California Water Service Group · NYSE:CWT
California Water Service — Q3 2017 Earnings Presentation
23 slides from California Water Service's earnings presentation, Oct 26, 2017
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 3 Today’s Participants Tom Smegal Vice President, CFO & Treasurer
Slide 3: Presentation Overview
Presentation Overview Financial Results Financial Highlights Q3 2017- Q3 2016 EPS Bridge YTD 2017- YTD 2016 EPS Bridge California Fire Emergency Response and Training Cost of Capital Update Other Regulatory Notes Water Quality Regulation Update Drought and effects on WRAM Receivable Cap Ex 2007 Reco
Slide 4: Financial Results: Third Quarter
(amounts are in millions, except for EPS) Q3 2016 Q3 2017 Variance Operating Revenue $184.3 $211.7 14.9% Operating Expenses 154.2 170.5 10.6% Income from Operations 30.1 41.2 37.1% Other Income 0.5 1.2 131.6% Net Interest 7.7 8.6 11.2% Net Income $22.9 $33.8 48.0% EPS $0.48 $0.70 45.8% Financial Res
Slide 5: Financial Results: Year to Date
(amounts are in millions, except for EPS) 9 Months Ended Sep. 30, 2016 9 Months Ended Sep. 30, 2017 Variance Operating Revenue $458.4 $504.9 10.1% Operating Expenses 403.6 430.4 6.6% Income from Operations 54.9 74.5 35.8% Other Income 1.4 4.3 215.2% Net Interest 22.6 25.3 11.8% Net Income $33.6 $53.
Slide 6: Financial Highlights – 3rd Quarter
Financial Highlights – 3rd Quarter Quarterly earnings increase of $10.9 million, primarily attributable to $12.0 million additional revenue from recent rate increases in California and increased unbilled revenue accrual of $3.4 million. Other income increased $0.7 million primarily due to implementa
Slide 7: Financial Highlights – YTD
Financial Highlights – YTD Year to date earnings increase of $19.9 million, largely attributable to $33.9 million additional revenue from recent rate increases in California Incremental drought-related costs decreased $3.8 million Other income increased $2.9 million due to the implementation of equi
Slide 8: EPS Bridge Q3 2016 to Q3 2017
EPS Bridge Q3 2016 to Q3 2017 9 $0.015
Slide 9: EPS Bridge YTD 2016 to YTD 2017
EPS Bridge YTD 2016 to YTD 2017 10
Slide 10: Notes on EPS Bridge Items
Notes on EPS Bridge Items Increased rate relief is consistent with the GRC decision Change in unbilled revenue accrual is seasonal and reflects consumption changes due to weather and other factors Increased depreciation is consistent with $230 million additional capital investment placed into servic
Slide 11: California Fire Emergency Response and Training
California Fire Emergency Response and Training Minor damage in recent firestorms but fortunately no customer effects Flumes damaged on a raw water canal in Oroville serving irrigation customers Major incidents including Erskine Fire in 2016 and Oroville dam emergency in 2017 continue to teach lesso
Slide 12: Cost of Capital Update
Cal Water filed its cost of capital application on April 2, 2017 to set ROE and capital weighting for 2018 Requested 10.75% ROE and 53.4% equity capital structure Ratepayer Advocate proposed 8.22% ROE and 54.4% equity Currently authorized 9.43% ROE and 53.4% equity Hearings were held in September Co
Slide 13: Other Regulatory Notes
Other Regulatory Notes California escalation rate increases of up to $17.2 million for 2018 will be requested in the fourth quarter Increase is subject to an earnings test which reviews capital investment performance Increase will also vary with recorded inflation 2018 rates will also incorporate Sa
Slide 14: Water Quality Regulation Update
Cal Water’s project to comply with approved standard for 1,2,3 –Trichloropropane (TCP) is on schedule Company plans to add granular-activated carbon filtration at 38 sites Cal Water plans to invest $20 million in 2017 and $40 million in 2018 (included in its projected CapEx) to meet the new regulati
Slide 15: Drought and effects on WRAM Receivable
Cal Water’s decoupling mechanism (WRAM) and drought rate design combined to reduce impact of drought on financials Income statement insulated from most sales changes During the drought, the WRAM receivable balance declined due to drought surcharge In 2017, sales have increased 4.9% from the drought
Slide 16: Net WRAM Receivable Balance
Net WRAM Receivable Balance (in millions) (End of Year balance except current period) California water volumes were 81% of adopted through September 2017 17
Slide 17: Recovery of 2016-2017 Drought Expenses
Recovery of 2016-2017 Drought Expenses Expenses to administer drought programs were booked in the period incurred Drought expenses of $0.2 million for 2017, down from $4.0 million in the first nine months of 2016 Drought costs of $4.6 million expensed in 2016 and beginning of 2017 Will file to recov
Slide 18: Capital Investment History and Projection
Capital Investment History and Projection (in millions) *2017-2018 amounts are based upon Company projections including 2015 California Rate Case decision CAGR = 13.0% (2007-2016) 19
Slide 19: Regulated Rate Base of CWT
Regulated Rate Base of CWT Regulated Rate Base of CWT (in millions) *Includes estimated cumulative additions in 2017-2019 of $28M, $96M, and $197M for advice letters. 20
Slide 20: Looking Toward Year End and 2018
Looking Toward Year End and 2018 Company awaiting a decision in California cost of capital application We anticipate filing advice letters for escalation rate increases in California, along with a sales adjustment for all districts, in November, with new rates expected to be effective in January 201
Slide 21: 2017 California GRC Adopted Revenue by Month
2017 California GRC Adopted Revenue by Month (in millions) Total 2017 Adopted Revenue of $651.3M 22
Slide 22: 2017 California GRC Adopted Revenue by Month
2017 California GRC Adopted Revenue by Month (in millions) Total 2017 Adopted Revenue of $651.3M 70.1 684 676 ‘ Caan $ & we es ys ys pe of oo
Slide 23: Discussion
Discussion
California Water Service Group — Q3 2017 Earnings Presentation on 6ix