Q4 2023 Essential Utilities Inc Earnings Call

Hello, and welcome to the essential utilities 40 F 'twenty two 'twenty three.

Operator: Hello and welcome to the Essential Utilities full year 2023 earnings call. Please note this conference is being recorded and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions. This can be done by pressing star one on your telephone keypad to register your questions.

<unk> core. Please note. This conference is being recorded and for the duration of our call. Your lines will be only some only however, you would have the opportunity to ask questions. This can be done by pressing star one on your telephone keypad to register your question.

Operator: If you require assistance at any point, please press star 0 and you'll be connected to an operator. I will now hand you over to your host, Brian Dingerdissen, to begin today's conference. Thank you, Francois. Good morning, everyone, and thank you for joining us.

If you require assistance at any point, Chris Press Star Zero, and you're very connected to one operator.

I will now hand, you over to your host Bryan Gunderson.

Bryan Gunderson: Today's conference. Thank you.

Bryan Gunderson: Thank you Francois and good morning, everyone and thank you for joining us.

Brian Dingerdissen: If you did not receive a copy of the press release, you can find it by visiting the Investor Relations section of our website. Slides that we will be referencing during the webcast of this event can also be found on the website. As a reminder, some of the matters discussed during this call may include forward-looking statements that involve risk, uncertainties, and other factors that may cause actual results to be materially different from any future results expressed or implied by such forward-looking statements. Please refer to our most recent 10-Q, 10-K, and other SEC filings for a description of such risk and uncertainty. During the course of this call, reference may be made to certain non-GAAP financial measures. A reconciliation of any non-GAAP to GAAP financial measures is posted in the Investor Relations section of the website.

Bryan Gunderson: If you did not receive a copy of the press release, you can find it by visiting the Investor Relations section of our website.

Bryan Gunderson: That we will be referencing and the webcast of this event can be found on the website.

Bryan Gunderson: As a reminder, some of the matters discussed during this call may include forward looking statements that involve risks uncertainties and other factors that may cause the actual results to be materially different from any future results expressed or implied by such forward looking statements. Please refer to our most recent 10-Q10-K and other SEC filings for a description of such risks and.

Bryan Gunderson: During the course of this call reference may be made to certain non-GAAP financial measures. A reconciliation of any non-GAAP to GAAP financial measures is posted in the Investor Relations section of the website. We will begin the call today with Chris Franklin, Our chairman and CEO, who will provide an update on the company and then Dan Schuller, our CFO will provide an overview of the final.

Brian Dingerdissen: We will begin the call today with Chris Franklin, our Chairman and CEO, who will provide an update on the company. Then Dan Schuller, our CFO, will provide an overview of the financial results before Chris closes the call with an update on our guidance and overall company priorities. With that, I will turn the call over to Chris Franklin. Thanks, Brian. Good morning, everyone.

Dan J. Schuller: Actual results before Chris closes the call with an update on our guidance and overall company priorities with that I will turn the call over to Chris Franklin.

Christopher H. Franklin: Hey, Thanks, Brian and good morning, everyone. Thanks for joining us.

Christopher H. Franklin: Thanks for joining us. Let's start the call with some highlights from 2023 and some company updates. Despite the unusually warm winter weather in much of 2023, we remain focused on operational excellence and improving our water and natural gas systems by investing capital in continuous improvement measures. As a result of this good work, we're happy to report earnings per share of $1.86, which is in line with our 5-7% guidance.

Let's start the call with some highlights from 2023 and some company updates.

Christopher H. Franklin: Despite the unusually warm winter weather in much of 2023.

Christopher H. Franklin: We remain focused on operational excellence and improving our water and natural gas systems by investing capital and continuous improvement measures.

Christopher H. Franklin: As a result of this good work, we're happy to report earnings per share of $1 86, which is in line with our 5% to 7% guidance.

Christopher H. Franklin: As Dan will discuss in a few moments in more detail, our team was able to really make up for the $43 million of weather-related net revenue shortfall versus budget and still meet our guidance range, which was quite an accomplishment in 2023. Now, last year, we invested nearly $1.2 billion in infrastructure improvements as compared to $1.06 billion in 2022. Our commitment to investing in critical infrastructure across our footprint has led to the replacement, retirement, and installation of over 300 miles of pipe in 2023 alone. This improves service and reliability for our customers throughout the water, wastewater, and natural gas parts of the platform. As I've mentioned in the past, this investment spans thousands of projects and takes significant expertise to achieve, excluding West Virginia. We reported year-over-year rate-based growth of more than 10% from organic capital investment alone.

Christopher H. Franklin: As Dan will discuss in a few moments in more detail.

Christopher H. Franklin: Our team was able to make really make up for the $43 million.

Christopher H. Franklin: Weather related net revenue shortfall versus budget.

And still meet our guidance range, which was quite an accomplishment in 2023.

Christopher H. Franklin: Now last year, we invested nearly $1 $2 billion in infrastructure improvements as compared to a $1 6 billion in 2022.

Christopher H. Franklin: Our commitment to investing in critical infrastructure across our footprint.

Christopher H. Franklin: He has led to the replacement retirement and installation of over 300 miles of pipe in 2023 alone.

Christopher H. Franklin: This improved service and reliability for our customers throughout the water wastewater and natural gas part of the platform.

Christopher H. Franklin: As I've mentioned in the past this investment spans thousands of projects and takes significant expertise to achieve.

Christopher H. Franklin: Excluding west Virginia, we.

Christopher H. Franklin: We reported year over year rate base growth of more than 10% from organic capital investment alone.

Christopher H. Franklin: We also took two divestiture actions last year that will really allow us to place more focus on our core utilities with fewer distractions. You may recall that in Q4, we closed the sale of our West Virginia gas utility, a very small unit with less than 15,000 customers, and we announced the sale of our three non-utility microgrid and district energy projects in Pittsburgh. We recently closed on the $165 million sale of those energy projects, which was, as you know, a very strong outcome. The proceeds of both were used to finance capital expenditures and water and wastewater acquisitions in place of external funding from equity and debt issuances.

Christopher H. Franklin: We also took two divestiture actions last year.

It will really allow us to place more focus on our core utilities with fewer distractions.

Christopher H. Franklin: You may recall in Q4, we closed the sale of our West Virginia gas utility very small unit with less than 15000 customers and we announced the sale of our three non utility micro grid and district energy projects in Pittsburgh.

Christopher H. Franklin: We recently closed on the $165 million sale of those energy projects, which was as you know a very strong outcome. The proceeds of both were used to finance capital expenditures and water and wastewater acquisitions in place of external funding from <unk>.

Christopher H. Franklin: And debt issuances.

Christopher H. Franklin: During the year, we continue to build on our 30-plus year track record of consolidation in the U.S. water and wastewater industry. Last year, we acquired seven systems, adding over $44 million in rate base and over 11,000 new customers. We currently have asset purchase agreements signed for six municipal acquisitions, totaling approximately $380 million in purchase price.

Christopher H. Franklin: Now during the year, we continued to build on our 30 plus year track record of consolidation in the U S water and wastewater industry.

Christopher H. Franklin: Last year, we acquired seven systems, adding over $44 million in rate base and over 11000, new customers. We currently have asset purchase agreements signed for six municipal acquisitions totaling approximately $380 million in purchase price.

Christopher H. Franklin: This includes the recently signed agreement with North Versailles, and yes, it is Versailles, to acquire their wastewater system in Pennsylvania. Later in the call, I'll update you on the latest acquisition-related activities. Lastly, on this slide, I'm pleased to tell you that we have been named to Newsweek's 2024 list of America's most responsible companies. This is the third consecutive year that we have been on this list, which recognizes the top 600 most responsible public companies headquartered in the United States that have demonstrated meaningful and impactful business practices.

Christopher H. Franklin: This includes the recently signed agreement with North of our sales and yes. It is for sales to acquire their wastewater system in Pennsylvania later in the call I'll update you on the latest acquisition related activity.

Christopher H. Franklin: Lastly on this slide I'm pleased to tell you that.

Christopher H. Franklin: We have been named to Newsweek's 2024 list of America's most responsible companies. This is the third consecutive year that we've been on this list that recognizes the top 600, most responsible public companies headquartered in the United States that have demonstrated meaningful and impactful business practice.

Christopher H. Franklin: <unk>.

Christopher H. Franklin: Now turning to the next slide maybe it goes without saying, but at essential our focus is on quality and reliability for our customers and sustainable returns for our investors.

Christopher H. Franklin: Now turning to the next slide, maybe it goes without saying, but at Essential, our focus is on quality and reliability for our customers and sustainable returns for our investors. Our 138-year history, 32 years of dividend increases, and many, many years of continuously delivering on our environmental commitments are made possible by an organization with several competitive advantages. First, I think of the importance of operating in constructive regulatory environments. Essential operates in nine states, most of which have received favorable regulatory rankings.

Christopher H. Franklin: Our 138 year history 32 years of dividend increases in many many years of continuously delivering on our environmental commitments is made possible by an organization with several competitive advantages.

Christopher H. Franklin: First I think of.

Christopher H. Franklin: The importance of operating in constructive regulatory environments.

Christopher H. Franklin: Essential operates in nine states most of which have received favorable regulatory rankings.

Christopher H. Franklin: Secondly, we want to operate where there is growth opportunity. We're well positioned to grow both organically, being in states with high population growth, like Texas and North Carolina, and through acquisition. And we've demonstrated our ability to do so. In the water and natural gas industry, there's a great advantage to possessing advanced technical and engineering expertise. We were, and plan to continue to be, leaders on issues like PFAS mitigation and lead remediation, safety issues, etc. Last but not least, Operational Excellence.

Christopher H. Franklin: Secondly, we want to operate where there is growth opportunity.

Christopher H. Franklin: We are well positioned to grow both organically being in states with high population growth like Texas, and North Carolina and through acquisition and we've demonstrated our ability to do so.

Christopher H. Franklin: And the water and natural gas industry. There is a great advantage to possessing advanced technical and engineering expertise.

Christopher H. Franklin: We were and plan to continue to be leaders on issues like P fast mitigation and led remediation safety issues et cetera.

Last but not least operational excellence.

Christopher H. Franklin: We have 3,000-plus dedicated people working every day to manage the complexity of thousands of projects which have taken us to industry-leading quality and service levels. I want to share just a couple of those accomplishments of our operating team. By any measure, the numbers on this page make us a clear leader in both the natural gas and water industries.

Christopher H. Franklin: We have 3000, plus dedicated people working every day to manage the complexity of thousands of projects, which have taken us to industry, leading quality and service levels.

Christopher H. Franklin: I want to share just a couple of those accomplishments of our operating team.

Christopher H. Franklin: By any measure the numbers on this page make us a clear leader in both natural gas and water industries. The combination of operational excellence and capital investment have accelerated our quest to continue as leaders in the industry.

Christopher H. Franklin: The combination of operational excellence and capital investment has accelerated our quest to continue as leaders in the industry. Now, the backbone of our capital program in both water and gas is our pipe replacement program. Tightening our water and gas mains improves compliance, reduces outages, and improves the environment.

Christopher H. Franklin: Now the backbone of our capital program in both water and gas is our pipe replacement program, the tightening of our water and gas mains improves compliance reduces outages and improves the environment.

Christopher H. Franklin: According to a report by the Pennsylvania Public Utility Commission, we are running a larger pipe replacement program than our peers.

Christopher H. Franklin: According to a report by the Pennsylvania Public Utility Commission, we are running a larger pipe replacement program than our peers. This large amount of gas pipe replacement, combined with a refocused effort on addressing leaks, has allowed us to shift to a find-and-fix approach to leaks. And to put this in context, when we announced the acquisition of Peoples just a few years ago, the company, like most gas LDCs, had a backlog of several hundred leaks. Over the period, since we acquired the company and run the company now, we have reduced outstanding leaks by 83 percent. So outstanding results. Our water business continues to operate at a 99.9% compliance rate, which is also outstanding. You can imagine the confidence that this builds in our customers' minds as they drink and cook with the water we provide. From a reliability standpoint, our systems rarely have outages, and when they do experience that rare outage, it's typically because a storm disrupts the power to a plant.

This large amount of of gas pipe replacement combined with a refocused effort on addressing leaks has allowed us to shift to a find and fix approach to leaks.

Christopher H. Franklin: To put this in context, when we announced the acquisition of peoples just a few years ago.

Christopher H. Franklin: A company like most gas LDC had a backlog of several hundred leaks.

Christopher H. Franklin: Over the period since we've acquired the company and run the company now we have reduced outstanding leaks by 83%.

Christopher H. Franklin: Outstanding results.

Our water business continues to operate at a 99, 9% compliance rate, which is also outstanding you can imagine the confidence that this builds in our customers' minds as they drink and cook with the water we provide.

Christopher H. Franklin: From a reliability standpoint, our systems rarely have outages and when they experienced that rare outage, it's typically because our storm disrupts the power to a plant now of course, we have larger or larger plants are supported with generators and we continue to position our our portable generation near our smaller.

Christopher H. Franklin: Now, of course, our larger plants are supported by generators, and we continue to position our portable generation near our smaller systems, especially during storm prep. I am really proud of our operating team, and they continue to raise the bar on operational excellence in both gas and water. Now, speaking of operational excellence on the next slide here, given the importance of the expected PFAS regulations from the U.S. EPA and the impact on our customers, we probably need to spend a few minutes on this topic. We're diligently working so that we are aligned with the EPA's timeline and standards to ensure that our finished water does not exceed the federal maximum contaminant level of PFOA, PFAS, and PF Our most recent disclosure is that we expect to spend about $450 million, or I should say at least $450 million, and that's included in the new capital investment guidance that we're providing today.

Christopher H. Franklin: Systems, especially during storm prep.

Christopher H. Franklin: Im really proud of our operating team and they continue to raise the bar on operational excellence in both gas and water.

Christopher H. Franklin: Now speaking of operational excellence on the next slide here given the importance of the expected P. Fast regulations from the U S EPA and the impact on our customers.

Christopher H. Franklin: What we need to spend a few minutes on this topic.

Christopher H. Franklin: Now we are diligently working so that we are aligned with the epa's timeline and standards to ensure that our finished water does not exceed the federal maximum contaminant level of P. <unk> P fast and Pf <unk> compounds.

Christopher H. Franklin: Our most recent disclosure is that we expect to spend.

Christopher H. Franklin: About $450 million or I should say at least $450 million and Thats included in the new capital investment guidance that we're providing today.

Christopher H. Franklin: Our capital spending on this mitigation effort.

Christopher H. Franklin: Our capital spending on this mitigation effort is somewhat fluid, though, I have to point out, and we expect that the $450 million could increase as plans for construction are refined, the EPA and states' timelines for compliance are determined, and if any additional sites pop up and require treatment as we move forward. Now for clarity, if the EPA and the State Environmental Agencies require a three-year compliance timeline, we would expect our costs to rise because it may not fit with the timelines associated with applications for low-interest loans and grants.

Christopher H. Franklin: Is somewhat fluid, though I have to point out and we expect that the $450 million could increase as plans for construction are refined the EPA and states timelines for compliance is determined and if any additional sites pop up and require treatment as we move forward.

Christopher H. Franklin: For clarity, if the EPA and the state environmental agencies require a three year compliance timeline, we would expect our cost to rise because it may not fit with the timelines associated with applications for low interest loans and grants could also caused us to work overtime and in <unk>.

Christopher H. Franklin: It could also cause us to work overtime and cause contractor costs to rise. Having said that, we are in the process of meeting with the heads of all the agencies involved to press for accelerated approval processes for loans and grants to protect our customers and, where appropriate, look for extensions in time to comply with this new regulation we expect in the coming month, year, or so. Now the effort to comply with the four parts per trillion standard will be significant, there's no doubt about that. Each of our 300 plus sites that need mitigation must be engineered, permitted, procured, and constructed. To accomplish this in what is anticipated to be a three-year timeline will be a huge and very expensive effort. But, make no mistake; our team is up to the task, and we will meet compliance deadlines. So with that, we hand it over to Dan to talk about the year's financial results. Thanks, Chris, and good morning, everyone.

Christopher H. Franklin: Cost contracted cost to rise.

Christopher H. Franklin: Having said that we are in the process of meeting with the heads of all the agencies involved to press for accelerated approval processes for loans and grants to protect our customers and where appropriate look for extensions and time to comply with this new regulation, we expect in the coming months or so.

Christopher H. Franklin: Now the effort to comply with the four parts per trillion standard will be significant there's no doubt about that.

Christopher H. Franklin: Each of our 300 plus sites that need mitigation must be engineered permitted procured and constructed.

Christopher H. Franklin: To accomplish this and what is anticipated to be a three year timeline.

Christopher H. Franklin: Will be a huge and very expensive effort.

Christopher H. Franklin: Now make no mistake, our team is up to the task and we will meet compliance deadlines.

Christopher H. Franklin: So with that we hand, it over to Dan to talk about the year's financial results.

Dan J. Schuller: Thanks, Chris and good morning, everyone.

Dan J. Schuller: On slide nine, let's take a few minutes to review the fourth quarter highlights before moving into the full year. Well, many of you focus on the company over a longer period of time, which we believe is appropriate. We did want to provide a quick update on how the fourth quarter of 2020... On a gap basis, we have revenues for the quarter of $479.4 million compared to $705.4 million. As we experienced in prior quarters, the largest contributory decrease in revenues for the fourth quarter was the recovery of lower natural gas commodity prices, purchase gas costs decreasing by $209.6 million from the same period last year.

Dan J. Schuller: On slide nine let's take a few minutes to review our fourth quarter highlights before moving into the full year.

Dan J. Schuller: Well many of you focus on the company over longer period of time, which we believe is appropriate we did want to provide a quick update on how the fourth quarter of 2023 concluded.

Dan J. Schuller: On a GAAP basis, we had revenues for the quarter of $479 4 million compared to $705 4 million in the fourth quarter last year.

Dan J. Schuller: As we experienced in prior quarters, the largest contributor to the decrease in revenues for the fourth quarter was the recovery of lower natural gas commodity prices with purchased gas costs decreasing by $209 6 million from the same period last year.

Dan J. Schuller: Additionally, the weather in Q4 was warmer than normal and therefore contributed to reduced gas usage by our customers.

Dan J. Schuller: Additionally, the weather in Q4 was warmer than normal and therefore contributed to reduced gas usage by our customers... A regulated water segment contributed $281.8 million in revenue, and regulated natural gas contributed $188.7 million. Incremental revenues from regulatory recoveries and water and wastewater customer growth contributed positively to the state's recovery. However, these impacts were offset by lower purchase gas costs, lower volumes in both the natural gas and water sectors, and other items for the quarter. Operations and maintenance expenses decreased 15% to $157 million, down from $184.7 million in the same quarter of last year, due to decreases in other items.

Dan J. Schuller: Our regulated water segment contributed $281 $8 million in revenue in a regulated natural gas segment contributed $188 7 million.

Incremental revenues from regulatory recoveries and water and wastewater customer growth contributed positively. However, these impacts were offset by the lower purchased gas costs lower volumes in both the natural gas and water segments and other items for the quarter.

Dan J. Schuller: Sure.

Dan J. Schuller: Operations and maintenance expenses decreased 15% to $157 million for the quarter down from $184 7 million in the same quarter of last year.

Dan J. Schuller: Decreases in other items lower recoverable costs related to our natural gas customer rider.

Dan J. Schuller: Lower recoverable costs related to our natural gas customer and lower Bad Debt were the primary drivers, although these were offset by higher water production costs and operating expenses. Acquiring. Net income was up year over year from $114.9 million to $135.4 million, and GAP EPS was up 13.6. 44 cents in the fourth quarter last year to 50 cents for the quarter this year. Next, we'll discuss the full-year financial high. Let's talk at a high level and then we'll get into the details when we go to the water. We ended the year with $2.05 billion in revenue compared to $2.29 billion last year. For the year, our regulated water segment contributed $1.15 billion of revenue, and our regulated natural gas segment contributed nearly $864 million. Purchase gas costs decreased by $249.7, 41.5% compared to the prior year.

Dan J. Schuller: And lower bad debt were the primary drivers of the decrease.

Dan J. Schuller: These were offset by higher water production costs and operating expenses related to acquired systems.

Dan J. Schuller: Net income was up year over year from $114 9 million to $135 4 million and GAAP EPS was up 13, 6% from 44 in the fourth quarter last year to 50 for the quarter. This year.

Speaker Change: Next we'll discuss the full year financial highlights.

Speaker Change: Let's talk high level, and then we'll get into the details when we go to the waterfall.

Speaker Change: We ended the year with $2 5 billion in revenue compared to $2 two 9 billion last year.

Speaker Change: For the year, our regulated water segment contributed $1, one 5 billion of revenue and our regulated natural gas segment contributed nearly $864 million.

Speaker Change: Purchased gas costs decreased by $249 7 million or 41, 5% compared to prior year.

Speaker Change: Operations and maintenance expenses decreased six 2% from $613 6 million to $575 5 million.

Speaker Change: Operating income was up four 7% from $661 2 million to $692 1 million.

Dan J. Schuller: Operations and maintenance expenses decreased 6.6% from $613.6 million to $575.5 million. Operating income was up 4.7% from $661.2 million to $692.1 million.

Speaker Change: Year over year, net income increased $33 million or seven 1%.

Speaker Change: From $465 2 million to $498 2 million.

Speaker Change: And GAAP earnings per share increased five 1% to $1 86, which was solidly in our dollars $85 90 guidance range for the year.

And GAAP earnings per share increased five 1% to $1 86, which was solidly in our dollars $85 90 guidance range for the year.

Dan J. Schuller: Year over year, net income increased $33 million, or 7.1%, from $465.2 million to $498.2 million, and GAAP earnings per share increased 5.1% to $1.86, which was solidly in our $1.85 to $1.90 guidance range for the year. And earnings would certainly have been higher were it not for the balmy December weather. Next, let's walk through the full-year waterfalls, including how we successfully overcame adverse weather impacts in the first and fourth quarters of 2023, which caused a $43 million net revenue shortfall versus budget or normal weather. Let's start with revenue on slide 11. In 2023, revenues decreased $234 million, or 10.2% on a gap year.

Speaker Change: And earnings would have certainly been higher were it not for the <unk> December weather in Pittsburgh.

Speaker Change: Next let's walk through the full year waterfalls, including how we successfully overcame adverse weather impacts in the first and fourth quarters of 2023, which caused a $43 million net revenue shortfall versus budget or normal weather.

Speaker Change: Let's start with revenue on slide 11.

Speaker Change: In 2023 revenues decreased $234 million or 10, 2% on a GAAP basis.

Speaker Change: Starting in the left hand side of the waterfall regulatory recoveries added $69 1 million in revenues year over year, which includes the impact of base rate cases or other regulatory proceedings.

Speaker Change: Next organic and acquisition growth from our regulated water segment provided an additional $13 1 million.

Speaker Change: The largest driver of the decreased revenue was the $249 7 million impact of lower purchased gas costs.

Dan J. Schuller: Starting in the left-hand side of the waterfall, regulatory recoveries added $69.1 million in revenues year-over-year, which included the impact of base rate cases or other regulatory problems. Next, Organic and Acquisition Growth from a Regulated Water Segment provided an additional $13. The largest driver of the decreased revenue was the $249.7 million impact of lower purchased gas.

Speaker Change: Now this is simply a comparison of last year's purchase gas cost line on the income statement to this year's <unk>.

Speaker Change: It reflects both a significant decline in natural gas commodity prices.

Speaker Change: As well as the lower quantity of gas being purchased.

Speaker Change: Clearly lower commodity prices are a good thing for our customers, who benefit with lower overall bills for heating and cooking.

Speaker Change: As a result of unfavorable weather throughout the quarter I should say throughout the year.

Speaker Change: Lower gas usage decreased revenue by $53 1 million from 2022.

Dan J. Schuller: Now this is simply a comparison of last year's purchase gas cost line and the income statement to this. So it reflects both a significant decline in natural gas commodity prices, as well as a lower quantity of... Clearly, lower commodity prices are a good thing for our customers, who benefit with lower overall bills for heating. As a result of unfavorable weather throughout the quarter, or I should say throughout the year, lower gas usage decreased revenue by $53.1 million in 2022. 2022 was even colder.

Speaker Change: 2022 was colder than normal.

Speaker Change: And lower water and wastewater volumes decreased revenue by $7 5 million as well.

And lastly, other items of $6 1 million, which includes the impact of lower customer assistance program recoveries also contributed to the reduction in revenues.

Speaker Change: I'd like to remind everyone that we currently do not have weather normalization for our Pennsylvania natural gas business.

Speaker Change: These results were seeing the significant impact of 2020 three's warmer than normal weather.

Speaker Change: However had it been equally colder than normal our customers would've seen significantly higher bills, resulting in higher revenues.

Dan J. Schuller: And lower water and wastewater volumes decreased revenue by $7.5 million as well. And lastly, other items of $6.1 million, which include the impact of lower customer assistance program recoveries, also contributed to the reduction in. I'd like to remind everyone that we currently do not have weather normalization for our Pennsylvania natural gas. In these results, we're seeing the significant impact of 2023's warmer than normal weather. However, had it been equally colder than normal, our customers would have seen significantly higher, resulting in higher. As many of you know, we recently filed the first Pennsylvania gas rate since our acquisition in 2020. And in that case, we propose a weather normalization.

Speaker Change: Now as many of you know, we recently filed the first Pennsylvania gas rate case.

Speaker Change: Our acquisition in 2020.

Speaker Change: And in that case, we proposed a weather normalization mechanism.

Speaker Change: Okay.

Speaker Change: Next we'll review the operations and maintenance expenses.

Speaker Change: Operations and maintenance expenses were $575 5 million for the year, a decrease of six 2% compared to $613 6 million in 2022.

Speaker Change: Increased production costs, primarily related to chemicals purchased water and purchased power contributed $12 2 million in operating expenses from newly acquired systems in our regulated water segment added another $5 8 million.

Speaker Change: These were offset by other items, including lower outside services costs and the.

Speaker Change: Higher year impact of a lease related charge as well as lower contributions to our foundation, which decreased operations and maintenance expenses by $27 6 million.

Dan J. Schuller: Next, we'll review Operations and Maintenance. Operations and maintenance expenses were $575.5 million for the year, a decrease of 6.2% compared to $613.6 million in 2022. Increased production costs, primarily related to chemicals, purchased water, and purchased power, contributed $12.2 million, and operating expenses from newly acquired systems in our regulated water added another $5.6. These were offset by other items, including lower outside services costs and the prior year impact of a lease-related charge, as well as lower contributions to our foundation. Decreased Operations and Maintenance. 27.

Speaker Change: The gas customer rider, which is recoverable through a revenue surcharge decreased $18 7 million again due to lower commodity prices in the regulated natural gas segment.

Speaker Change: Employee related cost decreased by $5 4 million, partly due to the incremental pension contributions and an accrual for one time inflation related incentive compensation for non office through level employees back in 2022.

Speaker Change: And finally, lower bad debt decreased operations and maintenance expenses by another $4 4 million.

Speaker Change: Next let's spend a minute on the earnings per share waterfall.

Speaker Change: Beginning on the left side of the slide GAAP EPS for 2022 was $1 77.

Regulatory recoveries contributed 19.

Speaker Change: Lower O&M expenses contributed another <unk> <unk>.

Dan J. Schuller: The gas customer rider, which is recoverable through a revenue surcharge, decreased $18.7, again due to lower commodity prices and the regulated..., segment. Employee-related costs decreased by $5.4 million, partly due to the incremental pension contribution and an accrual for one-time inflation-related incentive compensation for non-officer-level employees back in 2012. And finally, lower bad debt decreased operations and maintenance by another $4.4 million. Next, let's spend a minute on the earnings per share water. Beginning on the left side of the slide, GAP EPS for 2022 was $1.77, and regulatory recoveries contributed $0.19. Lower O&M expenses contributed another $0.08.

Speaker Change: On organic and acquisition growth from our regulated water segment added <unk>.

Speaker Change: These were offset by decreased volume from our regulated natural gas segment of 2014.

And other items of <unk>.

Speaker Change: As well as decreased volume from our regulated water segment of <unk>.

Speaker Change: The result is GAAP EPS of $1 86 for the year.

Speaker Change: And given the fact that weather in Pittsburgh was approximately 16% warmer than normal for 2023. We believe this is an outstanding result.

Speaker Change: Now in this waterfall the other bar includes the impacts of increased interest and depreciation offset by an increased tax benefit. This increased tax benefit as a result of both increased pipe replacement capital.

Speaker Change: And the ongoing and onetime benefits related to the Irs's natural gas Safe Harbor, which we've discussed previously.

Speaker Change: The one time benefit related to the IRS change was about four and a half cents.

Speaker Change: So all of these impacts along with the pickups from the O&M items, we discussed earlier and the purchased water pass through in Texas. So it was a tax related change in New Jersey. These were all critical in offsetting the impact of the unfavorable first and fourth quarter weather.

Dan J. Schuller: Organic and acquisition gross from our regulated water system. These were offset by decreased volume from our regulated natural gas segment of 14 cents, and other items of 3 cents, as well as decreased volume from our regulated water. The result is GAAP EPS of $1.86 for the year. And given the fact that weather in Pittsburgh was approximately 16 percent warmer than normal in 2023, we believe this is an outstanding result. Now, in this waterfall, the other bar includes the impacts of increased interest and depreciation offset by an increased tax benefit. This increased tax benefit is the result of both increased pipe replacement capital and the ongoing and one-time benefits related to the IRS's natural gas safe harbor, which we've discussed previously. The one-time benefit related to the IRS change was about four and a half.

Speaker Change: I will note that regarding 2024 financings you may have seen that last month, we completed a $500 million issuance of 10 year debt at a rate of five and three eighths.

Speaker Change: We also we also expect to raise approximately $250 million in 2024 through an ATM equity program.

Speaker Change: And given this we will file soon for an ATM of up to $1 billion, which should be viewed to cover our equity needs for multiple years.

Yeah.

Now moving to regulatory activity and other matters.

Speaker Change: In 2023, we completed rate cases, or surcharge filings and all nine states in our footprint with total annualized revenue increases of $47 2 million for water and $21 3 million for natural gas.

Dan J. Schuller: So all of these impacts, along with the pickups from the O&M items we discussed earlier, and the purchased water pass-through and tech, as well as the tax-related change in New Jersey, were all critical in offsetting the impact, favorable first and fourth quarter. I will note that regarding 2024 financings, you may have seen that last month we completed a $500 million issuance of 10-year debt at a rate of 5-in-3-8. We also expect to raise approximately $250 million in 2024 through an ATM equity program. And given this, we'll file soon for an HM of up to one billion dollars, which should be viewed to cover our equity needs for multiple years. Now moving to regulatory activity and other matters. In 2023, we completed rate cases or surcharge filings in all nine states in our footprint, with total annualized revenue increases of $47.2 million for water and $21.3 million for natural gas.

Speaker Change: So far in 2024, we've completed rate cases or surcharge filings in three of our water states with total annualized revenue increases of $9 1 million.

Speaker Change: And achieved $22 million and $22 1 million in our regulated natural gas segment.

Speaker Change: We have a busy but manageable regulatory calendar in 2024 with base rate cases, or surcharge filings underway in Illinois, New Jersey, Texas, and Virginia for our regulated water segment.

Speaker Change: And just before the end of 2023, we filed a base rate case for our regulated.

Speaker Change: Pennsylvania, natural gas utility, which I'll discuss in more detail on the next slide.

Speaker Change: Now this is the first Pennsylvania natural gas rate case that we filed under our ownership. It's also the first since the adoption of tax repair in the gas business and.

Speaker Change: And also the first case in which there is a request for weather normalization, which is a mechanism that a number of our peers in Pennsylvania have today.

Speaker Change: As a reminder, as part of this case, we expect the tax repair benefit to shift from the shareholders to the customers as the tax benefit is incorporated into rates.

Dan J. Schuller: So far in 2024, we've completed rate cases or surcharge filings in three of our water states, total annualized revenue increases of $9.1 million, and achieved $22 million, and $22.1 million in our regulated NAC. We have a busy but manageable regulatory calendar in 2024 with base rate cases or surcharge filings underway in Illinois, New Jersey, Texas, and Virginia for regulated water. And just before the end of 2023, we filed a base rate case for our regulated... Pennsylvania Natural Gas Utility, which I'll discuss in more detail on the next slide. Now this is the first Pennsylvania natural gas rate case that we've filed under our ownership, also the first since the adoption of tax repair in the gas business, and also the first case in which there's a request for weather normalization, which is a mechanism that a number of our peers in Pennsylvania have.

Speaker Change: Tax repair allowed us to stay out of rates for five years, and we would likely have stayed out longer but the commission order associated with our repair election required us to file by the end of 2023.

Speaker Change: And in this case as you see on this slide we've requested an increase of $156 million or 18, 7% in terms of revenue.

Speaker Change: So through the fully projected forward looking test year, we will have replaced over a thousand miles of gas mains in Pennsylvania since the last rate case.

Speaker Change: And therefore rate base growth at peoples is significant the $4 2 billion in rate base. In this case is up from $2 1 billion in the prior case.

Speaker Change: So that's a doubling in a five year period.

Speaker Change: This investment has made our system safer and more reliable while significantly reducing our greenhouse gas emissions since 2019.

Speaker Change: Given the fully projected future test year, we anticipate recovering the impact of rising interest rates and inflation through much of 2025.

Dan J. Schuller: As a reminder, as part of this case, we expect the taxpayer benefit to shift from the shareholders to the customers, as a tax benefit is incorporated into. Tax repair allowed us to stay out of rates for five years, and we would likely have stayed out longer, but the commission order associated with our repair election required us to file by the end of. And in this case, as you see on the slide, we've requested an increase of 156 million, or 18.7%. Rev.

Speaker Change: And in addition, we did want to mention that we expect to file a rate case for Aqua, Pennsylvania in the second quarter as it has been nearly three years since our last filing.

We believe our rate activity, especially in Pennsylvania is very different than some of what you may be seeing across the industry.

Speaker Change: We've been out of rates for nearly three years for Aqua, Pennsylvania.

Speaker Change: Our plans are known by the regulators in advance and we've maintained a strong focus on affordability.

Christopher H. Franklin: But through the fully projected forward-looking test here, we'll have replaced over 1,000 miles of gas mains in Pennsylvania since the last test. And therefore, rate-based growth at Peoples is significant. The 4.2 billion in rate base in this case is up from 2.1 billion in the prior case, so that's a doubling in a five-year period. This investment has made our system safer and more reliable, while significantly reducing our greenhouse gas emissions. Given the fully projected future test year, we anticipate recovering the impacts of rising interest rates and inflation through much of. In addition, we did want to mention that we expect to file a rate case for Aqua Pennsylvania in the second quarter, as it's been nearly three years since our last filing.

Speaker Change: We will also take a responsible approach to our proposed act 11 subsidization.

Speaker Change: And with that I'll hand, it back over to Chris Chris Hey, Thanks, Dan.

Christopher H. Franklin: It's hard to believe it's been five and a half years under your leadership as CFO and I want to thank you for that also want to recognize the great work done by Dan and his team in achieving our 2023 financial results. It was a challenging year.

Speaker Change: On the weather front.

Christopher H. Franklin: Chris Yes.

Christopher H. Franklin: Let's talk for a moment about our water and wastewater acquisition program as you know the program has been successful and continuously evolving.

Christopher H. Franklin: Nearly 30 years now.

Christopher H. Franklin: I have to tell you that we're really pleased with the leadership of the Pennsylvania public utilities Chairman.

Christopher H. Franklin: Commission Chairman, Steve D. Frank on addressing some of the issues that have arisen associated with the use of the fair market value statute that was passed in 2016.

Christopher H. Franklin: We believe our rate activity, especially in Pennsylvania, is very different than some of what you may be seeing across the industry. We've been out of rates for nearly three years for aquapencils. Our plans are known by the regulators in advance, and we've maintained a strong focus on affordability. We will also take a responsible approach to our proposed Act XI. And with that, I'll hand it back over to Chris.

Christopher H. Franklin: We believe that the proposal. He has made at a recent PUC public meeting will make a real difference in moderating rate increases for customers, while still providing a fair price to governmental entities.

Christopher H. Franklin: Decided to sell their water or wastewater utilities.

Christopher H. Franklin: We view this as a very positive development in our acquisition program in Pennsylvania, and believe that the pipeline remains strong.

Christopher H. Franklin: Hey, thanks, Dan. And it's hard to believe it's been five and a half years under your leadership as CFO, and I wanna thank you for that. I also wanna recognize the great work done by Dan and his team in achieving our 2023 financial results. It was a challenging year on the weather front.

Christopher H. Franklin: As I mentioned earlier in the call in 2023, we acquired seven systems, adding over 11000 customer equivalents to our current water and wastewater footprint.

Christopher H. Franklin: We have now acquired over $500 million of rate base via acquisitions. Since this leadership team came together in 2015.

Christopher H. Franklin: Thank you, Chris. Yep. Let's talk for a moment about our Water and Wastewater Acquisition Program. As you know, the program has been successful and continuously evolving for nearly 30 years now. I have to tell you that we're really pleased with the leadership of the Pennsylvania Public Utilities Chairman, Commission Chairman Steve DeFrank, on addressing some of the issues that have arisen associated with the use of the Fair Market Value Statute that was passed in 2016. We believe that the proposal he made at a recent PUC public meeting will make a real difference in moderating rate increases for customers while still providing a fair price to governmental entities that We view this as a very positive development in our acquisition program in Pennsylvania and believe that the pipeline remains strong. As I mentioned earlier in the call, in 2023, we acquired seven systems, adding over 11,000 customer equivalents to our current water and wastewater footprint. We have now acquired over 500 million rate-based VIA acquisitions since this leadership team came together in 2015. That statistic just doesn't do justice, though, to the amount of work that goes into the program.

Christopher H. Franklin: That statistic just doesn't do justice, though to the amount of work that goes into the program.

Christopher H. Franklin: We expect that the company will continue to be a major player in the consolidation of the water and wastewater utility industry in the United States.

Christopher H. Franklin: Now moving to next slide.

Christopher H. Franklin: Take a minute to review the pending transactions as well.

Christopher H. Franklin: This call, we've six signed asset purchase agreements in two states in which we have existing water and wastewater operations.

Christopher H. Franklin: Acquisitions will add over 215000 customer equivalents and total approximately $308 $80 million purchase price.

Christopher H. Franklin: As I noted in my opening remarks. This includes the recently signed agreement with North for sales Township Sanatory authority to acquire their wastewater system in Allegheny County, Pennsylvania, which is expected to add approximately 4400 customers to our regulated water segment now.

Christopher H. Franklin: This is another transaction that resulted from the reputation and relationships of our peoples gas team in western Pennsylvania, and another opportunity to leverage that relationship between the gas and water utilities.

We continue to see a strong and healthy pipeline of opportunities for additional growth and we're currently engaged in active discussions with municipalities, which have over 400000 potential water and wastewater customers.

Christopher H. Franklin: I fully expect that the company will continue to be a major player in the consolidation of the water and wastewater utility industry in the United States. Moving to the next slide, let's take a minute to review the pending transactions. As of this call, we have six signed asset purchase agreements in two states in which we have existing water and wastewater operations. These acquisitions will add over 215,000 customer equivalents and total approximately $380 million in purchase price. As I noted in my opening remarks, this includes the recently signed agreement with North For Sale Township Sanitary Authority to acquire their wastewater system in Allegheny County, Pennsylvania, which is expected to add approximately 4,400 customers to our regulated water segment.

Christopher H. Franklin: If chairman D. Frank's proposal is successful there should be a much clearer path to closing municipal acquisitions in Pennsylvania in the future and that is a bright spot.

Now before moving on I.

Christopher H. Franklin: Just want to note that the Dell core regulatory process continues to be under a stay by the federal bankruptcy court, but we remain confident that we will ultimately close the <unk> transaction.

Christopher H. Franklin: In early February we filed another motion requesting the federal bankruptcy Court judge lift the stay that has now been in place for over nine months.

Christopher H. Franklin: In April there was a scheduled hearing at the Pennsylvania Commonwealth Court.

Christopher H. Franklin: To rule on Delaware counties appeal of the validity of our asset purchase agreement with Dell Cora Youll recall.

Christopher H. Franklin: That was upheld successfully in the lower court.

Christopher H. Franklin: Based on what we know today, we still believe we can close this transaction by mid 2025.

Now before I get to guidance I, just want to reaffirm our strategy and visit some of our high priorities for the year.

Christopher H. Franklin: This is another transaction that resulted from the reputation and relationships of our People's Gas Team in Western Pennsylvania. You had another opportunity to leverage that relationship between the gas and water utilities. We continue to see a strong and healthy pipeline of opportunities for additional growth, and we're currently engaged in active discussions with municipalities that have over 400,000 potential water and wastewater customers. If Chairman DeFrank's proposal is successful, there should be a much clearer path to closing municipal acquisitions in Pennsylvania in the future, and that is a bright spot. Now, before moving on, I just want to note that the Delcoura regulatory process continues to be under a stay by the Federal Bankruptcy Court, but we remain confident that we will ultimately close the Delcoura transaction.

Christopher H. Franklin: First with regard to strategy, we're going to continue to investing significant capital in needed infrastructure.

Christopher H. Franklin: This will drive quality safety and reliability for our customers. We will also drive rate base growth, which in turn also drive shareholder value.

Christopher H. Franklin: <unk> customer affordability is always a priority.

Christopher H. Franklin: We know a key piece of driving shareholder value is continued growth in our dividend and we have a long track record of returning cash to our shareholders and that will continue in fact, we've raised our dividend continuously for 30 years now.

Lastly, we continue to see opportunities for further consolidation through acquisitions in the water and wastewater space and we will pursue transactions that broaden the customer base in a constructive regulatory environment allow.

Christopher H. Franklin: Allow us to apply our economies of scale to our to manage our costs and give us the opportunity to be a solution to communities that need our expertise or financial strength.

Christopher H. Franklin: In early February, we filed another motion requesting the Federal Bankruptcy Court judge lift the stay that has now been in place for nine months. In April, there was a scheduled hearing at the Pennsylvania Commonwealth Court to rule on Delaware County's appeal of the validity of our asset purchase agreement with Delcoura. You'll recall that was upheld successfully in the lower court.

Christopher H. Franklin: We believe that this strategy puts us in a great position to continue building and delivering value for our shareholders.

Christopher H. Franklin: So as we think about 2024, we have some important work to accomplish.

Sure My priorities each year with the board and of course, the management team and I'll summarize them quickly for you here.

Christopher H. Franklin: First we will remain focused on operational excellence throughout the year I will continue to share examples with you on our calls and meetings and this will include increased exposure to our segment Presidents Colleen Arnold and my QR.

Christopher H. Franklin: Now, based on what we know today, we still believe we can close this transaction by mid-2025. Now, before I get to guidance, I just want to reaffirm our strategy and discuss some of our high priorities for the year. First, with regard to strategy, we're going to continue investing significant capital in needed infrastructure. This will drive quality, safety, and reliability for our customers. It will also drive rate-based growth, which in turn also drives shareholder value. Importantly, customer affordability is always a priority.

Christopher H. Franklin: Secondly.

Christopher H. Franklin: We will continue to look for opportunities to make tangible improvement in the service we provide to our customers. In fact, we just rolled out an exciting new customer portal to provide our water and wastewater customers with more visibility into outages and restoration as well as allow them to see the details of their usage more easily.

Christopher H. Franklin: And pay their bills online.

Christopher H. Franklin: Also this year, we will continue our leadership role and Remediated P fashion led across our footprint and we will share our knowledge across the industry to help others leverage what we know.

Christopher H. Franklin: Now I'll sustainability, we're going to continue to focus on.

Christopher H. Franklin: We know a key piece of driving shareholder value is continued growth in our dividend, and we have a long track record of returning cash to our shareholders, and that will continue. In fact, we've raised our dividend continuously for 30 years now. Lastly, we continue to see opportunities for further consolidation through acquisitions in the water and wastewater space, and we'll pursue transactions that broaden the customer base in a constructive regulatory environment, allow us to apply economies of scale to manage our costs, and give us the opportunity to be a solution to communities that need our expertise or financial strength. We believe that this strategy puts us in a great position to continue building and delivering value for our shareholders. As we think about 2024, we have some important work to accomplish. I share my priorities each year with the board and, of course, the management team, and I'll summarize them quickly for you here.

Christopher H. Franklin: Our continued.

Christopher H. Franklin: Commitments and sustainability.

Christopher H. Franklin: And our accomplishments.

Christopher H. Franklin: We will continue to grow the company through accretive water and wastewater acquisitions, unless we have some pretty important regulatory things in front of us this year, including two rate cases that Dan mentioned in Pennsylvania, among others. The F&B refinement and also the Finalization of the <unk> regulations thats going to be a very busy.

Christopher H. Franklin: Here this year folks.

Speaker Change: Alright, let's get the guidance.

Speaker Change: Before we walk through this little acknowledge what you read in the release last night.

Speaker Change: Throughout this year, we will be working through two critical rate cases, both in our largest divisions in gas and water and both in Pennsylvania. Thus, we are refraining from providing a multi year earnings per share growth rate guidance range now both base rate cases are.

Speaker Change: <unk>, which will be around this time next year, we'll return to our normal longer term earnings per share guidance range.

Speaker Change: So let's review the guidance that we're providing.

Which we believe is significant and provides a clear line of sight to the opportunities in front of the company.

Christopher H. Franklin: First, we'll remain focused on operational excellence throughout the year. I'll continue to share examples with you during our calls and meetings, and this will include increased exposure to our segment presidents, Colleen Arnold and Mike Huar.

Speaker Change: In 2024, we expect to earn a $1 96 to $2, which is a 5% to 7% earnings growth range.

Speaker Change: Through 2028, we plan to invest approximately $7 2 billion annually on regulated infrastructure in our existing utilities, let me point out some of this increase is being driven by the regulatory requirements associated with <unk> and led migration mitigating mitigation.

Christopher H. Franklin: We'll continue to look for opportunities to make tangible improvements in the service we provide to our customers. In fact, we just rolled out an exciting new customer portal to provide our water and wastewater customers with more visibility into outages and restoration, as well as allow them to see the details of their usage more easily and pay their bills online. Also this year, we'll continue our leadership role in remediating PFAS and lead across our footprint, and we'll share our knowledge across the industry to help others leverage what we know. Now, sustainability. We're going to continue to focus on our continued commitments and sustainability and our accomplishments. We will continue to grow the company through accretive water and wastewater acquisitions. And last, we have some pretty important regulatory things in front of us this year, including two rate cases that Dan mentioned in Pennsylvania, among others, the FMV refinement, and also the finalization of the PFAS regulations. It's going to be a very busy year this year, folks.

Speaker Change: Now in 2024, we expect to invest between one three to one 4 billion.

Speaker Change: The annual amount may be a bit lumpy based on the needs and regulatory recovery activity throughout the five year period point again to <unk> as I mentioned earlier in the call.

Speaker Change: I also want to point out that we are providing a five year outlook on capital investments for the first time, we've always provide your three year capital outlook, and we hope that moving to a longer term view of capital spending will provide a better picture of our long term opportunities.

Speaker Change: Now based on this investment we expect rate base will grow at a compounded annual growth rate of approximately 8% for water and approximately 10% for natural gas through 2028.

Speaker Change: Find utility base.

Speaker Change: We'll grow at a compounded annual growth rate of over 8%.

Speaker Change: We continue to expect that together organic customer growth and growth from acquisitions will for water and wastewater will continue at a growth rate of 2% to 3% on average we were always remind our investors that growth from acquisitions are lumpy and should be viewed over a three year average we expect continued stability.

Christopher H. Franklin: All right, let's get to guidance. Before we walk through this, I want to acknowledge what you read in the release last night. Now, throughout this year, we will be working through two critical rate cases, both in our largest divisions in gas and water, and both in Pennsylvania. Thus, we are refraining from providing a multi-year earnings per share growth rate guidance range.

Speaker Change: <unk> and our natural gas customer base.

Speaker Change: As Dan mentioned, we also expect to raise about $250 million in 2020 for using an ATM equity program.

Speaker Change: And we remain committed to reducing our scope one and scope two greenhouse gas emissions by 60% by 2035 from our 2019 baseline as you know we've already made significant progress on this and we estimate it to be about 25% as of the year end 2023.

Christopher H. Franklin: Now, once both base rate cases are complete, which will be around this time next year, we'll return to our normal longer-term earnings per share guidance range. So let's review the guidance that we're providing, which we believe is significant and provides a clear line of sight to the opportunities in front of the company. In 2024, we expect to earn $1.96 to $2, which is a 5% to 7% earnings growth range.

Alright.

Speaker Change: Covered a lot that concludes our formal remarks, and we're happy to take your questions. So let me turn it back to Francois.

Francois: Thank you Rima.

Francois: If you would like to ask a question or micro contribution on today's call.

Christopher H. Franklin: Through 2028, we plan to invest approximately $7.2 billion annually in regulated infrastructure in our existing utilities. Let me point out that some of this increase is being driven by the regulatory requirements associated with PFAS and lead mitigation. Now in 2024, we expect to invest between $1.3 to $1.4 billion. The annual amount may be a bit lumpy based on the needs and regulatory recovery activity throughout the five-year period. I'll point again to PFAS, as I mentioned earlier in the call.

Francois: Star one on your telephone keypad, if you change your mind and want to withdraw your question press.

Speaker Change: Tal to these onshore your line's on mute locally.

Speaker Change: Prompted <unk> to ask your question.

Speaker Change: Our first question comes from the line of Ryan Connors from Northcoast Research. Please go ahead.

Hey, Ryan Thanks for taking hi, good morning. Thanks for taking my question I think he did a great job.

With the details Dan so thank you for that so a couple of bigger picture questions here.

Ryan Michael Connors: Chris you talked about strategically about kind of rate and capex strategy, but tactically.

Christopher H. Franklin: I also want to point out that we're providing a five-year outlook on capital investments for the first time. We've always provided you with a three-year capital outlook, and we hope that moving to a longer-term view of capital spending will provide a better picture of our long-term opportunities. Now, based on this investment, we expect Ratebase will grow at a compounded annual growth rate of approximately 8% for water and approximately 10% for natural gas through 2028. Additionally, we continue to expect that together, organic customer growth and growth from acquisitions for water and wastewater will continue at a growth rate of 2 to 3 percent on average. We always remind our investors that growth from acquisitions is lumpy and should be viewed over a three-year average.

Lots of high profile industry noise in Pennsylvania, right now in terms of rate increases in water, how does that impact your tactical thinking about rate strategy NPA in terms of the rate cycle and the cadence of Capex.

Ryan Michael Connors: Going forward any thoughts there.

Yes, Ryan.

Ryan Michael Connors: Think cadence is important the challenge that we could face.

Ryan Michael Connors: A moment ago is if Pennsylvania for example requires us to comply with the <unk> rules over three year period. It appears in the federal.

Ryan Michael Connors: Regulation that hasnt been formally released yet, but the draft would suggest that states can extend that by two years. So if they allow us to extend it it would allow it will give us an opportunity to spread that a little bit that's the only thing that could push us seeing a little sooner.

Ryan Michael Connors: We think that the cadence we have now is a.

Ryan Michael Connors: It is a good cadence now theres a lot of capital before us, including led so that could impact the cadence of future cases, but listen I think affordability is key in how we think about things.

Christopher H. Franklin: We expect continued stability in our natural gas customer base. Now, as Dan mentioned, we also expect to raise about $250 million in 2024 using an ATM equity program. And we remain committed to reducing our Scope 1 and Scope 2 greenhouse gas emissions by 60% by 2035 from our 2019 baseline. As you know, we've already made significant progress on this, and we estimate it to be about 25% as of year-end 2023. All right. I've covered a lot.

Ryan Michael Connors: Think how we how we think about.

Ryan Michael Connors: Act 11, and shifting of costs is key to us.

Ryan Michael Connors: And I also think about that.

Ryan Michael Connors: That throttling of capital to make sure that things remain affordable to our customers is also critically important.

Ryan Michael Connors: Yes.

Ryan Michael Connors: And then relatedly so.

Ryan Michael Connors: You mentioned your comments on the M&A environment, which I appreciate.

Ryan Michael Connors: But there was some big news yesterday, not one of your deals, but the PUC actually rejecting an act 12 deal.

Operator: That concludes our formal remarks, and we're happy to take your questions, so let me turn it back to Francois. Thank you. As a reminder, if you would like to ask a question or make a contribution during today's call, please press star 1 on your telephone keypad. If you change your mind and want to withdraw your question, please press star 2. Please ensure your lines are unmuted locally, as you'll be prompted when to ask your question.

Ryan Michael Connors: How do you view that in terms of the potential impact on the near term pipeline I mean will that scare off some potential sellers at least until we can get finality on where this reform process ends up.

Ryan Michael Connors: It's an interesting question and I think what it does is it provides pretty clear guidance to sellers.

Ryan Michael Connors: What what's the multiple on depreciated original cost that they can probably expect now we're probably a couple of months away from the Finalization of chairman to Franks motion because Theres 30 days, followed by a 15 day comment period.

Ryan Michael Connors: The first question comes from a line by Ryan Connors from North Coast Research. Please go ahead. Hey Ryan, thanks for taking my question. I think you did a great job with the details, Dan, so thank you for that. Just a couple of bigger picture questions here. Chris, you talked strategically about rate and CapEx strategy, but tactically, there is lots of high-profile industry noise in Pennsylvania right now in terms of rate increases for water. How does that impact your tactical thinking about rate strategy in PA in terms of the rate cycle and the cadence of CapEx going forward? Any thoughts there? Yeah, Ryan, look, listen. I think cadence is important.

Ryan Michael Connors: Assuming it stays even close to where the chairman's proposal is it will give a pretty clear guidance as to where.

Ryan Michael Connors: Were those purchase prices can be and believe me I think that those are still really nice premiums that can be paid for these utilities, while we while we keep rates in check.

Ryan Michael Connors: I think yesterday's decision probably is in line with the commissioners FIFO vote on Commissioner D. Frank's see motion on its proposed changes.

Ryan Michael Connors: I think that given the difference in the.

Ryan Michael Connors: The multiples on depreciated original cost.

Ryan Michael Connors: It would be it would have been hard for them to do this one now I do think and this is important.

Christopher H. Franklin: The challenge that we could face, and I outlined a moment ago, is if Pennsylvania, for example, requires us to comply with the PFAS rules over a three-year period. It appears in the federal regulation that, you know, hasn't been formally released yet, but the draft would suggest that states could extend that by two years. So if they allow us to extend it, it would give us an opportunity to spread that a little bit. That's the only thing that could push us in a little sooner. But we think that the cadence we have now is a good rhythm.

Ryan Michael Connors: As we think about.

Ryan Michael Connors: Acquisitions, particularly in Pennsylvania.

Ryan Michael Connors: <unk> systems are really differentiated from this process and so I think the.

Ryan Michael Connors: The acquisitions that we have in the pipeline many of them are troubled and so.

Ryan Michael Connors: You have a little bit more flexibility in this for troubled acquisitions that they may take more of a focus.

Speaker Change: Yes, I appreciate that and then one last one from me if I could sneak it in just Super Big picture, Chris I mean, there seems like there's been a pretty big pretty stark role reversal for water and gas.

Christopher H. Franklin: Now, there's a lot of capital before us, including lead. So, you know, that could impact the cadence of future cases. But listen, I think affordability is key in how we think about things.

Speaker Change: Over the last.

Speaker Change: Six months or so water seems to be facing some headwinds now and gas utility stocks are now actually outperforming the water names Thats one of the reasons your stock's done relatively well.

Christopher H. Franklin: I think how we think about Act 11 and the shifting of costs is key to us. And I also think that throttling of capital to make sure that things remain affordable to our customers is also critically important. Yes.

Speaker Change: How does that shift your thinking if at all on portfolio strategy going forward I mean, you've talked in the past about kind of staying put in gas and really growing and water is there a is there a.

Ryan Michael Connors: And then relatedly, so this: You mentioned your comments on the M&A environment, which I appreciate, but there was some big news yesterday, not one of your deals, but the PUC actually rejecting an Act 12 deal. How do you view that in terms of the potential impact on the near-term pipeline? I mean, will that scare off some potential sellers, at least until we can get finality on where this reform process ends up?

Thought process that maybe.

<unk> could be more of a growth.

Speaker Change: Platform.

Speaker Change: Well.

Speaker Change: I'm not ready to say that yet, but I think youre exactly right in your.

Speaker Change: Public sentiment, including in Europe, you saw that.

Speaker Change: Even in the European Union gas is now considered green again, so I think public sentiment has changed a bit I think.

Speaker Change: The realization that natural gas is going to be here for a very long time, given the critical role. It plays in the energy mix is is more evident in people's knowledge today.

Christopher H. Franklin: You know, it's an interesting question, and I think what it does is it provides pretty clear guidance to sellers as to what's the multiple on depreciated original cost that they can probably expect. Now, we're probably a couple of months away from the finalization of Chairman DeFrank's motion because there are 30 days followed by a 15-day comment period. But assuming it stays even close to where the chairman's proposal is, it'll give pretty clear guidance as to where those purchase prices can be. And believe me, I think that those are still really nice premiums that can be paid for these utilities while we keep rates in check. And I think yesterday's decision probably is in line with the commissioner's 5-0 vote on Commissioner DeFrank's C motion on his proposed changes. I think given the difference in the multiples on depreciated original cost, you know, it would have been hard for them to do this one.

Speaker Change: But having said that listen we're going to remain focused this year on delivering.

Speaker Change: A really quality rate case in Pennsylvania, and so that's going to be our primary focus in the gas business in 2024.

Speaker Change: Got it thanks for your time.

Speaker Change: You bet. Thank you take care.

Speaker Change: The next question comes from the line of Doug <unk> from Evercore ISI. Please go ahead.

Hey, good morning, Doug.

Doug: Hey, good morning, guys. Thanks for the time.

Doug: I wanted to kind of stick on the theme of the rate cases.

Doug: Getting a lot of questions from investors obviously.

On the on the waterfront.

Doug: Maybe can you just.

Doug: Give us a sense of what kind of revenue or rate increase as that you might seek.

Doug: In the upcoming water case, you mentioned affordability several times.

Speaker Change: No comments, so just trying to get a sense of.

Speaker Change: How big of a rate increase you might see if you can give us a range or something along those lines.

Speaker Change: So we're still working through that case right now and of course as you indicated affordability is a concern.

Christopher H. Franklin: Now, I do think, and this is important, as we think about acquisitions, particularly in Pennsylvania, troubled systems are really differentiated from this process, and so I think the acquisitions that we have in the pipeline, many of them are troubled, and so you have a little bit more flexibility in this for troubled acquisitions, and they may take more of a focus. Yep. I appreciate that. And one last one from me, if I could sneak it in.

Speaker Change: <unk>.

Speaker Change: So we don't have we don't have a number to share we will obviously share that number.

Speaker Change: Pretty close to that number when we have our first quarter call. So we'll provide more detail at that point I would say, though and you see it in the <unk>.

Speaker Change: The five year Capex guidance that we've shown that we're going to continue to have strong capex in the water business.

Speaker Change: <unk> P fast and later a portion of that.

Capex so.

Speaker Change: Sure.

Speaker Change: Those capital expenditures here for the time period kind of through 2025 will be included in this rate case.

Ryan Michael Connors: Just a super big picture, Chris. I mean, there seems like there's been a pretty big, pretty stark role reversal for water and gas over the last, you know, six months or so. You know, water seems to be facing some headwinds now, and gas utility stocks are now actually outperforming the water names. That's one of the reasons your stock's done relatively well. How does that shift your thinking, if at all, on portfolio strategy going forward? I mean, you've talked in the past about kind of staying put in gas and really growing in water. Is there a thought process that maybe gas could be more of a growth platform? Well, I'm not ready to say that yet, but I think you're exactly right about public sentiment, including in Europe.

Speaker Change: Let me just point you to their guests to the some of the comments I made in the call here.

Speaker Change: We're meeting with regulators as we speak environmental regulators that is to talk about this timeline for <unk>, we pretty much know, where we're going with play but.

Speaker Change: That timing is a key consideration in this how we think about this case. So number is still moving around a bit but as Dan said, we should be clear in the coming months.

I appreciate that and then.

Speaker Change: A large step up in Capex I think if I just take the average annual capital among its like 30% higher versus previous guidance one for on average with a one one.

Speaker Change: Maybe just can you talk to obviously and thank you by the way of procuring the equity plan for this year, Mike I appreciate it.

Speaker Change: Can you talk to the financing needs in 'twenty.

Speaker Change: <unk> 25, and beyond should we use that to $150 million as a run rate or should it be.

Christopher H. Franklin: We saw that even in the European Union, gas is now considered green again. So I think public sentiment has changed a bit. I think the realization that natural gas is going to be here for a very long time, given the critical role it plays in the energy mix, is more evident in people's knowledge today. But having said that, listen, we're going to remain focused this year on delivering a really quality rate case in Pennsylvania. And so that's going to be our primary focus in the gas business in 2024. Got it?

Be higher given the Capex is stepping up quite a bit maybe just talk to that and then I have a follow up.

Speaker Change: Yeah, we probably won't provide too many details on that beyond 2024 only because.

Speaker Change: The needs in the future for equity also depend on.

Speaker Change: On acquisitions, and how they play out, but I would say as we think about that $1 billion ATM program.

Speaker Change: Generally we are thinking about that as three plus years, but again it depends on both acquisitions and investment needs.

Ryan Michael Connors: Thanks for your time. You bet. Thank you. Take care. The next question comes from a line Durgesh Chopra from Evercore ISI, please go ahead. Hey, Durgesh. Good morning, Durgesh.

Speaker Change: Okay perfect I appreciate that Dan and then maybe just.

Speaker Change: One last question for me is.

Durgesh Chopra: Hey, good morning, guys. Thanks for the time. Hey, just I want to kind of stick on the theme of the great cases. We're getting a lot of questions from investors, obviously, you know, on the waterfront. Maybe can you just give us a sense of what kind of revenue or rate increase that you might seek in the upcoming water case. You mentioned affordability several times in your comments. So just trying to get a sense of how big a rate increase you might see if you can give us a range or something along those lines. So Durgesh, you know, we're still working through that case right now. And of course, as you indicated, affordability is a concern. So we don't have a number to share.

<unk> is growing at a materially faster what are projected to grow at a materially higher.

Dan J. Schuller: Assuming you got a favorable regulatory outcomes in the PMA cases.

Dan J. Schuller: Could we see a step up in long term growth rate going forward as youre spending more money or maybe perhaps to the towards the high end of that five to seven or how should we think about that I don't know I. Appreciate there's no long term guidance, but maybe directionally you could help us think about long term growth rate.

Dan J. Schuller: Yes.

Speaker Change: We're trying to refrain from.

Speaker Change: Front running the commission in Pennsylvania, So I'm going to be careful in how I answer this.

Speaker Change: Sure.

Speaker Change: Listen I think.

Speaker Change: Peoples is coming out of a repair, which we've I think we've talked about many many times and so as we think about coming out of repair.

Christopher H. Franklin: We'll obviously share that number, or pretty close to that number, when we have our first quarter call, so we'll provide more detail at that. I would say, though, and you see it in the... five-year CAPEX guidance that we've shown that we're going to continue to have strong CAPEX in the water business, and PFAS and the latter portion of that, and Lex Brown. And now, the American Reveille with Gregg Orrill, Durgesh Chopra, Brian Dingerdissen, and Durgesh Chopra.

Speaker Change: And an earning well before that.

Speaker Change: The step is not it's not what would be an eight and a normal step.

Speaker Change: Rate case, so I think I think I would be.

Speaker Change: I think we're comfortable with the guidance, we've given and hopefully that gives you a little bit of sense of how we think about it.

Speaker Change: Okay.

I appreciate that great. Thanks, so much.

Speaker Change: Right.

Speaker Change: <unk>.

Speaker Change: Our next question comes from a line of Travis Miller from Morningstar. Please go ahead.

Travis Miller: Thank you and good morning, everyone.

Travis Miller: Sure.

Travis Miller: Kind of going back to the again this whole PFS discussion in the investment needs I think Chris if I heard you correctly huge and expensive was.

Travis Miller: <unk>.

Travis Miller: Does that refer to the $4 50, and the 5% O&M or is there more.

Christopher H. Franklin: You know, those capital expenditures here for the time period kind of through 2025 will be included in this. Let me just point you to some of the comments I made in the call here. We're meeting with regulators as we speak, environmental regulators that is, to talk about this timeline for PFAS. We pretty much know where we're going with lead, but that timing is a key consideration even in this, how we think about this case. So the numbers are still moving around a bit, but as Dan said, we should be clear in the coming months. I appreciate that.

Travis Miller: Potential Capex <unk> O&M.

Christopher H. Franklin: Yes, yes. Good question, so here's how we think about it as we estimate it today, we're saying at least $450 million, but the timing right.

Christopher H. Franklin: For example, we heard this week when we were in North Carolina that we must comply with a three year timeline in North Carolina, and so we're going to be all on push in Pennsylvania.

Christopher H. Franklin: We're hoping to get some definition around that from the <unk>.

Christopher H. Franklin: Regulators here.

Christopher H. Franklin: But if we have to move faster if we have to comply with three which we originally were hoping for a five year.

Durgesh Chopra: And then, you know, pretty large step up in CapEx. I think if I just take the average annual capital amount, it's like 30% higher versus previous guidance, 1.4 on average versus 1.1. Maybe just, can you talk to, obviously, and thank you, by the way, for sharing the equity plan for this year. Much appreciated.

Then it could be added costs and the added costs come from.

Christopher H. Franklin: Potentially our inability to get loans low interest loans and grants in that process because.

Christopher H. Franklin: Often they require us to apply and get the grant before we build and we can't wait and so that's the conversation that we're having with the regulators now is help us help our customers our customers didn't put this contaminant in the water nor did we but we are all faced with fixing it and pay.

Dan J. Schuller: But then, can you talk to financing needs in, you know, 25 and beyond? Should we use that $250 million as a run rate, or should it be higher, given that CapEx is, you know, stepping up quite a bit? Maybe just talk to that, and then I'll have a follow-up.

Christopher H. Franklin: For it and so we're trying to mitigate those costs as best we can that's why that number is moving around a little bit and could go north more if if we can't attain some of these grants.

Okay that partially answers and then my follow up was how much discussion or are you having with regulators in terms of getting some of those cost recovered outside of having to file.

Durgesh Chopra: Yeah, we probably won't provide too many details on that beyond 2024 only because, you know, the needs in the future for equity also depend on... acquisitions and how they play out, but I would say, as we think about that, the Billion Dollar ATM Program. Generally, we're thinking about that as three plus years, but again, it depends on both acquisitions and investments. Okay, perfect.

Christopher H. Franklin: Full base rate cases will there be some kind of rider treatment potential have you discuss that at all or is that on the table.

Christopher H. Franklin: That is a discussion that we're having in several locations we had a long discussion even internally here about how to make some of those things happened last night.

Christopher H. Franklin: It is important for customers to recognize that that portion of their rates is associated with <unk>.

Christopher H. Franklin: Compliance with the cleanup and not not.

Simply a an investment in pipe or improvement that we would normally make in the course of running utility I really want customers understand that they are paying for some of these costs now I'll remind you that we are getting some recovery from lawsuits and we hope to get somewhere between 90 and $110 million from the <unk>.

Christopher H. Franklin: I appreciate that, Dan. And then maybe just like one last question for me is whether the rate basis is going at a materially faster clip or projected to grow at a materially faster clip, assuming you get favorable regulatory outcomes in the PRA cases. Could we see a step up in long-term growth rate going forward as you're spending more money or, you know, perhaps perhaps towards the high end of that 5 to 7? Or how should we think about that? I don't know.

Christopher H. Franklin: Polluters, but.

Christopher H. Franklin: <unk>.

Christopher H. Franklin: That's not going to cover clearly the costs, we're talking about here.

Christopher H. Franklin: Okay.

Speaker Change: All helpful. Thank you and then one other on the gas side.

Durgesh Chopra: I appreciate there's no long-term guidance, but maybe directionally you could help us think about long-term growth rates. Yeah, listen. I think we're trying to refrain from, you know, front running the commission in Pennsylvania. So I'm going to be careful in how I answer this, but, you know, listen. I think.

Speaker Change: Any thoughts in terms of getting a weather normalization clause either in this rate case or a separate application.

Speaker Change: At least one other gas utility in the state has a pretty robust.

Weather normalization no excuse.

Speaker Change: Excuse me weather normalization clause. So wondering if that's part of the discussions and the current rate case or is that something that would come along.

Christopher H. Franklin: People are coming out of repair, which I think we've talked about many, many times. And so as we think about coming out of repair and earning well before that, you know, the step is not what it would be in a normal step rate case. So I think I would be, you know.

Speaker Change: In a separate filing yes.

Speaker Change: Let me just remind you. This is our first rate case two since we've owned the company. So thats why we don't have weather norm go ahead Dan.

Great point Chris.

Speaker Change: Yes, Travis we have filed this rate case, including a request for weather normalization and to your point a few of our peer companies here in Pennsylvania habit.

Durgesh Chopra: I think we're comfortable with the guidance we've given, and hopefully that gives you a little bit of a sense of how we think about it. Okay. I appreciate that, Chris. Thanks so much.

Dan J. Schuller: And achieving a similar program will be very beneficial to.

Travis Miller: You bet. Fibregas. The next question comes from a line from Travis Miller from Morningstar. Please go ahead. Thank you. Good morning, everyone.

Dan J. Schuller: To our company.

Dan J. Schuller: Okay.

Dan J. Schuller: Handicap wise do you think given that the other utilities.

Dan J. Schuller: This is a good chance or is there something unique about.

Operator: I'm gonna go back to this whole PFAS discussion and the investment needs. I think, Chris, if I heard you correctly, huge and expensive was the quote. Does that refer to the 450 and the 5% O&M, or is there more? Potential CapEx and or O&M. Yeah, yeah, good question.

I'll be discussing with regulators.

Dan J. Schuller: Say, the fact that other utilities in the state have it bodes well for a positive decision here.

Speaker Change: Okay great.

Speaker Change: Thanks, so much.

Speaker Change: Thank you Beth.

Speaker Change: Okay.

Speaker Change: Our next question comes from the line of David Sunderland from Baird. Please go ahead.

David Sunderland: Good morning, David Hey, Dan That'd.

David Sunderland: That would be Friday, guys. Thanks for the time you.

Speaker Change: You bet.

David Sunderland: Few questions from me.

David Sunderland: Wanted to ask about the decision not to give long term EPS guidance and I know you guys mentioned the rate case for being the reason for this but should we think of any pending acquisitions is playing a role in this and then I have one follow up.

Christopher H. Franklin: So here's how we think about it. As we estimate it today, we're saying at least $450 million. But the timing, right, if, for example, we heard this week when we were in North Carolina that we must comply with the three-year timeline in North Carolina. And so we're going to be, you know, all on a push. In Pennsylvania, we're, we're hoping to get some definition around that from the regulators here. But if we have to move faster, if we have to comply with three, which we originally were hoping for a five-year period, then it could be added cost. And the added costs come from potentially our inability to get loans, low-interest loans, and grants in that process because, often, they require us to apply for and get the grant before we build, and we can't wait.

Speaker Change: Yeah, no not at all we're not worried about the acquisitions. It's really the fact that we have two major rate cases filed in Pennsylvania, which account for.

Speaker Change: As you all know a large portion of our of our net income and so.

Speaker Change: I actually had conversations with regulators who who.

Speaker Change: He said it was it would be a sign of respect to be able to do that and so.

Speaker Change: I would gladly comply with that so it was really just.

Speaker Change: Front running the commission in terms of how they think about returns and processing of rate case.

Speaker Change: Especially given its importance to the overall picture here in our company.

Speaker Change: That makes sense. Thanks for that and then another one on just the acquisition pipeline broadly speaking I guess at a high level have you seen in light of the higher rate environment and increasing the number of system or I guess, maybe any thoughts on where valuations are.

Travis Miller: And so that's the conversation that we're having with the regulators now to help us help our customers. Our customers didn't put this contaminant in the water, nor did we, but we're all faced with fixing it and paying for it. And so we're trying to mitigate those costs as best we can. That's why that number is moving around a little bit and could go north more if we can't attain some of these grants. Okay, that partially answers my follow-up question: how much discussion are you having with regulators in terms of getting some of those costs recovered outside of having to file? full-based rate cases? Would there be some kind of rider treatment potential?

Speaker Change: Any commentary on where you're at with the 400000 customers too right now it would be helpful. Thank you.

Speaker Change: Yes, I would say theres a lot of active conversations happening clearly the.

Speaker Change: The news of the Chairman's see motion and then maybe the newest information on on Butler.

Speaker Change: Butler that just occurred.

Speaker Change: <unk>.

Speaker Change: People are processing that information I would say that was really really new information both of those so not sure exactly how the market will react but I'll tell you what.

Speaker Change: Assuming the chairman's motion is successful and we see a clear path to actually closing these and not having to deal with the the court issues and that just the prolonged nature of the challenges.

Christopher H. Franklin: Have you discussed that at all, or is that on the table? That is a discussion we are having in several locations. We had a long discussion internally here about how to make some of those things happen last night.

Travis Miller: And I think it's important for customers to recognize that that portion of their rates is associated with compliance with a cleanup and not simply an investment in pipe or improvement that we would normally make in the course of running a utility. I really want customers to understand that they're paying for some of these costs. Now, I'll remind you that we are getting some recovery from lawsuits. We hope to get somewhere between $90 and $110 million from the polluters, but that's not going to cover all the costs we're talking about here. Okay. No, that's all helpful. Thank you. And then there is one more on the gas side.

Speaker Change: I think that that will actually be a very positive signal to the market number one they can be paid a premium.

Speaker Change: All to be a controlled premium and then two there is a clear path to closing, which I think in some of these cases today that path is not as clear so.

Speaker Change: Now in terms of our general conversations with.

Speaker Change: Others in the pipeline.

Speaker Change: I'd say steady as she goes.

Speaker Change: Both acquisitions are lumpy, we've talked about that many times and so sometimes you feel like it's two steps forward and one step back but.

Speaker Change: Nevertheless, I do feel comfortable that the pipeline is still strong.

Travis Miller: Any thoughts in terms of getting a weather normalization clause, either in this rate case or a separate application? I know that at least one other gas utility in the state has a pretty robust one. Weather Normalization, excuse me, Weather Normalization Clause, so I wonder if that's part of the discussions in the current rate case or if that's something that would come along in a separate filing, and achieving a similar program would be very beneficial to our Okay, handicap wise, do you think given that the other utilities have it that there is a good chance, or is there something unique about..., that you're discussing with regulators. I would say the fact that other utilities in the state have it bodes well for a positive decision. Okay, great. Thanks so much.

Speaker Change: That's super helpful. Thanks, guys I appreciate it bye.

Speaker Change: Alright.

Speaker Change: Before proceeding to the next questions as a final reminder, if you'd like to ask a question. Please press star one.

Speaker Change: The next question comes from the line of Jonathan Reeder from Wells Fargo. Please go ahead.

Jonathan Reeder: Hey, Jonathan Good morning, Jonathan.

Jonathan Reeder: Good morning, Chris and Dan how are you all.

Jonathan Reeder: Very well thanks.

Jonathan Reeder: I just wanted to quickly clarify that the 24 guidance range doesn't include the onetime gain from the nonregulated sales that recently closed is that correct.

Jonathan Reeder: Yes, that's correct, Jonathan so that EPS guidance presumed normalized weather and excludes that gain on sale.

Speaker Change: Okay great.

Speaker Change: And I appreciate that you rolled out the five year guidance in terms of Capex and rate base I'm still just a little confused why it and also provide I guess the long term.

Speaker Change: <unk> CAGR.

Speaker Change: There's potentially another round of Ta rate cases that would fall during that 2024 to 2028 period. After the pending gas and soon to be filed wire one kind of wrapped up so I guess kind of the first part of the question that you just intend to provide a three year EPS CAGR.

Christopher H. Franklin: We'll be back. The next question comes from a line by Davies Sunderland from Baird. Go ahead. Good morning, David. Hey, Dan. Happy Friday, guys.

Travis Miller: Thanks for your time. I wanted to ask about the decision not to give long-term EPS guidance. And I know you guys mentioned the rate case as being the reason for this, but should we think of any pending acquisitions as playing a role in this? And then I have one follow-up. Yeah, no, not at all.

Speaker Change: When you do roll it out next year and then the second part.

Speaker Change: If we were to assume no change to the current.

Gas and water like return parameters.

Speaker Change: The allowed ROE and equity ratios.

Speaker Change: Is there any reason the EPS CAGR wouldn't be consistent with the prior five years to 7% range given rate base is expected to grow at over 8%, even taking into account presumed step down in peoples earned Roe.

Speaker Change: Yes so.

David Sunderland: We're not worried about the acquisitions. It's really the fact that we have two major rate cases filed in Pennsylvania, which account for, as you all know, a large portion of our net income. And so I actually had conversations with regulators who said it would be a sign of respect to be able to do that. And so I gladly comply with that. So it was really just not front-running the commission in terms of how they think about returns and processing a rate case, especially given its import to the overall picture here in our company. Thanks for that!

Speaker Change: Lot of questions in there.

Speaker Change: And then one question.

Speaker Change: So in terms of the.

Speaker Change: The guidance range and why why with regulators.

Speaker Change: I kind of covered that before Jonathan but I will just say again I recognize there is a stream of cases coming through Pennsylvania, and and so the way we think about it is to pick one case at a time, we just happen to have.

Speaker Change: Really heavy overlap here that People's case won't conclude till.

Speaker Change: Really fourth quarter 2024, the Aqua case won't conclude until.

Speaker Change: First quarter probably of 2025.

Christopher H. Franklin: And then another one on just the acquisition pipeline, broadly speaking, I guess, at a high level, what have you seen in light of the higher rate environment and increase in the number of systems, or maybe any thoughts on where valuations are? Any, any commentary on where you're at with the 400,000 customers too right now would be helpful. Thank you.

Speaker Change: It's just right on top of each other I think we have to look at the cadence and then and then how we would provide that respect to our regulators and guidance to our investors.

Speaker Change: And evaluate as we go and hopefully we can stay with largely the guidance we've always provided.

Christopher H. Franklin: Yeah, I would say there's a lot of active conversations happening. Clearly, the news of the chairman's C motion and then maybe the latest information on Butler that just occurred is, you know, people are processing that information. I'd say that was really, really new information, both of those. So I'm not sure exactly how the market will react. But I'll tell you what.

Speaker Change: Would anticipated we return at this time next year or two regular guidance I would expect a three year cadence not not.

Speaker Change: We can probably continue to do five years on capex, but but a three year guidance I just think there's so many things happening in the.

Speaker Change: And the industry.

Speaker Change: Yes.

Speaker Change: A much clearer.

Speaker Change: View of what's coming.

Christopher H. Franklin: You know, assuming the chairman's motion is successful and we see a clear path to actually closing these and not having to deal with the court issues and just the prolonged nature of the challenges, I think that will actually be a very positive signal to the market. Number one, they can be paid a premium, albeit a controlled premium. And then two, there's a clear path to closing, which I think in some of these cases today, that path is not as clear.

Speaker Change: And I think too Jonathan if you if you.

Speaker Change: Look at what we provided in terms of the peoples natural gas rate case rate base and equity layer and so forth.

Speaker Change: Tried to provide some data there that would help you model.

Speaker Change: 2025, a fully projected future test year in terms of an outcome.

Speaker Change: If you need any more help on that.

Speaker Change: Obviously take a call anytime we can have conversations but we are.

Speaker Change: Just not going to provide a guidance range at this moment.

Speaker Change: Yes, no I mean.

Okay.

Speaker Change: With the step up in Capex.

Speaker Change: Even the rate base growth.

Speaker Change: Strength there.

Speaker Change: Some people kind.

Christopher H. Franklin: So you know, now in terms of our general conversations with others in the pipeline, I would say they're steady as she goes. Municipal acquisitions are lumpy, we've talked about that many times, and so sometimes you feel like it's two steps forward and one step back, but nevertheless, I do feel comfortable that the pipeline is still strong. That's super helpful.

Speaker Change: Kind of wondering like sending them.

Speaker Change: A mixed message.

Speaker Change: If it's just purely out of deference to the regulators and the plan was just to keep the EPS CAGR at three years versus five year, along with the other stuff.

Speaker Change: I guess that makes a little more sense.

Speaker Change: So.

Speaker Change: In terms of kind of I guess modeling seven 2 billion like first off that's just pure capex that doesn't include anything for pending M&A.

Speaker Change: M&A or future placeholder right consistent with how you've done it in the past.

David Sunderland: Thanks guys, appreciate it. Bye-bye. Before proceeding to the next questions, as a final reminder, if you'd like to ask a question, please press star one. The next question comes from the line of Jonathan Reader from Wells Fargo. Please go ahead. Good morning, Chris and Dan. How are you all?

Speaker Change: Yes, it's consistent with the past. So it includes that doesn't include acquisition prices purchase prices paid it does include.

Speaker Change: Capex subsequent two acquisitions closing for those acquisitions, where we have a signed purchase and sale agreement.

Speaker Change: Okay.

Speaker Change: Okay and then.

In terms of like modeling it out.

Jonathan Reader: Hey, I just wanted to quickly clarify that the 24 guidance range doesn't include the one-time gain from the non-regulated sales that recently closed. Is that correct? Yeah, that's correct, Jonathan.

Speaker Change: Should we just assume like gradual annual increases off of the one three to one four or.

Speaker Change: Is that going to be a little more heavy and 25% and 26 because of the P fast stuff.

Speaker Change: I mean.

Speaker Change: So I think what you've been seeing still a little bit to be determined.

Speaker Change: Yeah, a little bit to be determined whether whether it <unk>.

Dan J. Schuller: So that EPS guidance presumes normalized weather and excludes that. Okay, great. And I appreciate that you rolled out the five-year guidance in terms of CapEx and rate base. I'm still just a little confused why you didn't also provide, I guess, the long-term. EPS CAGR since, you know, there's potentially another round of PA rate cases that, you know, would fall during that 2024 to 2028 period after the pending gas and soon to be filed water ones are kind of wrapped up. So I guess kind of the first part of the question is, do you just intend to provide a three-year EPS CAGR, you know, when you do roll it out next year? And then, you know, the second part, if we were to assume no change to the current PA gas and water return parameters, meaning the allowed ROEs and equity ratios, is there any reason the EPS CAGR wouldn't be consistent with the prior five to 7% range, given the rate base is expected to grow at over 8%, you know, even taking into account the presumed step down in people's earned ROE? Yeah, so... A lot of questions in just one question.

Speaker Change: Five year, three year program and by state otherwise I guess I would say that.

Speaker Change: If you take <unk> and you divide it by.

By five you are kind of in this 1314 range it kind of bounces around in that range over those years its not.

Speaker Change: Is that right.

Speaker Change: Necessarily a directionality to it.

Speaker Change: Okay can you can you kind of just talk about the drivers of the Capex increase.

Speaker Change: What caused you to kind of step it up because I think you had kind of been relatively consistent the past few years.

In your budget.

Speaker Change: This is a lot bigger increase and then along with that what sort of impact.

Speaker Change: The higher Capex will have on the average annual customer bill increases that you're pursuing.

Speaker Change: Yes, I'm happy to start and then Chris can chime in but.

Speaker Change: As we look forward and I think all utilities in really all companies that do construction work and have experienced this we do see higher construction costs in the future than we've had in the past so that gets incorporated when we develop our five year plan and then of course, we've got a bit more clarity here in this five year plan regarding.

Speaker Change: <unk> and led than we had previously as well.

Speaker Change: Yeah, Hi, Chris it's really a step up.

Speaker Change: One, 1% and 20 212 and 'twenty three and now are come up is <unk>.

Christopher H. Franklin: An average of one four so.

Christopher H. Franklin: It's not a massive increase but given.

Christopher H. Franklin: So in terms of the guidance range and why with regulars, I kind of covered that before with Jonathan, but I'll just say again, I recognize there's a stream of cases coming through Pennsylvania and so the way we think about it is, take one case at a time. We just happen to have, you know, really heavy overlap here. The People's case won't conclude till, you know, really fourth quarter 2024. The ACWA case won't conclude until, you know, the first quarter probably of 2025. It's just right on top of each other.

Christopher H. Franklin: The costs, we're seeing labor costs as well, we're seeing increase and then.

More clarity on Paphos in led.

Christopher H. Franklin: It just is migrating north.

Christopher H. Franklin: Yeah.

Speaker Change: Okay and then.

Speaker Change: Last for me on the PFS front can you provide any update on federal or state efforts to protect the water utilities for.

Speaker Change: From any potential liabilities related to distributing water that manav that would keep us prior to the <unk>.

<unk> actually establishing a rule I think theres some class action lawsuit, perhaps in Connecticut.

Speaker Change: Around this issue that had been filed.

Speaker Change: Yes listen.

Speaker Change: I think.

Speaker Change: A number of people are trying to figure out ways and at the state level, even two to protect water utilities through legislation from that kind of liabilities.

Christopher H. Franklin: I think we have to look at the cadence and then how we would provide that respect to our regulators and guidance to our investors and, you know, evaluate it as we go, and hopefully, we can stay with largely the guidelines we've always provided. I would anticipate that as we return at this time next year to regular guidance, I would expect a three-year cadence, not, you know, we could probably continue to do five years on CapEx, but a three-year guidance. I just think there are so many things happening in the industry that it's a much clearer view of what's coming. And I think, too, Jonathan, if you... You know, look at what we provided in terms of the people's natural gas rate case and rate base and equity layer and so forth. We've tried to provide some data there that would help you model, you know, 2025. Test.

Speaker Change: As you said, there's two in Connecticut with the public companies there one as well.

Speaker Change: Both product liability lawsuits class action, and which we're watching clearly.

Speaker Change: Very very closely as the rest of the industry is as well I'm not aware of any that have successfully passed in terms of protections.

Speaker Change: As we think about looking for protection and we're also looking for on the waste side right.

Speaker Change: Cercla.

Speaker Change: We want to understand really how we're going to be treated going forward with with the waste so work to be done.

Speaker Change: Listen to guys like Rob Powelson and the industry lobbyists are are working hard in Washington to try and get protection.

Dan J. Schuller: If you need any more help on that, we have. Take your call on, But we're just not going to provide it. Yeah, no, I mean, just with the step up in capex and you know, even even the rate-based growth, the strength there. I just know some people are kind of wondering, like, is it sending a mixed message?

Speaker Change: Give a quick shout out to.

Speaker Change: Senator Shelly capital, who has really done a nice work in this area and leading some of the work.

Speaker Change: Really understands what we're facing.

Speaker Change: The team Jonathan that.

Speaker Change: We're talking to elected officials about us.

Speaker Change: Again, we didn't put the water there and matter of fact, we've taken steps even before now too to put mitigation in place and so we we.

Jonathan Reader: But, you know, if it's just purely out of, you know, deference to the regulators, and the plan was just to keep the EPS CAGR at three years versus, you know, five years along with the other stuff, then I guess that makes a little more sense. So, in terms of kind of modeling the $7.2 billion, like, first off, that's just pure CapEx. That doesn't include anything for pending M&A or future placeholders, right, consistent with how you've done it in the past. Yeah, it's consistent with the past, so it includes, it doesn't include acquisitions, prices, you know, purchase prices paid. It does include CapEx subsequent to acquisitions closing for those acquisitions where we, Okay. Okay, and then, you know, in terms of like, modeling it out. We just assume, like, gradual annual increases off of the 1.3 to 1.4 or, you know. Is it going to be a little more heavy in 25 and 26 because of the PFAS stuff?

Speaker Change: We believe that our customers and our companies need to be protected so I would put that in the category of work that needs to be done.

Speaker Change: Okay, Yeah no.

Speaker Change: Definitely.

Speaker Change: Of interest.

Speaker Change: Given the size of the liabilities.

Speaker Change: Preliminary stage.

Hopefully that does.

Speaker Change: Come back on the water utilities, which ultimately gets passed on to the to the customers.

Bills and everything like that so good luck with that.

Speaker Change: <unk>.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Greg <unk> from UBS. Please go ahead.

Greg: Hey, Greg.

Greg: Thank you.

Greg: Yes, just thoughts on <unk>.

Greg: On.

Greg: Wherein in how you are.

Greg: Criteria would align with that.

Greg: As an opportunity.

Greg: How you think about that and I guess.

Speaker Change: Separate question I guess 23 is the base year for the rate base growth guidance.

Speaker Change: Yes, that's correct.

Yes.

Speaker Change: Greg It's good question, obviously the asset is in the market.

Christopher H. Franklin: I mean, I guess that's what you've been saying, still a little bit to be determined. Yeah, a little bit to be determined whether PFAS is a five-year or three-year program. Thank you. If you take 7-2 and divide it by 5, you're kind of in this 1-3, 1-4 range, and it kind of bounces around in that range. It's not necessarily a directionality.

Speaker Change: As announced by every source.

Speaker Change: Let's start with.

Speaker Change: It's a it's a strong asset in terms of.

Speaker Change: The quality of the asset itself.

Don Marci, who runs the company and along with that.

Speaker Change: No.

Speaker Change: Joe Nolan, who runs <unk>, they've done a nice job in maintaining the asset.

Dan J. Schuller: Okay, can you kind of just talk about the drivers of the CapEx increase? You know, what caused you to kind of step it up? Because I think you've kind of been, you know, relatively consistent the past few years in your budget. You know, this is a much bigger increase. And then, along with that, what sort of impact the higher CapEx will have on, you know, the average annual customer bill increases that you perceive? Yes, I'm happy to start, and then Chris can chime in.

Speaker Change: A little bit so from that perspective, I think it's a nice asset but.

Speaker Change: I also think it's challenged regulatory environment, and eight 7% ROE and our latest cases is it a little bit concerning I think to any potential buyer.

Speaker Change: I think the ability to grow in Connecticut is also challenging with the.

Speaker Change: The requirement of a referendum to grow so I think there are some challenging things listen there's a lot of people are going to look at that asset.

Christopher H. Franklin: But as we look forward, and I think all utilities and really all companies that do construction work have experienced this, we do see higher construction costs in the future as we have in the past, so that gets incorporated when we develop our five-year plan. And then, of course, we've got a bit more clarity in this five-year plan regarding PFAS and lead than we had previously. It's really a step up; we were 1-1 in 22, 1-2 in 23, and now we're coming up to an average of 1-4, so it's not a massive increase, but given the costs we're seeing, labor costs as well, we're seeing an increase, and then more clarity on PFAS and lead, it just is migrating north. Okay, and then last for me, on the PFAS front, can you provide any update on federal or state efforts to protect water utilities from any potential liabilities related to distributing water that might have had PFAS in it prior to, you know, the EPA actually establishing a rule?

Speaker Change: Talk about what what our plans are but.

Speaker Change: I think it's an interesting asset.

Speaker Change: And.

Speaker Change: It has some.

Speaker Change: Pluses and minuses to it.

Speaker Change: Okay. Thanks for your thoughts.

Speaker Change: You bet. Thanks, Craig.

Speaker Change: So no further questions. So I'll hand, you back to Christopher Franklin to conclude today's call.

Christopher H. Franklin: Thanks for sticking with US folks I know, we went a little long today, but good questions and a lot of material to cover on the year. So many things happening in the industry, obviously, Dan myself, Brian and the team are always available for your follow ups. Thanks for joining us today.

Christopher Franklin: Okay.

Thank you for joining today's call you may now disconnect. Your lines hosts please stay on the line in a way to provide instruction.

Christopher Franklin: Okay.

[music].

Christopher H. Franklin: I think, you know, there are some class action lawsuits, perhaps in Connecticut, around this issue that have been filed. Yeah, I mean, listen. I think a number of people are trying to figure out ways at the state level to protect water utilities through legislation from that kind of liability. And as you said, there are two in Connecticut with the public companies there. One is both product liability lawsuits, class action, which we're watching clearly, very closely as the rest of the industry is as well. I'm not aware of any that have successfully passed in terms of protection.

Christopher Franklin: Okay.

Christopher Franklin: Yes.

Christopher Franklin: Okay.

Christopher Franklin: Okay.

Christopher Franklin: Sure.

Christopher Franklin: Okay.

Christopher Franklin: Okay.

Christopher Franklin: Sure.

Christopher Franklin: Okay.

Christopher Franklin: Okay.

Christopher Franklin: Okay.

Christopher Franklin: Yes.

Jonathan Reader: But as we think about looking for protection, we're also looking for protection on the waste side, right? CERCLA, we want to understand really how we're going to be treated going forward with the waste. So work to be done. Listen, the guys like Rob Powelson and the industry lobbyists are working hard in Washington to try and get protection.

Christopher Franklin: [music].

Christopher Franklin: Yes.

Christopher Franklin: Yeah.

Christopher H. Franklin: I'll just give a quick shout out to Senator Shelley Capito, who's really done nice work in this area and is leading some of the work and really understands what we're facing. The theme, Jonathan, that we're talking to elected officials about is... Again, we didn't put the water there, and, matter of fact, we've taken steps even before now to put mitigation in place, and so we believe that our customers and our companies need to be protected. So I would put that in the category of work that needs to be done.

Jonathan Reader: Okay, yeah, no, it's definitely kind of of interest, you know, given the size of the liabilities that the actual polluters face. You know, hopefully that does come back on the water utilities, which ultimately gets passed on to the customers, you know, bills and everything like that. So good luck with that.

Christopher Franklin: [music].

Christopher H. Franklin: Yep, thank you. The next question comes from the line of Gregg Orrill from UBS. Please go ahead.

Gregg Gillander Orrill: Hey, Greg. Hey, thank you. Thank you. Yeah, just thoughts on Aquarian and how you're doing.

Christopher H. Franklin: Criteria would align with that as well, so it's an opportunity, you know, how you think about that. A separate question, I guess 23 is the base year for the rate-based growth guidance? Yes, that's correct. Yeah, on Aquarian, Gregg, it's a good question.

Gregg Gillander Orrill: Obviously, the asset is in the market, as announced by Eversource. Let's start with it's a strong asset in terms of the quality of the asset itself. Don Morrissey, who runs the company, along with Joe Nolan, who runs Eversource, they've done a nice job of maintaining and growing the asset.

Christopher H. Franklin: So from that perspective, I think it's a nice asset. But I also think it's a challenging regulatory environment. An 8.7 ROE in the latest case is a little bit concerning, I think, to any potential buyer. And I think the ability to grow in Connecticut is also challenging with the requirement of a referendum to grow. So I think there are some challenging things. Listen, there are a lot of people who are going to look at that asset. We don't talk about what our plans are, but I think it's an interesting asset. And it has some pluses and minuses.

Gregg Gillander Orrill: Okay, thanks for your thoughts. You bet. Thanks, Gregg. There are no further questions, so I'll hand you back to Christopher Franklin to conclude today's call. Thanks for sticking with us, folks. I know we went a little long today, but we had good questions and a lot of material to cover this year, so many things happening in the industry. Obviously, Dan, myself, Brian, and the team are always available for your follow-ups. Thanks for joining us today. Thank you for joining today's call. You may now disconnect your lines. Hosts, please stay on the line and wait for the instructions.

Operator: EssentialUtilities.com, Thanks for watching! Hello, and welcome to the Essential Utilities full year 2023 earnings call. Please note this conference is being recorded, and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions. This can be done by pressing star one on your telephone keypad to register your questions.

Operator: If you require assistance at any point, please press star zero, and you'll be connected to an operator. I will now hand you over to your host, Brian Dingerdissen, to begin today's conference. Thank you, Francois. Good morning, everyone, and thank you for joining us.

Brian Dingerdissen: If you did not receive a copy of the press release, you can find it by visiting the Investor Relations section of our website. Slides that we will be referencing during the webcast of this event can also be found on the website. As a reminder, some of the matters discussed during this call may include forward-looking statements that involve risk, uncertainties, and other factors that may cause actual results to be materially different from any future results expressed or implied by such forward-looking statements. Please refer to our most recent 10-Q, 10-K, and other SEC filings for a description of such risk and uncertainty. During the course of this call, reference may be made to certain non-GAAP financial measures. A reconciliation of any non-GAAP to GAAP financial measures is posted in the Investor Relations section of the website.

Christopher H. Franklin: We will begin the call today with Chris Franklin, our Chairman and CEO, who will provide an update on the company. And then Dan Schuller, our CFO, will provide an overview of the financial results before Chris closes the call with an update on our guidance and overall company priorities. With that, I will turn the call over to Chris Franklin. Hey, thanks, Brian. Good morning, everyone.

Christopher H. Franklin: Thanks for joining us. Let's start the call with some highlights from 2023 and some company updates. Despite the unusually warm winter weather in much of 2023, we remain focused on operational excellence and improving our water and natural gas systems by investing capital in continuous improvement measures. As a result of this good work, we're happy to report earnings per share of $1.86, which is in line with our 5-7% guidance.

Christopher Franklin: [music].

Christopher H. Franklin: As Dan will discuss in a few moments in more detail, our team was able to really make up for the $43 million of weather-related net revenue shortfall versus budget and still meet our guidance range, which was quite an accomplishment in 2023. Now, last year, we invested nearly $1.2 billion in infrastructure improvements as compared to $1.06 billion in 2022. Our commitment to investing in critical infrastructure across our footprint has led to the replacement, retirement, and installation of over 300 miles of pipe in 2023 alone. This improves service and reliability for our customers throughout the water, wastewater, and natural gas parts of the platform. As I've mentioned in the past, this investment spans thousands of projects and takes significant expertise to achieve, excluding West Virginia. We reported year-over-year rate-based growth of more than 10% from organic capital investment alone.

Christopher H. Franklin: We also took two divestiture actions last year that will really allow us to place more focus on our core utilities with fewer distractions. You may recall that in Q4, we closed the sale of our West Virginia gas utility, a very small unit with less than 15,000 customers, and we announced the sale of our three non-utility microgrid and district energy projects in Pittsburgh. We recently closed on the $165 million sale of those energy projects, which was, as you know, a very strong outcome. The proceeds of both were used to finance capital expenditures and water and wastewater acquisitions in place of external funding from equity and debt issuances.

Speaker Change: Hello, and welcome to the essential utilities 40 F. 'twenty 'twenty you create earnings call. Please note. This conference is being recorded and for the duration of our call. Your lines will be only some only however, you would have the opportunity to ask questions. This can be done by pressing.

Speaker Change: Final one on your telephone keypad to register your question. If you require assistance at any point, Chris Press Star Zero, and you're very connected to one operator.

Speaker Change: I will now hand, you over to your host Bryan Gunderson.

Christopher H. Franklin: During the year, we continued to build on our 30-plus year track record of consolidation in the U.S. water and wastewater industry. Last year, we acquired seven systems, adding over $44 million in rate base and over 11,000 new customers. We currently have asset purchase agreements signed for six municipal acquisitions, totaling approximately $380 million in purchase price.

Bryan Gunderson: Begin today's conference. Thank you.

Bryan Gunderson: Thank you Francois and good morning, everyone and thank you for joining us.

Bryan Gunderson: Did not receive a copy of the press release, you can find it by visiting the Investor Relations section of our website.

Bryan Gunderson: Slides that we will be referencing and the webcast of this event can be found on the website.

Bryan Gunderson: As a reminder, some of the matters discussed during this call may include forward looking statements that involve risks uncertainties and other factors that may cause the actual results to be materially different from any future results expressed or implied by such forward looking statements. Please refer to our most recent 10-Q10-K and other SEC filings for a description of such risks and.

Christopher H. Franklin: This includes the recently signed agreement with North For Sales, and yes, it is North For Sales, to acquire their wastewater system in Pennsylvania. Later in the call, I'll update you on the latest acquisition-related activity. Lastly, on this slide, I'm pleased to tell you that we have been named to Newsweek's 2024 list of America's Most Responsive Companies. This is the third consecutive year that we have been on this list, which recognizes the top 600 most responsible public companies headquartered in the United States that have demonstrated meaningful and impactful business practices.

Bryan Gunderson: Certainties during the course of this call reference may be made to certain non-GAAP financial measures. A reconciliation of any non-GAAP to GAAP financial measures is posted in the Investor Relations section of the website. We will begin the call today with Chris Franklin, Our chairman and CEO, who will provide an update on the company and then Dan Schuller, our CFO will provide an overview of the <unk>.

Christopher H. Franklin: Now turning to the next slide, maybe it goes without saying, but at Essential, our focus is on quality and reliability for our customers and sustainable returns for our investors. Our 138-year history, 32 years of dividend increases, and many, many years of continuously delivering on our environmental commitments are made possible by an organization with several competitive advantages. First, I think of the importance of operating in constructive regulatory environments. Essential operates in nine states, most of which have received favorable regulatory rankings.

Dan J. Schuller: Financial results before Chris closes the call with an update on our guidance and overall company priorities with that I will turn the call over to Chris Franklin.

Hey, Thanks, Brian and good morning, everyone. Thanks for joining us.

Christopher H. Franklin: Let's start the call with some highlights from 2023 and some company updates.

Christopher H. Franklin: Despite the unusually warm winter weather in much of 2023.

Christopher H. Franklin: We remain focused on operational excellence and improving our water and natural gas systems by investing capital and continuous improvement measures.

Christopher H. Franklin: Secondly, we want to operate where there is growth opportunity. We're well positioned to grow both organically, being in states with high population growth, like Texas and North Carolina, and through acquisition. And we've demonstrated our ability to do so. In the water and natural gas industry, there's a great advantage to possessing advanced technical and engineering expertise. We were, and plan to continue to be, leaders on issues like PFAS mitigation and lead remediation, safety issues, etc. Last but not least, Operational Excellence.

Christopher H. Franklin: As a result of this good work, we're happy to report earnings per share of $1 86, which is in line with our 5% to 7% guidance.

Christopher H. Franklin: As Dan will discuss in a few moments in more detail our team was able to make really make up for the $43 million.

Weather related net revenue shortfall versus budget.

And still meet our guidance range, which was quite an accomplishment in 2023.

Christopher H. Franklin: Now last year, we invested nearly $1 $2 billion in infrastructure improvements as compared to a $1 6 billion in 2022, our commitment to investing in critical infrastructure across our footprint.

Christopher H. Franklin: We have 3,000-plus dedicated people working every day to manage the complexity of thousands of projects which have taken us to industry-leading quality and service levels. I want to share just a couple of those accomplishments of our operating team. By any measure, the numbers on this page make us a clear leader in both the natural gas and water industries.

Christopher H. Franklin: This has led to the replacement retirement and installation of over 300 miles of pipe in 2023 alone.

Christopher H. Franklin: This improved service and reliability for our customers throughout the water wastewater and natural gas part of the platform.

Christopher H. Franklin: The combination of operational excellence and capital investment has accelerated our quest to continue as leaders in the industry. The backbone of our capital program in both water and gas is our pipe replacement program. Tightening our water and gas mains improves compliance, reduces outages, and improves the environment.

Christopher H. Franklin: As I've mentioned in the past this investment spans thousands of projects and takes significant expertise to achieve <unk>.

Christopher H. Franklin: Excluding west Virginia.

Christopher H. Franklin: We reported year over year rate base growth of more than 10% from organic capital investment alone.

Christopher H. Franklin: We also took two divestiture actions last year that will really allow us to place more focus on our core utilities with fewer distractions.

Christopher H. Franklin: According to a report by the Pennsylvania Public Utility Commission, we are running a larger pipe replacement program than our peers. This large amount of gas pipe replacement, combined with a refocused effort on addressing leaks, has allowed us to shift to a find-and-fix approach to leaks. And to put this in context, when we announced the acquisition of Peoples just a few years ago, the company, like most gas LDCs, had a backlog of several hundred leaks. Over the period since we acquired the company and run the company now, we have reduced outstanding leaks by 83 percent. So outstanding results. Our water business continues to operate at a 99.9% compliance rate, which is also outstanding. You can imagine the confidence that this builds in our customers' minds as they drink and cook with the water we provide. From a reliability standpoint, our systems rarely have outages, and when they do experience that rare outage, it's typically because a storm disrupts the power to a plant.

Christopher H. Franklin: You may recall in Q4, we closed the sale of our West Virginia gas utility very small unit with less than 15000 customers and we announced the sale of our three non utility micro grid and district energy projects in Pittsburgh.

Christopher H. Franklin: We recently closed on the $165 million sale of those energy projects, which was as you know a very strong outcome. The proceeds of both were used to finance capital expenditures and water and wastewater acquisitions in place of external funding from <unk>.

Christopher H. Franklin: Equity and debt issuances.

The year, we continued to build on our 30 plus year track record of consolidation in the U S water and wastewater industry.

Christopher H. Franklin: Last year, we acquired seven systems, adding over $44 million in rate base and over 11000, new customers. We currently have asset purchase agreements signed for six municipal acquisitions totaling approximately $380 million in purchase price.

Christopher H. Franklin: Now, of course, our larger plants are supported by generators, and we continue to position our portable generation near our smaller systems, especially during storm prep. I am really proud of our operating team, and they continue to raise the bar on operational excellence in both gas and water. Speaking of operational excellence, on the next slide here, given the importance of the expected PFAS regulations from the U.S. EPA and the impact on our customers, we probably need to spend a few minutes on this topic. Now we're diligently working so that we are aligned with the EPA's timeline and standards to ensure that our finished water does not exceed the federal maximum contaminant level of PFOA, PFOS, and PF Our most recent disclosure is that we expect to spend about $450 million, or I should say at least $450 million, and that's included in the new capital investment guidance that we're providing today.

Christopher H. Franklin: This includes the recently signed agreement with North of our sales and yes. It is for sales to acquire their wastewater system in Pennsylvania later in the call I'll update you on the latest acquisition related activity.

Christopher H. Franklin: Lastly on this slide I'm pleased to tell you that.

Christopher H. Franklin: We have been named to Newsweek's 2024 list of America's most responsible companies. This is the third consecutive year that we've been on this list that recognizes the top 600, most responsible public companies headquartered in the United States that have demonstrated meaningful and impactful business practice.

Christopher H. Franklin: <unk>.

Christopher H. Franklin: Now turning to the next slide maybe it goes without saying, but at essential our focus is on quality and reliability for our customers and sustainable returns for our investors.

Christopher H. Franklin: Our capital spending on this mitigation effort is somewhat fluid, though, I have to point out, and we expect that the $450 million could increase as plans for construction are refined, the EPA and state's timelines for compliance are determined, and if any additional sites pop up and require treatment as we move forward. Now for clarity, if the EPA and the state environmental agencies require a three-year compliance timeline, we would expect our costs to rise because it may not fit with the timelines associated with applications for low-interest loans and grants. It could also cause us to work overtime and cause contractor costs to rise.

Our 138 year history 32 years of dividend increases in many many years of continuously delivering on our environmental commitments is made possible by an organization with several competitive advantages.

Christopher H. Franklin: First I think of.

Christopher H. Franklin: The importance of operating in constructive regulatory environments.

Christopher H. Franklin: Essential operates in nine states most of which have received favorable regulatory rankings.

Christopher H. Franklin: Secondly, we want to operate where there is growth opportunity.

Christopher H. Franklin: We are well positioned to grow both organically being in states with high population growth like Texas, and North Carolina and through acquisition and we've demonstrated our ability to do so.

Christopher H. Franklin: Having said that, we are in the process of meeting with the heads of all the agencies involved to press for accelerated approval processes for loans and grants to protect our customers, and where appropriate, look for extensions in time to comply with this new regulation we expect in the coming month, year or so. Now the effort to comply with the four parts per trillion standard will be significant; there's no doubt about that. Each of our 300 plus sites that need mitigation must be engineered, permitted, procured, and constructed. To accomplish this on what is anticipated to be a three-year timeline will be a huge and very expensive effort. Now, make no mistake; our team is up to the task, and we will meet the compliance deadlines. So, with that. We now hand it over to Dan to talk about the year's financial results. Thanks, Chris, and good morning, everyone.

Christopher H. Franklin: And the water and natural gas industry. There is a great advantage to possessing advanced technical and engineering expertise.

Christopher H. Franklin: We were and plan to continue to be leaders on issues like P fast mitigation and led remediation safety issues et cetera.

Christopher H. Franklin: Last but not least operational excellence.

Christopher H. Franklin: We have 3000, plus dedicated people working every day to manage the complexity of thousands of projects, which have taken us to industry, leading quality and service levels.

Speaker Change: Sure just a couple of those accomplishments of our operating team.

Speaker Change: Any measure the numbers on this page make us a clear leader in both natural gas and water industries. The combination of operational excellence and capital investment have accelerated our quest to continue as leaders in the industry.

Dan J. Schuller: On slide nine, let's take a few minutes to review the fourth quarter highlights before moving into the full year. Well, many of you focus on the company over a longer period of time, which we believe is appropriate. We did want to provide a quick update on how the fourth quarter of 2020... On a gap basis, we have revenues for the quarter of $479.4 million compared to $705.4 million. As we experienced in prior quarters, the largest contributor to the decrease in revenues for the fourth quarter was the recovery of lower natural gas commodity prices, purchase gas costs decreasing by $209.6 million from the same period last year. Additionally, the weather in Q4 was warmer than normal and therefore contributed to reduced gas usage by our customers. The regulated water segment contributed $281.8 million in revenue, and regulated natural gas contributed $188.7 million.

Speaker Change: Now the backbone of our capital program in both water and gas is our pipe replacement program.

Tightening of our water and gas mains improves compliance <unk>.

Speaker Change: <unk> outages and improves the environment.

Speaker Change: According to a report by the Pennsylvania Public Utility Commission, we are running a larger pipe replacement program than our peers.

Speaker Change: This large amount of of gas pipe replacement combined with a refocused effort on addressing leaks has allowed us to shift to a find and fix approach to leaks.

Speaker Change: And to put this in context, when we announced the acquisition of peoples just a few years ago. The company like most gas Ldc's had a backlog of several hundred leaks.

Speaker Change: Over the period since we've acquired the company and run the company now we have reduced outstanding leaks by 83%.

Speaker Change: The outstanding results.

Speaker Change: Our water business continues to operate at a 99, 9% compliance rate, which is also outstanding you can imagine the confidence that this builds in our customers' minds as they drink and cook with the water we provide.

Dan J. Schuller: Incremental revenues from regulatory recoveries and water and wastewater customer growth contributed positively to the state's recovery. However, these impacts were offset by lower purchase gas costs, lower volumes in both the natural gas and water sectors, and other items for the Court. Operations and maintenance expenses decreased 15% to $157 million, down from $184.7 million in the same quarter of last year, due to decreases in other items.

Speaker Change: Reliability standpoint, our systems rarely have outages and when they experienced that rare outage, it's typically because our storm disrupts the power to a plant now of course, we have larger or larger plants are supported with generators and we continue to position our our portable generation near our smaller systems.

Speaker Change: Especially during storm prep.

I am really proud of our operating team and they continue to raise the bar on operational excellence in both gas and water.

Dan J. Schuller: Lower recoverable costs related to our natural gas customer and lower Bad Debt were the primary drivers, although these were offset by higher water production costs and operating expenses.

Speaker Change: Now speaking of operational excellence on the next slide here given the importance of the expected <unk> regulations from the U S EPA and the impact on our customers probably need to spend a few minutes on this topic.

Dan J. Schuller: Net income was up year over year from $114.9 million to $135.4 million, and GAP EPS was up 13.6%. $0.44 in the fourth quarter last year to $0.50 for the quarter this year. Next, we'll discuss the full year financials. Let's talk high level, and then we'll get into the details when we go to the water. We ended the year with $2.05 billion in revenue, compared to $2.29 billion last year. For the year, our regulated water segment contributed $1.15 billion of revenue, and our regulated natural gas segment contributed nearly $864 million. Purchase gas costs decreased by 249.7 million, or 41.5% compared to the prior year.

Speaker Change: Now we are diligently working so that we are aligned with the epa's timeline and standards to ensure that our finished water does not exceed the federal maximum contaminant level of P. <unk> P fast and Pf <unk> compounds.

Speaker Change: Our most recent disclosure is that we expect to spend about $450 million or I should say at least $450 million and thats included in the new capital investment guidance that we're providing today.

Speaker Change: Our capital spending on this mitigation effort.

Speaker Change: Is somewhat fluid, though I have to point out and we expect that the $450 million could increase as plans for construction are refined the EPA and states timelines for compliance is determined and if any additional sites pop up and require treatment as we move forward.

Speaker Change: For clarity, if the EPA and the state environmental agencies require a three year compliance timeline, we would expect our cost to rise because it may not fit with the timelines associated with applications for low interest loans and grants could also cause us to work overtime and in <unk>.

Dan J. Schuller: Operations and maintenance expenses decreased 6.6% from $613.6 million to $575.5 million. Operating income was up 4.7% from $661.2 million to $692.1 million.

Speaker Change: Cost contracted cost to rise.

Speaker Change: Having said that we are in the process of meeting with the heads of all the agencies involved to press for accelerated approval processes for loans and grants to protect our customers and where appropriate look for extensions and time to comply with this new regulation, we expect in the coming months or so.

Dan J. Schuller: Year over year, net income increased $33 million, or 7.1%, from $465.2 million to $498.2 million. In GAAP, earnings per share increased 5.1% to $1.86, which was solidly in our $1.85 to $1.90 guidance range for the year. And earnings would certainly have been higher were it not for the balmy December weather. Next, we'll walk through the full-year waterfalls, including how we successfully overcame adverse weather impacts in the first and fourth quarters of 2023, which caused a $43 million net revenue shortfall versus budget or normal weather. Let's start with revenue on slide 11. In 2023, revenues decreased $234 million, or 10.2% on a gap year.

Speaker Change: Now the effort to comply with the four parts per trillion standard will be significant there's no doubt about that each of our 300 plus sites that need mitigation must be engineered permitted procured and constructed to accomplish this and what is anticipated to be a three year.

Speaker Change: Timeline.

Speaker Change: Will be a huge and very expensive effort.

Speaker Change: Now make no mistake, our team is up to the task and we will meet compliance deadlines.

Speaker Change: So with that we hand, it over to Dan to talk about the year's financial results.

Dan J. Schuller: Thanks, Chris and good morning, everyone.

Dan J. Schuller: On slide nine let's take a few minutes to review our fourth quarter highlights before moving into the full year.

Dan J. Schuller: Well many of you focus on the company over a longer period of time, which we believe is appropriate we did want to provide a quick update on how the fourth quarter of 2023 concluded.

Dan J. Schuller: Starting in the left-hand side of the waterfall, regulatory recoveries added $69.1 million in revenues year-over-year, which included the impact of base rate cases or other regulatory problems. Next, Organic and Acquisition Growth from a Regulated Water Segment provided an additional $13. The largest driver of the decreased revenue was the $249.7 million impact of lower purchased gas.

Dan J. Schuller: On a GAAP basis, we had revenues for the quarter of $479 4 million compared to $705 4 million in the fourth quarter last year.

Dan J. Schuller: As experienced in prior quarters, the largest contributor to the decrease in revenues for the fourth quarter was the recovery of lower natural gas commodity prices with purchased gas costs decreasing by $209 6 million from the same period last year.

Dan J. Schuller: Now this is simply a comparison of last year's purchase gas cost line and the income statement to this one. It reflects both a significant decline in natural gas commodity prices as well as a lower quantity of. Clearly, lower commodity prices are a good thing for our customers. You benefit with lower overall bills for heating. As a result of unfavorable weather throughout the quarter, or I should say throughout the year, lower gas usage decreased revenue by $53.1 million in 2022. 2022 was colder, and lower water and wastewater volumes decreased revenue by $7.5 million as well.

Dan J. Schuller: Additionally, the weather in Q4 was warmer than normal and therefore contributed to reduced gas usage by our customers.

Dan J. Schuller: Our regulated water segment contributed $281 $8 million in revenue in a regulated natural gas segment contributed $188 7 million.

Incremental revenues from regulatory recovery and water and wastewater customer growth contributed positively. However, these impacts were offset by the lower purchased gas costs lower volumes in both the natural gas and water segments and other items for the quarter.

Dan J. Schuller: Operations and maintenance expenses decreased 15% to $157 million for the quarter down from $184 7 million in the same quarter of last year.

Dan J. Schuller: And lastly, other items of $6.1 million, which includes the impact of lower customer assistance program recoveries, also contributed to the reduction. I'd like to remind everyone that we currently do not have weather normalization for our Pennsylvania natural gas. In these results, we're seeing the significant impact of 2023's warmer than normal weather. However, had it been equally colder than normal, our customers would have seen significantly higher..., resulting in higher As many of you know, we recently filed the first Pennsylvania gas rate since our acquisition in 2020. And in that case, we propose a weather normalization.

Dan J. Schuller: Decreases in other items.

Dan J. Schuller: Recoverable costs related for our natural gas customer rider.

Dan J. Schuller: And lower bad debt were the primary drivers of the decrease.

Dan J. Schuller: These were offset by higher water production costs and operating expenses related to acquired systems.

Net income was up year over year from $114 9 million to $135 4 million and GAAP EPS was up 13, 6% from 44 in the fourth quarter last year to 50 for the quarter. This year.

Speaker Change: Next we'll discuss the full year financial highlights.

Speaker Change: Let's talk high level, and then we'll get into the details when we go to the waterfall.

Speaker Change: We ended the year with $2 5 billion in revenue compared to $2 two 9 billion last year.

For the year, our regulated water segment contributed 1.15 billion of revenue and our regulated natural gas segment contributed nearly $864 million.

Dan J. Schuller: Next, we'll review Operations and Maintenance. Operations and maintenance expenses were $575.5 million for the year, a decrease of 6.2% compared to $613.6 million in 2022. Increased production costs, primarily related to chemicals, purchased water, and purchased power, contributed $12.2 million, and operating expenses from newly acquired systems in our regulated water added another $5.6. These were offset by other items, including lower outside services costs and the prior year impact of a lease-related charge, as well as lower contributions to our foundation. Decreased Operations and Maintenance. 27.

Speaker Change: Purchased gas costs decreased by $249 7 million or 41, 5% compared to prior year.

Speaker Change: Operations and maintenance expenses decreased six 2% from $613 6 million to $575 5 million.

Speaker Change: Operating income was up four 7% from $661 2 million to $692 1 million.

Speaker Change: Year over year, net income increased $33 million or seven 1%.

$465 2 million to $498 2 million.

Speaker Change: And GAAP earnings per share increased five 1% to $1 86, which was solidly in our dollars $85 90 guidance range for the year.

And earnings would have certainly been higher were it not for the Bond me December weather in Pittsburgh.

Speaker Change: Next let's walk through the full year waterfalls, including how we successfully overcame adverse weather impacts in the first and fourth quarters of 2023, which caused a $43 million net revenue shortfall versus budget or normal weather.

Dan J. Schuller: The gas customer rider, which is recoverable through a revenue surcharge, decreased $18.7, again due to lower commodity prices and the regulated..., segment. Employee-related costs decreased by $5.4 million, partly due to the incremental pension contribution and an accrual for one-time inflation-related incentive compensation for non-officer-level employees back in 2010. And finally, lower bad debt decreased operations and maintenance by another 4.4 million. Next, let's spend a minute on earnings per share water. Beginning on the left side of the slide, GAP EPS for 2022 was $1.77, and regulatory recoveries contributed $0.19. Lower O&M expenses contributed another $0.08.

Speaker Change: Let's start with revenue on slide 11.

Speaker Change: In 2023 revenues decreased $234 million or 10, 2% on a GAAP basis.

Speaker Change: Starting in the left hand side of the waterfall regulatory recoveries added $69 1 million in revenues year over year, which includes the impact of base rate cases or other regulatory proceedings.

Speaker Change: Next organic and acquisition growth from our regulated water segment provided an additional $13 1 million.

Speaker Change: The largest driver of the decreased revenue was the $249 7 million impact of lower purchased gas costs.

Speaker Change: Now this is simply a comparison of last year's purchase gas cost line on the income statement to this year's <unk>.

Speaker Change: It reflects both a significant decline in natural gas commodity prices.

Dan J. Schuller: Organic and acquisition growth from our regulated water system. However, this was offset by decreased volume from our regulated natural gas segment of 14 cents, and other items of 3 cents, as well as decreased volume from our regulated water. The result is GAAP EPS of $1.86 for the year. And given the fact that weather in Pittsburgh was approximately 16% warmer than normal in 2023, we believe this is an outstanding result. Now, in this waterfall, the other bar includes the impacts of increased interest and depreciation offset by an increased tax benefit. This increased tax benefit is the result of both increased pipe replacement capital and the ongoing and one-time benefits related to the IRS's natural gas safe harbor, which we've discussed previously. The one-time benefit related to the IRS change was about four and a half. So all of these impacts, along with the pickups from the O&M items we discussed earlier, and the purchased water pass-through in Texas, as well as a tax-related change in New Jersey. These were all critical in offsetting the impact of the favorable first and fourth quarter.

Speaker Change: As well as the lower quantity of gas being purchased.

Speaker Change: Clearly lower commodity prices are a good thing for our customers, who benefit with lower overall bills for heating and cooking.

Speaker Change: As a result of unfavorable weather throughout the quarter I should say throughout the year.

Speaker Change: Lower gas usage decreased revenue by $53 1 million from 2022, and 2022 was colder than normal.

Speaker Change: And lower water and wastewater volumes decreased revenue by $7 5 million as well.

Speaker Change: And lastly, other items of $6 1 million, which includes the impact of lower customer assistance program recoveries also contributed to the reduction in revenues.

Speaker Change: I would like to remind everyone that we currently do not have weather normalization for our Pennsylvania natural gas business.

Speaker Change: In these results we are seeing the significant impact of 2020 three's warmer than normal weather.

Speaker Change: However had it been equally colder than normal our customers would've seen significantly higher bills, resulting in higher revenues.

Speaker Change: Now as many of you know, we recently filed the first Pennsylvania gas rate case since our acquisition in 2020.

Speaker Change: And in that case, we proposed a weather normalization mechanism.

Speaker Change: Okay.

Speaker Change: Next we'll review the operations and maintenance expenses.

Speaker Change: Operations and maintenance expenses were $575 5 million for the year, a decrease of six 2% compared to $613 6 million in 2022.

Speaker Change: Increased production costs, primarily related to chemicals purchased water and purchased power contributed $12 2 million in operating expenses from newly acquired systems in our regulated water segment added another $5 8 million.

Dan J. Schuller: I will note that regarding 2024 financing, you may have seen that last month we completed a $500 million issuance of 10-year debt at a rate of 5-in-3-8. We also expect to raise approximately $250 million in 2024 through an ATM equity program. And given this, we'll file soon for an HM of up to $1 billion, which should be viewed to cover our equity needs for multiple years. Now moving to regulatory activity and other matters. In 2023, we completed rate cases or surcharge filings in all 9 states in our footprint, with total annualized revenue increases of $47.2 million for water and $21.3 million for natural gas.

Speaker Change: These were offset by other items, including lower outside services costs in the prior year impact of a lease related charge as well as lower contributions to our foundation, which decreased operations and maintenance expenses by $27 6 million.

The gas customer rider, which is recoverable through a revenue surcharge decreased $18 7 million again due to lower commodity prices in the regulated natural gas segment.

Employee related costs decreased by $5 4 million, partly due to the incremental pension contributions and an accrual for one time inflation related incentive compensation for non office through level employees back in 2022.

Dan J. Schuller: So far in 2024, we've completed rate cases or surcharge filings in three of our water states, with total annualized revenue increases of $9.1 million, and achieved $22 million, and $22.1 million in our regulated NAC. We have a busy but manageable regulatory calendar in 2024, with base rate cases or surcharge filings underway in Illinois, New Jersey, Texas, and Virginia for regulated water. And just before the end of 2023, we filed a base rate case for our regulated... Pennsylvania Natural Gas Utility, which I'll discuss in more detail on the next slide. Now this is the first Pennsylvania natural gas rate case that we've filed under our ownership, also the first since the adoption of tax repair in the gas business, and also the first case in which there's a request for weather normalization, which is a mechanism that a number of our peers in Pennsylvania have.

Speaker Change: And finally, lower bad debt decreased operations and maintenance expenses by another $4 4 million.

Speaker Change: Next let's spend a minute on the earnings per share waterfall.

Speaker Change: Beginning on the left side of the slide GAAP EPS for 2022 was $1 77.

Speaker Change: Regulatory recoveries contributed <unk> 19.

Speaker Change: Lower O&M expenses contributed another <unk> <unk>.

Speaker Change: On organic and acquisition growth from our regulated water segment added <unk>.

These were offset by decreased volume from our regulated natural gas segment a 14th.

Speaker Change: And other items of <unk>.

Speaker Change: As well as decreased volume from our regulated water segment of <unk>.

Speaker Change: The result is GAAP EPS of $1 86 for the year.

Speaker Change: And given the fact that weather in Pittsburgh was approximately 16% warmer than normal for 2023. We believe this is an outstanding result.

Speaker Change: Now in this waterfall the other bar includes the impacts of increased interest and depreciation offset by an increased tax benefit. This increased tax benefit as a result of both increased pipe replacement capital.

Speaker Change: And the ongoing and onetime benefits related to the Irs's natural gas Safe Harbor, which we've discussed previously.

Dan J. Schuller: As a reminder, as part of this case, we expect the tax repair benefit to shift from the shareholders to the customer, as a tax benefit is incorporated into. Tax Repair allowed us to stay out of rates for five years, and we would likely have stayed out longer, but the commission order associated with our repair election required us to file by the end of... And in this case, as you see on the slide, we've requested an increase of 156 million, or 18.7%. Rev.

Speaker Change: The one time benefit related to the IRS change was about four five cents.

Speaker Change: So all of these impacts along with the pickups from the O&M items, we discussed earlier and a purchase water pass through in Texas. So all the tax related change in New Jersey. These were all critical in offsetting the impact of the unfavorable first and fourth quarter weather.

Speaker Change: I will note that regarding 2024 financings you may have seen that last month, we completed a $500 million issuance of 10 year debt at a rate of five and three eighths.

Dan J. Schuller: But through the fully projected forward-looking test here, we'll have replaced over 1,000 miles of gas mains in Pennsylvania since the last... And therefore, rate-based growth of people is significant. The $4.2 billion in rate base in this case is up from $2.1 billion in the prior case. So that's a doubling in a five-year period.

Speaker Change: We also we also expect to raise approximately $250 million in 2024 through an ATM equity program.

Speaker Change: And given this we will file soon for an ATM of up to $1 billion, which should be viewed to cover our equity needs for multiple years.

Speaker Change: Okay.

Speaker Change: Now moving to regulatory activity and other matters in.

Dan J. Schuller: This investment has made our system safer and more reliable, while significantly reducing our greenhouse gas emissions. Given the fully projected future test year, we anticipate recovering the impact of rising interest rates and inflation through much of. In addition, we did want to mention that we expect to file a rate case for Aqua Pennsylvania in the second quarter, as it's been nearly three years since our last filing. We believe our rate activity, especially in Pennsylvania, is very different from some of what you may be seeing across the industry. We've been out of rates for nearly three years on aquapencils.

Speaker Change: In 2023, we completed rate cases, or surcharge filings in all nine states in our footprint with total annualized revenue increases of $47 2 million for water and $21 3 million for natural gas.

Speaker Change: So far in 2024, we've completed rate cases or surcharge filings in three of our water states with total annualized revenue increases of $9 1 million and achieved $22 million and $22 1 million in our regulated natural gas segment.

Speaker Change: We have a busy but manageable regulatory calendar in 2024 with base rate cases, or surcharge filings underway in Illinois, New Jersey, Texas, and Virginia for our regulated water segment.

Speaker Change: And just before the end of 2023, we filed a base rate case for our regulated.

Christopher H. Franklin: Our plans are known by the regulators in advance, and we've maintained a strong focus on affordability. We will also take a responsible approach to our proposed Act XI. So with that, I'll hand it back over to Chris.

Speaker Change: Pennsylvania, natural gas utility, which I'll discuss in more detail on the next slide.

Speaker Change: Now this is the first Pennsylvania natural gas rate case that we filed under our ownership.

Speaker Change: Also the first since the adoption of tax repair in the gas business.

Christopher H. Franklin: Hey, thanks, Dan. And it's hard to believe it's been five and a half years under your leadership as CFO, and I want to thank you for that. I also want to recognize the great work done by Dan and his team in achieving our 2023 financial results. It was a challenging year on the weather front.

Speaker Change: And also the first case in which there is a request for weather normalization, which is a mechanism that a number of our peers in Pennsylvania have today.

Speaker Change: As a reminder, as part of this case, we expect the tax repair benefit to shift from the shareholders to the customers as the tax benefit is incorporated into rates.

Christopher H. Franklin: Thank you, Chris. Let's talk for a moment about our Water and Wastewater Acquisition Program. As you know, the program has been successful and continuously evolving for nearly 30 years now. I have to tell you that we're really pleased with the leadership of the Pennsylvania Public Utilities Chairman, Commission Chairman Steve DeFrank, on addressing some of the issues that have arisen associated with the use of the Fair Market Value Statute that was passed in 2016. We believe that the proposal he made at a recent PUC public meeting will make a real difference in moderating rate increases for customers while still providing a fair price to governmental entities that decide to sell their water or wastewater utilities. We view this as a very positive development in our acquisition program in Pennsylvania and believe that the pipeline remains strong. As I mentioned earlier in the call, in 2023, we acquired seven systems, adding over 11,000 customer equivalents to our current water and wastewater footprint. We have now acquired over $500 million in rate-based VIA acquisitions since this leadership team came together in 2015. That statistic just doesn't do justice, though, to the amount of work that goes into the program.

Speaker Change: Tax repair allowed us to stay out of rates for five years, and we would likely have stayed out longer but the commission order associated with our repair election required us to file by the end of 2023.

Speaker Change: And in this case as you see on this slide we've requested an increase of $156 million or 18, 7% in terms of revenue.

Speaker Change: So through the fully projected forward looking test year will have replaced over a thousand miles of gas mains in Pennsylvania in the lab.

Speaker Change: <unk> rate case.

Speaker Change: And therefore rate base growth at peoples is significant.

$4 2 billion in rate base. In this case is up from $2 1 billion in the prior case.

Speaker Change: So that's a doubling in a five year period.

This investment has made our system safer and more reliable while significantly reducing our greenhouse gas emissions since 2019.

Speaker Change: Given the fully projected future test year, we anticipate recovering the impact of rising interest rates and inflation through much of 2025.

Speaker Change: And in addition, we did want to mention that we expect to file a rate case for Aqua, Pennsylvania in the second quarter as it has been nearly three years since our last filing.

Speaker Change: We believe our rate activity, especially in Pennsylvania is very different than some of what you may be seeing across the industry.

Speaker Change: We've been out of rates for nearly three years for Aqua, Pennsylvania.

Speaker Change: Our plans are known by the regulators in advance and we've maintained a strong focus on affordability.

Christopher H. Franklin: I fully expect that the company will continue to be a major player in the consolidation of the water and wastewater utility industry in the United States. Moving to the next slide, let's take a minute to review the pending transactions. As of this call, we have six signed asset purchase agreements in two states in which we have existing water and wastewater operations. These acquisitions will add over 215,000 customer equivalents and total approximately $380 million in purchase price. As I noted in my opening remarks, this includes the recently signed agreement with North For Sale Township Sanitary Authority to acquire their wastewater system in Allegheny County, Pennsylvania, which is expected to add approximately 4,400 customers to our regulated water segment.

Speaker Change: We will also take a responsible approach to our proposed act 11 subsidization.

Speaker Change: And with that I'll hand, it back over to Chris Chris Hey, Thanks, Dan.

Christopher H. Franklin: It's hard to believe it's been five and a half years under your leadership as CFO and I want to thank you for that also want to recognize the great work done by Dan and his team in achieving our 2023 financial results. It was a challenging year from <unk>.

Christopher H. Franklin: On the weather front.

Christopher H. Franklin: Chris.

Let's talk for a moment about our water and wastewater acquisition program as you know the program has been successful and continuously evolving.

Christopher H. Franklin: Nearly 30 years now.

Christopher H. Franklin: To tell you that we're really pleased with the leadership of the Pennsylvania public utilities Chairman.

Christopher H. Franklin: Commission Chairman, Steve D. Frank on addressing some of the issues that have arisen associated with the use of the fair market value statute that was passed in 2016.

Christopher H. Franklin: This is another transaction that resulted from the reputation and relationships of our People's Gas Team in Western Pennsylvania. You had another opportunity to leverage that relationship between the gas and water utilities. We continue to see a strong and healthy pipeline of opportunities for additional growth, and we're currently engaged in active discussions with municipalities that have over 400,000 potential water and wastewater customers. If Chairman DeFrank's proposal is successful, there should be a much clearer path to closing municipal acquisitions in Pennsylvania in the future, and that is a bright spot. Now before moving on, I just want to note that the Delcoura regulatory process continues to be under a stay by the Federal Bankruptcy Court, but we remain confident that we will ultimately close the Delcoura transaction. In early February, we filed another motion requesting the federal bankruptcy court judge lift the stay that has now been in place for nine months.

Christopher H. Franklin: We believe that the proposal. He has made at a recent PUC public meeting will make a real difference in moderating rate increases for customers, while still providing a fair price to governmental entities.

Christopher H. Franklin: Decided to sell their water or wastewater utilities.

Christopher H. Franklin: We view this as a very positive development in our acquisition program in Pennsylvania, and believe that the pipeline remains strong.

Christopher H. Franklin: As I mentioned earlier in the call in 2023, we acquired seven systems, adding over 11000 customer equivalents to our current water and wastewater footprint.

Christopher H. Franklin: We have now acquired over $500 million of rate base via acquisitions. Since this leadership team came together in 2015.

Christopher H. Franklin: That statistic just doesn't do justice notes in the amount of work that goes into the program.

Christopher H. Franklin: We expect that the company will continue to be a major player in the consolidation of the water and wastewater utility industry in the United States.

Christopher H. Franklin: Now moving to the next slide.

Christopher H. Franklin: Take a minute to review the pending transactions as of this call. We have six signed asset purchase agreements in two states in which we have existing water and wastewater operations. These acquisitions will add over 215000 customer equivalents and totaled approximately $308 $80 million.

Christopher H. Franklin: In April, there was a scheduled hearing at the Pennsylvania Commonwealth Court to rule on Delaware County's appeal of the validity of our asset purchase agreement with Delcoura. You'll recall that it was upheld successfully in the lower court. Now, based on what we know today, we still believe we can close this transaction by mid-2025. Now, before I get to guidance, I just want to reaffirm our strategy and discuss some of our high priorities for the year. First, with regard to strategy, we're going to continue to invest significant capital in needed infrastructure. This will drive quality, safety, and reliability for our customers. It will also drive rate-based growth, which in turn also drives shareholder value. Importantly, customer affordability is always a priority.

Christopher H. Franklin: Purchase price as.

I noted in my opening remarks. This includes the recently signed agreement with North for sales Township Sanatory authority to acquire their wastewater system in Allegheny County, Pennsylvania, which is expected to add approximately 4400 customers to our regulated water segment now.

Christopher H. Franklin: This is another transaction that resulted from the reputation and relationships of our peoples gas team in Western Pennsylvania, you had another opportunity to leverage that relationship between the gas and water utilities.

Christopher H. Franklin: We continue to see a strong and healthy pipeline of opportunities for additional growth and we're currently engaged in active discussions with municipalities, which have over 400000 potential water and wastewater customers.

Christopher H. Franklin: We know a key piece of driving shareholder value is continued growth in our dividend, and we have a long track record of returning cash to our shareholders, and that will continue. In fact, we've raised our dividend continuously for 30 years now. Lastly, we continue to see opportunities for further consolidation through acquisitions in the water and wastewater space, and we'll pursue transactions that broaden the customer base in a constructive regulatory environment, allow us to apply economies of scale to manage our costs and give us the opportunity to be a solution to communities that need our expertise or financial strength. We believe that this strategy puts us in a great position to continue building and delivering value for our shareholders. As we think about 2024, we have some important work to accomplish. I share my priorities each year with the board, and, of course, the management team, and I'll summarize them quickly for you here.

Christopher H. Franklin: Chairman <unk> proposal is successful there should be a much clearer path to closing municipal acquisitions in Pennsylvania in the future and that is a bright spot now.

Christopher H. Franklin: Now before moving on I, just want to note that the Dell core regulatory process continues to be under a stay by the federal bankruptcy court, but we remain confident that we will ultimately close the <unk> transaction.

Christopher H. Franklin: In early February.

Christopher H. Franklin: We filed another motion requesting the federal bankruptcy Court judge lift the stay that has now been in place for over.

Christopher H. Franklin: For nine months.

In April there was a scheduled hearing at the Pennsylvania Commonwealth Court too.

Christopher H. Franklin: To rule on Delaware counties appeal of the validity of our asset purchase agreement with Dell Cora you'll recall.

That was upheld successfully in the lower court.

Christopher H. Franklin: Based on what we know today, we still believe we can close this transaction by mid 2025.

Christopher H. Franklin: First, we'll remain focused on operational excellence throughout the year. I'll continue to share examples with you during our calls and meetings, and this will include increased exposure to our segment presidents, Colleen Arnold and Mike Huar. Secondly... We'll continue to look for opportunities to make tangible improvements in the service we provide to our customers. In fact, we just rolled out an exciting new customer portal to provide our water and wastewater customers with more visibility into outages and restoration, as well as allow them to see the details of their usage more easily and pay their bills online.

Christopher H. Franklin: Now before I get to guidance I, just want to reaffirm our strategy and visit some of our high priorities for the year.

Christopher H. Franklin: First with regard to strategy, we're going to continue to investing significant capital in needed infrastructure. This.

Christopher H. Franklin: This will drive quality.

Christopher H. Franklin: Safety and reliability for our customers will also drive rate base growth, which in turn also drive shareholder value.

Christopher H. Franklin: <unk> customer affordability is always a priority.

Christopher H. Franklin: We know a key piece of driving shareholder value is continued growth in our dividend and we have a long track record of returning cash to our shareholders and that will continue in fact, we've raised our dividend continuously for 30 years now.

Christopher H. Franklin: Lastly, we continue to see opportunities for further consolidation through acquisitions in the water and wastewater space and we will pursue transactions that broadened the customer base in a constructive regulatory environment allow.

Christopher H. Franklin: Also this year, we'll continue our leadership role in remediating PFAS and lead across our footprint, and we'll share our knowledge across the industry to help others leverage what we know. Now, sustainability. We're going to continue to focus on our continued commitments and sustainability and our accomplishments. We will continue to grow the company through accretive water and wastewater acquisitions. And last, we have some pretty important regulatory things in front of us this year, including two rate cases that Dan mentioned in Pennsylvania, among others, the FMV refinement, and also the finalization of the PFAS regulations. It's going to be a very busy year this year, folks.

Christopher H. Franklin: Allow us to apply of economies of scale to our <unk> to manage our costs and give us the opportunity to be a solution to communities that need our expertise or financial strength.

Christopher H. Franklin: We believe that this strategy puts us in a great position to continue building and delivering value for our shareholders.

Christopher H. Franklin: So as we think about 2024, we have some important work to accomplish.

Speaker Change: Sure My priorities each year with the board and of course, the management team and I'll summarize them quickly for you here.

Speaker Change: First we will remain focused on operational excellence throughout the year all continue to share examples with you on our calls and meetings and this will include increased exposure to our segment Presidents Colleen Arnold and my QR.

Christopher H. Franklin: All right, let's get to guidance. Before we walk through this, I want to acknowledge what you read in the release last night. Now, throughout this year, we will be working through two critical rate cases, both in our largest divisions in gas and water, and both in Pennsylvania. Thus, we are refraining from providing a multi-year earnings per share growth rate guidance range.

Speaker Change: Secondly.

Speaker Change: We will continue to look for opportunities to make tangible improvement in the service we provide to our customers. In fact, we just rolled out an exciting new customer portal to provide our water and wastewater customers with more visibility into outages and restoration as well as allow them to see the details of their usage more easily.

Christopher H. Franklin: Now, once both base rate cases are complete, which will be around this time next year, we'll return to our normal longer-term earnings per share guidance range. So let's review the guidance that we're providing, which we believe is significant and provides a clear line of sight to the opportunities in front of the company. In 2024, we expect to earn $1.96 to $2, which is a 5% to 7% earnings growth range.

Speaker Change: And pay their bills online.

Speaker Change: Also this year, we will continue our leadership role and Remediated fashion led across our footprint and we will share our knowledge across the industry to help others leverage what we know.

Now sustainability, we're going to continue to focus on.

Speaker Change: Our continued.

Speaker Change: Commitments and sustainability.

Speaker Change: And our accomplishments.

We will continue to grow the company through accretive water and wastewater acquisitions, unless we have some pretty important regulatory things in front of us this year, including two rate cases that Dan mentioned in Pennsylvania, among others. The F&B refinement and also the Finalization of the <unk> regulations thats going to be a very busy.

Christopher H. Franklin: Through 2028, we plan to invest approximately $7.2 billion annually in regulated infrastructure in our existing utilities. Let me point out that some of this increase is being driven by the regulatory requirements associated with PFAS and lead mitigation. Now in 2024, we expect to invest between $1.3 to $1.4 billion. The annual amount may be a bit lumpy based on the needs and regulatory recovery activity throughout the five-year period. I point again to PFAS, as I mentioned earlier in the call.

Speaker Change: Here this year folks.

Speaker Change: Alright, let's get the guidance.

Speaker Change: Before we walk through this.

Speaker Change: Acknowledge what you read in the release last night.

Now throughout this year, we will be working through two critical rate cases, both in our largest divisions in gas and water and both in Pennsylvania.

Speaker Change: We are refraining from providing a multi year earnings per share growth rate guidance range now both base rate cases are complete which will be around this time next year, we'll return to our normal longer term earnings per share guidance range.

Christopher H. Franklin: I also want to point out that we're providing a five-year outlook on capital investments for the first time. We've always provided you with a three-year capital outlook, and we hope that moving to a longer-term view of capital spending will provide a better picture of our long-term opportunities. Now, based on this investment, we expect Ratebase will grow at a compounded annual growth rate of approximately 8% for water and approximately 10% for natural gas through 2028. Additionally, we continue to expect that together, organic customer growth and growth from acquisitions for water and wastewater will continue at a growth rate of 2 to 3 percent on average. We always remind our investors that growth from acquisitions is lumpy and should be viewed over a three-year average. We expect continued stability in our natural gas customer base.

Speaker Change: So let's review the guidance that we're providing.

Speaker Change: Which we believe is significant and provides a clear line of sight to the opportunities in front of the company.

Speaker Change: In 2024, we expect to earn a $1 96 to $2, which is a 5% to 7% earnings growth range.

Speaker Change: Through 2028, we plan to invest approximately $7 $2 billion annually on regulated infrastructure in our existing utilities, let me point out some of this increase is being driven by the regulatory requirements associated with <unk> and led migration mitigate mitigation.

Speaker Change: Now in 2024, we expect to invest between one three to one 4 billion.

Speaker Change: The annual amount may be a bit lumpy based on the needs and regulatory recovery activity throughout the five year period, a point again to <unk> as I mentioned earlier in the call.

Christopher H. Franklin: Now, as Dan mentioned, we also expect to raise about $250 million in 2024 using an ATM equity program. And we remain committed to reducing our scope one and scope two greenhouse gas emissions by 60% by 2035 from our 2019 baseline. As you know, we've already made significant progress on this, and we estimate it to be about 25% as of year-end 2023. I've covered a lot. That concludes our formal remarks, and we're happy to take your questions. So, let me turn it back to Francois.

Speaker Change: I also want to point out that we're providing a five year outlook on capital investments for the first time, we've always provide you a three year capital outlook and we hope that moving to a longer term view of capital spending will provide a better picture of our long term opportunities.

Speaker Change: Now based on this investment we expect rate base will grow at a compounded annual growth rate of approximately 8% for water and approximately 10% for natural gas through 2028.

Utility base.

Speaker Change: But we will grow at a compounded annual growth rate of over 8%.

We continue to expect that together organic customer growth and growth from acquisitions will for water and wastewater will continue at a growth rate of 2% to 3% on average we were always remind our investors that growth from acquisitions are lumpy and should be viewed over a three year average we expect continued stability.

Operator: Thank you. As a reminder, if you would like to ask a question or make a contribution during today's call, please press star 1 on your telephone keypad. If you change your mind and want to withdraw your question, please press star 2. Please ensure your lines are unmuted locally, as you'll be prompted when to ask your question.

Speaker Change: <unk> and our natural gas customer base now.

Speaker Change: Now as Dan mentioned, we also expect to raise about $250 million in 2020 for using an ATM equity program.

Speaker Change: And we remain committed to reducing our scope one and scope two greenhouse gas emissions by 60% by 2035 from our 2019 baseline as you know we've already made significant progress on this and we estimate it to be about 25%.

Ryan Michael Connors: The first question comes from a line from Ryan Connors from North Coast Research. Please go ahead. Hey, Ryan. Hey, good morning.

Christopher H. Franklin: Thanks for taking my question. I think you did a great job with the details, Dan, so thank you for that. Just a couple of bigger picture questions here. Chris, you talked strategically about rate and CapEx strategy, but tactically, there is lots of high-profile industry noise in Pennsylvania right now in terms of rate increases for water. How does that impact your tactical thinking about rate strategy in PA in terms of the rate cycle and the cadence of CapEx going forward? Any thoughts there? Yeah, Ryan, listen. I think cadence is important.

Speaker Change: As of the year end 2023, alright.

Speaker Change: Alright, we.

Speaker Change: Covered a lot that concludes our formal remarks, and we're happy to take your questions. So let me turn it back to Francois.

Francois: Thank you as a reminder, if you would like to ask a question or make a contribution on today's call.

Francois: Paul one on your telephone keypad, if you change your mind and want to withdraw your question press.

Francois: Tall too. Please ensure your line's on mute locally hasnt be prompted to ask your question.

First question comes from the line of Ryan Connors from Northcoast Research. Please go ahead.

Ryan Michael Connors: Hey, Ryan Thanks for taking hi, good morning. Thanks for taking my question I think you did a great job.

Christopher H. Franklin: The challenge that we could face, and I outlined a moment ago, is if Pennsylvania, for example, requires us to comply with the PFAS rules over a three-year period. It appears in the federal regulation, which hasn't been formally released yet, but the draft would suggest that states could extend that by two years. So if they allow us to extend it, it would give us an opportunity to spread that a little bit. That's the only thing that could push us in a little sooner. But we think that the cadence we have now is a good rhythm.

Ryan Michael Connors: The details Dan so thank you for that so a couple of bigger picture questions here.

Ryan Michael Connors: Chris you talked about strategically about kind of rate and capex strategy, but tactically.

Ryan Michael Connors: Lots of high profile industry noise in Pennsylvania, right now in terms of rate increases in water how does it impact your tactical thinking about rate strategy in terms of the rate cycle and the cadence of Capex.

Ryan Michael Connors: Going forward any thoughts there.

Christopher H. Franklin: Yes, Ryan.

Ryan Michael Connors: Think cadence is important the challenge that we could face.

Ryan Michael Connors: A moment ago is if Pennsylvania for example requires us to comply with the <unk> rules over three year period.

Christopher H. Franklin: Now, there's a lot of capital before us, including lead. So, you know, that could impact the cadence of future cases. But listen, I think affordability is key in how we think about things.

Ryan Michael Connors: It appears in the federal.

Ryan Michael Connors: Regulation that hasnt been formally released yet, but the draft would suggest that states can extend that by two years. So if they allow us to extend it it would allow it will give us an opportunity to spread that a little bit that's the only thing that could push us seeing a little sooner.

Christopher H. Franklin: I think how we think about Act 11 and the shifting of costs is key to us. And I also think that throttling of capital to make sure that things remain affordable to our customers is also critically important. Yes.

Ryan Michael Connors: But we think that the cadence we have now is a.

Ryan Michael Connors: Um, and then relatedly, so this. You mentioned your comments on the M&A environment, which I appreciate, but there was some big news yesterday, not one of your deals, but the PUC actually rejecting an Act 12 deal. How do you view that in terms of the potential impact on the near-term pipeline? I mean, will that scare off some potential sellers, at least until we can get finality on where this reform process ends up?

Ryan Michael Connors: It is a good cadence now theres a lot of capital before us, including led so that could impact the cadence of future cases, but listen I think affordability is key in how we think about things.

Ryan Michael Connors: Think how we how we think about.

Ryan Michael Connors: Act 11, and shifting of costs is key to us.

Ryan Michael Connors: And I also think about that.

Ryan Michael Connors: That throttling of capital to make sure that things remain affordable to our customers is also critically important.

Ryan Michael Connors: Yes.

Christopher H. Franklin: You know, it's an interesting question, and I think what it does is it provides pretty clear guidance to sellers as to what's the multiple on depreciated original cost that they can probably expect. Now, we're probably a couple of months away from the finalization of Chairman DeFrank's motion because there are 30 days followed by a 15-day comment period. But assuming it stays even close to where the chairman's proposal is, it'll give pretty clear guidance as to where those purchase prices can be. And believe me, I think that those are still really nice premiums that can be paid for these utilities while we keep rates in check. And I think yesterday's decision probably is in line with the commissioner's 5-0 vote on Commissioner DeFrank's C motion on his proposed changes. I think that given the difference in the multiples on depreciated original cost, you know, it would have been hard for them to do this one.

Ryan Michael Connors: And then relatedly so.

Ryan Michael Connors: You mentioned your comments on the M&A environment, which I appreciate.

But there was some big news yesterday, not one of your deals, but the PUC actually rejecting an act 12 deal.

Ryan Michael Connors: How do you view that in terms of the potential impact on the near term pipeline. That's scare off some potential sellers at least until we can get finality on where this reform process ends up.

Ryan Michael Connors: It's an interesting question and I think what it does is it provides pretty clear guidance to sellers as to what what's the multiple on depreciated original cost that they can probably expect now we're probably a couple of months away from the Finalization of chairman to Franks motion because Theres 30 days, followed by a 15 day comment.

Ryan Michael Connors: Period.

Ryan Michael Connors: Assuming it stays even close to where the chairman's proposal is it will give pretty clear guidance as to.

Ryan Michael Connors: Were those purchase prices can be and believe me I think that those are still really nice premiums that can be paid for these utilities, while we while we keep rates in check.

Christopher H. Franklin: Now, I do think, and this is important, as we think about acquisitions, particularly in Pennsylvania, troubled systems are really differentiated from this process, and so I think, you know, the acquisitions that we have in the pipeline, many of them are troubled, and so you have a little bit more flexibility in this for troubled acquisitions, and they may take more of a focus. Yep. I appreciate that. And one last one from me, if I could sneak it in.

Ryan Michael Connors: And I think yesterday's decision probably is in line with the commissioners FIFO vote on Commissioner D. Frank's see motion on his proposed changes.

Ryan Michael Connors: Think that given the difference in the the multiples on depreciated original cost.

Ryan Michael Connors: It would be would have been hard for them to do this one now I do think and this is important because.

Ryan Michael Connors: As we think about.

Ryan Michael Connors: Acquisitions, particularly in Pennsylvania troubled systems are really differentiated from this process and so.

Ryan Michael Connors: Just a super big picture, Chris. I mean, there seems like there's been a pretty big, pretty stark role reversal for water and gas over the last, you know, six months or so. You know, water seems to be facing some headwinds now, and gas utility stocks are now actually outperforming the water names. That's one of the reasons your stock's done relatively well. How did that shift your thinking, if at all, on portfolio strategy going forward? I mean, you've talked in the past about kind of staying put in gas and really growing in water. Is there a thought process that maybe gas could be more of a growth platform?

Ryan Michael Connors: I think.

Ryan Michael Connors: The acquisitions that we have in the pipeline many of them are troubled and so.

Ryan Michael Connors: You have a little bit more flexibility in this for troubled acquisitions that they may take more of a focus.

Speaker Change: Yes, I appreciate that and then one last one for me if I could sneak it in just Super Big picture, Chris I mean, there seems like there's been a pretty big pretty stark role reversal for water and gas.

Speaker Change: The last.

Speaker Change: Six months or so water seems to be facing some headwinds now and gas utility stocks are now actually outperforming the water names Thats one of the reasons your stock's done relatively well.

Speaker Change: How does that shift your thinking if at all on portfolio strategy going forward I mean, you've talked in the past about kind of staying put in gas and really growing and water is there a is there a.

Christopher H. Franklin: Well, I'm not ready to say that yet, but I think you're exactly right about public sentiment, including in Europe. We saw that even in the European Union, gas is now considered green again. So I think public sentiment has changed a bit. I think the realization that natural gas is going to be here for a very long time, given the critical role it plays in the energy mix, is more evident in people's knowledge today.

Speaker Change: Thought process that maybe.

Gas could be more of a growth.

Platform.

Speaker Change: Well.

Speaker Change: I'm not ready to say that yet, but I think you're exactly right in your.

Public sentiment, including in Europe, you saw that.

Speaker Change: Even in the European Union gas is now considered green again, so I think public sentiment has changed a bit I think.

Speaker Change: The realization that natural gas is going to be here for a very long time, given the critical role. It plays in the energy mix is is more evident in people's knowledge today.

Ryan Michael Connors: But having said that, listen, we're going to remain focused this year on delivering a really quality rate case in Pennsylvania, and so that's going to be our primary focus in the gas business in 2024. Got it. Thanks for your time. You bet. Thank you. Take care. The next question comes from Durgesh Chopra from Evercore ISI. Please go ahead. Hey, Durgesh. Good morning, Durgesh.

Speaker Change: But having said that listen we're going to remain focused this year on delivering.

Speaker Change: A really quality rate case in Pennsylvania, and so that's going to be our primary focus in the gas business in 2024.

Got it thanks for your time.

Speaker Change: You bet. Thank you we'll take care.

Speaker Change: The next question comes from the line of Doug <unk> from Evercore ISI. Please go ahead.

Doug: Hey, good morning, Doug.

Durgesh Chopra: Hey, good morning, guys. Thanks for the time. Hey, just I want to kind of stick on the theme of the great cases. We're getting a lot of questions from investors, obviously, you know, on the waterfront. Maybe can you just give us a sense of what kind of revenue or rate increase that you might seek in the upcoming water case. You mentioned affordability several times in your comments. So just trying to get a sense of how big a rate increase you might see if you can give us a range or something along those lines. So Durgesh, you know, we're still working through that case right now. And of course, as you indicated, affordability is a concern. So we don't have a number to share.

Hey, good morning, guys. Thanks for the time.

Doug: Yes.

Doug: I wanted to kind of stick on the theme of the rate cases.

Doug: Getting a lot of questions from investors obviously.

Doug: On the on the waterfront, maybe can you just.

Doug: Give us a sense of what kind of revenue or rate increase as that you might seek.

Doug: The upcoming water case, you mentioned affordability several times.

Doug: In your comments, so just trying to get a sense of.

Doug: How big of a rate increase you might see if you can give us a range or something along those lines.

Doug: So we're still working through that case right now and of course as you indicated affordability is a concern.

Speaker Change: So we don't have we don't have a number to share, we'll obviously share that number.

Christopher H. Franklin: We'll obviously share that number, or pretty close to that number, when we have our first quarter call, so we'll provide more detail at that. I would say, though, and you see it in the..., five-year CAPEX guidance that we've shown that we're going to continue to have strong CAPEX in the water business and PFAS and the latter portion of that. You know, those capital expenditures here for the time period kind of through 2025 will be included in this. Let me just point you to some of the comments I made in the call here.

Speaker Change: Close to that number when we have our first quarter call Sue will provide more detail at that point I would say, though and you see it in the <unk>.

Speaker Change: Our five year Capex guidance that we've shown that we're going to continue to have strong capex in the water business.

Speaker Change: <unk> PFS and later a portion of that.

Capex so.

Speaker Change: Those capital expenditures here for the time period kind of through 2025 will be included in this rate case.

Speaker Change: Let me just point you to their guests to the some of the comments I made in the call here we are.

Christopher H. Franklin: We're meeting with regulators as we speak, environmental regulators that is, to talk about this timeline for PFAS. We pretty much know where we're going with lead, but timing is a key consideration even in this, how we think about this case. So numbers are still moving around a bit, but as Dan said, it should be clear in the coming months. I appreciate that.

Speaker Change: We're meeting with regulators as we speak environmental regulators that is to talk about this timeline for <unk>, we pretty much know, where we're going with plaid but.

That timing is a key consideration in this how do we think about this case. So number is still moving around a bit but as Dan said should be cleared in the coming months.

I appreciate that and then.

Durgesh Chopra: And then, you know, pretty large step up in capex. I think if I just take the average annual capital amount, it's like 30% higher versus previous guidance, 1.4 on average versus 1.1. Maybe just, can you talk to, obviously, and thank you, by the way, for sharing the equity plan for this year. Much appreciated.

Speaker Change: The large step up in Capex I think if I just take the average annual capital amount, it's like 30% higher versus previous guidance $1 four on average north of one one.

Speaker Change: Maybe just can you talk to obviously and thank you by the way of procuring the equity plan for this year, which I appreciate it.

Dan J. Schuller: But then, can you talk to financing needs in, you know, 25 and beyond? Should we use that $250 million as a run rate, or should it be higher, given the CapEx is, you know, stepping up quite a bit? Maybe just talk about that, and then I'll have a follow-up. Yeah, we probably won't provide too many details on that beyond 2024, only because, you know, the needs in the future for equity also depend on acquisitions and how they play out, but I would say as we think about that billion dollar ATM program. Generally, we're thinking about that as three plus years, but again, it depends on both acquisitions and investments. Okay, perfect. I appreciate that, Dan.

Speaker Change: Can you talk to financing needs.

Speaker Change: 25, and beyond should we use that to $150 million as a run rate or should it be higher given the capex.

Speaker Change: Stepping up quite a bit maybe just talk to that and then I have a follow up.

Speaker Change: Yes.

Speaker Change: Probably won't provide too many details on that beyond 2024 only because.

Speaker Change: The needs in the future for equity also depend on.

Speaker Change: On acquisitions, and how they play out, but I would say as we think about that $1 billion ATM program.

Speaker Change: Generally we are thinking about that as three plus years, but again it depends on both acquisitions and investment needs.

Okay perfect I appreciate that Dan and then maybe just one.

Durgesh Chopra: And then maybe just like one last question for me is whether the rate basis is going at a materially faster clip or projected to grow at a materially faster clip, assuming you get favorable regulatory outcomes in the PRA cases. Could we see a step up in long-term growth rate going forward as you're spending more money or, you know, perhaps towards the high end of that 5 to 7? Or how should we think about that? I don't know.

Speaker Change: And one last question for me is.

Speaker Change: <unk> business is growing at a materially faster clip are projected to grow at a materially positive clip, assuming you got a favorable regulatory outcomes into PMA cases.

Speaker Change: Could we see a step up in long term growth rate going forward as youre spending more money or maybe perhaps to the towards the high end of that five to seven or how should we think about that I don't know I. Appreciate there's no long term guidance, but maybe directionally you could help us think about long term growth rate.

Christopher H. Franklin: I appreciate there's no long-term guidance, but maybe directionally, you could help us think about long-term growth rates. Yeah, listen. I think we're trying to refrain from, you know, front running the commission in Pennsylvania. So I'm going to be careful in how I answer this, but, you know, listen, I think people are coming out of repair, which I think we've talked about many, many times. And so as we think about coming out of repair and earning well before that. You know, the step is not what it would be in a normal step rate case. So I think I would be, you know.

Speaker Change: Yes.

Speaker Change: We're trying to refrain from.

Speaker Change: Front running the commission in Pennsylvania, So I'm going to be careful.

Speaker Change: And how I answer this.

Speaker Change: Yeah.

Speaker Change: Listen I think.

Speaker Change: Peoples is coming out of a repair, which we've I think we've talked about many many times and so as we think about coming out of repair.

Speaker Change: And an earning well before that.

Speaker Change: The step is not it's not what would be an a and a normal step.

Durgesh Chopra: I think we're comfortable with the guidance we've given, and hopefully that gives you a little bit of a sense of how we think about it. Okay, I appreciate that, Chris. Thanks so much. You bet. Bye, Durgesh.

Speaker Change: Rate case, so I think I think I would be.

Speaker Change: Yeah.

I think we're comfortable with the guidance, we've given and hopefully that gives you a little bit of sense of how we think about it.

Speaker Change: Okay.

Speaker Change: I appreciate that great. Thanks, so much.

Speaker Change: Right.

Speaker Change: <unk>.

Travis Miller: The next question comes from a line by Travis Miller from Morningstar. Please go ahead. Thank you. I'm gonna go back to this whole PFAS discussion and the investment needs again. I think, Chris, if I heard you correctly, huge and expensive was the quote. Does that refer to the 450 and the 5% O&M, or is there more? Potential CapEx and or O&M. Yeah, yeah, good question. So here's how we think about it. As we estimate it today, we're saying at least $450 million.

Speaker Change: The next question comes from a line of Travis Miller from Morningstar. Please go ahead.

Travis Miller: Thank you and good morning, everyone.

Travis Miller: Sure.

Kind of going back to that again this whole PFS discussion in the investment needs I think Chris if I heard you correctly huge and expensive was the quote.

Travis Miller: Does that refer to the $4 50, and the 5% O&M or is there more.

Potential Capex <unk> O&M.

Christopher H. Franklin: Yes. Good question, so here's how we think about it as we estimate it today, we're saying at least $450 million, but the timing right.

Christopher H. Franklin: But the timing, right, if, for example, we heard this week when we were in North Carolina that we must comply with the three-year timeline in North Carolina. And so we're going to be, you know, all on a push. In Pennsylvania, we're, we're hoping to get some definition around that from the regulators here. But if we have to move faster, if we have to comply with three, which we originally were hoping for a five-year period, then it could be added cost. And the added costs come from potentially our inability to get loans, low-interest loans, and grants in that process because, often, they require us to apply for and get the grant before we build, and we can't wait.

Christopher H. Franklin: For example, we heard this week when we were in North Carolina that we must comply with a three year timeline in North Carolina, and so we're going to be all on push in Pennsylvania.

Christopher H. Franklin: We're hoping to get some definition around that from the regulators here.

But if we have to move faster if we have to comply with three which we originally were hoping for a five year.

Then it could be added costs and the added costs come from.

Christopher H. Franklin: Potentially our inability to get loans low interest loans and grants in that process because.

Christopher H. Franklin: Often they require us to apply and get the grant before we build and we can't wait and so that's the conversation that we're having with the regulators now is help us help our customers our customers didn't put this contaminant in the water nor did we but we are all faced with fixing it and pay.

Christopher H. Franklin: And so that's the conversation that we're having with the regulators now to help us help our customers. Our customers didn't put this contaminant in the water, nor did we, but we're all faced with fixing it and paying for it. And so we're trying to mitigate those costs as best we can. That's why that number is moving around a little bit and could go north more if we can't attain some of these grants. Okay, that partially answers my follow-up question: how much discussion are you having with regulators in terms of getting some of those costs recovered outside of having to file? full base rate cases. Would there be some kind of rider treatment potential?

Christopher H. Franklin: For it and so we're trying to mitigate those costs as best we can that's why that number is moving around a little bit and could go north more if if we can't attain some of these grants.

Speaker Change: Okay that partially answers and then my follow up was how much discussion or are you having with regulators in terms of getting some of those cost recovered outside of having to file.

Speaker Change: Full base rate cases would there be some kind of rider treatment potential have you discuss that at all or is that on the table.

Travis Miller: Have you discussed that at all, or is that on the table? That is a discussion we are having in several locations. We had a long discussion internally here about how to make some of those things happen last night.

Speaker Change: That is a discussion that we're having in several locations we had a long discussion even internally here about how to make some of those things happened last night and I think it's important for customers to recognize that that portion of their rates is associated with compliance.

Christopher H. Franklin: And I think it's important for customers to recognize that that portion of their rates is associated with compliance with a cleanup and not simply an investment in pipe or improvement that we would normally make in the course of running a utility. I really want customers to understand that they're paying for some of these costs. Now, I'll remind you that we are getting some recovery from lawsuits. We hope to get somewhere between $90 and $110 million from the polluters, but that's not going to cover all the costs we're talking about here.

Speaker Change: Compliance with the cleanup and not not.

Simply a an investment in pipe or improvement that we would normally make in the course of running utility I really want customers understand that they are paying for some of these costs now I'll remind you that we are getting some recovery from lawsuits and we hope to get somewhere between 90 and $110 million from that.

Speaker Change: Polluters, but.

Speaker Change: <unk>.

Speaker Change: That's not going to cover clearly the costs, we're talking about here.

Travis Miller: Okay. No, that's all helpful. Thank you. And then one more on the gas side.

Okay.

Speaker Change: All helpful. Thank you and then one other on the gas side.

Travis Miller: Any thoughts in terms of getting a weather normalization clause, either in this rate case or a separate application? I know that at least one other gas utility in the state has a pretty robust one. Weather Normalization, excuse me, Weather Normalization Clause, so I wonder if that's part of the discussions in the current rate case or if that's something that would come along in a separate filing, and achieving a similar program would be very beneficial to us. Okay, handicap wise, do you think given that the other utilities have it that this is a good chance, or is there something unique about... That's what we're discussing with regulators. I would say the fact that other utilities in the state have it bodes well for a positive decision. Okay, great. Thanks so much.

Speaker Change: Any thoughts in terms of getting a weather normalization clause either in this rate case or a separate application I know that at least one other gas utility in the state is a pretty robust.

Speaker Change: Weather normalization no excuse.

Speaker Change: Excuse me weather normalization clause. So wondering if that's part of the discussions and the current rate case or is that something that would come along.

Speaker Change: In a separate filing yes.

Speaker Change: Let me just remind you. This is our first rate case two since we've owned the company. So thats why we don't have weather norm go ahead Dan.

Dan J. Schuller: Great point, Chris So, yes, we have filed this rate case, including a request for weather normalization and to your point a few of our peer companies here in Pennsylvania habit.

Dan J. Schuller: And achieving a similar program would be very beneficial to.

Dan J. Schuller: To our company.

Dan J. Schuller: Okay.

Dan J. Schuller: Handicap why is it do you think given that the other utilities habit.

Dan J. Schuller: There's a good chance or is there something unique about.

Dan J. Schuller: I'll be discussing with regulators.

Dan J. Schuller: I'd say, the fact that other utilities in the state have it bodes well for a positive decision here.

Christopher H. Franklin: Thank you. You bet. The next question comes from a line from David Sunderland from Baird. Go ahead. Good morning, David. Hey, Dan.

Speaker Change: Okay great.

Speaker Change: Thanks, so much.

Speaker Change: Thank you Beth.

Okay.

Speaker Change: Our next question comes from the line of David Sunderland from Baird. Please.

David Sunderland: Please go ahead.

David Sunderland: Good morning, David Hey, Dan.

David Sunderland: Happy Friday, guys. Thanks for your time. Two questions for me. I wanted to ask about the decision not to give long-term EPS guidance, and I know you guys mentioned the rate case as being the reason for this, but do we think of any pending acquisitions as playing a role in this? And then I have one follow-up. Yeah, no, not at all. We're not worried about the acquisitions.

David Sunderland: That would be Friday, guys. Thanks for the time.

Speaker Change #100: You bet.

David Sunderland: Two questions from me.

David Sunderland: I wanted to ask about the decision not to give long term EPS guidance and I know you guys mentioned the rate case for being the reason for this but should we think of any pending acquisitions is playing a role in this and then I have one follow up.

Speaker Change #101: Yeah, no not at all we're not worried about the acquisitions. It's really the fact that we have two major rate cases filed in Pennsylvania, which account for.

Christopher H. Franklin: It's really the fact that we have two major rate cases filed in Pennsylvania, which account for, as you all know, a large portion of our net income. And so I actually had conversations with regulators who said it would be a sign of respect to be able to do that. And so I gladly will comply with that.

Speaker Change #101: As you all know a large portion of our of our net income and so.

Speaker Change #101: I actually had conversations with regulators who.

Speaker Change #101: He said it was it would be a sign of respect to be able to do that and so.

Speaker Change #101: I'd gladly comply with that so it was really just.

Christopher H. Franklin: So it was really just not front-running the commission in terms of how they think about returns and processing a rate case, especially given its import to the overall picture here in our company. That makes sense. Thank you for that.

Speaker Change #101: Not that front running the commission in terms of how they think about returns and processing a rate case.

Speaker Change #101: Especially given its importance to the overall picture here in our company.

Speaker Change #102: That makes sense. Thanks for that and then another one on just the acquisition pipeline broadly speaking I guess at a high level have you seen in light of the higher rate environment, an increase in the number of system.

David Sunderland: And then another one on just the acquisition pipeline, broadly speaking, I guess, at a high level, have you seen, in light of the higher rate environment, an increase in the number of systems, or, I guess, maybe any thoughts on where valuations are? Any, any commentary on where you're at with the 400,000 customers too right now would be helpful. Thank you.

Speaker Change #102: Or I guess, maybe any thoughts on where valuations are and any commentary on where you're at with the 400000 customers too right now would be helpful. Thank you.

Christopher H. Franklin: Yeah, I would say there's a lot of active conversations happening. Clearly, the news of the chairman's C motion and then maybe the latest information on Butler that just occurred is, you know, people are processing that information. I'd say that was really, really new information, both of those.

Speaker Change #103: Yes, I would say theres a lot of active conversations happening clearly the.

The news of the Chairman's see motion and then maybe the newest information on on.

Speaker Change #103: Butler that just occurred.

People are.

Speaker Change #103: <unk> that information I would say that was really really new information both of those so not sure exactly how the market will react but I'll tell you what.

Christopher H. Franklin: I'm not sure exactly how the market will react, but I'll tell you what. You know, assuming the chairman's motion is successful and we see a clear path to actually closing these and not having to deal with the court issues and just the prolonged nature of the challenges, I think that will actually be a very positive signal to the market. Number one, they can be paid a premium, albeit a controlled premium.

Speaker Change #103: Assuming the chairman's motion is successful and we see a clear path to actually closing these and not having to deal with the.

Speaker Change #103: The court issues and adjust the prolonged nature of the challenges.

Speaker Change #103: I think that that will actually be a very positive signal to the market number one they can be paid a premium.

Speaker Change #103: All to be a controlled premium and then two there's a clear path to closing, which I think in some of these cases today that path is not as clear so.

Christopher H. Franklin: And then two, there's a clear path to closing, which I think in some of these cases today, that path is not as clear. So you know, now, in terms of our general conversations with others in the pipeline, I would say they're steady as she goes. Municipal acquisitions are lumpy, we've talked about that many times, and so sometimes you feel like it's two steps forward and one step back, but nevertheless, I do feel comfortable that the pipeline is still strong. That's super helpful.

Speaker Change #103: Now in terms of our general conversations with.

Others in the pipeline.

Speaker Change #103: I would say they are.

Speaker Change #103: Steady as she goes municipal acquisitions are lumpy, we've talked about that many times and so sometimes you feel like it's two steps forward and one step back but.

Speaker Change #103: Nevertheless, I do feel comfortable that the pipeline is.

Is still strong.

David Sunderland: Thanks guys, I appreciate it. You bet. Before proceeding to the next questions, as a final reminder, if you'd like to ask a question, please press star 1. The next question comes from Jonathan Reader from Wells Fargo. Please go ahead. Good morning, Chris and Dan. How are you all?

Speaker Change #104: That's super helpful. Thanks, guys I appreciate it.

Before proceeding to the next questions as a final reminder, if you'd like to ask a question. Please press star one.

Speaker Change #104: Next question comes from the line of Jonathan Reeder from Wells Fargo. Please go ahead.

Jonathan Reeder: Hey, Jonathan Good morning, Jonathan.

Jonathan Reeder: Chris and Dan how are you all.

Jonathan Reeder: Very well thanks.

Jonathan Reader: Hey, I just wanted to quickly clarify that the 24 guidance range doesn't include the one-time gain from the non-regulated sales that recently closed. Is that correct? Yeah, that's correct Jonathan. So that EPS guidance presumes normalized weather and excludes that. Okay, great.

Jonathan Reeder: I just wanted to quickly clarify that the 24 guidance range doesn't include the onetime gain from our nonregulated sales that recently closed is that correct.

Jonathan Reeder: Yes, that's correct, Jonathan so that EPS guidance presumed normalized weather and excludes that gain on sale.

Speaker Change #105: Okay great.

Dan J. Schuller: And I appreciate that you rolled out the five-year guidance in terms of CapEx and rate base. But I'm still just a little confused why you didn't also provide, I guess, the long-term. EPS CAGR since, you know, there's potentially another round of PA rate cases that, you know, would fall during that 2024 to 2028 period, you know, after the pending gas and soon to be filed water one, you know, kind of wrapped up. So I guess kind of the first part of the question is, do you just intend to provide a three-year EPS CAGR when you do roll it out next year? And then, you know, the second part, if we were to assume no change to the current TA gas and water return parameters, meaning the allowed ROEs and equity ratios, is there any reason the EPS CAGR wouldn't be consistent with the prior five to 7% range, given rate bases expected to grow at over 8%, you know, even taking into account, you know, the presumed step down in people's earned ROE?

Jonathan Reeder: And I appreciate that you rolled out the five year guidance in terms of Capex and rate base I'm still just a little confused by it and also provide I guess the long term.

Jonathan Reeder: <unk> CAGR.

There's potentially another round of rate cases that would fall during that 2024 to 2028 period. After the pending gas and soon to be filed wire one kind of wrapped up so I guess kind of the first part of the question you just intend to provide a three year EPS CAGR.

Jonathan Reeder: When you do roll it out next year and then the second part.

Jonathan Reeder: If we were to assume no change to the current <unk>.

Jonathan Reeder: Gas and water like return parameters.

Jonathan Reeder: The allowed ROE and equity ratios is.

Jonathan Reeder: Is there any reason the EPS CAGR wouldn't be consistent with the prior five years to 7% range given rate base is expected to grow at over 8%, even taking into account a presumed step down in peoples earned Roe.

Speaker Change #106: Yes so.

Speaker Change #107: Lot of questions in there.

Speaker Change #108: And then one question.

Dan J. Schuller: Yeah, so... A lot of questions in the one question. So in terms of the guidance range and why with regulars, I kind of covered that before Jonathan, but I'll just say again, I recognize there is a stream of cases coming through Pennsylvania, and so the way we think about it is take one case at a time. We just happen to have, you know, really heavy overlap here. The People's case won't conclude till, you know, really fourth quarter 2024. The ACWA case won't conclude until, you know, first quarter probably 2025. It's just right on top of each other.

Speaker Change #109: So in terms of the <unk>.

Speaker Change #109: The guidance range and why why with regulators.

Speaker Change #110: I kind of covered that before Jonathan but I will just say again I recognize there is a stream of cases coming through Pennsylvania, and and so the way we think about it is to pick one case at a time, we just happen to have.

Speaker Change #110: Really heavy overlap here the People's case won't conclude til.

Speaker Change #110: Really fourth quarter 2024, the Aqua case won't conclude until.

First quarter probably of 2025.

Speaker Change #110: It's just right on top of each other I think we have to look at the cadence and then and then how we would provide that respect to our regulators and guidance to our investors.

Christopher H. Franklin: I think we have to look at the cadence and then how we would provide that respect to our regulators and guidance to our investors and, you know, evaluate it as we go, and hopefully, we can stay with largely the guidelines we've always provided. I would anticipate that as we return at this time next year to regular guidance, I would expect a three-year cadence, not, you know, we could probably continue to do five years on CapEx, but a three-year guidance. I just think there are so many things happening in the industry that it's a much clearer view of what's coming. And I think, too, Jonathan, if you... You know, look at what we provided in terms of the people's natural gas rate case and rate base and equity layer and so forth. We've tried to provide some data there that would help you model, you know, 2025. Thank you. Bye, if you need any more help on that. We have to. Take your call on it. We're just not going to provide it.

Speaker Change #110: And evaluate it as we go and hopefully we can stay with largely the guidance we've always provided.

Speaker Change #110: Would anticipate as we return at this time next year or two regular guidance I would expect through a three year cadence.

Speaker Change #110: We could probably continue to do five years on capex, but but a three year guidance I just think there's so many things happening in the.

Speaker Change #110: And the industry.

A much clearer.

Speaker Change #110: View of what's coming.

Speaker Change #110: And I think too Jonathan if you if you.

Speaker Change #110: Look at what we provided in terms of the peoples natural gas rate case rate base and equity layer and so forth.

Speaker Change #110: To provide some data there that would help you model.

Speaker Change #110: 2025, a fully projected future test year in terms of an outcome.

If you need any more to help on that.

Speaker Change #111: Obviously take a call anytime we can have conversations but we are.

Speaker Change #112: Just not going to provide a guidance range at this moment.

Christopher H. Franklin: Yeah, no, I mean, just with the step up in CapEx and you know, even even the rate-based growth, the strength there. I just know some people are kind of wondering, like, is it sending a mixed message?

Speaker Change #113: Yes, no I mean.

Speaker Change #113: Okay.

Speaker Change #113: With the step up in Capex.

Speaker Change #113: Even the rate base growth.

The strength there.

And as you know some people.

Speaker Change #113: Kind of wondering Mike isn't standing there.

Speaker Change #113: A mixed message.

Jonathan Reader: But, you know, if it's just purely out of, you know, deference to the regulators and the plan was just to keep the EPS CAGR at three years versus, you know, five years along with the other stuff, then I guess that makes a little more sense. So, in terms of kind of modeling the $7.2 billion, like, first off, that's just pure CapEx. That doesn't include anything for pending M&A or future placeholders, right, consistent with how you've done it in the past. Yes, it's consistent with the past, so it includes, it doesn't include acquisitions, prices, you know, purchase prices paid. It does include CapEx subsequent to acquisitions closing for those acquisitions where we, time. Okay.

Speaker Change #113: If it's just purely out of deference to the regulators and the plan was just to keep the EPS CAGR at three years versus five year, along with the other stuff and I guess that makes a little more sense.

Speaker Change #113: So.

Speaker Change #113: In terms of kind of a I guess modeling $7 2 billion like first off that's just pure capex that doesn't include anything for pending M&A.

Speaker Change #113: M&A or future placeholder bright consistent with how you've done it in the past.

Speaker Change #113: Yes, it's consistent in the past so it includes <unk>. It doesn't include acquisition prices purchase prices paid it does include.

Speaker Change #113: Capex subsequent two acquisitions closing for those acquisitions, where we have a signed purchase and sale agreement.

Christopher H. Franklin: Okay, and then, you know, in terms of like, modeling and, we just assume like gradual annual increases off of the 1.3 to 1.4 or, you know. Is it going to be a little more heavy in 25 and 26 because of the P5? Staff. I guess that's what you've been saying; still a little bit to be determined. Yeah, a little bit to be determined whether PFAS is a five-year or three-year program, but otherwise, I guess I would say that, you know... You take 7-2 and you divide it by 5, you're kind of in this 1-3, 1-4 range, and it kind of bounces around in that range. It's not necessarily a directionality.

Speaker Change #113: Okay.

Okay and then.

Speaker Change #113: In terms of like modeling it out.

Speaker Change #113: Seem like gradual annual increases off of the one three to one four or.

Speaker Change #113: Is that going to be a little more heavy in 'twenty, five and 26 because of the piece off.

Speaker Change #113: I mean.

Speaker Change #114: So thats, what <unk> been seeing still a little bit to be determined.

Speaker Change #115: Yeah, a little bit to be determined whether whether it be <unk> <unk>.

Speaker Change #115: Five year, three year program and by state otherwise I guess I would say that.

Speaker Change #115: If you take 70 million you divide it by.

Speaker Change #115: <unk> five you are kind of in this 1314 range and it kind of bounces around in that range over those years its not.

Speaker Change #115: Not.

Speaker Change #115: Necessarily a directionality to it.

Dan J. Schuller: Okay, can you kind of just talk about the drivers of the capex increase? You know, what caused you to kind of step it up? Because I think you'd kind of been, you know, relatively consistent the past few years in your budget.

Speaker Change #116: Okay can you can you kind of just talk about the drivers of the Capex increase.

Speaker Change #116: What caused you to kind of step it up because I think you had kind of been relatively consistent the past few years.

Speaker Change #116: In your budget.

Speaker Change #116: There's a lot bigger increase and then along with that what sort of impact.

Speaker Change #116: The higher Capex will have on the average annual customer bill increases per se.

Speaker Change #117: Yes, I'm happy to start and then Chris can chime in.

Speaker Change #118: As we look forward.

Speaker Change #119: Thank all utilities in really all companies that do construction work and have experienced this we do see higher construction costs in the future than we've had in the past so that gets incorporated when we develop our five year plan and then of course, we've got a bit more clarity here in this five year plan regarding P fast and lead than we had previously.

Speaker Change #119: As well.

Speaker Change #120: Yeah, Hi, Chris it's really a step up.

Christopher H. Franklin: One one and 20 212, and 'twenty three and now come up as an average of one four so.

Christopher H. Franklin: It's not a massive increase but given the.

Christopher H. Franklin: The costs, we're seeing labor cost as well, we're seeing increase and then.

Christopher H. Franklin: Clarity on <unk> and led.

Christopher H. Franklin: Just migrating north.

Yeah.

Speaker Change #121: Okay and then.

Speaker Change #121: Last for me on the PFS front can you provide any update on federal or state efforts to protect the water utilities.

Speaker Change #121: From any potential liabilities related to distributing water that manav that key thoughts prior to.

Speaker Change #121: EPA actually establishing a rule I think theres some class action lawsuits, perhaps in Connecticut.

Speaker Change #121: Around this issue that had been filed.

Speaker Change #122: Yes listen.

Speaker Change #122: I think.

Speaker Change #122: A number of people are trying to figure out ways and at the state level, even two to protect water utilities through legislation from that kind of liabilities.

Speaker Change #122: As you said, there's two in Connecticut with the public companies there one as well.

Speaker Change #122: Both product liability lawsuits class action, and which we're watching clearly very very closely as the rest of the industry is as well I'm not aware of any that have successfully passed in terms of protections.

Speaker Change #122: As we think about looking for protection and we're also looking for on the waste side right.

Speaker Change #122: Cercla.

We want to understand really how we're going to be treated going forward with with the waste so work to be done.

Speaker Change #122: Listen to guys like Rob Powelson and the industry lobbyists are are working hard in Washington to try and get protection.

Speaker Change #122: Give a quick shout out to senator.

Senators Shelly capital, who has really done a nice work in this area and leading some of the work.

Speaker Change #122: Really understands what we're facing.

Speaker Change #122: The theme Jonathan that we're talking to elected officials about us.

Speaker Change #122: Again, we didn't put the water there and matter of fact, we've taken steps even before now too to put mitigation in place and so we.

Speaker Change #122: We believe that our customers and our companies need to be protected so I would put that in the category of work that needs to be done.

Speaker Change #123: Okay, Yes definitely.

Speaker Change #123: Definitely.

Speaker Change #123: Of interest.

Speaker Change #123: Given the size of the liabilities.

Speaker Change #123: Earlier statement.

Speaker Change #123: Hopefully that does.

Speaker Change #123: Come back on the water utilities, which ultimately gets passed on to the to the customers.

Speaker Change #123: Sales and everything like that so good luck with that.

Speaker Change #124: Thank you.

Speaker Change #124: Our next question comes from the line of Greg <unk> from UBS. Please go ahead.

Greg: Hey, Greg.

Greg: Thank you.

Greg: Yeah.

Greg: Yes, just thoughts on.

Greg: On.

Greg: <unk> and how you are.

Greg: Criteria would align with that.

Greg: As an opportunity.

Greg: How you think about that and I guess.

Greg: Separate question I guess 23 is the base year for the rate base growth guidance.

Speaker Change #125: Yes, that's correct.

Speaker Change #125: Yes on Aquarian, Greg. It's good question, obviously, the asset is in the market.

Speaker Change #125: As announced by <unk>.

Speaker Change #125: Resource.

Speaker Change #125: Let's start with.

Speaker Change #125: It's a it's a strong asset in terms of.

Speaker Change #125: The quality of the asset itself.

Speaker Change #125: Don Marci, who runs the company along with the.

Speaker Change #125: No.

Speaker Change #125: Joe Nolan, who runs ever source, they've done a nice job in maintaining the asset.

Speaker Change #125: Growing at a little bit so from that perspective, I think it's a nice asset but.

Speaker Change #125: I also think it's challenged regulatory environment and eight 7% Roe.

Speaker Change #125: And our latest cases is it a little bit concerning I think to any potential buyer.

Speaker Change #125: I think the ability to grow in Connecticut is also challenging with the.

Speaker Change #125: The requirement of a referendum to grow so I think there are some challenging things listen there's a lot of people are going to look at that asset.

Speaker Change #125: Talk about what what our plans are but.

I think it's an interesting asset.

Speaker Change #125: It has some.

Speaker Change #125: Pluses and minuses to it.

Speaker Change #126: Okay. Thanks for your thoughts.

Speaker Change #127: You bet. Thanks, Greg.

Speaker Change #127: So no further questions. So I'll hand, you back to Christopher Franklin to conclude today's call.

Christopher H. Franklin: Thanks for sticking with US folks I know, we went a little long today, but good questions.

Christopher H. Franklin: Lot of material to cover on the year, So many things happening in the industry.

Christopher H. Franklin: Obviously, Dan myself, Brian and the team are always available for your follow ups. Thanks for joining us today.

Christopher H. Franklin: Yes.

Speaker Change #128: Thank you for joining today's call you may now disconnect your lines.