Q4 2019 Earnings Call

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Finally, Chris It provides a summary of the day reiterate the guidance and then open the floor for questions. Following acuity period, we invite you to stay for lunch during which time the management team circulated between the tables with that I'd like to turn for over to Chris Franklin to start today's Fannie portion of the meeting.

Okay.

Hey, Thanks, Brian and thank you all for being here I feel like we spent a lot of time together last year or so [laughter], so nice to see familiar faces.

We stopped by just saying what an honor its been to be able to run.

Lead this company slashed almost five years now.

We.

We've had a lot of a lot of activity last five years and it's hard to believe that it was nearly four years ago that we had no immediate in this room similar in this building, where we talked about our renewed corporate growth strategy.

I'm proud of this strategy.

We put together I'm proud of the shareholder value that it's created over that time.

I'm really excited about the future.

I'm the guy that we create create it really is not just a reflection on the strategy itself. So it's really a reflection on the team that we feel good.

And I think it's a great demonstration oh the value that they don't together.

We spend a lot of time with many of you as I mentioned.

Particularly the last couple of years I know, you know, Brian and Dan and Matt in today I'm excited for you get to know a few other members of our team and some relatively new members of the team.

During the presentation is today.

Provide some new information not on our longer term guidance, which I know many of you been asking for but also some exciting news on our E.S.G. work.

To get to that in just a moment.

But first let's take a look back at the growth strategy, we unveiled in 2016.

This format May look a little different new template, but it's the same strategy, we introduced four years ago.

Our growth strategy is rooted in those same core competencies that we've discussed and consistently demonstrated.

These shame core competencies will remain critical to our operational ex execution in the coming years. So let's talk about what that focused strategy has yielded over the last several years.

Take the first problem, which is municipal acquisitions.

We've seen good progress in municipal transactions, then I think any of US really expected in fact you.

Got it over $520 million in new rate base. When you consider the deals announced or closed since January 2016.

Now that progress also includes largest municipal acquisition that we announced in the fall called del Toro.

The core is the equivalent of adding well, we're now seeing 198000 customer equivalents, that's a revised numbers metal talk about that in a few moments revised up.

On the second prom to talk about his strategic M&A.

Well identified a unique strategic opportunity in People's which presents us with.

A great opportunity to put a second platform in place for growth in a state that we know very well, Pennsylvania.

With significant organic rate base growth opportunity.

Replacing nearly 3000 miles of gas me.

And as customers sit on top of the Marcellus shale region.

I will discuss the status of that transaction in just a moment.

Lastly.

And maybe not loads demonstrated on this slide, but we really de emphasized the nonregulated or market based activities at the company.

Some of you may recall that when I became CEO, we really shifted our focus away from a and b age and really onto the regulated business opportunities.

And we only kept the royalty insurance business and some small local operating contracts and I really don't see a shift in this strategy moving forward.

So if you listen to our presentation today I hope to walk away with the same confidence that we have in the team's ability to continue to execute against all of these successful growth strategy.

Now for those of you.

They are new to the story or haven't followed it as closely I think it's important to outline our rationale for the People's transaction.

Now to be clear, we're not looking to buy just any natural gas company.

We were looking for natural gas distribution company that was not complicated with other lines of business.

It was constructed in a constructive regulatory state.

And it didn't participate in exploration or fracking and it had strong growth opportunities.

Well, we felt peoples we found a company that 99% regulated operates primarily in Pennsylvania sits on Marcellus shale had 3000 miles of pipe that need to do a placed.

And does not have an exploration business.

Furthermore, the L.D.C. has many similarities to the water business not the least of which were both underground type companies.

Now for these reasons along with the fact, the People's came along with a strong management team you'll hear from Joe Gregory Today, We believe the People's was and still is a great opportunity.

By the way that 3000 miles of pipe, which is slightly less than that today just given the work that's been done it between the announcement and and today, it's still a great opportunity for us to ramp to give highly visible rate base growth for the next 15 plus years, while we provide customers.

With increased reliability and reduced methane emissions, all while providing transparent earnings growth for our shareholders. This is truly a win for all of our stakeholders.

No. This is a bit of a busy slide they graphically outlines our progress toward closing of the People's transaction.

You may recall that the Pennsylvania public utility Commission took formal action to approve the transaction on January 16th of this year, which caused us to close knowing our date, we've announced a march 16th.

We continue to believe that the there was possible to close this transaction much more quickly if it weren't for one issue that became somewhat contentious we've talked about this with many of you already issue centered around gas gathering system in southwest, Pennsylvania, just below Pittsburgh called Goodwin income all the issues.

Well, the Pennsylvania public utility commissions order, which concurred with the administrative law judges order that she put out and basically said that the system should be replaced and fully recovered in the context of a rate case.

Given that.

Oh, we we'd go up given that we didn't only gas utility for the first quarter of the year. The guidance will present today will will be pro forma on financials and will basically demonstrate what a full year of 2020 would look like how do we peoples for the entire year.

I think that's what you're looking for this will provide a better idea as to the earnings power of this new combined company intends to cover that you much more detail when few moments.

Let's take a look at a view at the combined company here.

You can see the combined pro forma utility profile is really interesting you see on this slide that we're combining the second largest standalone regulated water utility in the country with the fifth largest standalone regulated gas LDC in the country.

A unique water gas combination will have operations in 10 states with over $7.3 billion in rate base more than 75% of that rate base.

It will be in the constructive regulatory environment in Pennsylvania, and overall business mix would be about 70% water 30% gas.

We continue to see more and significant opportunities in water like Delcor that mix of 70 30 could shift more heavily toward water.

Well continue to look for opportunities to expand our regular operation in all of our stage.

And we'll talk more about that with Matt I'm in a few moments as well.

So just how you think about the organization of the combined company. The publicly traded name is now essentially utilities, you know that water business will continue to operate under the name Aqua.

And the gas business will operate under the brand of peoples.

We believe that this structural walls to serve all of our stakeholders very effectively.

Well I publicly traded name is changed the missions and the respective utilities will not.

We remain focused on providing an affordable essential service to both water and natural gas customers.

Our mission.

As stated in the next slide.

It's a natural blend at the current missions of both utilities the corporate cultures of both companies have already begun to blend with the interaction that has taken place between the companies since announcement up until today that interaction has been very positive.

The good news is that both companies have similar cultures focused on employee and customer safety integrity and excellence in operations.

Let's talk little about U.S.G.

Yes, she is always at the top of our minds at the central.

Our board.

And management.

I've spent substantial time considering opportunities to improve U.S.G. I will share some of those initiatives with you. This morning.

Let's start way the top with the company's board of directors.

For the freshmen has been a key theme we've talked about that many of you in fact in the last five years since I've been CEO seven of our nine board members our new.

The board, we built has a diverse set of experiences.

It has looked carefully at to adopt modern board governance practices.

The board has the board just this week adopted a new peer group.

And a new compensation plan that we discussed with many of you over the last year.

Our renewed and hopefully easier to lead proxy.

We'll provide more details on both board governments governance and management compensation. You also find many of these details on our website.

No stay with the ceasing back in January we announced the new leadership team that we built the team has what I believe to be a mix of long time leadership the company along with those who joined US more recently last few years, bringing new and fresh ideas.

Any other members of the team a you'll meet today.

Well, let's say that diversity and inclusion is not just a box we check its core to our strategy.

It will align the makeup of our management team with that other customers and shareholders we serve.

Our management team has grown and diversity.

Not finished yet she.

Since becoming CEO I have appointed nine women to officer levels and have recently announced two new diverse senior leaders just in the last couple of weeks.

Key to our diversity program is that we find not only diverse candidates.

But the best most qualified candidates all in one.

I am incredibly proud of the team that we've assembled and expect great things in the coming months and years from Archie.

[laughter] I'll wrap up my E.S.G. thoughts by just saying that we continue to work on improving the basic blocking and tackling associated with U.S.G.

In 29, T., we completed the CDP survey for the second time.

And increased our grade from a C to a b minus which is a significant accomplishment for us.

We spent portions of three board meetings on how we think about each of the eat the S and the GE. The results of this you can see on the tear sheets, we published through our website just this week.

In order to ensure the right level of attention to U.S.G.. We've also added a full time resource whose principal focus will be E.S.G. that personally report the Brian as my Chief of staff and must be very close to me with the primary charge of ensuring that we consider U.S.G. everything we do at the company.

I want to acknowledge that in some regions of the country. The elevated concerns about the use of natural gas.

Some have even suggested that natural gas is a bridge fuel.

We must also acknowledge that the key burning natural gas is a key component of our country's energy independence and we further believe that in places like Pittsburgh, Pennsylvania Natural gas will continue to be a key piece of the energy energy solution for a very long time.

Now as we enter the world as fossil fuel without purchase of People's We remain focused on a reduction of the company's carbon footprint.

In this regard I have well I consider pretty exciting news.

We recently entered into a contract that will significantly reduce our carbon footprint in fact, our New Jersey, Pennsylvania, Ohio, and Illinois subsidiaries, we purchasing 100% renewable power by 2022.

This put our water utility in alignment with the Paris accord and will allow us to make a significant contribution to where the environment.

At essential we'll do our part to limit long term global temperature rise to less than one and a half degrees Celsius, which is an aggressive goal for our company.

I will also mentioned that we will achieve this level, while simultaneously lowering our overall cost of energy in those same stage.

Pretty important accomplishment.

These commitments to renewable energy reduce awkward overall absolute greenhouse gas emissions by nearly 60% from our 2018 baseline.

Instead of standard for the industry to follow in this important work.

Additionally, once we close peoples.

Well begin to ramp up the capital program at the company will also be significantly reducing reducing methane emissions by tightening up the natural gas grid.

Quantify the environmental impact in a you know update E.S.G. report later this year number we don't own the company quite yet.

No I have one other E.S.G. related announcements to make that we believe is very important I think you will too.

You will all like Oh, you are likely to up to be familiar at this point with the family of P. fast chemicals at this point been written up in the newspaper many many times.

In fact, the recent movie Dark waters is centered around this contaminant did they call that forever chemical because it takes a very long time to break down.

Today, the federal government has not regulated this content and other than to set a health advisory level of 70 parts per trade.

So that's for P for N.P. fast.

As a result of federal government inaction, many of the stage well, we do business are adopting their own standards and they vary significantly.

Most people hadn't even heard a p. fast before just a few years ago and now it's a regular topic on the news as I mentioned.

Beginning over a year ago, we took the important step of testing every water system every point of entry more than 1500 across our eight states. So this contaminant resulting in over.

2600 tests to date.

So today, unlike many water systems across the country, we know exactly where any traces of P. Foster MP feather into our water systems that's unique.

Today, we're announcing that we will take a step that no other multistate utility has taken yet.

We will provide water in all of our states that meets one standard which is far more protective then the federal health advisory level.

And even the CDC recommendations that build on scientific health base standards developed in New Jersey.

Beginning this year or begin the process to install mitigation at all of our states that exceed 13 parts per trillion of P. Foss, P. Fella and P.F. DNA individually.

We anticipate spending approximately $25 million across our platform to do this.

And this is a major step in addressing p. fast in our country, but we'll also continue we continuously evaluating if further action is needed as additional science comes to light on these chemicals.

We plan to work closely with both our environmental and our economic regulators to address this important issue.

To best of our knowledge awkward is the only.

Order supplier in the country that intends to install treatment for these chemicals in our systems without having on exceedance of the EPA health advisory to prompt action.

So you should know we discussed this vigorously among our management team and any end.

We unanimously concluded that we need to be a leader in this work and determined to set of standards that we believe protects our customers and all of those who consume our water.

I Hope you agree that this is a bold but prudent steps.

To protect public health by investing in the appropriate utility assets to address these contaminants.

[laughter].

Now before we transition to presentations by the other leaders of the company I want to make up a point to wrap up 29 tea.

As a team we discussed this a few weeks ago and it was amazing to comprehend all of what we accomplished in a single year between 19, so let's start with maybe the not so obvious.

First we installed a record amount of infrastructure over $550 million to improve and enhanced service to our customers.

No we don't always take the time to recognize this massive effort.

All of electric utilities, this might be a single project for $550 million, but in our world. We literally undertakes thousands of projects that are carefully coordinating engineered and executed by our professionals to deploy that level of capital.

Second we met the financial expectations of that we laid out for the year can you lay the center of our guidance.

47 non gap.

Dan will get into this in more detail that in a couple of moments. We often forget we also saw the settlement of our Pennsylvania rate case, the first one after seven years.

Third last year, we completed five municipal deals.

We signed three more including Duck War, which is the largest at a $276 million. In addition, we secured fair market value legislation into more stage, Ohio, and Texas generating hopefully more growth.

So one thing most obvious we continue down the path of closing our People's transaction.

Well, it's taken longer than we had hoped we're proud to today be really on the one yard line to closing this important transaction.

Related to this we developed the comprehensive integration plan. It came up with a new name and new logo, new ticker symbol and walk through regulatory approvals in three states very very busy year.

We accomplished all these things while continuing our operational excellence in providing service to our customers every day I continue to be amazed by what are people can accomplish and I'm. So proud of this company and probably need it and I think that this company has a very very bright future.

Now before I turn to Matt Let me just discuss a little bit what we have in the coming years 2020 lay out the groundwork for wasn't here today I would say two or three primary themes for 2020 integration growth and operational excellence, let's start with integration I mean.

You have integration, we're integrating two almost equally sized utilities.

In Auckland peoples and will prepare to onboard the Dell core customers right after that.

Secondly, and since I've become CEO, we've been focused on gross.

This will not change as Matt will share our municipal pipeline is robust.

And we'll likely not do something the size of People's every year, but we'll continue to pursue strategic acquisitions as they make sense.

And finally, a 30 for the year is really.

The first thing above all always that is often taken for granted but we'll continue to maintain standards of operational excellence. It's an exciting time in water. It will continue to be industry leaders in gas, we'll begin our ownership of the company by having a third party conduct a full safety review of peoples.

Rick enjoy going to talk more about that in a few moments.

Well doing this oh well it will all this work will continue to invest now about a billion dollars of capital.

A year in infrastructure improvements.

With that as our vision for the for the next a year or so I'll, let me turn it over to Matt to discuss our growth plans that.

Thank you.

Yes.

[noise], Thanks, Chris and thanks to all of you for joining us today.

Hi, Matt roads, and I lead strategy and corporate development for essential having joined the company in June of 2018 [noise]. Since then you can say, we've been a little busy and I'll discuss that in more detail.

As we think about gross we're very sizable capital opportunities to grow rate base organically. In addition, we have a very robust municipal acquisition program with a proven track record of success.

I mean, this will program truly has been our core rate base and customer growth engine over the last several years and we expected to remain our primary focus for consistent year over year growth going forward.

In fact, we continue to see significant opportunities ahead of us and water and wastewater for municipal transactions of all sizes.

We're emphasizing the point that our municipal initiative is our most important growth driver I listing at first on the slide and making it the largest portion of the box on the right.

With that being said well continue being opportunistic as we evaluate larger strategic transactions and both water and gas, but we'll remain disciplined buyers.

I will note that we had would not have pursued many other opportunities the size of People's as Chris previously alluded to the People's opportunity was unique and that is predominantly located in a state. The we're very familiar with Pennsylvania.

It has a it's a pure play gossip, they see with no material unregulated businesses.

And it has significant infrastructure investment needs, which will drive organic growth.

We're quite happy with our existing mix of each other platforms at approximately 70% water and 30% gas.

Going forward will be very selective with future gas acquisitions.

If water and wastewater is 80% of our company for example going forward.

Well, maybe even very successful at our water and wastewater municipal acquisition program and we'd be very happy with that.

We're certainly very mindful evaluation differences across the utility sector and continue to be.

Lastly, all opposed to India is or nonregulated opportunities has not changed we believe that our best opportunities for growth are regulated and falling buckets, one and two on the slide.

People's does bring with it some MBS and we're excited about that but it was not a major piece of the business and not a driver of our interest in the company as Chris said, we saw many of our other non MBS or other MB A's over the last several years.

I'd like to People's the India is that they do have which I'll talk about in more detail later.

Only represent about 1% of their business as well.

From time to time, we will evaluate new India opportunities, but we're not really spending a lot of our time here.

Turning to the next slide.

Let's review, our water and wastewater municipal acquisition program in more detail.

First we're seeing more municipals expressing interest in selling their systems. This is due to several factors, including the municipals need for proceeds to invest in community needs or economic development.

Haven't experienced operator invested capital needed to improve the infrastructure.

And to address the challenges with increasing and more stringent environmental regulations.

The market value legislation, which I'll discuss more in a minute has given municipality is an opportunity to realize the appropriate value for the water and wastewater systems and re purpose capital into other community needs.

Well, we think of what we evaluate and pursuing in municipal opportunity there variety of considerations.

Without giving away any secret sauce here, a few items that we think about.

Yes on purchase price and the future capital requirements.

The impact a customer rates.

The returns will realize and win.

Among many other factors east it's different with its own set of opportunities and challenges, but we feel confident we can provide an ideal solution for many municipalities and are excited about the new numerous opportunities that we have in front of us.

[noise]. This next slide discuss is one of our key drivers of the municipal program. This illustrates where we have fair market value legislation and where it's been passed in the U.S.. You'll note that seven of the eight states, where we currently have water and wastewater operations.

Has fair market value.

This legislation is a powerful tool for municipalities to solve their infrastructure challenges.

FNB was first implemented in Illinois in 2013, and we've been able to can complete several transactions utilizing fair market value in the state.

In Pennsylvania, where we also see significant activity.

Fair market value was passed in 2016.

We have observed that it typically takes a couple of years for a robust pipeline of opportunities to develop after fair market value legislation is enacted.

We are starting to see this in states like Ohio, and Texas, where and we recently completed our first municipal acquisition in Ohio.

The simple explanation of how this legislation works and it varies a bit from state to state.

Is it allows a municipality to get multiple third party appraisals for its water wastewater system.

We as an acquirer and then pay that appraised the mouth and included in our rate base as part of our next rate case filing.

Prior to FNB legislation it was difficult for us to pay I mean, this pally wasn't it appreciate it costs on its books, because we would incur goodwill.

Especially at cost is appreciated asset value on a municipality is books is often very low because it doesn't include potentially significant amounts.

Contributed property from developers therefore, the purchase price we were previously able to pay for fair market value often didn't generate much excitement at the municipality.

Yeah, I recall that we and the bottled water utility industry had been leaders in innovative legislation.

At market value is just the latest of these.

Originated the de sick or the distribution service <unk> distribution system improvement charge in the 19 nineties, which is effectively a tracker for capital spending between rate cases.

Another piece of import legislation, it's called the water quality Accountability Act this legislation, which isn't two of our states now it's mental what is meant to level the playing field, our compliance requirements between regulated utilities and municipalities.

Allows us to be a potential solution for municipalities that are facing compliance related issues.

Moving to the next slide you can see to deals that we closed in 2019 and already in 2020.

If you look back over the last couple of years, you would see that we had been approaching a run rate of about $100 million and annual rate base through these acquisitions, sometimes deals take longer to close unexpected. Unfortunately, it happened with two deals for over $50 million in rate base that we originally expected to close in Htwo.

The 19.

But have slip to 2020 I'll discuss that more on the next slide.

I wouldn't know we've completed nearly 400 acquisitions of water and wastewater systems, both private investor owned utilities, and municipals and the last 25 years.

Starting in 2016, we refocused our efforts on municipal acquisitions as opposed to smaller private systems.

Shifting focus has provided more sizable opportunities for us.

Since 2015, Weve close 57 deals many of them municipal adding approximately 48000 connections and approximately 237 million in rate base.

Well I mean, it's more acquisitions such as the one shown on this slide our great long term investments I think it's important to point out the way it when we initially closed the acquisition.

We have to Sydney municipals existing rates, which are often much lower than ours. So these investments don't reach our full cost of service until the next rate case, meaning there can be some delay in achieving full earnings.

Finally, with this level of municipal acquisitions and organic growth. We continue to think that two or 3% customer growth, it's realistic target for water and wastewater business going forward.

[noise] turning to the next slide.

Here you can see the acquisitions, where we currently have signed agreements in place, but are not yet closed.

New Garden, and East Norton, which I mentioned, not a second ago, which are expected to add over 50 million in rate base are now expected to close in 2020.

We continue working diligently to move these three the regulatory process.

This also includes del Cora, which I'll spend more time on in a minute.

Once these deals are closed will add an additional 205000 customer equivalents and nearly 330 million in rate base.

Next on our pipeline of municipal deals.

BD team and our headquarters and in each of our states continues to foster and develop our robust pipeline.

To be included as part of our pipeline. It means that we're having active discussions with the municipality.

You can see from a slide that we now have many sizable opportunities and over 300000 customers in our pipeline.

While we do not expect to announce a large munis will be like they'll core every year.

Other opportunities like this are out there and we have at a very Ics, we had a very experienced team working on them.

Well most of our historical deal flow has been in two states, Illinois in Pennsylvania. We did recently closed on our first municipal acquisition in Ohio for the water system or the city of Campbell with 3200 connections.

We foresee this as a precedent setting transaction, which we hope to the will enhance our momentum in the state.

We also expect municipal acquisition activity took satellite in other states that have recently enacted fair market value legislation, such as North Carolina in Texas.

Many of our recent municipal acquisitions have been waste water assets, rather than water given the operation and compliance can be more difficult to manage.

We see the same trends and our pipeline opportunities.

But the majority of the potential customer additions coming from wastewater systems, which are effectively regulator the same way as water systems.

Now, let's move on to Delcor.

Especially previously mentioned in September we signed an asset purchase agreement, what they'll core for 276.5 million.

Oh boy headquartered in Chester, Pennsylvania.

It's center was 42 municipalities and approximately 500000 people in southeastern Pennsylvania in March the largest municipal acquisition and our company's history.

It is also the largest ever municipal acquisition in the state of Pennsylvania.

They'll core system includes 189 miles of pipe and as a customer base cuts consisting of large wholesale agreements with other municipal authorities, along with retail commercial and industrial customers.

We estimate that I'll call. It provides waste water service to approximately 198000 equivalent dwelling units or 80 years now let me take a minute to explain the concept of any to you.

Waste water 80 years deemed to constitute the estimated amount of domestic sanitary wastewater discharged by a single family dwelling unit in a single day.

We take the total waste water flow of the system and divide by this them out to estimate the number of easy to use you may have noticed that our estimated number of easy to use for Docomo has increased since we announced the deal. This is primarily due.

And to changes in how we are accounting for the flow of Delcor as large municipal customers, including a number of gallons. Each residential house is estimated to use.

However, there is no change in our estimated revenue.

Net income or actual customer connections for the Florida Alcobra as a result of this updated edu number.

[noise] post acquisition. So of course 50 million gallon per day waste water treatment plant in the Western service area will be the largest waste water treatment plant that we own and operate.

Decent service territory currently conveys waste water to Philadelphia water Department or PW D. Their contract that is set to expire in 2028.

Given this they'll cores responsible for a portion of Philadelphias EPA mandated cost to separate its combined storm and sewer systems.

If they'll call were to stay with Pwc over the long term, it's total expected costs related to Philadelphia, along with its own capital program.

Is expected to be 1.2 billion 320 42.

This capital would have increased the of course standalone customer rates substantially over the long term, which is why we began looking like why they began looking for a partner and decided to pursue a transaction with us.

To mitigate the rising costs from Philadelphia.

They'll call plans to build the infrastructure to divert waste water flows from PW D and double the size of its existing waste water plant to accommodate the additional flows.

[noise] essential is uniquely positioned to make these investments given its extensive experience in large and complex projects.

Total that they'll core a capex under our ownership through 20 or 28 is estimated to be $700 million with majority to be spent in 2026 to 2028.

They'll core intends to use net proceeds from the sale after debt repayment to establish a trust, which will help offset future rate increases due to the large capital cost I just described.

So we feel that the combination with no Cora is a win win for both parties involved and it's also a win for the customers of the okra.

We will follow the transaction approval application for the core what the Pennsylvania Public Utility Commission next week.

And is expected to close in late 2020 or early 2021.

We plan to fund the Delcor acquisition with a combination of debt and equity and importantly, we also expect future opportunities to acquire other collection systems, which currently convey wastewater two delcor.

In addition, turning over the next slide as you can see here I've already operates in many of the same communities as though Cora you can see the overlap on the slide.

There's a significant overlap in the two footprints between Opcos water service territory.

And they'll cores waste water service territory.

I feel it's already deeply entrenched in the in these local communities, where they'll cooperates and is well positioned to serve its customers and those communities.

As we've been working on the integration planning for People's we continue to evaluate and enhance our knowledge of the water and gas landscapes in Kentucky in West, Virginia, both of which will be new essential states upon the close of peoples.

A brief summary of our analysis as shown on this slide.

We're still in the early stages of getting to know these states. However, we see significant municipal opportunities in Kentucky in particular.

And are working with the Delta natural gas team on this effort.

Delta, which is part of the People's acquisition already has deep roots in Kentucky.

And finally as I previously mentioned, we have really de emphasized our focus on MBS days or nonutility businesses.

Over the last five years in particular.

And essential today, we really only have two nonutility businesses.

These consist of a royalty payment we received from home service is they provide home warranty services to our customers and a pipeline joint venture that was constructed several years ago <unk> to provide water.

The natural gas drillers in North Central Pennsylvania.

The performance of this pipeline has been up and down and as you may recall, we wrote off a significant portion of its value in 2015.

However, the pipeline has performed well the last two years and we're currently in the market to sell it.

[noise] People's does have a few nonregulated businesses in Pennsylvania and Kentucky.

Ah People's has a home warranty protection program somewhat similar to ours for.

For water sewer and gas lines and other services in the home under its People's Protection plan and Homeworks brands.

So both of these programs People's provides a service across approximately 150000 contracts.

People, who also developing combined heat and power projects or CHP projects and find its first two contracts with the Pittsburgh Airport and Allegheny Health networks Rexford Hospital.

He was can take people continue to look for additional CHP opportunities because they produce additional demand for natural gas and generate nice financial returns and there are other projects that People's has an early development.

Finally People's has investment in early stage fuel cell company that is attempting to commercialize its technology.

In Kentucky Delta has small non regulated businesses that own land and gas production and it processes and then sells the gas.

Well continue to evaluate and optimize these businesses in the future, but I want to emphasize again the day comprise less than 1% of our total net income.

Our focus has van and we'll continue to be on a regulated operations going forward.

With that I'll turn it over direct to discuss the operations of essential.

Thanks, Matt and good morning, everyone.

As an 18 year veteran of the company I'm honored to lead the workforce that is once we include People's we'll have more than 2300 experienced operations professionals.

These employees are dedicated in mission driven to provide high quality utility service, while using excellent safety and operational best practices every day.

Now well leadership team this year in New York, maybe with all of you the water and gas continues to flow at our current.

And our future customers.

And this was due to the strong organization in operational excellence that our team prides itself on.

Today I'd like to share a little more about that organization that will ensure continued service to both our water and gas customers.

First calling Arnold.

She will be the leader of our water business at closing Colleen is a 27 year water industry professional with prior experience technical consulting.

And at a large municipal city of Wilmington.

And finally with awkward for the past eight years.

She has also been the deputy Chief operating officer working for me for the past four and a half years.

We are proud that she will be the first female to lead our water business in the company's history.

We'll talk more about her organization in a moment.

Next we have Dr., Chris Crockett, Who's our chief Environmental safety and sustainability officer.

At essential.

He joined US 40 years ago from the city of Philadelphia, where he was the Deputy Commissioner at the Philadelphia Water Department.

There be directed one of the largest water.

A couple water systems in the United States for 21 years.

And with 25 years of total industry experience, Chris is a true water expert and he leaves our water quality efforts across the company.

His organization is responsible for oversight of compliance reporting for all our water and wastewater systems.

He is also responsible for OCC was centralized water laboratory.

On that note.

I'm proud to announce that we are finalizing plans to build a new state of the art lab at our headquarters building and Glenmore.

We are quickly outgrowing, our existing lab as we add more testing capabilities and more customers.

In addition, Chris also leads the team that will ensure our combined safety efforts across both operating units are aligned.

Next is jumbo beta.

He's been with a company for 13 years and has a total of 21 years as a professional engineer.

Jim became our chief engineer three years ago, having previously served in a new Jersey operation.

He is responsible for roughly half a billion dollars capital budget at Blackwell and we'll see leadership for the combined capital budget of essential which is now approaching $1 billion per year.

Jim's group is ultimately responsible for managing the thousands of projects that make up those budgets.

May surprise, you that we typically only have a few really large projects.

And most projects, they're more modest sized distribution system projects and the average project size is only $250000.

So you can imagine the effort to manage all of those projects.

Similar to what share his expertise in Iraq was expertise that we've gained over the years with the People's team to help ensure effective management of their growing capital program.

And finally, I'd like to introduce Joe Gregory.

Will be our president of the gas business.

Joe has been with People's for 33 years.

Prior to closing you leads all operations as Chief operating officer.

And if we worked on this deal in this transaction I've gotten to know joke in Joe's team.

So impressed with the him and his teams knowledge expertise.

And dedication.

Joe Colleen and Chris our here today, and there will be able to panel is coming up next so you'll get to hear from them in a little bit.

Jim is back and Bryn Mawr investing in infrastructure.

Now, let's turn to Aqua specifically those of you or who are familiar with awkward. They already know how we've been structured for the past few years.

Reporting to Colleen our states presidents in each of our eight Aqua states.

And these precedents are responsible for managing the operations.

Maintaining regulatory relationships and looking for acquisition opportunities.

We are so lucky to have a team this experienced in very good what they do.

And we also have a nice mix of leaders who have been under rose more than a decade to those who have just recently joined Aqua.

In fact, you may have heard some recent announcements of Larry Carson in car he been it as president of our New Jersey in Indiana operations, respectively.

In addition, just this week Mark Macquarie with announced at the Vice President of Aqua reporting to colleague and Mark will join us in early March.

For those of you that may not be is familiar with aqua.

The company the company originated a nearly 135 years ago and suburban Philadelphia.

Today, we have over $5 billion of rate base with approximately 88% of that in water and 12% wastewater.

You may recall that in until 1999, the company only had operations in Pennsylvania.

And then it was only water no wastewater.

We've grown a bit since then.

[noise] awkward 1600 employees provide water and wastewater serviced over 3 million people in eight states.

This is done through a combination of large surface water systems like we have in Pennsylvania.

The small groundwater systems like we have on our southern states.

And nearly 190 wastewater treatment systems of all sizes.

It is our job to maintain and operate these assets to provide a round the clock service to our customers.

Most of you probably see variations of this slide in the past.

What is the picks is the state of the United States water wastewater industry.

There are three main points.

First as a whole university.

The industry needs, an enormous amount of capital investment.

The country's water and wastewater infrastructure has largely been under invested in for decades.

Second.

The industry is highly fragmented with over 50000 water systems and 14000 wastewater systems.

And third.

Most of the United States population receives water and wastewater service from a municipal system.

We view this as a significant opportunity, which Matt already discussed.

But I could we take a wallet providing excellent service to our customers seriously.

One of the ways. We provide service is by investing in required infrastructure to maintain system reliability for our customers.

This slide shows the increasing investment we've made and infrastructure since 2014.

Importantly, we are now investing over half a billion dollars annually water wastewater infrastructure.

The 2019, we invested a record of $550 million.

We intend to do the same.

In 2020.

Keep in mind. This does not include capital for acquisitions.

[noise] certainly all of this investment has an impact on our customer bills, we take pride in trying to minimize this impact.

What does the ways. We do this is through projects, we refer to as eight to one projects.

These are situations, where we can reduce one dollar of operating expense or own EM.

By investing uptick $8 of capital.

These types of projects have zero impact on our customers bills, but they solve an important operational need for those customers.

This slide highlights one project, where we developed our own water supply to reduce the need to purchase costly water from another provider.

The other project is where capital investments and an innovative design allows us to save power and treatment costs at a waste water plant.

By the way that project won the 2019 National Association of water companies Management Innovation Award.

Most importantly, these projects for provide improved service quality or reliability for our customers.

Now, let's shift to People's.

This slide shows the operations organization that has been it in place it People's for the last several years.

I've already introduced Joe Gregory who will lead the gas business.

It's important to note that we are retaining all the employees and operational expertise from peoples.

As we need their skill and experience to ensure that gas utilities continues to operate safely and effectively.

Concerning the organizational structure, except for the Kentucky operations, which will be led by John Brown as they president kind of like we do it Aqua.

The People's organizations for logical reasons is structured by function rather than geography.

Reporting to Joe or executives responsible for key functions of operations.

Engineering and construction.

Reliability.

In sales and marketing.

This team is very experienced and they have worked together for a long time.

Is the fact of between them they have more than 263 years of natural gas experience.

And they're also dedicated.

Because of those 263 years 248 of them.

With People's where its predecessors.

I'm looking forward to these executives officially becoming part of the central family.

Now club peoples, there's also a nearly 135 year old utility and it is based in Pittsburgh.

They have been owned by still river, a private infrastructure fund for the past 10 years during that time and through three subsequent acquisitions People's has grown to serve approximately 750000 customers in three states.

And they have about 1500 employees.

The largest number of customers are in western Pennsylvania, representing 93, <unk>, 3%, though the total and the rest are in West, Virginia and Kentucky.

This slide provides a more information for you on the makeup of the People's pipeline system.

As an ongoing need for pipeline replacement at peoples and this will allow increased capital investment in the coming years.

Of People's total distribution pipeline miles.

About 2700 miles are bare steel or cast iron it needs to be replaced.

People's has already been replacing these pipes.

But under a central ownership, we've committed to further accelerate the replacement over the next 15 years.

This accelerated pipeline replacement will be done through the Pennsylvania public utility commissions long term infrastructure investment program also known as Hell tip.

[noise] shown on this next chart and discussed on the previous slide people said it has been committed to investing in required infrastructure to maintain system reliability.

We intend to grow the replacement program and increase our capital expenditures like over 40% in 2020.

And later then we'll talk about how are we plan to implement repair tax as a treatment or two to finance that process.

The switch gears to the safety in environment.

At essentially we've always maintained the primary core value that is committed the public safety.

And then we began the process of acquiring a gas utility we wanted to make sure that this business had that same commitment.

And we found it in peoples.

People already has extremely strong gas safety and compliance programs.

And a culture committed to public safety.

In fact People's this proactively implementing that a few new initiatives to further enhance its existing commitments to guess safety.

When they go through.

First.

In response to a 2018 non peoples gas industry incident in Massachusetts.

Related to an ever pressuring the pipeline system.

People's initiated and Overpressure protection self review.

That effort reviewed its procedures and developed and implemented enhanced procedures to avoid such incidents in their system.

Further.

At the request of essential People's higher Black and Veatch, an industry leader in pipeline safety assessment.

Variety third party review of people systems procedures incident risk exposure.

And mitigation measures.

And to conduct an industry best practices review.

This assessment has already started any final report.

I will be issued in may.

Lastly in 2019 People's began the process to proactively adopt a pipeline safety management system known as a P.S.M.S.

This is recommended by state and federal regulating agencies.

The program will be implemented later this year and it uses a structured the framework to identify manage and continuously improve gas pipeline safety.

In addition to safety essential has a strong focus and commitment.

Well, yes, G as Chris already discussed.

So I want to share with you some important environmental initiatives at peoples that may not be obvious when you think of a typical gas utility.

For started the accelerated pipeline replacement program will move about 200 miles of old bare steel pipelines this year.

It as a result and based on calculations provided by the United States EPA.

Peoples annual methane emissions will be reduced by 353 metric tons.

And that equates to greenhouse gas reductions equal to eliminating about 1900 automobiles.

Importantly.

This benefit will compound each year as more and more pipes are replaced.

Also because people's has a program to capture and use nothing from local landfills. This provides enough gas each year to fuel 19400 homes.

And reduce greenhouse gas emissions equal to eliminating.

75000 vehicles.

And lastly people say the program for natural gas vehicles or in GB.

It involves expanding the use of in GB at peoples and also serving 26 public in GB fueling stations.

In GB use reduces greenhouse gas emissions by 20% to 30% when compared to gasoline or diesel fuels.

Okay, that's talk about.

Some of the infrastructure investments we plan to make.

As a combined company, we expect to invest just under $1 billion in infrastructure annually.

And for the three year period between 2020 2022, we expect those best $2.8 billion I will note that this does not include capital for acquisitions work for the capital that those acquisitions will require.

This capital is mainly for distribution pipe replacement and source treatment in the water business in for pipeline replacement in the natural gas business.

It is also important to note.

At approximately 50% of this capital is eligible for recovery under surcharge mechanisms like the disk.

No we won't necessarily recover it that way, but it is eligible.

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The Capex are discussed in the previous slide will translate into significant rate base growth.

In the water business our rate base is growing roughly 6% to 7% from infrastructure improvements.

No again, we do not factory in acquisitions as they can be lumpy.

For example, we expect to a closed okra by early 2021 and that will cause our rate base to grow by an additional $276 million, but we don't count that in this calculation.

We believe the 6% to 7% rate base from Capex is sustainable.

In the water business.

If a gas rate based growth should be in 8% to 10% range due to the pipeline replacement needs at peoples.

Hopefully that provided over your view of the company and our strategy.

Well now going to take a 15 minute break and then we'll reconvene for panel on operational excellence and regulatory affairs.

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[noise], ladies and gentlemen, the program or resuming a few moments if you could please take your seats at this time. Thank you.

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Once again, ladies and gentlemen.

We're now going to resume our program if you could please take your seats. Thank you.

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[noise] [noise] Greg.

Great.

Hi, everyone.

For now.

Yes.

Phil.

[laughter].

[noise] [noise] [noise] [noise] alright, very good out there. We go we have found welcome back I Hope you all had a great break.

And thanks for returning because a you're gonna here from a panel, which I hope you will find interesting.

The purpose of this panel is to give you a bit more exposure.

To our leadership team.

And the different part of our leadership team and cover some of the more industry specific items in a deeper way than we typically do yeah for investor relations purposes.

No I already introduced a Chris Crockett Colleen Arnold and Joe Gregory wrong, the stage with me now when I walk through my organization.

I'd now like to introduce Kim Joyce, who has been with the company for 13 years and as our Vice President of regulatory and government Affairs.

It was regulatory council for the company, she overseas and manages regulatory filings, including base rate cases.

Acquisition applications, and the implementation of federal and state Legislative and regulatory policy at the public utility commissions that regulate essential.

She is responsible for maintaining awareness and providing advocacy on governmental and legislative issues that impact the company.

In addition, Kim is proud to lead the company's volunteer and corporate giving initiatives welcome Ken.

So calling let's let's start with you.

You've been a consultant two.

And a in employee of as it is a director a large municipal water utility.

How do you compare what you saw when you were at a municipal to what you see when you're at Aqua.

Thanks, Eric [noise].

Good morning, everyone.

Okay.

The keys that France, especially when I think about the small to medium sized municipalities I interacted with is that on the municipal side or in city government.

Our utility can often just to kind of another city department or government service.

And that's not necessarily in understanding or tied to cost to service.

Right in Plano words, what that means its water rates the kind of attack.

Where they think of it as attack.

So that means is that it because it can become subject to your political discretion well the well to actually get anything God only have a key public health hurdle you know that can get a we tell I being a phase in the system to break down and honestly I think we file that to a certain extent go for it.

Uh huh.

Right.

[laughter] show [laughter] thinking first and foremost about water and wastewater lobbyists you back on track and a lot. So I'm not trying to protect the dollar economic development or talk about crime, Oh, Oh willing to talk about that I you know.

Well I don't know under the street and say without that okay.

Well I had a critical time I kind of see communication on water with our country and Uh huh.

Yeah.

They see that are out there today. He has been on the headlines in terms of P. five water quality, what actually you know it's getting increasingly complex.

Without.

Oh I focused on line I think at Danville, leaving a little bit of our public trust and well not enough on making me in Boston set me too and that critical service.

Alright, great. Thank you so workers Crockett County mentioned water quality and a in technology now most of the fruit probably has no idea what it takes to manage the system with 1500 point of entry you talked a little bit about your team or what you do what's what's involved.

So as you mentioned, Rick you know a most people don't realize all the things that have to happen to make sure that that water that comes out of your top is safe every day and all the things that we need to do and it's a big job done by large to people and its non 24, seven and sometimes it takes something as simple as a tour like we did with it.

Jos team, where they came through the water treatment plant and went through the the lab for them to even remind you how much work you do some days because we take it off for granted.

Now when it comes the testing it is down by a big team, including technicians and operators had the plants and in the field all to engineers and scientists to folks in a laboratory that information, but that the whole way from the field level the whole lay up to the corporate level every day and I'm. In addition to access equipment process equipment probes monitoring water quality 20.

For seven all the way from where it comes in from the River all the way out to the top in places.

Oh, what people don't realize it's just last year in 2019, we collected over 120000 samples for compliance as a company.

Others 120000 samples 35000 went to our central laboratory in Bryn Mawr.

Our central laboratory in Bryn Mawr runs about 40 different methods that can detect up to 240 different constituents in the drinking water only nine year regulated.

There was 35000 samples generated 308000 hassane analyses in our laboratory.

So that's just one year off for a portion of our work in addition to that and we mentioned the process moderating the person equipment. We're also looking at and using intelligent systems like fastest flu, which harness all that water quality data that we're gathering and allow us to look at that to predict future water quality for things like algal blooms as well as.

Provide tools to allow us to optimize treatment faster and cheaper to renew those kinds of chemicals to make sure. The drinking water safe. In addition, we have early warning systems on systems wait for water from rivers and streams and it was early warning systems allow us to get a heads up in advance if there's a spill or an accident upstream.

I mean, there was would require us to either shut down our water intake change to another source or put on additional treatment. All those things are happening 24, seven behind the scenes to deliver that save glass water to you. So we know from whatever to tap.

Exactly what's going on and to make sure that you're safe 24, seven thanks very very good thanks for the detailed answer.

So can't let's turn to you now everything that Colleen and Chris just talked about sounds really costly.

How do you think about how the company is going to earn a return on that investment while still.

Taking care of our customers.

Good morning, everybody happy if he has.

Talk a little bit about the golf and I think Theres a father why don't I understand are fairly familiar with surcharge mechanism at different acronym and different tape out I referred to that I said that it started out in Pennsylvania in the water under strain in the early nineties and it looks really love to incentivize on investor.

On utilities, and Pennsylvania to focus on replacing 75 year old distribution, hi, hunger and you're all distribution pipe, but since that time, we've seen significant expansion.

Guess mechanisms and a lot of things have gotten very create our and what they're on incentivizing background utility to look at in the play and no. One has one of the project, but I was I'm really proud to be a part as.

And then North Carolina, we have water and wastewater operations in North Carolina.

About 80000, why our customers about 18000, <unk> flatter smart, but just to put this in perspective.

To serve those customized says about 1400 Wow.

We have customers and 51 county.

And more 750 different water that's done <unk> that we own and operate for de lever Sarah not what's happening in parts of North Carolina Harker the pockets in the community that we are.

Everything ironed out of your fair share it should naturally occurring iron anomalies in the water.

And certainly that was there and I went back optimize right is that how for later this year and common secondary water quality, yes, yeah, but I'm not it not a good thing for our customers and certainly we wanted to do something about at our regulators wanted to do something about it.

Can you elaborate catalysts that we all work together collaborative collaborative way in that particular infrastructure mechanism and North Carolina is aimed at addressing that a share south and incentive either sell cars.

Say traffic issues.

And since the wealth cannot calpine out what path, we've put and 41 health care.

And different communities.

Over the past yeah.

I I just think that's a really good example have how and expanded at a draft different issues in different there.

Other sample as well right, just adding wastewater <unk> Ah Ah eligible plant that we cannot play that's happening in New Jersey right now.

I do think spanning more than just a distribution hi, and I think last day because the mechanism has worked so well typically have a top involved and testing have news and increase the.

On the amount that you can run parallel I'm mechanism.

And then certainly expanding treatment Towerco states, like Illinois, and Ohio that havoc Uninvested eligible Matt I'm basically the so as to where a customer.

What I had.

Okay fair enough, but how do these mechanisms actually benefit customers.

That's it that's a great class and we have other discussions all the time, yeah I think.

One of the challenge me targets, we have water and wastewater industry.

So a lot of what we do our customers don't see right. So I, just wonder Crown and [laughter] worked out really a.

Work, that's being done at the treating that plan Erika waste water treatment plant.

And said most of these mechanisms.

Well the acquired either to present, our long term infrastructure I plan, but that I'm, writing ahead of the projects that we deal or after the project that we go so really isn't opportunity frac can be transparent and right now what our plans are gonna be and educate our customer and show them.

This is the work that were going in your community.

Well have an impact on your now but at least they got that connection and understand I'm. The work that's being done.

In addition, we now our customers do not like lives like site. These mechanisms allow gradual increases.

And then there is other operation, Washington, DC decreases and accounted for water, we can see decreases and customer water quality complain.

And then lastly, let US now you know rate cases, and our industry certainly start Uh huh.

And that they need for them.

But again, the I'm fighting for our customers. It take a lot of work latter work on the management team lot of what kinda staff and how fast that put them together I might not why worksite regulator.

I think that that we can.

More time to clean arbitrary cases and use the types of mechanism at that's a win win for everybody very good. Thank you. So much let's let's switch over and ask a question on the gas business. So Joe Guerrini is not yet and employee of essential he will become one on the March 16th when we close so Joe.

When you become the president of the gas business what are your priorities well, there's a a number of priorities size and they're very important things that and we need to take care of the too.

I guess I've no one is the opportunity to accelerate our pipe replacement you know we've already got an accelerator program at People's We're gonna, having more meaningful accelerated pipe replacement program I'm on the distribution side and so we're going to ramp that up but also of note is on our gathering pipelines we have.

Oh.

To over 2000 miles of gathering pipelines and the ability to move gas from the well have to the customer.

And we've got program around accelerating replacement does and then Chris frankly had mentioned the good one time by issue, which was a very prominent issue any acquisition case, we have a seven year commitment to replace all the pipelines are serving customers out there.

So I think the challenge there. It's a good challenged to have right is we've got to get ready and ramp up and be in execute around that so we're already into planning stages designing an engineering our pipeline projects more than Weve traditionally have which is a good thing.

Yes, onboard our own workforce to do tie ins and be inspectors and increase our contractor network or the folks that are actually lane applied for us and what kinds of that is training you know we have to qualify and train all of those new hires as well as requalify all the ones that we tradition that we currently have.

Which are from 750 plus.

Uh-huh and we do that in our own in House training Center.

So it sounds like I said, it's a good challenge so it's gonna be prominent on our list of things to do any other things and I think we saw some of this already today. It was around a natural gas role in E.S.G. initiatives I'm, just going to be a prominent thing that we knew for you on the commercial side you saw a little bit about combined heat and power natural.

Yes vehicles, we've got a sales team that.

They are trying to work is a really hard with our a potential customers out there have turnkey solutions for them.

It's not only say as customers money, but it really a natural gases.

Environmentally friendly I am very efficient fuel. So it has a nice is GE story around it.

Landfill gas Ah, we keep trying to acquire as much as as we can has huge environmental impacts and then the other thing with that goes with that and you saw some statistics today around the quantification on greenhouse gas emissions with some of our natural gas is she initiatives and particularly on the gathering side.

<unk> some of the statistics are based on EPA standard Kinda national.

Metrics, we're going to take a real hard look in quantifying it on our system, especially on the gathering systems, where you have higher.

Mission rates.

So were work real hard to make sure that that we've got a good handle and can accurately quantify BSG impacts we think it's more than what youve inside today. Thank you very good.

Back to calling into a in a couple of weeks you can become the president of the water business what are your priorities.

You've heard us talk about it I know it operational excellence is our core competency.

And I, certainly want and why don't I cannot emphasize fivefold increase it and I'm, just saying don't talk about operator training.

Well that in a few things I had some evidence so far and I interaction on would show that operator training and qualification program on data is on its really Vega.

On the one operation side I don't know people unless that certification requirement for what makes a lot to operate on differs greatly philosophy in all 50 states and it doesn't that they would qualify our operators father kind of class a increasing treatment that I talked about earlier, so I'm looking at focusing on operator trying.

Many of the aging workforce like we all know well today historically, what we've done that you've taken I see operator and have them trained a genuine and the technology today, Chris talked about fond of saying and thoughtfully get smarter and data analytics I think we cannot smarter operators, who are more focused and proactive anything like that.

Yeah, and then there'll be more efficient without too.

And then of course, well talk about it.

And I personally for me I like they spoke about my answer the municipal market I personally met coal market will be a key priority.

Hi, I'm really excited to be able to extend our value proposition.

The regulated utility to the municipal side I've been working in water for over 25 years I'm passionate about.

The water industry and I know, we have on and off all some cancellations to offer and I know will make the right and that's.

Perfect Joe will switch back to gas for a second.

If you think about the pipeline replacement.

Projects that are coming up how do you factor in and how do you think about how that impacts safety.

Well, let me start by saying that and we're I'm very proud of the employee safety culture, we have it people's as well as a very strong and rigorous gas pipeline safety and compliance program. We literally have hundreds of standard operating procedures, John procedures, well out of those are pattern around federal.

So regular gas pipeline safety regulations, but also say commission regulations, it's really the core of what we do but yeah. We try to be go beyond that and you know Rick touched on some of these self initiated a programs that we started in gas pipeline replacement an accelerated.

Program is one of that you know when we we look at our pipelines you know, we've got 2700 miles as bare steel in some cast iron pipelines.

That's a fair amount we've had an accelerator program in place for the last seven years, but now with the ability to increase that accelerate it more there's our highest risk pipeline and we're going to be able to take them out of the ground sooner than what we could before so I mean that overall is one of the most important initiatives to improving I guess my voice safety in our system.

And Rick mentioned, a couple of or other self initiated program. So the pipeline safety management program again. This isn't mandated are required a it's a practice that's used in other industries aviation chemical nuclear we're going to bring it over and use it on the gas or should we think it's the best practice and Ah it's going to.

Enhance our safety or across the.

The company, that's going to allow our subject matter experts or two on AI based on US a set framework and on a regular basis get together assess all other risks. It's a you know this is a very dynamic process I identify mitigation steps and then test them and verify them and we're going to actually.

Have we're gonna have dedicated folks that were going to bring onboard to help manage this this isn't just a fad. This is going to be a permanent part of our an important part of our gas safety a program going forward and work also mentioned the or the the that the Massachusetts incidents in the overpressure situation.

You know that's another self initiated program that we undertook a it caught the industry's attention, but it did catch our attention what happened there we have low pressure system similar to what what's up there. So we immediately engaged our team in identifying all of our procedures around is low pressure systems studied real hard what came out of the investigator.

Since the T.N. NTSB state commissions or AG American gas Association.

And implemented steps, we put some immediate steps in place and short term in longer term steps you know some capital programs to address that so I know that's beyond the pipe replacement, but he and I think it's another example of some of the important initiatives around gas safety and I'll just add people life question dad.

Yes, the Pennsylvania death, GLA People's has a 5% cap rate on their debt right. Now. So there is that opportunity under legislation check increase that just like we have and on the water side, how Pennsylvania, Kim thanks for bringing that up it highlights the parallels that we've already seen.

Between the water business and the gas business.

Thanks for doing that.

'cause crack at it your turn now.

And I might ask your technical question.

Calling mentioned the increased complexity of water quality issues.

How do you see the PFS led pharmaceuticals in the water and water quality in general playing out in the next few years.

That's good question and I could spend probably three hours talking about this sort of my favorite things talk about emerging or water quality issues, but I'm going to try to keep the honestly, let's see if I can crime at all it so I wasn't let's start with the opportunity that these chemicals represent.

They all they represent incredible opportunity for offer to be a leader and a champion of protecting public health and also an opportunity for growth, which I'll talk about a minute.

Oh the issue that were seen here is the way the safe drinking water Act was set up in the way drinking water regulations were set up since the seventies is science identifies the contaminant.

Then the scientists and regulators determined the safe level that it can be in the water.

And then the water suppliers remove that chemical to that safe level.

The the issue that we're seeing now is our ability in science is outstripping, our outpacing our ability to understand the public health significance and the regulatory process. For example, we use it as had chemicals at the part per million or milligram per liter level than parts per billion now we are detecting.

Better quality at the part per trillion level, which is one grain of sand in Olympics I swimming pool.

So our ability to attack these things is occurring at a much faster rate than our ability to understand what it means for public health and then we have a regulatory process that takes years to adapt to new chemical to its list. In fact, there is only 90 regulator contaminants in drinking water and EPA has not adopted a new maximum contaminant level level when there.

Over 20 years.

So that how is aqua approaching these emerging panic well regardless of what the EPA is doing we go and understand the state of science and how those are these chemicals and participate in research with universities and organizations.

Second.

We engage our our customers to try to understand what their questions or concerns about these chemicals that we can explain to them, what we're doing and what the issues are.

Third we as we mentioned earlier, Chris mentioned earlier, we test our systems, we go out and develop the ability to test our systems for these emerging contaminants for example piece as when I first I was on the scene in 2016 laboratories are only handful in the country. They could do it. It took you two months to get a result, we when.

Bill or put in our own Oh, no capabilities to analyze for it put in a $400000 liquid chromatographs.

And we were getting results in under a week and went out tested thousands of our locations.

Next after we have acquired all this information at same time, working with our environmental regulators as well as our economic regulators to make sure that they understand that we are supportive of regulations to remove these contaminants as well as to gain acceptance for the technologies and the recovery remains these contaminants.

So that's p. Fas and emerging contaminants in a nutshell.

Where we think it's a substantial opportunity for growth is as we mentioned there's 50000.

Community water systems out there many of them today struggle to me the environmental regulations of the past century, let alone what's coming ahead in the next 20 years.

Your next two years even.

And so many of those systems that are struggling already feeling the pressure of these emerging contaminants communities that have already had contamination from p. Pfizer led have really not had the wherewithal to manage the issue.

And they're turning to either massive investments that they can't afford to community level, and then are turning to the state and federal tax payers to bail them out to grant. We don't think that's a sustainable up option, we think that probably utilities like ours, we have the way with all the complexity to be able to go in and address these issue.

Ladies and manage them properly and do a cost efficiently for the customer.

So we think again that these emerging as habits are real opportunity for us to be a leader public health champion and to grow this company.

Awesome I don't think you made your three men at target [laughter] is a very thoughtful answer very important information. So Joe coming back to you know talk about People's or you know People's like Aqua has grown through acquisitions can you talk about your thoughts on how you had to go through some integration efforts at People's Yeah.

Yeah sure Rick you know in a relatively short period of time, a handful of years you know people's through acquisitions are essentially doubled the size of our business in western Pennsylvania and uniquely there's three systems that were brought together where on the same geographic area and literally.

We have situations, where we have pipes from different legacy systems on the same street, it's unique that the western Pennsylvania area. So one of my biggest challenges was when we acquire those systems. We had three legacy unions worker unionized workforce about 750 employees three separate sets.

Contracts three sets are operating rules three different sets of shop locations and so really a breakthrough in that integration wasn't 2016, we were able to negotiate a single labor agreement that covered all of those employees and for the first time, we're able to bring all those together under common work rules part of that we literally.

This is not an exaggeration, we had our guys driving by each other so huge efficiencies that we were able to gain out of that so it was a big part and we actually were able to consolidate some of our shop locations to be more efficient. So that was a big piece of it and then when we were sold from by Ah Dominion resources in 2010 in steel River.

Acquired us.

We had to start a new with all of our IP infrastructure, we had a short period of time to rely on the dominion systems, but within its but less than a year or little over a year had to build our own IP infrastructure. So having those new state of the art systems, especially on the operation side for managing our compliance work scheduling our work our mapping.

Systems I can go on <unk>.

In quite a few those having those in place really made it much easier and more effective to integrate the three businesses and put us on a same common practices and actually eliminating a lot of manual processes that existed with couple of the other legacy companies and then lastly, as I mentioned because of the overlapping service territory as we go through it.

Replace pipe on all three of those legacy systems, we're able to do it in a much more efficient way, we don't have to replace pipe for pipe. We may have opportunities when they only have to replace one pipe and tie in a two different legacy sets of customers or eliminate a pipe all together and just tied into an existing system, that's not going to be.

Replaced and over the last a number of years, we've been able to eliminate the replacement of 30 miles of pipeline are related to our bare steel pipeline replacement project, which is played a big part now it's you know maintain fishing operation so.

Hi, Thanks, again, Kim journey, and let's change gears and talk about a whole new topic fair market value valuation.

Matt discussed earlier that its spurred conversations.

Municipalities talking about selling their utilities can you talk about our company's biggest learnings as regards the fair market valuation SAR style crest likes to talk about emerging haven't am I right I talk about fair market value on and that legislation. So when you talk about fair market valuation legislation on I think it then.

Clinton pets I recognize it's a real shaft and the way of thinking about Africa, shands and the rate making process.

And so.

Now in my regulatory while back a lot of Keith <unk>. They called are on that came along with US on this journey and Michelle.

And really create hauling and walk strain.

Right and in some of our game.

What the success of fair market valuation legislation for Affleck not Nothing's mentioned it started in Illinois in 2013 and since then we had some type of version of this legislation and seven out of our eight day.

So really short amount of time and I think because at the test and then.

I think legislators, we're working on for tool and ways to incentivize consolidation and then and then UNICEF hallmark at.

So the short amount of time and a lot of progress has been made.

Just to take a step back when you think about fair market value and and different types of legislation to me if they're very young our acquisition policies and most of the thing that me, Iran has had type said apparition policy, which were again they they want their intent was to consolidate right.

Gain efficiencies of scale, because there's so many water and wastewater provider and there's so much fragmentation knows acquisition hockey's worked really well I think for small our IR here small molecule, Justin mom and pop boxing you need.

But they weren't really making a lot of panera and consolidation and the municipal area and so what the legislation really try to gal.

Not only today and his presentation is the thing and again, if I guess why well has depreciated original car and that's gonna be different and fair market value now and so how can we get our current Ralph and a process.

Yeah, we kinda tail airfreight.

Oh Boy litigation about what that price that.

And then they'll have customer protection.

When we file that the application for approval at the Commission.

But some of our big biggest learnings only file the transactions at the connection.

No other deals have different nuances and aren't there Frank the reason for why and now our town is deciding to sell that that's where all the Frank.

Some might have a large amount of that pension obligation.

Sometimes they set up meaning environmental compliance issues that they went to transfer that rack too.

A company like Aclara at an expert and and saying and attracting issues and regulatory compliant.

Sometimes they just want to exit the business and all those are valid reason.

One thing that you know I I've learned and talking tell.

Like officials that I'm, making these decisions if that are all really trying to do the right thing [laughter] American our constituents right. They are amazingly inquisitive about the rate, making process and the regulator process and want to know how their customers are gonna be treated under the public utility Commission. They went to now that the protection and there.

Really want to know that right and.

[laughter] al could have on their customer and salary almost kind of guy frail and many ratemaking education, but the public officials I can take them on on this journey.

And again, a lot of Latin America on Andre and trying to be as transparent as possible because we do now we have to you know <unk> open and transparent about you know the price and the value and as I said, well have an impact on the rights and their customers and our customer.

Thank you so much.

I think we're out of time and so in closing I'd like to thank the panelists I hope you found this especially be really informative.

Now I'd like to like the insurer to the podium.

Talk about our financial update.

[noise] [noise].

[noise]. Thank you Rick Thanks, Sal good morning, everyone.

Many of you are likely focused on 2020 and beyond we stopped by recapping 2019.

First random deal with almost 890 million in revenue up 6.2% as we benefited from the impact to the Pennsylvania rate case and continued customer growth.

Oh on M. was up 8% from 308.5 million to 333.1 million. However, those results are skewed by the People's transaction related costs as long as growth, which will discuss further when we show the owing I'm waterfall.

Net income was up 17% year over year from 192 million to 224 and a half million.

But.

And that was impacted by transaction related expenses as well.

GAAP EPS was down 3.7% given that the 2019 share count was higher than 2018 due to the April 2019, common stock and tangible equity unit offering.

Right, a clearer picture of year over year income what sort of the adjusted income and adjusted income per share lie.

Adjusted income was up 5.1% and adjusted income per share was up 4.3% <unk> dollar 41 to $1.47.

<unk> dollar 47 excludes the impact of People's related expenses and the additional shares issued to fund the People's transaction.

We will use that dollar 47 to baseline our future earnings growth.

Next let's walk through the details in the falling waterfall flight starting with revenue.

[laughter] for 20, I've seen reported strong revenue growth of 6.2%, which was primarily driven by rate increases in customer growth.

I would note that this included the first rate case impacted Aqua, Pennsylvania. So 2012 during that time, if that's over $2 billion and infrastructure improvement in Pennsylvania.

No the customer growth about 70% of that revenue gain came from newly acquired assets with the remainder from organic growth.

I do want to know if the volume categories shown here reflects both water consumption and waste water volumes.

We know this change in our category and our third quarter earnings presentation to the increasing importance of wastewater and our business.

Next let's say a quick look at that rate case activity before moving on to owing on expenses.

In 2019, we complain a rate cases are surcharges in New Jersey, North Carolina, Ohio and of course, Pennsylvania totaling annualized revenue.

58.2 million.

That's far in 2020, we have completed rate cases in surcharges in Illinois, Ohio, and North Carolina for annualized revenue increased to 4.8 million and we expect another <unk> point threemillion from our pending activity in Indiana, New Jersey, North Carolina and Virginia.

Well not on that slide I should mention that people had a successful rate case in 2019 for the People's natural gas business unit, resulting in approximately 59 million in additional annualized revenue.

Now back to own now.

Well, if the waterfall, you'll see that there are some onetime events in both 2018 and 19 that led to an uncharacteristic increasing I went out what people's related costs in both years and from other nonrecurring beneficial items in 2018.

That's the overall increase is not reflective of the true up.

Results of the business on a same system basis, which were more in line with our historical expectation.

Next let's spend some time in the earnings per share waterfall.

Admittedly this is a complex fly them, we felt the whole screen with it as you can say, let's walk through a carefully because it stretches between GAAP and adjusted figures for both 2018 and 2019.

So got bps in 2018 was a dollar eight but adjusting out the mark to market impact to the interest rate swap and People's related expenses tenets $1.41 on an adjusted basis for 2018.

For 2019 at rates since surcharges were the biggest contributors of growth.

Contributing an additional 16 sat.

Well from acquisitions and organic customer additions added another three cents.

And that was offset by other by higher expenses other and volume thing extra dollar 47 for the adjusted income per share for 29 teed up 4.3% from 2018.

Continuing into the right then the dollar 47 is then impacted negatively by 22 cents of People's related costs about 11 cents from the dilutive effect to the equity offering and approximately 10 cents for the settlement to the interest rate swap, resulting in GAAP EPS on a dollar or for 2019.

I really focus on the middle of the fly between the two medium blue bars to understand the baseline year over year results for the business.

Let's take a look at the multiyear trend in income per share.

On the graph an income per share slide you'll see the steady increase in our income per share since 2014.

Those either followed us for some time a recognized that this growth rate.

In the recent years was less than our rate base growth.

Given the outlook cancel their aqua, Pennsylvania repair implementation, which led to more rapid earnings growth in the early years and slower growth thereafter.

The green boxes, and just the GAAP results for various items like the 2015 impairment of our JV pipeline in the Marcellus.

And at the 2018 and 2019 impact other of the People's transaction related expenses and financing.

Next let's discuss the dividend trend over the same period.

In 2019, we increased the dividend, 7% we've increased the dividend 29 times in 28 years and as of March 1st we'll have a 75 year history of paying quarterly cash dividends.

This slide and no shown previously in the finest section had been focused on the financial results of the water and wastewater business.

At this point, though we're going to shift our sites the future to provide you with more information on the combined water and natural gas utility business.

Talking about credit rating, what you can expect to see in terms of segment reporting key drivers the business and that combined earnings guidance.

So first let's spend a few minutes on credit ratings, which now include the impact of the People's transaction.

As you said when we first announced the people transaction, we are committed to maintaining a strong balance sheet and our credit metrics reflect that.

Historically, we had an S&P rating at Aqua, Pennsylvania, and People's had ratings from both S&P and Moody's.

Given they need to issue public debt at the essential level, we went through the ratings processes that both agencies prior to our public debt issuance last year.

Following our Pennsylvania regulatory approval in January S&P released their rating getting getting essential an issuer rating of hey, meaning that unsecured holdco debt would be rated a minor.

You might recall last April S&P had the holding company at a plot, but they indicated they would downgrade the holding company by up to two notches with the transaction, but given.

Updated financial projections this year I think the only it.

Downgraded the central or not central down by one notch from a plot to anyway. So we're quite pleased with that outcome.

Moody's came out with a beautiful a two rating and we issued last April and we understand that that rating will remain constant at closing.

Different rating methodology is it's not uncommon for utilities have lower ratings from Moody's then from S&P as you can see on the bottom of the slide He's ratings are in line with those of our peers, which include water and gas players, but about two and a half billion to 25 billion in market cap.

And we'll work to support strong investment grade ratings by maintaining our primary credit metrics in the ranges are shown on the right hand side fly the.

In blue over there.

In terms of debt issuances, you should generally expect to see going forward a mix of first mortgage bonds at the opco level in those states really have active indentures and play, but Pennsylvania, Ohio, and Illinois, and public data essential level for our other water state and for funding people.

Capital needs in Pennsylvania, Kentucky, and West Virginia.

Good day snatching from water and wastewater to natural gas. We thought was important to give you a better sense of what investors will see in the future with respect to financial reporting.

So far accounting standard segment and the level of detail by segment I really defined by the chief operating decision maker and the level of information, which he or she regularly considers.

Given that's when business, two reportable segments water, including wastewater and gap, which together with nonregulated and parent some that are consolidated.

The level of detail except to provide is outlined on the fly but basically it's a complete income statement downturn that income for the two reportable segments.

Well its information on capital expenditures total assets and rate base.

We plan to provide most of that every quarter, but rate base. For example, we made just provide annually as we do on our 10-K today.

Bausch and cash flow statement will only be at the consolidated company level.

Now and putting it together we believe that this will provide you with the level of information that you would expect from a it to commodity utility.

Next let's shift gears and talk about the drivers of the combined essential business with both water and gas.

Let's take these block one by one.

Regulatory environment as you know not all states are equal in terms of the constructive net of the regulatory environment.

Some are forward looking others, our historical somewhat higher higher ROI, we either have better infrastructure recovery mechanism.

Turning infrastructure surcharges are so focused on pipe, while others are really sourced to meter and some say some revenue adjustment mechanism.

Once we're in a state we worked to optimize our return in light of that regulatory environment, but we also see to improve below average regulatory environment by working closely with regulators and supporting legislation, which was facilitate more progressive regulation.

And as you'll recall, we have exited certain states that we deemed to have consistently subpar regulatory environment.

Capital investment in recovery.

It's really the core of our economic model, we invest capital, which builds rate base and then we seek to earn a return up and on the equity that supports that rate base.

Regulatory discipline. This is about understanding the specific regulatory rules and state and doing everything we can to ensure optimal regulatory outcome and women that regulatory lag. For example, we carefully planned our capital expenditure and rate case timing to minimize that regulatory lag.

Operating efficiency. This is and then panels talked about that others have spoken about it but this is really about maintaining a key focus are keen focus I should say on our own inexpensive so that when we file a rate it for a rate increase the vast majority of that increase is predicated on the capital that we have.

Invested to improve service to our customers.

Lets spend much time in the on M. ratio today, because it can be misleading for example for seven years, we didn't have a rate increase it aqua, Pennsylvania, so naturally the own m. ratio within cranes.

We would expect similar impact if our repair election at people allows us to stay out of rates for an extended period of time.

That said, we continue our focus on expense lines via our variants reporting monthly review processes.

That's it and internal board meeting.

And we're seeking efficiencies as we bring OCC when people together, especially through technology.

Seasonality in weather.

For utilities seasonality is the regular pattern of higher or lower usage, depending on the season.

The normal pattern of had been flows through the year you might say, whether however could be described is that inherent volatility within each season and these affect these effect find their way into utilities financial performance.

I wish on a few minutes the effects are much more pronounced for gas than they are for water and those of us in the room are gonna have to get comfortable with the fact that colder than normal or warmer than normal weather will factor into our earnings predictability.

And finally tax efficiency as regulated utilities, it's incumbent on us to make optimal tax collections to benefit customers and investors.

I think tax repair.

Soccer, Pennsylvania, this allowed us to sort of rates for seven years, while we invested that $2 billion of capital.

And other than the D. S. I see customer rates were flat through that period and now customers continue to benefit due to the lower effective tax rate, which is incorporated into the revenue requirement.

So all the whether it's out of our control the message of the flies it will never satisfied with the status quo were determined to affect these other drivers as much as we can to drive business performance and improve returns.

Next let's spend a couple of minutes on capital recovery.

As you know starting with the Pennsylvania debt, Yes, I see back in 1996, we spend a great deal of time supporting enabling legislation.

Infrastructure trackers or surcharges these mechanisms directly benefit customers by facilitating accelerated replacement of aging infrastructure, while providing more timely recovery for the utility.

That's why captures the current state of water and gas surcharges across our combined footprint and how it's the percentage of capital expenditures that eligible for recovery via a particular surcharge.

As Rick said earlier over 50% of our capital investment across the two operating units is eligible for infrastructure surcharges.

Well, some states have better trackers and others. He's mechanisms are always critical to us and that they allow us turn actual returns on equity, which are closer to the authorized and not help us to set a break longer that benefit customers as well because rate case expenses ultimately our pass through to customers.

So we currently have infrastructure surcharges in six or eight water states and two of our gas day.

Plus we have enabling legislation in Texas and expect the death I seem to be implemented. There later in 2020, and we also a pilot mechanism in Virginia.

We should note that some star Trek telcos eligible capital won't be recovered by at the surcharge.

Apple cabling, but after the cap has been reached before rate case.

Sure if the shareholders are benefiting from repair and the level of earnings preclude implementing the infrastructure surcharge somehow it's more capital would have to wait until the next rate case.

Next let's talk about the weather impact on the business.

So this this is were made about remedial for those new around that cover other gas companies. That's worth a few minutes for those who are.

Historically focused on water a little newer to the gas story.

So heating degree day as a management designed to quantified the demand for energy needed to hit a building. It's the number of degrees that todays average temperature is below 65 degrees Fahrenheit.

So I feel like a mean temperature of 30 degrees Fahrenheit represent 35 heating degree day.

So using data from the energy administration energy information administration from 1990 trimming. Some time, we plotted monthly gas consumption in the Pittsburgh area versus monthly heating degree days for the same region.

In the West pain, you see that strong correlation the colder and as the more gas that's here quite intuitive price.

On the right pain, we plotted heating degree days by month by year from 2014 to 2019.

As we'd expect we see a certain seasonality with more heating degree days in January February and March falling off to effectively zero in the summer part again by rising heating degree days as we transition into the fall and into the winter.

Youre surprised me, perhaps is the variability and whether they can exist in the same month between two different years.

For example in February 2015, there were about 1300 heating degree day.

But in February 2017, there are less than 700, and we would expect the gas usage followed these weather pattern.

So not only a seasonality of gas usage something for us to bear in mind, but the variability and whether it's too.

It's sort of people got throughput by quarter.

In the West pain, we plotted the quarterly percentage of People's annual GAAP throughput for 2019 as expected the colder months.

Juan and Q4, what are the strongest forget sale.

Now shifting to the financial impact on the right.

No pain here, we've used our 2019 monthly water revenue as the base and Navy Blue and then added people monthly gas revenues on top in the lighter below.

It didn't just focus on the Navy you'll notice some uplift in revenue in the warmer summer months, what people are doing where alco watering, but enough for the revenue is in our based facility charges to limit that revenue seasonality.

Looking at the likely however at the seasonality of natural gas usage is more dramatically reflected in the monthly revenues.

Let's talk about this means for net income seasonality.

You will recall that for the water business Q3 was historically, our strongest quarter in terms of not income followed by Q2.

That changes with the addition of people.

The not encumbered rather by quarter is much more pronounced in gas utilities than it is in water utility.

On a combined basis, we're forecasting the strongest two quarters going forward to be Q1, and Q4, the strong summer quarters, and water offset by a fall off and gas consumption and the resulting lack of core profitability, especially in Q3.

So we wanted to give me a sense the percentage of net income by quarter represented by the ranges on that slide, but I should caveat that by saying, we don't yet on the business and so we haven't been through a year of reporting earnings every quarter quarter after quarter for the combined company.

As time moves forward, we'll obviously be developing that dataset.

And you will be better able to characterize our annual earnings based on that that track record.

Now that we've kinda seasonality hernia touching repair tax and what we can expect at peoples.

As you know I want to many important implemented repair back in 2012 apparel is not unique taqua no with implementation using flow through account.

But there can be divided into two parts.

First the current portion and then second the catch up deduction, which looks back a path capital investments as they prepare had been elected that.

The current portion can immediately be recorded an income statement, but the catch up is typically discussed and attract and a rate case or other PC proceed.

The guidance, we're writing today only includes assumptions, we're making about repair at people for the current portion.

To be more precept specific in terms of the election, well only elect to repair for People's natural gas, which includes the legacy Dominion and equitable system that show spoke about rather than for all of People's agreement All People's in Pennsylvania.

We've defined near a property as a pressures on between regulator station and a tenant over that threshold at 10%, meaning that if a getting project is replacing less than 10% of a pressure zone with no betterment it would qualify for repair.

Well, we will be asking the Pennsylvania P C for guidance on how to treat the catch up deduction. We've not included the catch up in our core cat.

Our assumptions were made based on our in house, the people capital and how much the capital maybe eligible for repair, but since we don't yet only company. These assumptions will likely evolve as we learn more and we'll share though its new findings on future earnings calls.

Let's spend a few minutes on the earnings per share guidance.

On a GAAP base is providing a guidance range for earnings per share of a dollar five to $1.10 for 2020.

For 2020 on an adjusted pro forma basis, so, including 12 months of estimated natural gas earnings were providing guidance range of $1.53 to $1.58.

So this is based off the dollar 47 adjusted income per share for 2019.

Then we expect to continue earnings per share growth, a 5% to 7% CAGR through 2022.

As you think about earnings fell to 5% to 7% persons our rate base growth of 6% to 7% for water and 8% to 10% forgot there are few things to consider.

First as we have success with municipal acquisition that will be contributing lag. These acquisitions rarely if ever Arnie for return immediately post closing.

Apple we have approximately 200 million of Pennsylvania acquisition, not currently and couldn't right and that's excluding or before we consider del Cora.

At 134 year old company, we believe that acquisitions at one times rate. They are beneficial for long term shareholder value, even if they're not accretive to earnings growth on day one.

Second if we go from a period of higher earning two a period of earning a more normal return that would result in slower earnings growth versus rate base growth.

And then third we will of course have distension discontinuity is when we issue equity, especially for people.

However, absent these things over the long run there's nothing structurally that should keep our long term or rate base growth and our long term earnings growth from being more closely aligned.

In terms of thought act accretion from peoples.

You for let's say that people will be accretive in the first for here excluding tax repair for natural gas.

Let's talk through that in light of the guidance as you know 2020 will be the first full year with the benefits of tax repair at Aqua, Pennsylvania incorporate it into rate I'm not the effectively fully enduring choose the customer.

Even in 2019, we had a portion of year, where those tax repair benefits and nerd to the shareholders and that's the 2019 earnings reflect those incremental earnings.

Without any significant measures then 2020 would've been down a bit in terms of earnings per share, but we had some levers that would have offset this.

If they are peoples and 2020 would have been accreted to that level of earnings by a few pennies and then the repair benefit would be on top of that.

Given the timing of the Aqua, Pennsylvania rate case, and the transaction closing bope offset from the calendar year, we won't see that in the annual reported numbers, but that's what's going on behind the scenes.

Wrapping up the question how much he picked benefit will come from repair.

That said, we don't get on the company or control the capital program. Therefore, even after significant analysis, we're still making some simplifying assumption in terms of how much capital will be repair eligible also we don't want to over promise if there's more value to repair once we're in a credit we'll let you know but for now I agree with eight to 12.

On a share for 2020 for simple math.

All that said I believe we've outlined an achievable path to 5% to 7% earnings growth over the next three years with relatively consistent growth year over year as is generally favored by utility investors. This does include the incorporation. The current portion of a pair of people, but no earnings tied to the catch up deduction.

Furthermore, it includes a fairly conservative assumptions with respect to acquisition, incorporating only known transactions plus $50 million annually and additional fair value acquisitions.

Finally on several earnings calls we've been asked about our share count and haven't system.