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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13
or 15(d) of
The Securities Exchange Act of 1934
Date of Report (date of earliest event reported): October 31, 2024
CALIFORNIA WATER SERVICE GROUP
(Exact name of Registrant as Specified in its Charter)
| Delaware (State or other jurisdiction of incorporation) |
1-13883 (Commission file number) |
77-0448994 (I.R.S. Employer Identification Number) |
| 1720 North First Street San Jose, California (Address of principal executive offices) |
95112 (Zip Code) |
(408) 367-8200
(Registrant’s telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Common Shares, par value $0.01 |
CWT | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined by Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
| Item 2.02. | Results of Operations and Financial Condition |
On October 31, 2024, California Water Service Group (the “Company”) issued a press release (a copy of which is attached hereto as Exhibit 99.1 and incorporated herein by reference) announcing its financial results for the third quarter of 2024, ended September 30, 2024.
As announced, the Company will host a conference call on Thursday, October 31, 2024, at 11:00 am EDT to discuss financial results and management’s business outlook. The financial results announcement contains information about how to access the conference call and webcast. A slide presentation, which includes supplemental information relating to the Company, will be used by management during the conference call. A copy of the slide presentation is attached hereto as Exhibit 99.2 and is incorporated by reference herein. The Exhibits will be posted on the Company’s website at www.calwatergroup.com under the “Investor Relations” tab.
The information furnished pursuant to Item 2.02 of this Current Report shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.
| Item 9.01. | Financial Statements and Exhibits. |
We hereby furnish the following exhibits, which shall not be deemed “filed” for the purposes of Section 18 of the Exchange Act, with this report:
| Exhibit No. | Description | |
| 99.1 | Press Release issued October 31, 2024 | |
| 99.2 | Slide presentation relating to conference call | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CALIFORNIA WATER SERVICE GROUP | ||
| Date: October 31, 2024 | By: | /s/ James P. Lynch |
| Name: | James P. Lynch | |
| Title: | Senior Vice President, Chief Financial Officer and Treasurer | |
Exhibit 99.1
California Water Service Group Reports Third Quarter Results
SAN JOSE, Calif., October 31, 2024 (GLOBE NEWSWIRE) -- California Water Service Group (“Group” or “Company,” NYSE: CWT), a leading publicly traded water utility serving California, Hawaii, New Mexico, Washington, and Texas, today reported financial results for the third quarter of 2024.
Highlights included:
| • | Recorded diluted earnings per share of $1.03 in Q3 2024 and $2.93 year-to-date, compared to $0.60 in Q3 and $0.38 year-to-date in 2023. |
| • | Invested a record $332.2 million of capital in infrastructure during the first nine months of 2024. |
| • | Retained authorized return on equity (“ROE”) of 10.27% for 2025 for California Water Service (Cal Water). |
| • | Declared the 319th consecutive quarterly dividend in the amount of $0.28 per common share. |
| • | Received approval on advice letter filings related to regulatory mechanisms expected to result in the recovery of $94.2 million in cash over the next three years. |
| • | Received awards from the U.S. Environmental Protection Agency (“EPA”), Great Place to Work, and Newsweek. |
According to Chairman and Chief Executive Officer Martin A. Kropelnicki, financial results were in line with expectations, as Group continued to benefit from the effects of the 2021 California General Rate Case (“2021 California GRC”) decision received on March 7, 2024.
“In addition to solid financial performance, our teams did exceptionally well on many fronts, including water system improvements, water conservation, and emergency response. During the third quarter, we invested $117.8 million in infrastructure; earned a WaterSense Excellence Award for conservation from the EPA; and were honored with the National Association of Water Companies Living Water Award for our employees’ response to the 2023 Lahaina fires on Maui. We were also recognized as a Great Place to Work and one of the World’s Most Trustworthy Companies,” he said.
Q3 2024 Financial Results
| • | Q3 2024 net income attributable to Group was $60.7 million, compared to net income of $34.4 million in Q3 2023. |
| • | Operating revenue was $299.6 million in Q3 2024, compared to $255.0 million in Q3 2023, an increase of $44.6 million. |
| ◦ | Increased rates added $42.2 million in revenue. |
| ◦ | Increased customer usage and new customers added $9.6 million. |
| ◦ | The increases were offset by the Monterey Water Rate Adjustment Mechanism (“MWRAM”) approved in the 2021 California GRC, which reduced revenue by $9.4 million. |
| • | Operating expenses were $232.8 million in Q3 2024, compared to $211.5 million in Q3 2023, an increase of $21.3 million. |
| ◦ | Water production costs increased by $2.7 million to $95.1 million in Q3 2024 compared to the same period last year, primarily due to an increase in wholesale water rates and water usage. |
| ◦ | Income tax expenses increased primarily due to the increase in pre-tax income. |
Year-to-Date 2024 Financial Results
| • | Year-to-date net income attributable to Group was $171.1 million, compared to net income of $21.8 million for the nine-month period ended September 30, 2023. |
| • | Operating revenue was $814.6 million in the first nine months of 2024, compared to $580.1 million in the first nine months of 2023, an increase of $234.5 million. |
| ◦ | A cumulative adjustment for the 2023 impacts of the 2021 California GRC decision and 2024 MWRAM added $99.9 million in revenue. |
| ◦ | Increased rates, including recognition of the 2024 Interim Rates Memorandum Account (“IRMA”), increased revenue by $95.0 million. |
| ◦ | Deferred revenue decreased by $15.6 million primarily due to recognition of previously deferred Water Revenue Adjustment Mechanism (“WRAM”) revenue as a result of securing California Extended Water and Wastewater Arrearage Payment Program funds for the payment of eligible customer balances. |
| ◦ | Accrued and unbilled revenue increased revenue by $6.7 million. |
| • | Operating expenses were $621.8 million for the nine-month period ended September 30, 2024, compared to $538.2 million in the same period last year. |
| ◦ | Water production costs increased by $18.7 million, mostly due to an increase in wholesale water rates and water usage. |
| ◦ | Other operations expense increased $11.4 million, primarily due to the recognition of $13.1 million of costs associated with the recognized deferred revenue. |
| ◦ | Income taxes increased $41.1 million primarily due to the increase in pre-tax net operating income. |
As a result of the Q1 2024 adoption of the 2021 California GRC decision, interim rate relief related to 2023 totaling $64.0 million was included in 2024 net income, including $15.2 million and $50.4 million that were attributable to the three and nine months ended September 30, 2023, respectively.
Liquidity, Financing, and Capital Investment
As of September 30, 2024, Group maintained $105.2 million of cash, of which $45.6 million was classified as restricted, and had additional short-term borrowing capacity of $340 million, subject to meeting the borrowing conditions on the Group and Cal Water lines of credit.
On August 2, 2024, the California Public Utilities Commission (“CPUC”) approved Cal Water to issue up to $1.3 billion in new debt and equity securities.
On October 22, 2024, Cal Water issued $125 million aggregate principal of its 5.22% First Mortgage Bonds (“Bonds”) due October 22, 2054. The Bonds include terms and conditions similar to Cal Water’s existing First Mortgage Bond indebtedness. In addition, during Q3 2024, Group sold 639,000 shares of common stock under its at-the-market stock issuance program raising net proceeds of approximately $34.5 million.
Group capital investments during the nine-month period ended September 30, 2024 increased to a record total of $332.2 million, up 21% over the same period last year.
California Regulatory Activity
2024 Infrastructure Improvement Plan and General Rate Case
As reported last quarter, on July 8, 2024, Cal Water submitted a GRC that included Infrastructure Improvement Plans for 2025-2027. Cal Water proposes to invest more than $1.6 billion in its districts from 2025-2027 in order to support its ability to provide a reliable supply of high-quality water and enhance sustainability. In its application, Cal Water proposes to adjust rates to increase total revenue by $140.6 million, or 17.1%, in 2026; $74.2 million, or 7.7%, in 2027; and $83.6 million, or 8.1%, in 2028. Importantly, the application also proposes a Low-Use Water Equity Program that would decouple revenue from water sales to assist low-water-using, lower-income customers.
Cal Water has concluded an initial pre-hearing conference and an administrative law judge and Commissioner have been assigned to the GRC. The triennial filing begins an approximately 18-month review process by the CPUC.
Cost of Capital
Cal Water’s authorized Cost of Capital includes a mechanism that adjusts authorized ROE in the event there is a 100-basis point movement in the 12-month (October 1 through September 30) average of Moody’s Aa utility bond index as compared to the same period in the previous year. The average movement in the index during the measurement period was less than 100-basis points. As a result, no adjustment to Cal Water’s current ROE of 10.27% is required for 2025.
Other Regulatory Mechanisms and Filings
Cal Water recently filed advice letters pertaining to the IRMA, the 2023 MWRAM, and the 2023 Incremental Cost Balancing Account (“ICBA”). These filings were approved and became effective on October 1, 2024. Over a three-year period, Group anticipates recovering approximately $94.2 million in cash, primarily derived from the IRMA, MWRAM, and ICBA.
Group expects that $11.6 million of this amount will be collected from customers in the fourth quarter of 2024. This will further bolster Group’s financial position and support its ongoing operations and investments in water infrastructure.
Water Conservation, Emergency Response, and Workplace Leadership Awards
The Company continued to demonstrate its industry leadership and commitment to excellence during the third quarter of 2024, earning several prestigious awards.
For the ninth consecutive year, the Great Place to Work® Institute certified the Company as a Great Place to Work in August. This recognition, based on employee feedback, reflects the Company's ongoing commitment to fostering a positive work environment and supporting its workforce through enhanced engagement initiatives and benefit programs.
In early September, Newsweek named the Company one of the "World's Most Trustworthy Companies" for the second year running. This global recognition, which considered feedback from customers, investors, and employees, places the Company among only five water utilities honored in the energy and utilities category.
Shortly thereafter, the National Association of Water Companies honored Hawaii Water Service Operations Manager John “Kani” Kadowaki with the Living Water Award in recognition of his leadership of the team that kept water flowing to local communities during the devastating fires in Lahaina in 2023. Hawaii Water Service was the only water provider in West Maui that did not need to issue boil water advisories or experience water service interruptions during the tragedy.
Capping off the quarter, the EPA awarded Cal Water the WaterSense® Excellence in Promoting WaterSense Labeled Products Award for the second consecutive year. This accolade recognizes Cal Water's outstanding efforts in promoting water efficiency, including the installation of water-saving devices that are projected to conserve an estimated 395 million gallons of water over their lifetime. Cal Water’s leadership in supporting customers’ conservation efforts ties directly to its commitment to maintaining affordable rates. In July, a study by the Alliance for Water Efficiency highlighted the significant financial benefits of Cal Water's conservation efforts, finding that these initiatives have reduced customers' bills by up to 20.5% over the past 15 years compared to projections without such measures.
Finally, shortly after the quarter closed, Newsweek named Group one of “America’s Greenest Companies” in recognition of the Company’s commitment to and advancements in sustainability. Group was one of two water utilities among the 500 companies honored.
These accolades reflect Group's holistic approach to excellence, encompassing environmental stewardship, customer service, employee satisfaction, and corporate trustworthiness, reinforcing its position as a leader in the water utility sector.
For additional details, please see Form 10-Q which will be available at https://www.calwatergroup.com/investors/financials-filings-reports/sec-filings
Quarterly Earnings Teleconference
All stockholders and interested investors are invited to attend the conference call on Thursday, October 31, 2024 at 8 a.m. PT (11 a.m. ET) by dialing 1-800-715-9871 or 1-646-307-1963 and keying in ID# 2796844, or you may access the live audio webcast at https://edge.media-server.com/mmc/p/z25hs69f/. Please join at least 15 minutes in advance to ensure a timely connection to the call. A replay of the call will be available from 2:00 p.m. ET on Thursday, October 31, 2024, through Monday, December 30, 2024, at 1-800-770-2030 or 1-609-800-9909 and key in ID# 2796844, or by accessing the webcast above. The call will be hosted by Chairman and Chief Executive Officer Martin A. Kropelnicki, Senior Vice President, Chief Financial Officer and Treasurer James P. Lynch, and Vice President, Rates and Regulatory Affairs, Greg A. Milleman. Prior to the call, Group will furnish a slide presentation on its website.
About California Water Service Group
California Water Service Group is the parent company of regulated utilities California Water Service, Hawaii Water Service, New Mexico Water Service, and Washington Water Service, as well as Texas Water Service, a utility holding company. Together, these companies provide regulated and non-regulated water and wastewater service to more than 2.1 million people in California, Hawaii, New Mexico, Washington, and Texas. California Water Service Group’s common stock trades on the New York Stock Exchange under the symbol “CWT.” Additional information is available online at www.calwatergroup.com.
This news release 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” treatment established by the PSLRA. Forward-looking statements in this news release are based on currently available information, expectations, estimates, assumptions and projections, and our management’s beliefs, assumptions, judgments and expectations about us, the water utility industry and general economic conditions. These statements are not statements of historical fact. When used in our documents, statements that are not historical in nature, including words like will, would, expects, intends, plans, believes, may, could, estimates, assumes, anticipates, projects, progress, predicts, hopes, targets, forecasts, should, seeks or variations of these words or similar expressions are intended to identify forward-looking statements. Examples of forward-looking statements in this news release include, but are not limited to, statements describing Group’s expected financial performance; Group’s plans and proposals pursuant to the California GRC filed on July 8, 2024; investments in infrastructure projects and estimated capital investments, anticipated recovery from unrecorded regulatory mechanisms (including the IRMA, M-WRAM, and ICBA); and expectations regarding the business and financial impact of the 2021 California GRC decision. Forward-looking statements are not guarantees of future performance. They are based on numerous assumptions that we believe are reasonable, but they are open to a wide range of uncertainties and business risks. Consequently, actual results may vary materially from what is contained in a forward-looking statement. Factors that may cause actual results to be different than those expected or anticipated include, but are not limited to: our ability to invest or apply the proceeds from the issuance of common stock in an accretive manner; governmental and regulatory commissions’ decisions, including decisions on proper disposition of property; consequences of eminent domain actions relating to our water systems; changes in regulatory commissions’ policies and procedures, such as the CPUC’s decision in 2020 to preclude companies from proposing fully decoupled WRAMs, which impacted the 2021 California GRC Filing; the outcome and timeliness of regulatory commissions’ actions concerning rate relief and other matters; increased risk of inverse condemnation losses as a result of climate change and drought; our ability to renew leases to operate water systems owned by others on beneficial terms; changes in California State Water Resources Control Board water quality standards; changes in environmental compliance and water quality requirements; electric power interruptions, especially as a result of public safety power shutoff programs; housing and customer growth; the impact of opposition to rate increases; our ability to recover costs; availability of water supplies; issues with the implementation, maintenance or security of our information technology systems; civil disturbances or terrorist threats or acts; the adequacy of our efforts to mitigate physical and cyber security risks and threats; the ability of our enterprise risk management processes to identify or address risks adequately; labor relations matters as we negotiate with the unions; changes in customer water use patterns and the effects of conservation, including as a result of drought conditions; our ability to complete, in a timely manner or at all, successfully integrate and achieve anticipated benefits from announced acquisitions; the impact of weather, climate change, natural disasters, and actual or threatened public health emergencies, including disease outbreaks, on our operations, water quality, water availability, water sales and operating results and the adequacy of our emergency preparedness; restrictive covenants in or changes to the credit ratings on our current or future debt that could increase our financing costs or affect our ability to borrow, make payments on debt or pay dividends; risks associated with expanding our business and operations geographically; the impact of stagnating or worsening business and economic conditions, including inflationary pressures, general economic slowdown or a recession, increasing interest rates, instability of certain financial institutions, changes in monetary policy, adverse capital markets activity or macroeconomic conditions as a result of the geopolitical conflicts, and the prospect of a shutdown of the U.S. federal government; the impact of market conditions and volatility on unrealized gains or losses on our non-qualified benefit plan investments and our operating results; the impact of weather and timing of meter reads on our accrued unbilled revenue; the impact of evolving legal and regulatory requirements, including emerging environmental, social and governance requirements and our ability to comply with PFAS regulations; and other risks and unforeseen events described in our Securities and Exchange Commission (“SEC”) filings. In light of these risks, uncertainties and assumptions, investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this news release. When considering forward-looking statements, you should keep in mind the cautionary statements included in this paragraph, as well as the Annual Report on Form 10-K, Quarterly 10-Q, and other reports filed from time-to-time with the SEC. We are not under any obligation, and we expressly disclaim any obligation to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise.
Contacts:
James P. Lynch (408) 367-8200 (analysts)
Shannon Dean (408) 367-8243 (media)
CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
| (In thousands, except per share data) | September 30, 2024 |
December 31, 2023 |
||||||
| ASSETS | ||||||||
| Utility plant: | ||||||||
| Utility plant | $ | 5,263,692 | $ | 4,925,483 | ||||
| Less accumulated depreciation and amortization | (1,222,808 | ) | (1,152,228 | ) | ||||
| Net utility plant | 4,040,884 | 3,773,255 | ||||||
| Current assets: | ||||||||
| Cash and cash equivalents | 59,556 | 39,591 | ||||||
| Restricted cash | 45,641 | 45,375 | ||||||
| Receivables: | ||||||||
| Customers, net | 81,075 | 59,349 | ||||||
| Regulatory balancing accounts | 59,095 | 64,240 | ||||||
| Other, net | 20,254 | 16,431 | ||||||
| Accrued unbilled revenue, net | 55,971 | 36,999 | ||||||
| Materials and supplies | 19,872 | 16,170 | ||||||
| Taxes, prepaid expenses, and other assets | 21,487 | 18,130 | ||||||
| Total current assets | 362,951 | 296,285 | ||||||
| Other assets: | ||||||||
| Regulatory assets | 340,419 | 257,621 | ||||||
| Goodwill | 37,039 | 37,039 | ||||||
| Other assets | 233,615 | 231,333 | ||||||
| Total other assets | 611,073 | 525,993 | ||||||
| TOTAL ASSETS | $ | 5,014,908 | $ | 4,595,533 | ||||
| CAPITALIZATION AND LIABILITIES | ||||||||
| Capitalization: | ||||||||
| Common stock, $0.01 par value; 136,000 shares authorized, 59,473 and 57,724 outstanding on September 30, 2024 and December 31, 2023, respectively | $ | 595 | $ | 577 | ||||
| Additional paid-in capital | 965,278 | 876,583 | ||||||
| Retained earnings | 671,913 | 549,573 | ||||||
| Accumulated other comprehensive loss | (9,197 | ) | — | |||||
| Noncontrolling interests | 3,043 | 3,579 | ||||||
| Total equity | 1,631,632 | 1,430,312 | ||||||
| Long-term debt, net | 1,051,585 | 1,052,768 | ||||||
| Total capitalization | 2,683,217 | 2,483,080 | ||||||
| Current liabilities: | ||||||||
| Current maturities of long-term debt, net | 890 | 672 | ||||||
| Short-term borrowings | 260,000 | 180,000 | ||||||
| Accounts payable | 171,501 | 157,305 | ||||||
| Regulatory balancing accounts | 24,133 | 21,540 | ||||||
| Accrued interest | 17,131 | 6,625 | ||||||
| Accrued expenses and other liabilities | 97,074 | 64,197 | ||||||
| Total current liabilities | 570,729 | 430,339 | ||||||
| Deferred income taxes | 365,598 | 352,762 | ||||||
| Regulatory liabilities | 734,925 | 683,717 | ||||||
| Pension | 83,412 | 82,920 | ||||||
| Advances for construction | 201,417 | 199,448 | ||||||
| Contributions in aid of construction | 292,540 | 286,491 | ||||||
| Other | 83,070 | 76,776 | ||||||
| Commitments and contingencies | ||||||||
| TOTAL CAPITALIZATION AND LIABILITIES | $ | 5,014,908 | $ | 4,595,533 | ||||
CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In thousands, except per share data)
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Operating revenue | $ | 299,563 | $ | 254,976 | $ | 814,611 | $ | 580,120 | ||||||||
| Operating expenses: | ||||||||||||||||
| Operations: | ||||||||||||||||
| Water production costs | 95,091 | 92,347 | 236,920 | 218,222 | ||||||||||||
| Administrative and general | 35,453 | 34,216 | 103,091 | 105,177 | ||||||||||||
| Other operations | 33,618 | 32,331 | 86,169 | 74,758 | ||||||||||||
| Maintenance | 9,264 | 8,930 | 26,064 | 24,063 | ||||||||||||
| Depreciation and amortization | 33,065 | 29,897 | 98,887 | 89,636 | ||||||||||||
| Income tax expense (benefit) | 15,483 | 3,949 | 39,710 | (1,366 | ) | |||||||||||
| Property and other taxes | 10,841 | 9,832 | 30,962 | 27,731 | ||||||||||||
| Total operating expenses | 232,815 | 211,502 | 621,803 | 538,221 | ||||||||||||
| Net operating income | 66,748 | 43,474 | 192,808 | 41,899 | ||||||||||||
| Other income and expenses: | ||||||||||||||||
| Non-regulated revenue | 4,133 | 4,535 | 14,744 | 13,643 | ||||||||||||
| Non-regulated expenses | (934 | ) | (5,992 | ) | (7,013 | ) | (11,224 | ) | ||||||||
| Other components of net periodic benefit credit | 4,451 | 4,776 | 12,062 | 14,753 | ||||||||||||
| Allowance for equity funds used during construction | 1,691 | 1,387 | 5,252 | 4,146 | ||||||||||||
| Income tax expense on other income and expenses | (1,939 | ) | (1,063 | ) | (4,566 | ) | (4,302 | ) | ||||||||
| Net other income | 7,402 | 3,643 | 20,479 | 17,016 | ||||||||||||
| Interest expense: | ||||||||||||||||
| Interest expense | 14,384 | 13,482 | 45,024 | 39,791 | ||||||||||||
| Allowance for borrowed funds used during construction | (788 | ) | (690 | ) | (2,358 | ) | (2,314 | ) | ||||||||
| Net interest expense | 13,596 | 12,792 | 42,666 | 37,477 | ||||||||||||
| Net income | 60,554 | 34,325 | 170,621 | 21,438 | ||||||||||||
| Net loss attributable to noncontrolling interests | (126 | ) | (113 | ) | (527 | ) | (345 | ) | ||||||||
| Net income attributable to California Water Service Group | $ | 60,680 | $ | 34,438 | $ | 171,148 | $ | 21,783 | ||||||||
| Earnings per share of common stock: | ||||||||||||||||
| Basic | $ | 1.03 | $ | 0.60 | $ | 2.93 | $ | 0.38 | ||||||||
| Diluted | $ | 1.03 | $ | 0.60 | $ | 2.93 | $ | 0.38 | ||||||||
| Weighted average shares outstanding: | ||||||||||||||||
| Basic | 58,931 | 57,704 | 58,321 | 56,695 | ||||||||||||
| Diluted | 58,982 | 57,740 | 58,358 | 56,731 | ||||||||||||
| Dividends per share of common stock | $ | 0.28 | $ | 0.26 | $ | 0.84 | $ | 0.78 | ||||||||
Exhibit 99.2
Third Quarter 2024 Earnings Presentation October 31, 2024
2 Today’s Speakers Marty Kropelnicki Chairman & CEO James Lynch Sr.
Vice President, CFO & Treasurer Greg Milleman Vice President, Rates & Regulatory Affairs 3 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" treatment established by the PSLRA . Forward - looking statements in this presentation are based on currently available information, expectations, estimates, assumptions and projections, and our management's beliefs, assumptions, judgments and expectations about us, the water utility industry and general economic conditions . These statements are not statements of historical fact . When used in our documents, statements that are not historical in nature, including words like will, would, expects, intends, plans, believes, may, could, estimates, assumes, anticipates, projects, progress, predicts, hopes, targets, forecasts, should, seeks, commits or variations of these words or similar expressions are intended to identify forward - looking statements . Examples of forward - looking statements in this presentation include, but are not limited to, statements describing expectations regarding potential increases in revenue, capital investments or expenditures, depreciation or regulated rate base, Group’s plans and proposals pursuant to Cal Water’s General Rate Case (GRC) filed on July 8 , 2024 , anticipated recovery from unrecorded regulatory mechanisms, impacts of the decision of the California Public Utilities Commission on Cal Water’s 2021 GRC, compliance with new PFAS regulations, and sufficiency of cash to support capital investment and growth . Forward - looking statements are not guarantees of future performance . They are based on numerous assumptions that we believe are reasonable but are subject to uncertainty and risks . Actual results may vary materially from what is contained in a forward - looking statement . Factors that may cause actual results to be different than those expected or anticipated include, but are not limited to : our ability to integrate business acquisitions and operate them in an effective and accretive manner ; governmental and regulatory commissions' decisions ; consequences of eminent domain actions relating to our water systems ; changes in regulatory commissions' policies and procedures ; the outcome and timeliness of regulatory commissions' actions concerning rate relief and other actions ; changes in water quality standards ; changes in environmental compliance and water quality requirements ; electric power interruptions ; the impact of opposition to rate increases ; our ability to recover costs ; availability of water supplies ; issues with the implementation, maintenance or security of our information technology systems ; civil disturbances or terrorist threats or acts ; the adequacy of our efforts to mitigate physical and cyber security risks and threats ; the ability of our enterprise risk management processes to identify or address risks adequately ; changes in customer water use patterns and the effects of conservation ; the impact of weather, climate change, natural disasters, and actual or threatened public health emergencies ; restrictive covenants in or changes to the credit ratings on our current or future debt that could increase our financing costs or affect our ability to borrow, make payments on debt or pay dividends ; the impact of market conditions and volatility on unrealized gains or losses on our operating results ; risks associated with expanding our business and operations geographically ; and other risks and unforeseen events described in our Annual Report on Form 10 - K and other reports filed from time to time with the SEC . In light of these risks, uncertainties and assumptions, investors are cautioned not to place undue reliance on forward - looking statements, which speak only as of the date of this presentation . We are not under any obligation, and we expressly disclaim any obligation to update or alter any forward - looking statements, whether as a result of new information, future events or otherwise . Nothing in this presentation constitutes an offer to sell, or a solicitation of an offer to buy, any securities or should be treated or relied upon as a recommendation or advice . A credit or environmental, social and governance (ESG) rating is not a recommendation to buy, sell or hold any securities, may be changed at any time by the applicable ratings agency and should be evaluated independently of any other information .
Forward - Looking Statements and Other Important Information 4 Highlights from the Period Results reflect c ontinued benefit from resolution of 2021 CA GRC Filed 2024 CA GRC / Infrastructure Improvement Plans for 2025 - 2027 Initial pre - hearing conference has been conducted, and a judge and commissioner have been assigned. Made critical infrastructure investments totaling $ 332.2M to support our ability to provide safe, reliable water supply Received awards for conservation, workplace, and sustainability 1 2 3 4 5 Approved advice letters relating to regulatory mechanisms to provide $94.2M in cash authorized for collection over next three years 5 Third Quarter 2024 Financials % Change $ Variance Q3 2023 Q3 2024 (in millions except EPS amounts and % s) 17.5% $44.6 $255.0 $299.6 Operating Revenue 10.1% $21.3 $211.5 $232.8 Operating Expenses 6.2% $0.8 $12.8 $13.6 Net Interest Expense 76.5% $26.3 $34.4 $60.7 Net Income Attributable to CWT 71.7% $0.43 $0.60 $1.03 Diluted Earnings per Share Note: Due to adoption of the 2021 CA GRC, Q1 2024 net income included interim rate relief totaling $64.0M attributable to 202 3, of which $15.2M was attributable to Q3 2023.
Diluted EPS Bridge Q3 2023 to Q3 2024 6 $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 - $0.04 - $0.04 $0.60 - $0.12 $0.56 $ 0.09 $0.10 - $0.10 $1.03 7 Year - to - Date 2024 Financials 7 % Change $ Variance YTD 2023 YTD 2024 (in millions except EPS amounts and % s) 40.4% $234.5 $580.1 $814.6 Operating Revenue 15.5% $83.6 $538.2 $621.8 Operating Expenses 13.9% $5.2 $37.5 $42.7 Net Interest Expense 684.9% $149.3 $21.8 $171.1 Net Income Attributable to CWT 671.1% $2.55 $0.38 $2.93 Diluted Earnings per Share Note: Due to adoption of the 2021 CA GRC, Q1 2024 net income included interim rate relief totaling $64.0M attributable to 202 3, of which $50.4M was attributable to the year - to - date period ended 9/30/23.
Diluted EPS Bridge YTD 2023 to YTD 2024 8 $0.00 $0.40 $0.80 $1.20 $1.60 $2.00 $2.40 $2.80 $3.20 $3.60 - $0.18 - $0.13 $0.17 - $0.25 $0.38 $0.12 $0.04 $ 1.19 $1.29 $0.21 $0.09 $ 2.93 Reflects regulatory approval of Cal Water’s 2021 GRC in Q1 24 9 Growth in capital investment outpaces depreciation (in millions) 2015 - 2024* TOTAL CapEx 3x DEPRECIATION *Estimates for 2024: Capital Investment through Q3 2024 was $ 332.2M ; depreciation through Q3 2024 was $ 98.9M . **Estimates for 2025 - 2027 are based on amounts requested in the 2024 California GRC application plus estimated capital expenditu res in other states; these capital expenditures are subject to review and approval by the CPUC and other regulators. Note: Estimates for 2024 - 2027 exclude anticipated $226.0M (before recovery offsets) of estimated PFAS - related capital investment s that will be incurred over multiple years. $177 $229 $259 $272 $274 $299 $293 $328 $384 $385 $660 $750 $655 $61 $64 $77 $84 $89 $99 $109 $115 $121 $133 $144 $136 $150 $0 $100 $200 $300 $400 $500 $600 $700 $800 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024* 2025** 2026** 2027** Capital Investment Depreciation Capital Investment & Depreciation CapEx 2025 - 2027** > 4x Depreciation 10 Estimated to achieve over $3.3 billion by 2027 *2024 rate base estimates include amounts authorized in 2021 California GRC plus estimated rate base in other states; these values are not yet adopted and are subject to review and approval by the commissions regulating our non - California operations.
**2025 - 2027 rate base estimates include amounts requested in the 2024 California GRC plus estimated rate base in other states; these values are not yet adopted and are subject to review and approval by the CPUC and other regulators. Note: Amounts presented for 2024 - 2027 exclude anticipated $226.0M (before recovery offsets) in PFAS treatment capital investment s that will be incurred over multiple years. Regulated Rate Base Growth $1.24 $1.26 $1.61 $1.87 $2.01 $2.20 $2.36 $2.58 $2.93 $3.35 $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 2018 2019 2020 2021 2022 2023 2024* 2025** 2026** 2027** (in billions)
Capital Allocation | Balance Sheet Continue to maintain financial discipline with strong balance sheet, while allocating capital in efficient manner Declared 319 th consecutive quarterly dividend of $0.28 per share Authorized CA capital structure of 60.8% equity and 39.2% debt supportive of future growth; CA - authorized ROE affirmed at 10.27% through 2025 Maintain Board - authorized at - the - market program used opportunistically to raise $34.5M during Q3 in support of capital growth and business investments Cal Water issued $ 125M of its 5.22% First Mortgage Bonds due 10/22/54 to support capital growth and business investments 11 Statistics as of September 30, 2024 Liquidity Profile Group maintains strong liquidity profile to execute capital plan and strategic M&A investments • Expect to have adequate cash to support capital investment and growth • Credit facilities of $600M that can be expanded up to $800M; facilities mature in March 2028 • Global credit rating A+/stable affirmed at S&P Global • Cal Water First Mortgage Bonds rated AA - Statistics as of September 30, 2024 12 (in millions) $59.6 $45.6 $340.0 $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 Unrestricted cash Restricted cash Available credit
13 2024 California General Rate Case Key updates since filing : • Pre - hearing conference has been completed • A judge and commissioner have been assigned to the rate case • Responding to data requests 13 Investment proposed in/for Cal Water districts from 2025 - 27 $1.6B Application proposes Low - Use Water Equity Program that would decouple revenue from water sales to enhance affordability LUWEP Month - long process begun for triennial filing with CPUC 18 (anticipated ) Requests rate adjustments necessary to generate total revenue increases of: • $140.6M , or 17.1%, for 2026 • $74.2M , or 7.7%, for 2027 • $83.6M , or 8.1%, for 2028 No change triggered for California Return on Equity (ROE) in 2025 Water Cost of Capital Mechanism • Cal Water’s current Cost of Capital decision, as extended through 12/31/25, includes Water Cost of Capital Mechanism (WCCM) WCCM features: • Mechanism not triggered during 2024 measurement period, leaving in place current ROE of 10.27% for 2025 14 Provides automatic adjustment (up or down) of adopted ROE Is triggered by positive or negative difference of more than 100 basis points in average Moody’s Aa utility bond index, year over year Is measured during period from 10/1 – 9/30 for changes to go into effect on 1/1 of succeeding year
Received approval for advice letters seeking recovery of $94.2 million to be recognized as cash over next three years Other Regulatory Mechanisms & Filings • Received approval for advice letters relating to Interim Rates Memorandum Account (IRMA), 2023 Monterey Water Rate Adjustment Mechanism (MWRAM), Incremental Cost Balancing Account (ICBA), and other balancing and memorandum accounts Key impacts: 15 Effective 10/1/24 Approximately $94.2M will be collected over three - year period as cash Relates primarily to IRMA and 2023 MWRAM and ICBA regulatory mechanisms Group expects up to $11.6M to be recovered in 2024 EPA names Cal Water 2024 WaterSense ® Excellence Award winner for second consecutive year San Francisco Chronicle names Company a Top Bay Area Workplace for 12 th consecutive year Newsweek names Group one of World’s Most Trustworthy Companies & one of America’s Greenest Companies Great Place to Work® Institute names Company a Great Place to Work for 9th consecutive year National Association of Water Companies awards Maui Operations Manager Living Water Award for leadership during Lahaina fires Recognized Leader 16
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