP) $16.9 Vv | $50.8 (66.7%) Net Income 9 per Share (GAAP) $0
Slide 8: Operating Revenues
Operating Revenues Q1 2019 vs. Q1 2018 $210,000 $205,000 $200,000 $195,000 $190,000 $185,000 $180,000 $175,000 $170,000 $165,000 AQUA Change in Operating Revenues (thousands) 1,036 $3,147 $ $70 ($2,215) — — $201,132 $4,747 r | | $194,347 | Revenue Q1 2018 Rates & Regulated Other Market-Based Consump
Slide 9: Operations & Maintenance Expenses
Operations & Maintenance Expenses Q1 2019 vs. Q1 2018 Change in Operations & Maintenance Expenses (thousands) $90,000 $85,000 56,646 so72 $744 $638 $376 ($4,008) $80,000 = ~ |_| sro $75,000 $73,946 J $70,000 $65,000 $60,000 $55,000 $50,000 $45,000 $40,000 O&M Q12018 Transaction Regulated Production
Slide 10: EPS bridge Q1 2018 to Q1 2019
$0.006 ($0.036) $0.011 $0.020 $0.29 ($0.009) $0.28 ($0.154) ($0.030) $0.09
Slide 11: Pending and Completed Rate Cases and Surcharges
As of 5/2/2019 Completed Rate • Cases and Surcharges As of 5/2/2019 PA Rate Case • Settlement Reached Pending Approval As of 5/2/2019 Pending • • Pending Rate Rate Cases and Cases and • • Surcharges Surcharges
Slide 12: Peoples PA Rate Case Update
Peoples PA Rate Case Update Peoples Natural Gas! (PA) Date Filed 28-Jan-2019 Requested Rate Base $2,052m * Fully-projected future test year ending Oct-2020 Requested Revenue | $94.9m ($m) Rate case proceedings ongoing New rates expected to go into effect in fall 2019 Peoples’ first rate case since 2
Slide 13: Sources of Funds and Uses of Funds
Sources of Funds Uses of Funds Common Stock $1,294 Peoples Equity Purchase Price1 $2,905 CPPIB Equity Investment2 $750 Assumption of Peoples debt3 $1,370 Tangible Equity Units Aqua Private Placement Note $690 $314 (“Mandatory Convertible”) Refinancing Debt $900 Transaction Costs / Expenses $265 Assu
Slide 14: Strong Debt Issuance and Credit Ratings
Strong Debt Issuance and Credit Ratings * Issued $900 million of senior notes at a weighted average yield of 3.96% S&P Global * Weighted average maturity of 21 Ratin gs years ¢ Lower interest rate than expected at October announcement Moopy’s * Strong investment-grade ratings * Interest rate swaps s
Slide 15: Municipal Growth
Municipal Growth Chris Franklin Chairman, Chief Executive Officer and President AQU A NYSE: WTR &
Slide 16: Municipal Acquisitions
Approximate Rate Total Total Approx. Purchase Acquisitions State Type Base Acquisition State Type Cust. Cust. Price ($000s) ($thousands) Manteno IL WW 3,890 $25,200 New Garden PA WW 2,106 $29,500 Limerick PA WW 5,497 $64,100 Schuylkill PA W 600 $3,600 Peotone IL W / WW 3,083 $12,500 Grant Park IL WW
Slide 17: Municipal Systems by Size Range
Size Range Total Customers (Approx. # of Customers) (approx.) >50,000 315,000 10,000 – 50,000 54,000 <10,000 46,000 Total 415,000
Slide 18: Peoples Transaction
Peoples Transaction Chris Franklin Chairman, Chief Executive Officer and President AQU A NYSE: WTR 6
Slide 19: Peoples Overview by State
• • • • • • Approximate # of State Customers Pennsylvania 693,244 • Kentucky 38,701 West Virginia 12,868 • Total 744,813 • •
Slide 20: Peoples Infrastructure Investment and Capex
8,000 PA WV KY 6,000 4,000 2,000 0 Cast Iron Bare Unprotected Bare Cathodically Coated Unprotected Coated Cathodically Plastic, Copper and Steel Protected Steel Steel Protected Steel Fiberglass • $400 $350 ➢ $300 ($ Millions) $250 $200 ➢ $150 $100 $50 - 2016A 2017A 2018A 2019E 2020E 2021E
Slide 21: Capex 2019-2021 Estimates and Rate-Making Mechanisms
Aqua Capex: 2019-2021 Peoples Capex: 2019-2021 Pro Forma Combined Capex: Estimates Estimates 2019-2021 Estimates 54% 70% DSIC 30% 57% DSIC 43% 46% DSIC Standard Eligible Standard Eligible Standard Eligible Rate- Rate- Rate-Making Making Making State PA IN OH NJ IL NC Mechanism DSIC DSIC SIC DSIC QIP
Slide 22: Peoples Regulatory Approval Timeline
✓ ✓ ✓ ✓ ✓ ✓ ✓ October November December January February March April May June ✓ ✓ ✓ 22
Slide 23: Guidance
Guidance Chris Franklin Chairman, Chief Executive Officer and President AQU A NYSE: WTR 6
Slide 24: 2019 Aqua Stand-Alone Guidance
2019 Aqua Stand-Alone Guidance Excluding Peoples transaction-related items and earnings impacts from Peoples post-closing » Adjusted income of $1.45 to $1.50 per share Infrastructure investments of approximately $550 million in 2019 for communities served by Aqua » Infrastructure investments of appr
Slide 25: Summary
Summary v Peoples acquisition regulatory approval on track for mid-year closing v Peoples equity and debt financing successfully completed v Aqua PA rate case settlement nearing regulatory approval with rates to go into effect in May v Strong municipal acquisition pipeline in development for 2019 an
Slide 26: Q&A Session
O&A Session Aqua America
Slide 27: Thank You for Attending Aqua's First Quarter 2019 Conference Call
Thank You for Attending Aqua’s First Quarter 2019 Conference Call Second Quarter 2019 Earnings Conference Call and Webcast Wednesday, August 7, 2019 For more information contact: Brian Dingerdissen Vice President, Chief of Staff and Investor Relations 610.645.1191 BJDingerdissen@AquaAmerica.com AQUA
Slide 28: _ Aqua America
NYSE: WTR . ; _ Aqua America » , > r Abe.
Slide 29: GAAP to non-GAAP Reconciliation
GAAP to non-GAAP Reconciliation Quarter Ended March 31, 2019 2018 Net income (GAAP financial measure) $16,924 $50,839 Plus: transaction-related expenses for the Peoples 41,428 transaction Less: tax effect (8,628) Adjusted income (non-GAAP financial measure) $ 49,724 $50,839 Net income per common sha
Slide 30: Aqua 2019 Rates and Surcharges
Aqua 2019 Rates and Surcharges Completed As of May 2, 2019 Awarded Annualized Docket Number Revenue Increase (Sthousands) Illinois N/A Surcharge (w) $1,394 N/A Surcharge (ww) $268 Ohio 89-7028-WW-TRF Rate Cases (w) $974 18-0337-WW-SIC Surcharge (w) $2,267 M-2018-3006585, M- 2018-3006634, M-2019- 300
Slide 31: Aqua 2019 Rates and Surcharges Pending
Aqua 2019 Rates and Surcharges Pending As of May 2, 2019 Requested Annualized Docket Number Revenue Increase ($thousands) New Jersey WRT18121351 Rate Case (w) $7,202 North Carolina W-218, Sub 497A Surcharge (w) $602 W-218, Sub 497A Surcharge (ww) $62 On TEER ORCETE_Toy Comps en 19-567-WW-SIC Surchar
Slide 32: Dividend per Share (annualized)
Dividend per Share (annualized)
Slide 33: State by State Comparison
State by State Comparison As of December 31, 2018 State Rate Base Water Wastewater Total (Sthousands) Connections Connections Customers PA 3,095,126 440,487 28,115 468,602 OH 317,168 145,938 6,878 152,816 IL 320,002 65,214 15,222 80,436 T™ 234,569 64,360 17,480 81,840 NJ 171,113 53,639 6,213 59,852
Slide 34: Infrastructure Capital Investment Breakdown 2019 - 2021
| nfra st ru ct ure Capital Investment Breakdown 2019 - 2021 Investment 15% Meters Regulated Operations 3.8% Mains & Services Source Treatment & 49.3% Facilities 36.0% Tanks & Boosters 3.7% ] 3 Year Total = $1.4 billion AQU A NYSE: WTR 4
Slide 35: Aqua and Peoples' Commitment to Safety and Sustainability
Aqua and Peoples’ Commitment to Safety and Sustainability • Issued inaugural Corporate Social Responsibility Report in Aqua Southeastern Pennsylvania Main Break Averages 2018 40 • Participated in Carbon Disclosure Project (CDP) Survey and Aqua Southeastern Pennsylvania break rates 35 received a stro