California Water Service Group · NYSE:CWT
California Water Service — FY2020 Earnings Presentation
24 slides from California Water Service's earnings presentation, Feb 25, 2021
Slide 1: Full Year & Fourth Quarter 2020 Results Presentation
Full Year & Fourth Quarter 2020 Results Presentation February 25, 2021 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 ("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 Paul Townsley Shannon Dean Vice President, Corporate Development Vice President, Customer Service President & CEO and Chief Regulatory Officer and Chief Citizenship Officer Tom Smegal Dave Healey Vice President, CFO & Treasurer Vice President, Controller INVEST
Slide 4: Presentation Overview
o Our Operating Priorities o Financial Results o Earnings Breakdown for 2020 o How to Look at 2021 Earnings o Continuing COVID-19 Impacts o Company Values Statement o ESG Update Presentation Overview o California Regulatory Update o Capital Investment Update o Cap Ex and Rate Base Tables o Long-Term
Slide 5: Our Operating Priorities
Our Operating Priorities Affordable, High-Quality Employees as Strong Brand & Enhanced Excellent Service Water & Best Advocates Reputation Stockholder Wastewater Value o Continuous o Safe workplace & o Environmental improvement, o Consistent sampling healthy lifestyles stewardship o Infrastructure e
Slide 6: Financial Results: Full Year 2020
Financial Results: Full Year 2020 (Amounts are in millions, except for EPS) 2019 2020 Variance Operating Revenue $714.6 $794.3 11.2% Operating Expenses $615.1 $657.6 6.9% Net Interest Expense $41.2 $41.9 1.7% Net Income $63.1 $96.8 53.4% EPS $1.31 $1.97 50.4% Capital Investments $273.8 $298.7 9.1% I
Slide 7: Financial Results: Fourth Quarter 2020
Financial Results: Fourth Quarter 2020 (Amounts are in millions, except for EPS) Q4 2019 Q4 2020 Variance Operating Revenue $176.9 $189.2 7.0% Operating Expenses $156.5 $164.1 4.9% Net Interest Expense $10.5 $11.0 4.8% Net Income $11.3 $15.5 37.2% EPS $0.24 $0.31 29.2% Capital Investments $78.8 $77.
Slide 8: Full Year Financial Highlights
Full Year Financial Highlights NET INCOME INCREASE PRIMARILY DUE TO THE ADOPTION OF THE INCREASED BY CALIFORNIA GENERAL RATE CASE, WHICH… $33.7M Added revenue - cash recovery expected to begin April 2021 Lowered adopted water expense TO Recorded water cost above adopted created additional revenue $9
Slide 9: Q4 2020 Financial Highlights
Q4 2020 Financial Highlights Net income increased by $4.2M to $15.5M $12.0M Rate Increases due to adoption $4.8M Increased Repairs Tax Deductions of California GRC and lower income $7.6M Operating Cost Increases tax expense due to repairs deductions for mainline replacements INVESTOR RELATIONS 8
Slide 10: EPS Bridge 2019 to 2020
EPS Bridge 2019 to 2020 $1.97 $2.00 $0.11 - $0.17 -$0.07 $1.80 - $0.04 - $0.01 -$0.01 $1.60 $1.40 $1.31 $1.20 $0.85 $1.00 $0.80 $0.60 $0.40 $0.20 $0.00 INVESTOR RELATIONS 9
Slide 11: EPS Bridge Q4 2019 to Q4 2020
EPS Bridge Q4 2019 to Q4 2020 $0.70 $0.60 $0.50 $0.18 $0.06 - $0.07 $0.40 $0.03 -$0.04 $0.03 $0.31 $0.24 $0.30 - $0.12 $0.20 $0.10 $0.00 INVESTOR RELATIONS 10
Slide 12: Earnings Breakdown 2020
Earnings Breakdown 2020 2020 California regulated operations Regulated activities outside adopted net income of $76M California added $3.8M Notable differences from GRC adopted Additional net income outside core earnings regulated came from: o Recognition of AFUDC equity $5.0M o Recorded bad debt hi
Slide 13: How to Look at Earnings 2021
2021 California regulated operations adopted rate base of $1.70B and adopted net income of $83.5M o Depreciation and property taxes likely to be higher due to 2020 plant additions o Bad debt expense likely to continue through 2021 o Hiring authorized positions will add wages How to Look at Other sta
Slide 14: Continuing Impacts from Covid-19 Pandemic
Will continue to operate with enhanced safety protocols Will continue to suspend water shutoffs through at least end of Q1 2021 Increased customer account aging from suspension of collection activities o Bills outstanding >90 days increased to $9.6M o Increased reserve for doubtful accounts from $2.
Slide 15: Our Strategic Goals & Priorities
wel ewan, » ., Zee see er see y ot MEX7e, petiNGy: & z he Wen see Wee” OUR STRATEGIC GOALS & PRIORITIES Affordable, Excellent Service Strong Brand & Reputation WATER SERVICE GROUP High-Quality Water . & Wastewater < & Enhanced is Stockholder Value * Infrastructure investment © Growth by criteria & f
Slide 16: 2020 ESG Update
2020 ESG Update COMPLETED IN PROGRESS Engaged third-party to conduct Producing ESG report that aligns with materiality assessment to identify SASB and references GRI, available most relevant ESG topics April 10 ENVIRONMENT SOCIAL GOVERNANCE o Completed phase 1 of o Introduced a “Corporate o Forgave
Slide 17: 2021 California Regulatory Update
2021 California Regulatory Update On July 1, Cal Water We anticipate Filing will address rate On May 1, Cal Water expects to file 2021 requesting higher level design, sales forecast, will file for review of GRC, with rates of capital and water cost Cost of Capital for expected to be improvements tha
Slide 18: Capital Investment Update
Capital Investment Update 2020 Company and developer-funded capital investments: Capital Spending Target: 2022-2024 $298.7M Investments exceeded $270-$300M capital plans target range due to 9.1% For 2021 released in July favorable working conditions throughout the year compared to 2019 INVESTOR RELA
Slide 19: Long-Term Debt and Financing Plan
Long-Term Debt and Financing Plan TODAY: Cal Water announced it had priced $280M in first mortgage bonds through private placement process o $130M of 30-year bonds with coupon of 2.87% o $150M of 40-year bonds with coupon of 3.02% Bonds will fund May 11, 2021 Cal Water’s weighted average debt cost w
Slide 20: Capital Investment and Depreciation
Capital Investment and Depreciation (in millions) 2015-2020 2008-2019 $350 CapEx CAGR $299 $300 $285 $250 3x 9.7% DEPRECIATION $229 $259 $272 $274 $200 $177 $150 $131 $113 $111 $118 $116 $108 $108 $100 $99 $84 $89 $77 $58 $61 $61 $64 $50 $55 $40 $40 $43 $0 2009 2010 2011 2012 2013 2014 2015 2016 201
Slide 21: Estimated Regulated Rate Base of CWT
Estimated Regulated Rate Base of CWT (in millions) 2021 2022 Adopted Regulated Rate Base (CA) and projected (Other States) $ 1,810 $ 1,920 $2,500 Remaining potential advice letters $ 54 $ 54 Potential rate base including all advice letters $ 1,864 $ 1,974 *2022 Rate Base estimate assumes Cal $2,000
Slide 22: 2021 Business Outlook
2021 Business Outlook File and Complete Emerge File California California from Cost of GRC COVID-19 Capital 2021 ESG Initiatives INVESTOR RELATIONS 21
Slide 23: In Summary
o Performed well through COVID-19 and a delayed GRC in California o Record earnings paired with record capital spending o Kept our customers and employees safe In Summary o Strong year of business development o Looking forward to our new set of challenges in 2021 INVESTOR RELATIONS 22
Slide 24: Discussion
CALIFORNIA WATER SERVICE GROUP La INVESTING FOR LIFE _ |e | DISCUSSION
California Water Service Group — FY2020 Earnings Presentation on 6ix