Form 8-K - Current report

 

 

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): August 1, 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)

 

[phone]

(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 August 1, 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 second quarter of 2024, ended June 30, 2024.

 

As announced, the Company will host a conference call on Thursday, August 1, 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 August 1, 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: August 1, 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 Second Quarter Results

 

SAN JOSE, Calif., August 1, 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 second quarter of 2024.

 

Highlights included:

 

·

Diluted earnings per share of $0.70 in Q2 2024, compared to $0.17 in Q2 2023.

 

·

$214.4 million of capital invested in water system infrastructure for the first six months of 2024.

 

·

Declaration of the 318th consecutive quarterly dividend in the amount of $0.28 per share.

 

·

Filing of the 2024 General Rate Case (GRC) and Infrastructure Improvement Plans for 2025-2027 with the California Public Utilities Commission (CPUC). The application also proposes a Low-Use Water Equity Program, which would decouple revenue from water sales, to assist low-water-using, lower-income customers.

 

·

Affirmation of our S&P Global credit rating of A+ Stable for California Water Service Company.

 

According to Chairman and Chief Executive Officer Martin A. Kropelnicki, financial results continued to benefit from the effects of the 2021 California General Rate Case decision received on March 7, 2024.

 

“I’m pleased to see the effects of the 2021 decision on our results. I’m equally pleased with our team’s effort to put together a 2024 California General Rate Case that reflects our dedication to investing diligently in infrastructure, managing expenses responsibly, and structuring rates to keep bills affordable for customers. It reflects our continuing commitment to providing a reliable, sustainable water supply for generations to come,” he said.

 

Q2 2024 Financial Results

 

·

Net income attributable to Group was $40.6 million in Q2 2024, compared to net income of $9.6 million in Q2 2023.

 

·

Operating revenue was $244.3 million, compared to $194.0 million in Q2 2023, an increase of $50.3 million.

 

o

Increased rates added $19.3 million in revenue.

 

o

Increased accrued unbilled revenue as a result of an increase in customer rates and unbilled days added $10.4 million.

 

o

Rate mechanisms approved in the 2021 California GRC added $16.7 million. Reported revenues from the same quarter in the prior year did not reflect these mechanisms.

 

·

Operating expenses were $196.1 million in Q2 2024, compared to $178.1 million in Q2 2023, an increase of $18.0 million.

 

o

Water production costs increased by $6.8 million to $77.6 million, primarily due to an increase in wholesale rates and water usage.

 

o

Income tax expenses increased $8.4 million to $8.7 million, primarily due to the increase in pre-tax income.

 

 

 

 

Year-to-Date 2024 Financial Results

 

·

Net income attributable to Group was $110.5 million for the six-month period ended June 30, 2024, or $1.90 diluted earnings per share, compared to a net loss of $12.7 million, or ($0.23) per diluted earnings per share, in the same period last year.

 

·

Operating revenue was $515.0 million for the six months ended June 30, 2024, compared to $325.1 million in the same period in 2023, an increase of $189.9 million.

 

o

A cumulative adjustment for the impacts of the 2021 California GRC decision added $131.5 million.

 

o

Increased rates added $31.6 million in revenue.

 

o

Recognition of $16.0 million of previously deferred WRAM revenue as a result of securing California Extended Water and Wastewater Arrearages Payment Program funds for the payment of eligible customer balances.

 

·

Operating expenses for the six months ended June 30, 2024, were $389.0 million, compared to $326.7 million in the same period in 2023.

 

o

Water production costs increased by $16.0 million, mostly due to recording a cumulative adjustment of $9.2 million for the impacts of the 2021 California GRC in 2024 and increases in rates and water production.

 

o

Other operations expense increased $10.1 million, primarily due to the recognition of $13.6 million of costs associated with the revenue deferral decrease.

 

o

Income taxes increased $29.5 million, due mostly to an increase in pre-tax net operating income due to the recognition of the 2021 California GRC.

 

As a result of the Q1 2024 adoption of the 2021 California GRC, interim rate relief attributable to 2023 totaling $64.0 million was recognized in 2024 operating revenue, including $18.7 million and $35.4 million that were attributable to the three and six months ended June 30, 2023, respectively.

 

Liquidity, Financing, and Capital Investment

 

As of June 30, 2024, Group maintained $82.7 million of cash, of which $45.4 million was classified as restricted, and had additional short-term borrowing capacity of $355 million, subject to meeting the borrowing conditions on the Group and Cal Water lines of credit.

 

Group capital investments during the six-month period ended June 30, 2024, totaled $214.4 million, represents 56% of Group’s estimated $385 million capital investment target for 2024.

 

Cal Water Files Infrastructure Improvement Plan for 2024 California General Rate Case; Plans to Invest $1.6 Billion in its California Water Systems in Upcoming Three Years

 

On July 8, 2024, Group’s largest subsidiary, California Water Service (Cal Water), submitted Infrastructure Improvement Plans for 2025-2027 as part of its triennial GRC filing. The application to the CPUC also proposes a Low-Use Water Equity Program, which would decouple revenue from water sales, to assist low-water-using, lower-income customers.

 

 

 

 

Cal Water proposes to invest more than $1.6 billion in its districts from 2025-2027, including approximately $1.3 billion of newly proposed capital investments, to support its ability to continue to provide a reliable supply of high-quality water.

 

To enhance affordability—particularly for low-use and low-income customers, Cal Water’s application proposes a Low-Use Water Equity Program that would decouple revenue from water sales across its regulated service areas. The program is designed to work in conjunction with Cal Water’s proposed progressive, four-tier rate design and sales forecast proposals to keep rates affordable, reinforce conservation goals, and provide the utility an opportunity to recover its authorized revenue requirement in a timely manner.

 

In its application, Cal Water has proposed to change 2024 rates to increase 2026 total revenue by $140.6 million, or 17.1%. Cal Water also proposes rate increases of $74.2 million, or 7.7%, in 2027; and $83.6 million, or 8.1%, in 2028.

 

The triennial filing begins an approximately 18-month review process by the CPUC.

 

Company Hosts Emergency Response Exercises in Hawaii and Responds to the Butte County Thompson Fire

 

To enhance coordination during emergencies, the Company’s Hawaii subsidiary, Hawaii Water Service (Hawaii Water), hosted representatives from emergency response and regulatory agencies, elected and State offices, utilities, contractors, and other community partners for Community Emergency Operations Center (EOC) exercises in early July on both Maui and the Big Island.

 

Attendees of the Maui exercise, which included both an emergency response course using the Incident Command System and a hands-on disaster simulation, were Hawaii local and state representatives and representatives from the Maui Police Department, Maui Department of Water Supply, Hawaiian Electric, and the Hawaii Public Utilities Commission. Attendees of the Hawaii island exercise included representatives from Hawaii County Fire, Hawaii Wildfire Management Organization (Firewise), Hawaii County Civil Defense, Community Emergency Response Team (CERT) – Waikoloa, and Hawaii Rural Water Association.

 

Emergency response training is regularly conducted throughout the Company. In July, when the Butte County Thompson Fire threatened Oroville, Calif., Cal Water activated emergency operations, brought in additional resources to help manage the water system and communicate with customers, and embedded with the Butte County emergency operations center. None of the utility’s assets were impacted during the fire, which burned 3,789 acres over a six-day period.

 

Company Continues to Pursue Recovery for PFAS Contamination Costs

 

In April, the U.S. Environmental Protection Agency adopted a new National Primary Drinking Water Regulation to limit certain per- and polyfluoroalkyl substances (PFAS) in drinking water. Under the new regulation, public water systems across the country are required to monitor for these PFAS by 2027 and to comply with applicable maximum contaminant levels by 2029.

 

 

 

 

Although this regulation faces legal challenges, the Company is proceeding with compliance efforts and believes it is well positioned to comply within the designated timeline. At the same time, it is vigorously pursuing financial recovery from responsible parties. Group has submitted its initial claims in the 3M and DuPont class action settlements and will continue to seek cost recovery wherever it is appropriate to do so.

 

Separately, the EPA recently designated two of the most common PFAS, specifically PFOA and PFOS, as hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).

 

ESG Progress is Highlighted in the Company’s New ESG Report

 

In May, the Company released its 2023 ESG Report and ESG Analyst Download. The ESG Report—which is aligned with recognized reporting frameworks and standards, including the Sustainability Accounting Standards Board Water Utilities & Services Industry Standards, the Recommendations of the Task Force on Climate-Related Financial Disclosures, and the Global Reporting Initiative Standards—details progress made by Group's subsidiaries on the Company's ESG focus areas last year, while the supplemental ESG Analyst Download provides key ESG data and metrics.

 

This year's ESG Report highlights both ongoing efforts to support Group's ESG strategy and objectives along with significant achievements in 2023, such as how the Company is working to protect the planet, serve customers, and engage the Company’s workforce.

 

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 August 1, 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# 5681819, or you may access the live audio webcast at https://edge.media-server.com/mmc/p/nfn5956c .. 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, August 1, 2024, through Monday, September 30, 2024, at 1-800-770-2030 or 1-609-800-9909 and key in ID# 5681819, or by accessing the webcast above. The call will be hosted by Chairman, President 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, Cal Water 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 plans and proposal pursuant to Cal Water’s general rate case filed on July 8, 2024, and Group’s expectations regarding compliance with PFAS regulations and pursuit of cost recovery in relation to PFAS contamination. 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: the outcome and timeliness of regulations commissions’ actions concerning rate relief and other matters, including with respect to the 20224 California GRC; 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; governmental and regulatory commissions’ decisions, including decisions on proper disposition of property; consequences of eminent domain actions related to our water systems; 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.

 

Contact
James P. Lynch
[phone] (analysts)

 

Shannon Dean
[phone] (media)

 

 

 

 

CALIFORNIA WATER SERVICE GROUP 

CONDENSED CONSOLIDATED BALANCE SHEETS 

Unaudited

(In thousands, except per share data)

 

		June 30, 2024				December 31, 2023
ASSETS
Utility plant:
Utility plant		$	5,141,580			$	4,925,483
Less accumulated depreciation and amortization			(1,199,399	)			(1,152,228	)
Net utility plant			3,942,181				3,773,255
Current assets:
Cash and cash equivalents			37,272				39,591
Restricted cash			45,403				45,375
Receivables:
Customers, net			71,125				59,349
Regulatory balancing accounts			5,495				64,240
Other, net			17,110				16,431
Accrued unbilled revenue, net			48,812				36,999
Materials and supplies			17,645				16,170
Taxes, prepaid expenses, and other assets			23,948				18,130
Total current assets			266,810				296,285
Other assets:
Regulatory assets			397,498				257,621
Goodwill			37,039				37,039
Other assets			227,714				231,333
Total other assets			662,251				525,993
TOTAL ASSETS		$	4,871,242			$	4,595,533
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock, $0.01 par value; 136,000 shares authorized, 58,825 and 57,724 outstanding on June 30, 2024 and December 31, 2023, respectively		$	588			$	577
Additional paid-in capital			929,376				876,583
Retained earnings			627,705				549,573
Accumulated other comprehensive loss			(13,068	)			—
Noncontrolling interests			3,090				3,579
Total equity			1,547,691				1,430,312
Long-term debt, net			1,051,792				1,052,768
Total capitalization			2,599,483				2,483,080
Current liabilities:
Current maturities of long-term debt, net			1,183				672
Short-term borrowings			245,000				180,000
Accounts payable			143,533				157,305
Regulatory balancing accounts			12,754				21,540
Accrued interest			6,666				6,625
Accrued expenses and other liabilities			103,364				64,197
Total current liabilities			512,500				430,339
Deferred income taxes			363,597				352,762
Regulatory liabilities			742,842				683,717
Pension			83,266				82,920
Advances for construction			199,640				199,448
Contributions in aid of construction			289,820				286,491
Other			80,094				76,776
Commitments and contingencies
TOTAL CAPITALIZATION AND LIABILITIES		$	4,871,242			$	4,595,533

 

 

 

 

CALIFORNIA WATER SERVICE GROUP 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 

Unaudited

(In thousands, except per share data)

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
Operating revenue		$	244,299			$	194,044			$	515,048			$	325,144
Operating expenses:
Operations:
Water production costs			77,644				70,867				141,829				125,875
Administrative and general			32,042				34,975				67,638				70,961
Other operations			25,626				25,823				52,551				42,427
Maintenance			8,790				7,155				16,800				15,133
Depreciation and amortization			32,978				29,824				65,822				59,739
Income tax expense (benefit)			8,689				329				24,227				(5,315	)
Property and other taxes			10,364				9,122				20,121				17,899
Total operating expenses			196,133				178,095				388,988				326,719
Net operating income (loss)			48,166				15,949				126,060				(1,575	)
Other income and expenses:
Non-regulated revenue			5,513				4,485				10,611				9,108
Non-regulated expenses			(4,125	)			(2,957	)			(6,079	)			(5,232	)
Other components of net periodic benefit credit			4,338				4,756				7,611				9,977
Allowance for equity funds used during construction			1,819				1,355				3,561				2,759
Income tax expense on other income and expenses			(1,306	)			(1,445	)			(2,627	)			(3,239	)
Net other income			6,239				6,194				13,077				13,373
Interest expense:
Interest expense			14,840				13,491				30,640				26,309
Allowance for borrowed funds used during construction			(812	)			(795	)			(1,570	)			(1,624	)
Net interest expense			14,028				12,696				29,070				24,685
Net income (loss)			40,377				9,447				110,067				(12,887	)
Net loss attributable to noncontrolling interests			(174	)			(109	)			(401	)			(232	)
Net income (loss) attributable to California Water Service Group		$	40,551			$	9,556			$	110,468			$	(12,655	)
Earnings (loss) per share of common stock:
Basic		$	0.70			$	0.17			$	1.90			$	(0.23	)
Diluted		$	0.70			$	0.17			$	1.90			$	(0.23	)
Weighted average shares outstanding:
Basic			58,292				56,692				58,013				56,182
Diluted			58,325				56,730				58,046				56,182
Dividends per share of common stock		$	0.28			$	0.26			$	0.56			$	0.52

 

 

 

 

Exhibit 99.2

 

Second Quarter 2024 Earnings Presentation August 1, 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, assumptio ns and projections, and our management’s beliefs, assumptions, judgments and expectations about us, the water utility industry and general economic conditions. These statement s a re 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, ma y, could, estimates, assumes, anticipates, projects, progress, predicts, hopes, targets, forecasts, should, seeks, commits or variations of these words or similar expressions are in tended to identify forward - looking statements. Examples of forward - looking statements in this presentation include, but are not limited to, statements describing our expectations around c apital investment and depreciation, regulated rate base and customer growth, adequacy of our cash position, the 2024 California General Rate Case (“ GRC ”) filing, strategic investments and acquisitions and our commitment to reduce Scope 1 & 2 GHG emissions. Forward - looking statements are not guarantees of future performance. They are based on numerous assumptions t hat 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: the outcome and timeliness of regulatory commissions’ actions concerning rate relief and other matters, including with respect to the 2024 California GRC filing; 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; 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; con sequences of eminent domain actions relating to our water systems; increased risk of inverse condemnation losses as a result of climate change and drought; our ability to renew lea ses to operate water systems owned by others on beneficial terms; changes in California State Water Resources Control Board water quality standards; changes in environmental co mpliance 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 ; c ivil 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 managem ent 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, in clu ding 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 availabi lit y, 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 coul d i ncrease 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 impac t o f stagnating or worsening business and economic conditions, including inflationary pressures, general economic slowdown or a recession, increasing interest rates, instabilit y o f certain financial institutions, changes in monetary policy, adverse capital markets activity or macroeconomic conditions as a result of geopolitical conflicts, and the prospect of a shu tdo wn 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”) fili ngs . 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, Quarter ly Reports on Form 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 for ward - looking statements, whether as a result of new information, future events or otherwise. A credit rating is not a recommendation to buy, sell or hold any securities, may be cha nged 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 Operating results benefitted from resolution of 2021 CA GRC Company filed 2024 CA GRC / Infrastructure Improvement Plans for 2025 - 2027 CA Supreme Court voided the portion of CPUC decision related to elimination of decoupling, finding CPUC did not follow required process Hawaii Water hosted emergency response exercises with multiple agencies participating Company continued to pursue cost recovery for treatment required to meet new PFAS regulation set by EPA Newly published 2023 ESG Report highlights sustainability progress 1 2 3 4 5 6

 

 

5 Second Quarter 2024 Financials (in millions except EPS amounts & % s) Q2 2024 Q2 2023 Variance Operating Revenue $244.3 $194.0 25.9% Operating Expenses $196.1 $178.1 10.1% Net Interest Expense $14.0 $12.7 10.2% Net Income Attributable to CWT $40.6 $9.6 322.9% Diluted Earnings per Share $0.70 $0.17 311.8% Note: Due to adoption of the 2021 CA GRC , Q1 2024 operating revenue included interim rate relief totaling $ 64M attributable to 2023, of which $ 18.7M was attributable to Q2 2023.

 

 

Diluted EPS Bridge Q2 2023 to Q2 2024 Reflects regulatory approval of Cal Water’s 2021 GRC in Q1 24 6 $0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 $0.70 $0.80 $0.90 - $0.04 - $0.02 $0.17 - $0.09 $0.08 $0.26 $ 0.23 $0.14 - $0.03 $0.70

 

 

7 Second Quarter 2024 Financials 7 (in millions except EPS amounts & % ) YTD 2024 YTD 2023 Variance Operating Revenue $515.0 $325.1 58.4% Operating Expenses $389.0 $326.7 19.1% Net Interest Expense $29.1 $24.7 17.8% Net Income (loss) Attributable to CWT $110.5 ($12.7) 970% Diluted Earnings (Loss) per Share $1.90 ($0.23) 926% Note: Due to adoption of the 2021 CA GRC , Q1 2024 operating revenue included interim rate relief totaling $ 64M attributable to 2023, of which $ 35.4M was attributable to the year - to - date period ended 6/30/23.

 

 

Diluted EPS Bridge YTD 2023 to YTD 2024 Reflects regulatory approval of Cal Water’s 2021 GRC in Q1 24 8 -$0.40 -$0.10 $0.20 $0.50 $0.80 $1.10 $1.40 $1.70 $2.00 $2.30 - $0.08 - $0.06 - $0.23 - $0.13 $0.11 $0.44 $1.82 $0.22 - $0.19 $ 1.90

 

 

9 Capital Investment & Depreciation Growth in capital investment outpaces depreciation 2015 - 2023 TOTAL CapEx 3x DEPRECIATION $177 $229 $259 $272 $274 $299 $293 $328 $384 $385 $660 $750 $655 $61 $64 $77 $84 $89 $99 $109 $115 $124 $133 $224 $263 $233 $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 (in millions) *Estimates for 2024: Capital Investment through Q2 2024 was $ 214.4M ; depreciation through Q2 2024 was $ 65.8M . **Estimates for 2025 - 2027 are based on amounts requested in the 2024 GRC application in CA plus estimated capital expenditures in other states; these capital expenditures are subject to review and approval by the CPUC and other regulators. Note: Estimates for 2024 - 2027 exclude $ 226.0M of estimated PFAS - related capital investments that will be incurred over multiple years.

 

 

10 Regulated Rate Base Growth Estimated to achieve over $3.3 billion by 2027 $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) *2024 rate base estimates include amounts authorized in 2021 GRC plus estimated rate base in other states; these values are n ot yet adopted and are subject to review and approval by the CPUC and other regulators. **2025 - 2027 rate base estimates include amounts requested in the 2024 CA 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 estimated $ 226.0M in PFAS treatment capital investments that will be incurred over multiple years.

 

 

Capital Allocation | Balance Sheet Continued to maintain financial discipline with strong balance sheet, while allocating capital in efficient manner Maintained Board - authorized equity ATM program and used opportunistically to raise incremental funds to support capital growth and investments in the business 11 Strong capital structure of 59.5% equity and 40.5% debt supportive of future capital growth S&P affirmed a global credit rating of A+ Stable for California Water Service Statistics as of June 30, 2024, except dividend data Declared 318 th consecutive quarterly dividend of $0.28 per share

 

 

Liquidity Profile Group maintained strong liquidity profile to help execute capital plan and pursue strategic M&A investments • Expect to have adequate cash to support capital investment and growth • Credit facility of $600 million that can be expanded up to $800 million • Extended maturity of credit facilities to March 2028 • Global credit rating A+/stable affirmed at S&P Global • First Mortgage Bonds rated AA - • Strong capital position of 59.5% equity and 40.5% debt Statistics as of June 30, 2024 12 (in millions) $37.3 $45.4 $355.0 $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 Unrestricted cash Restricted Cash Available Credit

 

 

13 2024 California General Rate Case Filing Filing requests total revenue increases of : • $ 140 . 6 million , or 17 . 1 % , for 2026 • $ 74 . 2 million , or 7 . 7 % , for 2027 • $ 83 . 6 million , or 8 . 1 % , for 2028 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

 

 

Group Hosts Emergency Exercises, Responds to Wildfires Hawaii Emergency Exercises • Hawaii Water hosted emergency response and regulatory agencies, elected and State offices, utilities, contractors, and other community partners for Community EOC exercises in July on Maui and Big Island • Exercises included both emergency response course using Incident Command System and hands - on disaster simulation 14 Thompson, Park & Borel Fires • Cal Water activated EOC in early July when Thompson Fire threatened Oroville service area, again in late July when Park Fire broke out on northeast edge of Chico service area and Borel Fire threatened Kern River Valley systems • Cal Water brought in additional resources to help manage water systems and communicate with customers, embedded with Butte County EOC , and is supporting Kern County EOC • None of utility’s assets impacted during the fires, which burned 3,800 acres (Thompson), 368,000+ acres (Park), and 53,000+ acres (Borel)* • Company continuing to support impacted employees *As of July 30, 2024

 

 

EPA adopted new National Primary Drinking Water Regulation to limit certain PFAS in Q2 2024 Group has been preparing for new regulation and believes well positioned to meet requirements before compliance deadlines EPA also designated 2 PFAS as hazardous substances under Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) Group leading water industry efforts on treatment cost recovery from PFAS manufacturers, recently submitted Phase 1 claim forms in 3M & DuPont class action settlements Group Executing Plan to Meet New PFAS Standards and Continues to Pursue Cost Recovery 15

 

 

Acquisitions Group continues to pursue diversification into compelling states including HI, WA, NM & TX • Completed acquisition of Kings Mountain Park Mutual Water Company in Q 2 ; although small, enhances water supply reliability and system resiliency • Anticipated growth opportunities should allow Group to achieve ~ 1 % growth target on average over next 5 years • New customer connections for BVRT have increased average of 20 % year - over - year over the past 5 years 16 ~1% Targeted annual cumulative addition of customers through new business development activities (announced in 2019) 36,000+ Total connections added through acquisitions since 2019

 

 

In May, Company released 2023 ESG Report and ESG Analyst Download, which: Aligns with Sustainability Accounting Standards Board Water Utilities & Services Industry Standards References Recommendations of the Task Force on Climate - Related Financial Disclosures ( TCFD ) References Global Reporting Initiative Standards ( GRI ) 2023 ESG Report Published Highlighting environmental, social, and governance efforts and strategic initiatives for 2024 17 Report highlights ongoing efforts to support Group's ESG strategy and objectives along with significant achievements in 2023, including: Invested in employee development $ 728K Contributed to local charities $ 1.5M Of $ 83M in secured state funds applied to eligible customers with past - due pandemic - period balances $ 58M Compliance with primary & secondary water quality standards 100% Gallons saved from water conservation programs implemented in 2023 95M Reduction commitment in Scope 1 & 2 GHG emissions by 2035 (from 2021 base year) 63%

 

 

Questions?

 

Cover	Aug. 01, 2024
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Aug. 01, 2024
Entity File Number	1-13883
Entity Registrant Name	CALIFORNIA WATER SERVICE GROUP
Entity Central Index Key	0001035201
Entity Tax Identification Number	77-0448994
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	1720 North First Street
Entity Address, City or Town	San Jose
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	95112
City Area Code	408
Local Phone Number	367-8200
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Shares, par value $0.01
Trading Symbol	CWT
Security Exchange Name	NYSE
Entity Emerging Growth Company	false

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