California Water Service Group · NYSE:CWT
California Water Service — Q3 2022 Earnings Presentation
22 slides from California Water Service's earnings presentation, Oct 27, 2022
Slide 1: Third Quarter 2022 Results Presentation
Third Quarter 2022 Results Presentation October 27, 2022 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 Tom Smegal Marty Kropelnicki Dave Healey Vice President, CFO & Treasurer President & CEO Vice President, Controller Paul Townsley Greg Milleman Vice President, Corporate Vice President, Rates Development & 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 Customer Debt Update Presentation Overview o Business Development Status o CapEx and Rate Base Tables o In Summary INVESTOR RELATI
Slide 5: Investor Relations Update
INVESTOR BOARD RELATIONS UPDATE 44
Slide 6: Financial Results: Third Quarter 2022
Financial Results: Third Quarter 2022 (Amounts are in millions, except for EPS) Q3 2021 Q3 2022 Variance Operating Revenue $256.7 $266.3 3.7% Operating Expenses $185.6 $201.4 8.5% Net Interest Expense $11.2 $11.3 0.8% Net Income Attributable to CWT $62.4 $55.9 (10.5%) EPS $1.20 $1.03 (14.1%) Capital
Slide 7: Financial Results: YTD 2022
Financial Results: YTD 2022 (Amounts are in millions, except for EPS) YTD 2021 YTD 2022 Variance Operating Revenue $617.6 $645.5 4.5% Operating Expenses $501.3 $544.1 8.5% Net Interest Expense $31.9 $33.2 4.2% Net Income Attributable to CWT $97.6 $76.4 (21.7%) EPS $1.91 $1.41 (26.0%) Capital Investm
Slide 8: Third Quarter Financial Highlights
Third Quarter Financial Highlights NET INCOME ATTRIBUTABLE TO CWT DECREASED $6.5M UNBILLED REVENUE INCREASED $3.4M AND WE RECORDED A $2.0M LOWER CHANGE IN VALUATION OF THE COMPANY’S NONQUALIFIED PLAN ASSETS AS COMPARED TO Q3 2021. $13.3M INCREASED TOTAL OPERATING EXPENSES DUE MAINLY TO WAGE INCREASE
Slide 9: Year to Date Financial Highlights
Year to Date Financial Highlights NET INCOME ATTRIBUTABLE TO CWT DECREASED $21.2M PRIMARILY DUE TO $9.4M REDUCTION IN UNBILLED REVENUE, AN $11.4M UNREALIZED CHANGE IN THE VALUATION OF NONQUALIFIED PLAN ASSETS, AND A $1.3M INCREASE IN INTEREST OVERALL, OPERATING EXPENSE INCREASES WERE MOSTLY DUE TO I
Slide 10: EPS Bridge Q3 2021 to Q3 2022
EPS Bridge Q3 2021 to Q3 2022 $0.22 $1.40 $1.20 $0.06 $1.20 -$0.04 -$0.05 $1.03 $1.00 -$0.36 $0.80 $0.60 $0.40 $0.20 $0.00 INVESTOR RELATIONS 9
Slide 11: EPS Bridge YTD 2021 to YTD 2022
EPS Bridge YTD 2021 to YTD 2022 $0.44 -$0.58 $2.00 $1.91 -$0.17 $1.80 -$0.20 $1.60 $0.01 $1.41 $1.40 $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $0.00 INVESTOR RELATIONS 10
Slide 12: California Cost of Capital Update
California Cost of Capital Update • No update in the quarter from the Administrative Law Judge on the submitted case. While there is still a potential for the CPUC to issue a decision this year, it is increasingly likely that a final decision will be made in 2023. • Because of the delay in issuing a
Slide 13: California General Rate Case Update
California General Rate Case Update • Cal Water and the Public Advocates Office filed a settlement on September 2, covering issues of rate design, sales forecast, and other less-controversial issues. • Litigated items not included in the settlement included capital investment budgets, WRAM balancing
Slide 14: Focus on Decoupling for 2023
Focus on Decoupling for 2023 • In 2023, Cal Water will no longer be decoupled and again experience revenue (sales) and production cost (source mix) variability not seen since 2008. • The 2021 General Rate Case settlement and stipulations contain provisions designed to mitigate the absence of a decou
Slide 15: California Drought Update
California Drought Update CONSERVATION IS WORKING - CALIFORNIA CUSTOMER USAGE DOWN 19% IN Q3 AS COMPARED TO ADOPTED, AND DOWN 7% COMPARED TO 2021 ALL CALIFORNIA DISTRICTS IN WATER REVENUE ADJUSTMENT MECHANISM BALANCE HAS “STAGE 2” DROUGHT INCREASED TO $94.8 MILLION DUE TO LOWER THAN ADOPTED RESTRICT
Slide 16: Capital Investment Update
• Q3 Capital spending tracked to our expectations with an increase in spending from 2021 • We continue to monitor supply chains for major materials, particularly ductile iron pipe and electrical equipment • We continue to look for risk mitigations including potentially Capital Investment Update stoc
Slide 17: Customer COVID Debt Update
Customer COVID Debt Update • Cal Water began shutting off past-due customers for nonpayment starting in late July • Under COVID guidelines, no collections were allowed from March 2020 until now • While California state aid resulted in a reduced number of delinquent accounts, it will still take month
Slide 18: 2022 Business Development Project Updates
2022 Business Development Project Updates System Water Wastewater Total Status Connections Connections Animas Valley Water 2,000 2,000 Closed April 2022 (NM) Railyard (TX) – New 350 (up to 1,500 at 350 (up to 1,500 Closed June 2022 service area of BVRT buildout) at buildout) Skylonda (CA) 176 176 CP
Slide 19: Capital Investment and Depreciation
Capital Investment and Depreciation (in millions) 2015-2021 TOTAL 2008-2019 CapEx Capital Investment Depreciation CAGR $400 $355 $360 $365 3x $350 $300 $250 9.7% DEPRECIATION $229 $259 $272 $274 $299 $293 $222.1 YTD $200 $177 $150 $131 $118 $116 $127 $135 $109 $116 $100 $99 $84 $89 $77 $58 $61 $61 $
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: In Summary
o Core business remains strong in 3rd year of California GRC cycle, while we face increases in wages, goods and services costs due to the inflationary environment o Market headwinds continue to lower unrealized valuation of certain retirement assets In Summary o Management focused on preparation for
Slide 22: Discussion
CALIFORNIA WATER SERVICE GROUP La i VEsTING FOR LIFE ¥
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