Q4 2023 American States Water Company Earnings Call
[music].
Ladies and gentlemen, thank you for standing by welcome.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the American States Water Company conference call discussing the company's fourth quarter and full year 2023 results. The call is being recorded.
Welcome to the American States Water Company conference call discussing the company's fourth quarter and full year 'twenty twenty-three results.
The call is being recorded.
Operator: If you would like to listen to the replay of this call, it will begin this afternoon at 5 p.m. Eastern Time and run through Thursday, February 29, 2024 on the company's website, www.aswater.com. The slides that the company will be referring to are also available on the website. All participants will be in a listen-only mode.
If you would like to listen to the replay of this call. It will begin this afternoon at five P. M. Eastern time and run through Thursday February 29, 2024 on the company's website www dot a S water dotcom.
The slides that the company will be referring to are also available on the website.
All participants will be in a listen only mode should.
Operator: Should you need any assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the star key, then 1 on your touchtone phone.
Should you need any assistance. Please signal a conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your Touchtone phone.
Operator: To withdraw your question, please press star then 2. This call will be limited to one hour. Presenting today from American States Water Company are Bob Sprowls, President and Chief Executive Officer, and Eva Tang, Senior Vice President of Finance and Chief Financial Officer. As a reminder, certain matters discussed during this conference call may be forward-looking statements intended to qualify for the Safe Harbor from Liability established by the Private Securities Litigation Reform Act of 1995. Please review a description of the company's risks and uncertainties in our most recent Form 10-K and Form 10-Q on file with the Securities and Exchange Commission. In addition, this conference call will include a discussion of certain measures that are not prepared in accordance with Generally Accepted Accounting Principles, or GAAP, in the United States and constitute non-GAAP financial measures under SEC rules. These non-GAAP financial measures are derived from consolidated financial information but are not presented in our financial statements that are prepared in accordance with GAAP.
To withdraw your question. Please press Star then two.
This call will be limited to one hour.
Presenting today from American States water company are Bob Sprowls, President and Chief Executive Officer, and Eva Tang Senior Vice President of Finance and Chief Financial Officer.
As a reminder, certain matters discussed during this conference call maybe forward looking statements intended to qualify for the safe Harbor from liability established by the private Securities Litigation Reform Act of 1995.
Please review a description of the company's risks and uncertainties in our most recent Form 10-K and Form 10-Q on file with the Securities and Exchange Commission.
In addition, this conference call will include a discussion of certain measures that are not prepared in accordance with generally accepted accounting principles or GAAP in the United States and constitute non-GAAP financial measures under SEC rules.
These non-GAAP financial measures are derived from consolidated financial information, but are not presented in our financial statements that are prepared in accordance with GAAP.
Operator: For more details, please refer to the press release. At this time, I will turn the call over to Bob Sprowls, President and Chief Executive Officer of American States Water Company. Please go ahead.
For more details please refer to the press release.
At this time I will turn the call over to Bob Sprowls, President and Chief Executive Officer of American States Water Company. Please go ahead.
Thank you Andrea.
Robert J. Sprowls: Thank you, Andrea, and welcome everyone, and thank you for joining us today. I'll begin with some brief comments on the year. Eva will then discuss some financial details, and then I'll wrap it up with updates on regulatory activity. Asus, dividends, and then we'll take your questions. A very productive and positive year for the company. In June, the company's water utility subsidiary, Golden State Water Company, received a final decision from the California Public Utilities Commission, or CPUC, on its water general rate case, setting rates for 2022 through 2024, as well as on its cost of capital proceedings. Both decisions represent constructive regulatory outcomes and enable us to continue investing in our water infrastructure for safe and reliable water services for generations to come. The cost of capital decision adopted the authorized return on equity, the capital structure, and the embedded cost of debt prospectively.
Welcome everyone and thank you for joining us today.
I'll begin with some brief comments on the year.
Eva will then discuss some financial details.
And then I'll wrap it up with the updates on regulatory activity.
Yes.
Dividends.
Then we will take your questions.
They're very productive and positive year for the company.
In June the company's water utility subsidiary Golden State Water Company received a final decision from the California Public Utilities Commission or CPUC on its water general rate case.
Rates for 2022 through 2024.
Well as the decision on its cost of capital proceeding.
Both decisions represent constructive regulatory outcomes.
And enable us to continue investing in our water infrastructure for safe and reliable water services for generations to come.
The cost of capital decision adopted the authorized return on equity capital structure.
Better cost of debt prospectively.
It also allows for the continuation of the water cost of capital mechanism or adjusting the return on equity.
Robert J. Sprowls: It also allows for the continuation of the water cost of capital mechanism for adjusting the return on equity. As a result, Golden State Water's authorized return on equity increased from 8.9% to 9.36%. Effective July 31st, 2023, and increased again to 10.06% for 2024, as a result of triggering the cost of capital mechanism for each year. In addition, we filed Golden State Water's general rate case in August 2023, and set new rates for the years 2025 through 2027. The filing included a request for capital investment of $611.4 million over the rate cycle.
As a result Golden state water's authorized return on equity increased from eight 9% to 93, 6%.
Effective July 31 2023.
And increased again to 10.06% for 2024.
As a result of triggering the cost of capital mechanism per each year.
In addition, we filed Golden State water General rate case in August 2023.
Set new rates for the years 2025 through 2027.
Finally included a request for capital investment.
$611 $4 million over the rate cycle.
Let's briefly discuss our earnings for the full 2023 year.
Robert J. Sprowls: Let's briefly discuss our earnings for the full 2023 year. Recorded diluted earnings for the year increased by $1.25 per share from 2022, for $0.41 per share adjusted, which excludes favorable variances resulting from the receipt of the final decisions in the general rate case and cost of capital proceedings in June 2023, which Eva will discuss in more detail. The adjusted earnings also exclude the net favorable variance from investments held to fund a retirement plan for both years.
Recorded diluted earnings for the year increased by $1 25 per share from.
From 2022.
Or <unk> 41 per share adjusted.
Which excludes favorable variances, resulting from the receipt of the final decisions in the general rate case and cost of capital proceedings in June 2023.
Eva will discuss in more detail.
The adjusted earnings also exclude the net favorable variance from investments held to fund a retirement plan from both years.
The <unk> 41 per share higher adjusted earnings.
Robert J. Sprowls: The $0.41 per share higher adjusted earnings were largely from the new 2023 water rates approved in Golden State Water's final general rate decision. I'm proud to report that the Consolidated Company earned a return on equity for 2023 of 14.1%, excluding the additional income from the adjusted items associated with Golden State Water's general rate case and cost of capital decision. In 2023, we invested a record-high $175.7 million in infrastructure at our regulated utilities and received $24.1 million in New Capital Upgrade Awards at the military Bases served by ASUS, which expired at the end of 2022. We are pleased that ASUS was awarded two contracts by the U.S. government in the third quarter of 2023 to operate, maintain, and provide construction management services for the water distribution and wastewater collection and treatment facilities on two military bases. The first was our first Navy contract, Naval Air Station Patuxent River, or Pax River, located in Maryland.
We're largely from the new 2023 water rates approved in Golden State Water's final general rate case decision.
I'm proud to report that the consolidated company earned a return on equity for 2023, a 14, 1%.
Excluding the additional income from the adjusted items associated with Golden State Water's general rate case and cost of capital decisions.
In 2023, we invested a record high $175 $7 million in infrastructure at our regulated utilities.
And received $24 $1 billion.
And new capital upgrade award at the military bases served by a S. U S existing at the end of 2022.
We are pleased that <unk> was awarded two contracts by the U S government in the third quarter of 2023 to operate maintain and provide construction management services for the water distribution and wastewater collection and treatment facilities on two military bases.
The first was our first Navy contract that Naval Air station Patuxent River or Pax River located in Maryland.
The initial value of the contract is estimated at $349 million.
Robert J. Sprowls: The initial value of the contract is estimated at $349 million over a 50-year period. ASUS was also awarded a 15-year contract at Joint Base Cape Cod, located in Massachusetts. Under this contract, ASUS has the opportunity to perform work through the periodic issuance of task orders by the U.S. government for up to a maximum initial value of $45 million over a 15-year period. However, both new contract awards are subject to annual economic price adjustments. We take great pride in our strong relationship with the U.S. government and their continued confidence in our expertise in managing water and wastewater systems on military bases, and we believe we are well positioned to continue competing for new contracts in the future. In 2023, we increased our third quarter cash dividend by 8.2%. This is our 69th consecutive year of annual dividend increases. We remain proud of our dividend history and continued growth. With that, I'll turn the call over to Eva to discuss the fourth quarter and full year earnings and liquidity. Thank you, Bob. Hello everyone.
Over a 50 year period.
<unk> was also awarded a 15 year contract at joint base Cape Cod.
Located in Massachusetts.
Under this contract.
<unk> has the opportunity to perform work.
Through the periodic issuance of task orders by the U S government.
For up to a maximum initial value of $45 million over a 15 year period.
Both new contract awards are subject to annual economic price adjustments.
We take great pride in our strong relationship with the U S government and their continued confidence in our expertise in managing water and wastewater systems on military basis.
And we believe we are well positioned to continue competing for new contracts in the future.
In 2023, we increased our third quarter cash dividend by eight 2%.
This is our 69th consecutive year of annual dividend increases.
We remain proud of our dividend history and continued growth.
With that I'll turn the call over to Eva to discuss the fourth quarter and full year earnings and liquidity.
Thank you Bob.
Hello, everyone and.
Let me start without fourth quarterly.
Slide eight consolidated army athlete corrugated Washington, five cents per share for the quarter.
Compared to 50 cents per share for the Codell 2022.
That is an increase of five cents per share.
Robert J. Sprowls: Let me start with our fourth quarter result on slide eight. Consolidate earnings as recorded were $0.55 per share for the quarter as compared to $0.50 per share for the quarter of 2022; that is an increase of $0.05 per share. In last year's fourth quarter, Golden State Water recorded a decrease in earnings of $0.03 per share for revenue subject to refund based on its cost of capital filing in 2021. As a result of receiving the final decision in the cost of capital proceeding in June of 2023 that sets the cost of capital prospectively, the 3 cents per share accrual recorded in Q4 2022 was reversed in the second quarter of 2023. Excluding this item, Adjusted Consolidated Earnings for the 4th Quarter of 2023 were $0.55 per share as compared to Adjusted Earnings of $0.53 per share for the 4th Quarter of 2022, an increase of $0.02 per share. For Golden State Water, reported earnings were $0.41 per share as compared to $0.28 per share for the fourth quarter of 2022. The $0.13 per share increase includes a $0.03 favorable variance from the cost of capital decision, as discussed.
Last year's fourth quarter goes as to why they recorded call.
Calling it a decrease.
Three cents per share for 11 years Pepco to be fact based.
Its cost of capital filing in 'twenty one.
As a result of really seeking to find out because they see the.
The cost of capital proceeding.
In June of 2023 that the cost of capital prospectively.
<unk> per share accrual recorded in Q4 like trying to trade it too what do you mean by the second quarter up 23.
Excluding this item adjusted consolidated earnings for the fourth quarter up 23, or 55 cents per share as compared to adjusted earnings of 53 cents per share for the fourth quarter of 2022.
<unk> Creek up two cents per share.
For Golden State water reported.
Why 41 cents per share as compared to 28 per share for the fourth quarter of 2022.
17 cents per share increase in <unk>.
A recent favorable if that is the cost of capital decision actually Scott.
Excluding this item adjusted earnings for the fourth quarter of 2000 trying to at the water segment was 31 cents per share as compared to recorded.
41 cents per share for the fourth quarter of 2023.
The increase of 10 cents per share.
Sure.
Exactly right.
There's 10 cents per share increase largely represents the rate increases for 2022 and trying to trying to three recorded 23 and higher again generated investment held for retirement plan.
Eva G. Tang: Excluding this item, adjusted earnings for the fourth quarter of 2022 at the water segment were $0.31 per share as compared to recorded earnings of $0.41 per share for the fourth quarter of 2023 and adjusted for an increase of $0.10 per share, or a 32% increase. The $0.10 per share increase largely represents the rate increases for 2022 and 2023 recorded in 2023 and higher gains generated from investments held for retirement plans. Partially offset by the effect of the cost of capital decision effective July 31st, 20 times 3, where there was a reduction in the cost of debt recovered in rates, partially offset by an increase to the authorized return on equity. There were also increases in operating expenses, interest expenses, and income tax.
It should be offset by the effect of the cost of capital decision effective July 31st trying to state Street.
There was a reduction in cost of debt recovered in rate, partially offset by increased to up to the authorized return on equity.
They are they were also increases in operating expenses interest expenses and income taxes.
Our electric segment earnings for the fourth quarter. This year was seven cents per share, which was a decrease of one cents per share compared to 2022, largely resulting from not having a rate in fact for 2023 as we await the pending electric T. I C that was that.
For 2023 through 26.
I also experiencing continued increases over our operating expenses.
Interest costs.
When that decision is issued new rate I expect it to be retroactive to January 2023, and cumulative adjustment will be recorded at the time.
I mean as far as U S Y 12 cents per share for the quarter, a decrease of five cents per share when compared to the same period in 2010.
Eva G. Tang: Our electric segment earnings for the fourth quarter of this year were $0.07 per share, which was an increase of $0.01 per share compared to 2022, largely resulting from not having new rates in effect for 2023 as we await the pending electric GRC that will set new rates for 2023-2026, while also experiencing continued increases in overall operating expenses and interest costs. When a decision is issued, the new rates are expected to be retroactive to January 2023, and cumulative adjustments will be recorded at the time. Earnings from SUS were $0.12 per share for the quarter, a decrease of $0.05 per share when compared to the same period in 2022, largely due to timing differences when construction work was performed throughout the 2023 year compared to 2022. Bob will discuss this in more detail later. Losses from our parent company were $0.04 per share for the quarter, an increase of $0.01 per share as compared to 2022, largely due to an increase in interest expense. Moving on, next slide.
Two large any timing differences of when construction work was performed throughout the 'twenty to 'twenty three year compared to try and tie it to.
Bob will discuss this in more detail later.
Losses from our parent company, what four cents per share for the quarter, an increase of one cents per share loss as compared to trying trying to actually do three increase.
<unk> expenses.
Next slide.
Holiday the revenue for the fourth quarter was consistent with the same period in 2022.
Revenues for the wireless segment.
Creased by $12 $6 million.
Today, representing the rate increases for 'twenty to 'twenty, two and train three recorded in 'twenty two 'twenty three partially offset by a decrease in revenues. We thought we can find the cost of capital decision effective July 23.
In addition, well.
The revenue for World of work in the fourth quarter of 2022 by $1.4 million.
The recording of revenue that's in two weeks I had an attack.
Electric revenue for the three months ended.
December 31st time train three.
Then to flat compared to the same period in 2022, that's new rates for 2023 have yet to be approved.
Or are you at there was a decrease in revenue of $13 million.
Due to timing differences input for me construction work.
Eva G. Tang: Consolidated revenue for the fourth quarter was consistent with the same period in 2022. However, revenues for the water segment increased by $12.6 million, largely representing the rate increases for 2022 and 2023 recorded in 2023, partially offset by a decrease in revenues resulting from the cost of capital decisions effective July 31, 2023. In addition, water revenues were lowered in the fourth quarter of 2022 by $1.4 million due to the recording of revenues subject to refund at the time. Electric revenue for the three months ended. December 31, 2023 have remained flat compared to the same period in 2022, as new rates for 2023 have yet to be approved. For ASUS, there was a decrease in revenue of $13 million due to timing differences in performing construction work.
Turning to slide 10.
Looking at a total operating expenses other than supply cost consol.
<unk> expenses decreased $9 $3 million, that's compared to last year's fourth quarter.
The decrease was largely related to lower construction costs as U S, partially offset by higher administrative and general expenses and other taxes.
Interest expense net of interest income decreased by $2 $4 million due to higher average interest rates during the quarter and increases in overall.
Oh.
Other income net of other expense remain flat for the quarter compared to the same period in 2022.
Slide 11 shows the adjusted EPS Bridge, comparing fourth quarter of 2023 and 2022.
This slide reflects our full year earnings per share by segment as reported and adjusted <unk>.
Diluted earnings reported for train train, three or $3 and 36% as compared to $2.11 for 'twenty to 'twenty two.
Eva G. Tang: Turning to slide 10, and looking at total operating expenses other than supply costs, consolidated expenses decreased $9.3 million as compared to last year's fourth quarter. The decrease was largely related to lower construction costs at the S.U.S., partially offset by higher administrative and general expenses, and other taxes. Interest expense, net of interest income, decreased by 2.4 million dollars due to a higher average interest rate during the quarter and increases in overall borrowing levels.
Increase of $1.05 per share.
Included in the 2023 we felt was the 38 cents per share related to the impact of a retroactive rate funded decision on the water general rate case for the full year of 2022.
In addition, as a result of the final cost of capital decision.
Chinese trade result, including 13 cents per share related to the revised so off to estimate the impact of a lower cost of debt.
In 2022.
The dollar kind of five cents per share increase also includes a favorable variance of 20 cents per share finally investments held to fund a retirement plan.
Eva G. Tang: Other income, none of the other expenses remained flat for the quarter compared to the same period in 2022. Slide 11 shows the adjusted EPS bridge comparing the fourth quarter of 2023 and 2022. This slide reflects our full-year earnings per share by segment as reported and adjusted. Fully diluted earnings as reported for 2023 were $3.36 as compared to $2.11 for 2022, an increase of $1.25 per share. Included in the 2023 result was $0.38 per share related to the impact of retroactive rates from the decision in the water generator case for the full year of 2022. In addition, as a result of the final cost of capital decision, the 2023 result includes $0.13 per share related to the reversal of the estimated impact of a lower cost of debt recorded in 2022. The $1.25 per share increase also includes a favorable variance of $0.20 per share from an investment held to fund a retirement plan.
Excluding the three items mentioned above.
The consolidated earnings for the year was $2 75 per share as compared to adjusted earnings of $2.34 per share for 2022, an increase of 41 cents per share.
The change in earnings has allowed today I always tell the rate increases for Golden State water.
Construction activity increases to managed revenue as U S.
Partially offset by overall higher operating and interest expenses across all segments.
For more details on the annual results. Please refer to yesterday's press release and Form 10-K.
Turning to liquidity net cash provided by operating activities was $67 $7 million for this year as compared to $117 $8 million for 2022.
Increase in operating cash flow was largely as a result of a decrease in billed water consumption and the delayed receipt and find out why the T. I C.
However.
While there has implemented new rates since July 30 for <unk> and is collecting surcharges to recover a retroactive amount due to the delayed beginning in October of last year.
In addition, cash flow from construction related activities as U S decrease this year, representing timing differences of when the construction work is being performed and when the payments are made to our contractors.
Eva G. Tang: Excluding the three items mentioned above, adjusted consolidated earnings for the year were $2.75 per share as compared to adjusted earnings of $2.34 per share for 2022, an increase of $0.41 per share. The change in earnings is largely a result of rate increases from Golden State Water and higher construction activity and increases to managed revenue from S.U.S., partially offset by overall higher operating and interest expenses across all sectors. For more details on the annual results, please refer to yesterday's press release and Form 10-K. Turning to liquidity, net cash provided by operating activities was $67.7 million for this year, as compared to $117.8 million for 2022. The decrease in operating cash flow was largely a result of a decrease in billed water consumption and a delay in receiving final water TRCs.
For investing activities as Bob mentioned, our regulated utility invested a record high of $175 $7 million on company funded capital projects during 2023.
Project Company funded capital expenditure at our regulated utility to be $160 million to $200 million this year.
We are currently maintaining a credit rating of AA stable with standard <unk> Poor's global ratings or S&P, while go to state maintains AA plus stable rating with S&P and an eight two stable rating with Moody's investors service.
Yeah.
These are some highest credit ratings in the U S investor owned water utility industry.
As we mentioned in the prior quarters American States water's intends to seek $150 million to $200 million of additional capital.
Eva G. Tang: However, Golden State Water has implemented new rates since July 31, 2023, and it is collecting surcharges to recover retroactive amounts due to the delay beginning in October of last year. In addition, cash flow from construction-related activities at ASUS decreased this year, representing timing differences between when the construction work is being performed and when the payments are made to our contractors. For investing activities, as Bob mentioned, our regulated utility invested a record-high $175.7 million on company-funded capital projects during 2023, and I would project company-funded capital expenditures at our regulated utility to be $160 to $200 million this year. AWR currently maintains a credit rating of A-Stable with Standard & Poor's Global Ratings, or S&P, while Golden State maintains an A-Plus Stable Rating with There are some; these are some of the highest credit ratings in the U.S. investor-owned water utility industry.
Over the next three years through equity offering.
Making crude and at the market program.
With that I'll turn the call back to Bob.
Thank you Eva.
Take a minute here and discuss a few key regulatory matters.
As mentioned earlier, the CPUC adopted Golden State Water's General rate case decision in June of 2023.
Final decision issued set new rates for 2022 through 2024.
Authorized capital infrastructure budget of $404 $8 million over the three year rate cycle.
Adopts new operating expense levels.
And allows for additional increases and adopted revenues for 2023 and 2024.
Subject to an earnings.
And changes to the inflationary index failures.
In August of last year, who stay waterfall. This general rate case for water rates for the years 2025 through 2027.
Among other things Golden state water.
Requested capital budgets in this application of 611 $4 million.
Over the rate cycle.
We also requested the continuation of mechanisms to accommodate fully decoupled revenues and sales interact differences between recorded and CPUC authorized supply related expenses.
The proposed decision in the water general rate case is scheduled for the fourth quarter of 2024 with new rates to become effective January one 2025.
Eva G. Tang: As we mentioned in the prior quarters, American States Water intends to seek $150 to $200 million of additional capital over the next three years through equity offerings, which may include an at-the-market program. With that, I'll turn the call back to Bob. Thank you, Eva.
Also in June of last year, the CPUC adopt a final decision in the cost of capital proceeding to set the new cost of capital for 2022 through 2024.
Robert J. Sprowls: Take a minute here and discuss a few key regulatory matters. As mentioned earlier, the CPUC adopted Golden State Water's general rate case decision in June of 2023. The final decision issued set new rates for 2022 through 2024, authorized the capital infrastructure budget of $404.8 million over the three-year rate cycle, adopted new operating expense levels, and allows for additional increases in adopted revenues for 2023 and 2024, subject to an earnings test and changes to the inflationary index values. In August of last year, Golden State Water filed its general rate case for water rates for the years 2025 through 2027. Among other things, Golden State Water requested capital budgets in this application of $611.4 million over the rate cycle. We also requested the continuation of mechanisms to accommodate fully decoupled revenues and sales and track differences between recorded and CPUC-authorized supply-related expenses.
The decision adopted our requested capital structure of 57% equity and 43% debt.
Requested cost of debt of five 1%.
And a return on equity of 885%.
It also allows for the continuation of the water cost of capital mechanism.
In addition, based on the final decision all adjustments to rates where prospective.
Golden State water filed an advice letter that implemented the new cost of capital effective July 31 2023.
So just mentioned the decision allowed for the continuation of the water cost of capital mechanism.
For the period from October one 2021 through September 32022.
Moody's double AA utility bond rate increased by 102.
Basis points from the benchmark.
Which triggered the water cost of capital mechanism adjustment.
51 basis points.
Because the recently authorized cost of capital.
As prospective Golden State water's adopted return on equity increased from 885% to 936%.
And its cost of debt decreased from six 6% to.
Five 1%.
In fact, the July 31 2023.
Additionally for the period from October one 2022 through September 32023.
Robert J. Sprowls: A proposed decision in the Water General Rate Case is scheduled for the fourth quarter of 2024 with new rates to become effective January 1st, 2025. Also, in June of last year, the CPUC adopted the final decision in the cost of capital proceeding to set the new cost of capital for 2022 through 2024. The decision adopted a requested capital structure of 57% equity and 43% debt, a requested cost of debt of 5.1%, and a return on equity of 8.85%. It also allows for the continuation of the water cost of capital mechanism. In addition, based on the final decision, all adjustments to rates were prospective.
The Moody's double a utility bond rates increased by 139 seven basis points from the benchmark.
Which again triggered another water cost of capital mechanism adjustment.
In November 2023, the CPUC approved Golden State waters filings to increase the 936% return on equity to 10.06% effective January one 2024.
Moving on to slide 16.
As many of you know investor owned water utilities, serving in California are required to file their cost of capital applications on a triennial basis.
Which means Golden state water's next cost of capital application.
Scheduled to be filed on May one of this year for the years 2025 through 2027.
Robert J. Sprowls: Golden State Water filed an advice letter that implemented the new cost of capital effective July 31st, 2023. As I just mentioned, the decision allowed for the continuation of the water cost of capital mechanism. For the period from October 1st, 2021, through September 30, 2022, the Moody's AA utility bond rate increased by 102.8 basis points from the benchmark, which triggered the Water Cost of Capital Mechanism Adjustment by 51 Basin. Because the recently authorized cost of capital is prospective, Golden State Water's adopted return on equity increased from 8.85% to 9.36%, and its cost of debt decreased from 6.6% to 5.1 percent, effective July 31st, 2023. Additionally, for the period from October 1st, 2022 through September 30th, 2023, the Moody's AA utility bond rate increased by 139.7 basis points from the benchmark, which again triggered another water cost of capital mechanism adjustment.
However, Golden state water, along with three other class a investor owned water utilities filed a joint request with the CPUC to defer the cost of capital applications by one year.
Which was approved by the CPUC.
On February 2nd of this year.
The joint request that the utilities keep the cost of capital currently authorized for 2024 in effect through 2025.
And to file new cost of capital applications by May one 2025 to.
To set the cost of debt return on equity and capital structure, starting January one 2026.
Golden State Water's current authorized rate of return on rate base is 793%.
Which will continue to be in effect through December 31, 2025.
Additionally, Golden State water's cost of capital mechanism will remain active.
Through the one year deferral period.
Our electric utility subsidiary filed its general rate case on August 32022 for new rates for the period 2023 through 2026.
Yeah application includes additional capital expenditures of $68 $2 million for the four year rate cycle.
A new cost of capital.
We have also requested recovery of more than $22 million in capital already spent related to the wildfire mitigation plans.
Robert J. Sprowls: In November 2023, the CPUC approved Golden State Waters' filing to increase the 9.36% return on equity to 10.06%, effective January 1st, 2024. Moving on to slide 16.
The new rates once approved will be retroactive to January one 2023.
Turning our attention to slide 17, we present the growth in Golden State Water's adopted average water rate base from 2018 through 2024.
Robert J. Sprowls: As many of you know, investor-owned water utilities serving in California are required to file their cost of capital applications on a triennial basis, which means Golden State Water's next cost of capital application, scheduled to be filed on May 1st of this year for the years 2025 through 2027. However, Golden State Water, along with three other Class A investor-owned water utilities, filed a joint request with the CPUC to defer the cost of capital applications by one year, which was approved by the CPC on February 2nd of this year, joint request asks that the utilities keep the cost of capital currently authorized for 2024 in effect through 2025, and to file new cost of capital applications by May 1st, 2025, set the cost of debt, return on equity, and capital structure starting January 1, 2026.
Golden State waters adopted average rate base increased from $752 $2 million.
In 2018 to 1 billion 357 $5 million in 2024.
That is a compound annual growth rate of 10, 3% for the six year period.
Let's continue to a S U S.
The issue has contributed earnings of <unk> 50 per share for the full year of 2023.
As compared to <unk> 46 per share for 2022.
The increase year over year was largely due to an increase in management fee revenue.
Resulting from the resolution of various economic price adjustments.
And an increase in construction activity.
The offset by higher overall operating expenses and interest cost.
The issue has contributed earnings of <unk> 12 per share for the fourth quarter of 2023.
As compared to <unk> 17 per share for the same period in 2022.
Robert J. Sprowls: Golden State Water's current authorized rate of return on rate base is 7.93%, which will continue to be in effect through December 31st, 2025. Additionally, Golden State Water's cost of capital mechanism will remain active through the one-year deferral period. Our electric utility subsidiary filed its general rate case on August 30, 2022, for new rates for the period 2023 through 2026. The application includes additional capital expenditures of $68.2 million for the four-year rate cycle and a new cost of capital. We have also requested the recovery of more than $22 million in capital already spent related to the wildfire mitigation plan.
The decrease largely resulting from the timing of when construction work was performed in 2023 as compared to 2022.
As previously highlighted issue has had two contract award wins during 2023.
The Naval Air station Patuxent River contract has an estimated $349 million contract value over a 50 year period.
It will be subject to annual economic price adjustments.
Yes U S was also awarded a 15 year contract.
<unk> joint base Cape Cod.
Under this contract <unk> will have the opportunity to perform work through the periodic issuance of task orders by the U S government.
Up to a maximum initial value of $45 million.
Over a 15 year period.
It is also subject to annual economic price adjustments.
In September 2023.
Robert J. Sprowls: The new rates, once approved, will be retroactive to January 1, 2023. Turning our attention to slide 17, we present the growth in Golden State Water's adopted average water rate base from 2018 through 2024. Golden State Water's adopted average rate base increased from $752.2 million in 2018 to $1,357,500,000 in 2024. That is a compound annual growth rate of 10.3% for the six-year period. Let's continue with ASUS.
The first task order was issued with a value of $2 $3 million to perform an evaluation construction and transition services.
Our scheduled for completion in 2024.
As I mentioned earlier <unk> received new capital upgrade project awards of $24 $1 million in 2023.
For work that will be performed in the next few years.
On the military bases that existed at the end of 2022.
With a solid performance expected for <unk> in 2024.
We project <unk> to contribute.
50 to 54 per share.
This year.
Which is <unk> <unk> per share higher than our range for 2024 that we had done discussed with you during our third quarter earnings call.
Robert J. Sprowls: ASU projected earnings of $0.50 per share for the full year of 2023, as compared to 46 cents per share for 2022. The increase year-over-year was largely due to an increase in management fee revenue, resulting from their resolution of various economic price adjustments, and an increase in construction activity, partially offset by higher overall operating expenses and interest costs. ASUS contributed earnings of $0.12 per share for the fourth quarter of 2023, as compared to $0.17 per share for the same period in 2022. The decrease largely resulted from the timing of when construction work was performed in 2023 as compared to 2022. Previously highlighted, ASUS had two contract award wins during 2023. The Naval Air Station Patuxent River contract has an estimated $349 million contract value over a 50-year period.
We remain confident that we can effectively compete for new military base contract Awards.
Based on our proven track record of managing water and wastewater related services for military basis since 2004.
I would like to turn our attention to dividends, which remains a compelling part of our investment story.
Our quarterly dividend rate has grown at a compound annual growth rate of nine 4%.
Over the last five years from 2018 to 2023.
These increases are consistent with our policy to achieve a compound annual growth rate in the dividend of more than 7% over the long term.
Our strong dividend history is something that the company is proud of.
And as a continuing asset to our shareholders.
I'd like to conclude our prepared remarks by thanking you for your interest in American States water.
And we'll now turn the call over to the operator for questions.
We will now take your questions to ask a question you May Press Star then one on your telephone keypad.
If you are using a speakerphone please pick up your handset before pressing the keys.
Robert J. Sprowls: It will be subject to annual economic price adjustment. ASUS was also awarded a 15-year contract to serve Joint Base Cape Cod. Under this contract, ASUS will have the opportunity to perform work through the periodic issuance of task orders by the U.S. government for up to a maximum initial value of $45 million over a 15-year period, and it is also subject to annual economic price adjustment until September 2023.
To withdraw your question. Please press Star then two.
Once again that was star then one to ask a question at this time, we will pause momentarily to assemble the roster.
And our first question will come from Gregg <unk> of UBS. Please go ahead.
Hello, Hi, Greg.
Okay.
Hey, what's the schedule and the rate case.
Robert J. Sprowls: The first task order was issued with a value of 2.3 million dollars to perform an evaluation, construction, and transition services that are scheduled for completion in 2024. As I mentioned earlier, ASUS received new capital upgrade project awards of $24.1 million in 2023 for work that will be performed in the next few years on the military bases that existed at the end of 2022, with a solid performance expected for ASUS in 2024. We project ASUS to contribute $0.50 to $0.54 per share this year, which is $0.02 per share higher than the range for 2024 that we had discussed with you during our third quarter earnings call. We remain confident that we can effectively compete for new military-based contract awards based on our proven track record of managing water and wastewater-related services for military bases since 2004.
The milestones coming up on the you said the proposed decision in the fourth quarter.
Yes, I would say that the big the big issue is we're waiting for public Advocate's report on the rate case.
And Thats I think due out by the end of February.
And then and then we'll move forward there I'm not sure hearings have been scheduled at this point, but.
But we'll be very interested to see what.
Public advocates office to say, sorry, Greg Hello.
Great.
Yes, yes, and so I know.
Uh huh.
Yeah.
No.
There was sort of.
Controversial or non standard recommendation by Cal advocates.
And.
Case for one of your peers.
Is that kind of what you're expecting in this case.
Well.
Not really sure.
We.
It's a little strange to see a.
Signed commissioner issue.
Alternate decision from the LNG given that.
Robert J. Sprowls: I would like to turn our attention to dividends, which remain a compelling part of our investment story. The quarterly dividend rate has grown at a compound annual growth rate of 9.4% over the last five years from 2018 to 2023. These increases are consistent with our policy to achieve a compound annual growth rate in the dividend of more than 7% over the long term. A strong dividend history is something the company is proud of, and is a continuing asset to our shareholders. I'd like to conclude our prepared remarks by thanking you for your interest in American States Water, and we'll now turn the call over to the operator for questions. We will now take your questions. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.
<unk> the assigned commissioner, but it's not.
Unheard of.
We hope.
We hope we don't have something similar there.
<unk>.
We do believe that the alternative and the Cal water case does not reflect a balanced decision.
And we'd like to.
The original proposed decision approved.
For the alternate revised.
<unk>.
Not exactly sure why is headed down this path.
Hmm.
Some of the things included in the decision or things that.
We've had included in our <unk>.
Prior filings so we're watching it closely as you can as you would expect.
Okay.
Okay. Thank you.
Thank you Greg.
Once again, if you would like to ask a question. Please press Star then one.
That will conclude today's question and answer session I would like to turn the.
Operator: To withdraw your question, please press star then 2. Once again, that was star then one to ask a question. And at this time, we will pause momentarily to assemble the roster. And our first question will come from Greg Orle of UBS. Please go ahead. Hello.
The conference back over to Bob Sprowls for any closing remarks.
Thank you Andrea I just wanted to thank everybody that participated today for their participation and let them know that we look forward to speaking with them.
Greg Orle: Hi Greg. Oh, sorry. I'm on mute.
During the next quarter.
Thank you everyone.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.
Greg Orle: Thank you. Okay. Hey, what's the schedule in the rate case? What are the milestones coming up on, you said, the proposed decision in the fourth quarter? Yeah, I would say the big issues are we're waiting for the public advocates report on the rate case. And that's, I think, due out by the end of February, and then we'll move forward there. I'm not sure hearings have been scheduled at this point, but we'll be very interested to see what Public Athletics has to say. Sorry, Greg.
Okay.
[music].
Robert J. Sprowls: Hello. Hi Greg. Yeah, yeah.
Robert J. Sprowls: And and so I know one, You know, there was sort of a controversial or non-standard recommendation by Cal Advocates in the case for one of your peers. Is that kind of what you're expecting in this case? Well, we're, you know, we're not really sure. You know, we... It's a little strange, you know, to see a...
Robert J. Sprowls: Signed, Commissioner, Issue of, Alternate decision from the ALJ given. Commissioner's the assigned commissioner, but it's not unheard of. Um, You know, we hope we don't have something similar there, but we do believe that the alternate decision in the Cal Water case does not reflect a balanced decision, and we'd like to see the original proposed decision approved, or The Alternate Revised. I'm not exactly sure why it's headed down this path. Some of the things included in the decision are things that we've had included in our prior filing. So we're watching it closely as closely as we can, as you would expect. Okay, thank you.
Yeah.
[music].
Operator: Page 6 of 6. Once again, if you would like to ask a question, please press star, then 1. That will conclude today's question and answer session. I would like to turn the conference back over to Bob Sprowls for any closing remarks. Thank you, Andrea. I just wanted to thank everybody that participated today for their participation and let them know that we look forward to speaking with them during the next quarter. Thank you, everyone.
Operator: The conference is now concluded. Thank you for attending today's presentation, and you may now disconnect. ??? ??? ??? © BF-WATCH TV 2021 ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Please Like, Subscribe, & Comment on where to head to next!
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the American States Water Company conference call discussing the company's fourth quarter and full year 2023 results. The call is being recorded.
Operator: If you would like to listen to the replay of this call, it will begin this afternoon at 5 p.m. Eastern time and run through Thursday, February 29, 2024 on the company's website, www.aswater.com. The slides that the company will be referring to are also available on the website. All participants will be in a listen-only mode.
Operator: Should you need any assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the star key, then 1 on your touchtone phone.
[music].
Operator: To withdraw your question, please press star then 2. This call will be limited to one hour. Presenting today from American States Water Company are Bob Sprowls, President and Chief Executive Officer, and Eva Tang, Senior Vice President of Finance and Chief Financial Officer. As a reminder, certain matters discussed during this conference call may be forward-looking statements intended to qualify for the Safe Harbor from Liability established by the Private Securities Litigation Reform Act of 1995. Please review a description of the company's risks and uncertainties in our most recent Form 10-K and Form 10-Q on file with the Securities and Exchange Commission. In addition, this conference call will include a discussion of certain measures that are not prepared in accordance with Generally Accepted Accounting Principles, or GAAP, in the United States and constitute non-GAAP financial measures under FEC rules. These non-GAAP financial measures are derived from consolidated financial information but are not presented in our financial statements that are prepared in accordance with GAAP.
Ladies and gentlemen, thank you for standing by welcome to the American States Water Company conference call discussing the company's fourth quarter and full year 'twenty twenty-three results.
The call is being recorded.
If you would like to listen to the replay of this call. It will begin this afternoon at five P. M. Eastern time and run through Thursday February 29, 2024 on the company's website at Www Dot a S water dotcom.
Operator: For more details, please refer to the press release. At this time, I will turn the call over to Bob Sprowls, President and Chief Executive Officer of American States Water Company. Please go ahead.
Robert J. Sprowls: Thank you, Andrea, and welcome everyone, and thank you for joining us today. I'll begin with some brief comments on the year. Eva will then discuss some financial details, and then I'll wrap it up with updates on regulatory activity. Asus, dividends, and then we'll take your questions. A very productive and positive year for the company. In June, the company's water utility subsidiary, Golden State Water Company, received a final decision from the California Public Utilities Commission, or CPUC, on its water general rate case to set rates for 2022 through 2024, as well as a decision on its cost of capital proceedings. Both decisions represent constructive regulatory outcomes and enable us to continue investing in our water infrastructure for safe and reliable water services for generations to come. The cost of capital decision adopted the authorized return on equity, the capital structure, and the embedded cost of debt prospectively.
The slides that the company will be referring to are also available on the website.
All participants will be in a listen only mode.
Should you need any assistance. Please signal a conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your Touchtone phone.
To withdraw your question. Please press Star then two.
This call will be limited to one hour.
Presenting today from American States water company are Bob Sprowls, President and Chief Executive Officer, and Eva Tang Senior Vice President of Finance and Chief Financial Officer.
As a reminder, certain matters discussed during this conference call maybe forward looking statements intended to qualify for the safe Harbor from liability established by the private Securities Litigation Reform Act of 1995.
Robert J. Sprowls: It also allows for the continuation of the water cost of capital mechanism for adjusting the return on equity. As a result, Golden State Water's authorized return on equity increased from 8.9% to 9.36%. Effective July 31st, 2023, and increased again to 10.06% for 2024, as a result of triggering the cost of capital mechanism for each year. In addition, we filed Golden State Water's general rate case in August 2023, and set new rates for the years 2025 through 2027. The filing included a request for capital investment of $611.4 million over the rate cycle.
Please review a description of the company's risks and uncertainties in our most recent Form 10-K and Form 10-Q on file with the Securities and Exchange Commission.
In addition, this conference call will include a discussion of certain measures that are not prepared in accordance with generally accepted accounting principles or GAAP in the United States and constitute non-GAAP financial measures under SEC rules.
These non-GAAP financial measures are derived from consolidated financial information, but are not presented in our financial statements that are prepared in accordance with GAAP.
For more details please refer to the press release.
At this time I will turn the call over to Bob Sprowls, President and Chief Executive Officer of American States Water Company. Please go ahead.
Robert J. Sprowls: Let's briefly discuss our earnings for the full 2023 year. Recorded diluted earnings for the year increased by $1.25 per share from 2022, for $0.41 per share adjusted, which excludes favorable variances resulting from the receipt of the final decisions in the general rate case and cost of capital proceedings in June 2023, which Eva will discuss in more detail. The adjusted earnings also exclude the net favorable variance from investments held to fund a retirement plan for both years.
Thank you Andrea.
Welcome everyone and thank you for joining us today.
I'll begin with some brief comments on the year.
Eva will then discuss some financial details.
And then I'll wrap it up with the updates on regulatory activity.
Yes U S.
Dividends.
Then we'll take your questions.
They're very productive and positive year for the company.
In June the Companys water utility subsidiary Golden State Water Company received a final decision from the California Public Utilities Commission or CPUC on its water general rate case.
Robert J. Sprowls: The $0.41 per share higher adjusted earnings were largely from the new 2023 water rates approved in Golden State Water's final general rate decision. I'm proud to report that the Consolidated Company earned a return on equity for 2023 of 14.1%, excluding the additional income from the adjusted items associated with Golden State Water's general rate case and cost of capital decision. In 2023, we invested a record-high $175.7 million in infrastructure at our regulated utilities and received $24.1 million in New Capital Upgrade Awards at the military Bases served by ASUS, which expired at the end of 2022. We are pleased that ASUS was awarded two contracts by the U.S. government in the third quarter of 2023 to operate, maintain, and provide construction management services for the water distribution and wastewater collection and treatment facilities on two military bases. The first was our first Navy contract, Naval Air Station Patuxent River, or Pax River, located in Maryland.
Rates for 2022 through 2024.
As well as the decision on its cost of capital proceeding.
Both decisions represent constructive regulatory outcomes and enable us to continue investing in our water infrastructure for safe and reliable water services for generations to come.
The cost of capital decision adopted the authorized return on equity.
Capital structure, and the embedded cost of debt prospectively.
It also allows for the continuation of the water cost of capital mechanism.
Adjusting their return on equity.
As a result Golden state water's authorized return on equity increased from eight 9% to 93, 6%.
Fact of July 31, 2023.
And increased again to 10.06% for 2024.
As a result of triggering the cost of capital mechanism per each year.
In addition, we filed Golden State water General rate case in August 2023.
New rates for the years 2025 through 2027.
Finally included a request for capital investment of $611 $4 million over the rate cycle.
Let's briefly discuss our earnings for the full 2023 years.
Recorded diluted earnings for the year increased by $1 25 per share.
From 2022.
Or <unk> 41 per share adjusted.
Robert J. Sprowls: The initial value of the contract is estimated at $349 million over a 50-year period. ASUS was also awarded a 15-year contract at Joint Base Cape Cod, located in Massachusetts. Under this contract, ASUS has the opportunity to perform work through the periodic issuance of task orders by the U.S. government for up to a maximum initial value of $45 million over a 15-year period. However, both new contract awards are subject to annual economic price adjustments. We take great pride in our strong relationship with the U.S. government and their continued confidence in our expertise in managing water and wastewater systems on military bases, and we believe we are well positioned to continue competing for new contracts in the future.
Which excludes favorable variances, resulting from the receipt of the final decisions.
The general rate case and cost of capital proceedings in June 2023.
Eva will discuss in more detail.
The adjusted earnings also exclude the net favorable variance from investments held to fund a retirement plan from both years.
The <unk> 41 per share higher adjusted earnings.
We're largely from the new 2023 water rates approved in Golden State Water's final general rate case decision.
I'm proud to report that the consolidated company earned a return on equity for 2023, a 14, 1%.
Excluding the additional income from the adjusted items associated with Golden State Water's general rate case and cost of capital decisions.
In 2023, we invested a record high $175 $7 million in infrastructure at our regulated utilities.
Robert J. Sprowls: In 2023, we increased our third quarter cash dividend by 8.2%. This is our 69th consecutive year of annual dividend increases. We remain proud of our dividend history and continued growth. With that, I'll turn the call over to Eva to discuss the fourth quarter and full year earnings and liquidity. Thank you, Bob. Hello, everyone.
And received $24 1 million.
And new capital upgrade awards at the military bases served by <unk> existing at the end of 2022.
We are pleased that <unk> was awarded two contracts by the U S government in the third quarter of 2023 to operate maintain and provide construction management services for the water distribution and wastewater collection and treatment facilities on two military bases.
Eva G. Tang: Let me start with our fourth quarter result on slide eight. Consolidate earnings as recorded were $0.55 per share for the quarter, as compared to $0.50 per share for the quarter of 2022. That is an increase of $0.05 per share. In last year's fourth quarter, Golden State Water recorded a decrease in earnings of $0.03 per share for revenue subject to refund based on its cost of capital filing in 2021. As a result of receiving the final decision in the cost of capital proceeding in June of 2023 that sets the cost of capital prospectively, the three cents per share accrual recorded in Q4 2022 was reversed in the second quarter of 2023. Excluding this item, adjusted consolidated earnings for the fourth quarter of 2023 were $0.55 per share as compared to adjusted earnings of $0.53 per share for the fourth quarter of 2022, an increase of $0.02 per share. For Golden State Water, reported earnings were $0.41 per share, as compared to $0.28 per share for the fourth quarter of 2022. The $0.13 per share increase includes a $0.03 favorable variance from the cost of capital decision, as discussed.
The first was our first navy contract that.
Naval Air Station Patuxent River Pax River located in Maryland.
The initial value of the contract is estimated at $349 million.
Over a 50 year period.
<unk> was also awarded a 15 year contract at joint base Cape Cod.
Located in Massachusetts.
Under this contract.
<unk> has the opportunity to perform work.
Through the periodic issuance of task orders by the U S government.
We're up to a maximum initial value of $45 million over a 15 year period.
Both new contract awards are subject to annual economic price adjustments.
We take great pride in our strong relationship with the U S government and their continued confidence in our expertise in managing water and wastewater systems on military basis.
And we believe we are well positioned to continue competing for new contracts in the future.
In 2023, we increased our third quarter cash dividend by eight 2%.
This is our 69th consecutive year of annual dividend increases.
We remain proud of our dividend history and continued growth.
With that I'll turn the call over to Eva to discuss the fourth quarter and full year earnings and liquidity.
Thank you Bob.
Hello, everyone let.
Let me.
Without fourth quarterly.
Like Inc.
Consolidated equity corrugated Washington.
This year for the quarter as compared to <unk> 50 per share for the quarter F 2022.
That is an increase of five cents per share.
In last year's fourth quarter goes as to why they recorded.
Calling it a decrease.
<unk> per share for 11 years Pepco can make fact based.
Cost of capital filing in 'twenty one.
As a result of receiving a final decision in the cost of capital proceeding in June of 2023.
The cost of capital prospectively at three per share accrual recorded in Q4 'twenty to 'twenty two what the.
Eva G. Tang: Excluding this item, adjusted earnings for the fourth quarter of 2022 at the water segment were $0.31 per share as compared to recorded earnings of $0.41 per share for the fourth quarter of 2023 and adjusted for an increase of $0.10 per share, or a 32% increase. The $0.10 per share increase largely represents the rate increases for 2022 and 2023 recorded in 2023 and higher gains generated from investment held for retirement plans. Partially offset by the effect of the cost of capital decision effective July 31st, 20 times 3, where there was a reduction in the cost of debt recovered in rates, partially offset by an increase to the authorized return on equity. There were also increases in operating expenses, interest expenses, and income.
In the second quarter of <unk>.
Excluding this item adjusted consolidated earnings for the fourth quarter up 23, or 55 per share as compared to adjusted earnings of 53 per share for the fourth quarter of 2022.
<unk> Creek up two cents per share.
For Golden State water reported <unk> 41 per share as compared to <unk> eight per share for the fourth quarter of 2022.
17 cents per share increase in <unk>.
Okay.
Favorable.
The cost of capital decision as discussed.
Excluding this item adjusted earnings.
For the fourth quarter of 2022 at the water segment.
<unk> per share as compared to recording.
41 points yet.
Fourth quarter of 2019.
The increase of 10 cents per share or <unk>.
Exactly.
At 10 cents per share increase largely represent the rate increases for 2022 and 'twenty three recorded.
Eva G. Tang: Our electric segment earnings for the fourth quarter of this year were $0.07 per share, which was a decrease of $0.01 per share compared to 2022, largely resulting from not having new rates in effect for 2023, as we await the pending electric TRC that will set new rates for 2023-2026, while also experiencing continued increases in overall operating expenses and interest costs. When a decision is issued, the new rates are expected to be retroactive to January 2023, and cumulative adjustments will be recorded at the time. Earnings from SUS were $0.12 per share for the quarter, a decrease of $0.05 per share when compared to the same period in 2022, largely due to timing differences when construction work was performed throughout the 2023 year compared to 2022. Bob will discuss this in more detail later. Losses from our parent company were $0.04 per share for the quarter, an increase of $0.01 per share as compared to 2022, largely due to an increase in interest expense. Moving on, next slide.
And higher again generated investment Helen filing cabinet plant.
Partially offset by the effect of the cost of capital decision effective July 23.
There was a reduction in cost of debt recovered in rate, partially offset by increased to up to the atherectomy cap equity.
They are they were also increases in operating expenses interest expenses and income taxes.
Our electric segment earnings for the fourth quarter. This year was seven seven per share, which was a duck Creek, a one cents per share compared to 2022, largely resulting from not having a rate in fact for train train three as we are.
Oh wait depending electric Ti fee that was set new rates for 2023 through 2026.
We're also experiencing continued increases.
Our operating expenses and interest costs.
That decision is issued new rate I expect it to be retroactive to January 2023, and cumulative adjustment will be recorded at the time.
Earnings from U S Y 12 cents per share for the quarter.
Decrease of <unk> <unk> per share when compared to the same period in 2022, largely timing differences of when construction work was performed throughout the 'twenty to 'twenty three year compared to 2019.
Bob will discuss this in more detail later.
Losses.
Parent company was <unk> <unk> per share for the quarter, an increase of one point share loss as compared to 2022, largely due to increased interest expense.
Next slide consolidated revenue for the fourth quarter was consistent with the same period in 2022.
Eva G. Tang: Consolidated revenue for the fourth quarter was consistent with the same period in 2022. However, revenues for the water segment increased by $12.6 million, largely representing the rate increases for 2022 and 2023 recorded in 2023. Partially offset by a decrease in revenues resulting from the cost of capital decisions effective July 31, 2023. In addition, water revenues were lowered in the fourth quarter of 2022 by $1.4 million due to the recording of revenues subject to refund at the time. Electric revenue for the three months ended December 31, 2023 remained flat compared to the same period in 2022, as new rates for 2023 have yet to be approved. For ASUS, there was a decrease in revenue of $13 million due to timing differences in performing construction work. Turning to slide 10.
Revenues for the water segment.
Creased by $12 $6 million.
Today, representing the rate increases for 2022 and <unk> three recorded in 'twenty two 'twenty three partially offset by a decrease in revenues, resulting from the cost of capital decision effective July 20.
<unk>.
In addition, while the revenue for World at work in the fourth quarter of 2022 by $1 $4 million.
The recording of revenue subject to refund and attack.
Electric revenue for the three months ended.
<unk> three <unk>.
The man to flat compared to the same period in 2022.
New rates for 2023 have yet to be approved.
Or are you at there was a decrease in revenue of $13 million.
Due to timing differences in performing construction work.
Turning to slide 10.
Eva G. Tang: And looking at total operating expenses, other than supply costs, consolidated expenses decreased $9.3 million as compared to last year's fourth quarter. The decrease was largely related to lower construction costs at SUN, partially offset by higher administrative and general expenses, and other taxes. Interest expense, net of interest income, decreased by 2.4 million dollars due to a higher average interest rate during the quarter and increases in overall borrowing levels.
And looking at a total operating expenses other than supply cost.
Validate expenses decreased $9 $3 million as compared to last year's fourth quarter.
The decrease was largely related to lower construction costs as U S, partially offset by higher administrative and general expenses and other taxes.
Interest expense net of interest income decreased by $2 $4 million due to higher average interest rates during the quarter and increases in overall borrowing level.
Eva G. Tang: Other income, none of the other expenses, remained flat for the quarter compared to the same period in 2022. Slide 11 shows the adjusted EPS bridge comparing the fourth quarter of 2023 and 2022. This slide reflects our full-year earnings per share by segment as reported and adjusted. Fully diluted earnings as reported for 2023 were $3.36 as compared to $2.11 for 2022, an increase of $1.25 per share. Included in the 2023 result was $0.38 per share related to the impact of retroactive rates from the decision in the water generator case for the full year of 2022. In addition, as a result of the final cost of capital decision, the 2023 result includes $0.13 per share related to the reversal of the estimated impact of a lower cost of debt recorded in 2022. The $1.25 per share increase also includes a favorable variance of $0.20 per share from an investment held to fund a retirement plan.
Other income net of other expense remained flat for the quarter compared to the same period in 2022.
Slide 11 shows the adjusted EPS Bridge, comparing fourth quarter of 2023 and 2022.
This slide reflects our full year earnings per share by segment as reported and adjusted <unk>.
Fully diluted earnings as reported for <unk> train three or $3 36.
As compared to $2 11 for 2022.
An increase of $1.05 per share.
Included in the 2023, we felt was the 30 <unk> per share related to the impact of retroactive rate funded decision in Nevada General rate case for the full year of 2022.
In addition, as a result of the final cost of capital decision in 2023 retail, including 13 cents per share related to the reversal of that.
The impact of a lower cost of debt.
Of course it in 2022.
The dollar kind of <unk> per share increase also includes a favorable variance of <unk> 20 per share of funding investments held to fund a retirement plan.
Eva G. Tang: Excluding the three items mentioned above, adjusted consolidated earnings for the year were $2.75 per share as compared to adjusted earnings of $2.34 per share for 2022, an increase of $0.41 per share. The change in earnings is largely a result of rate increases from Golden State Water and higher construction activity and increases to managed revenue from S.U.S., partially offset by overall higher operating and interest expenses across all sectors. For more details on the annual results, please refer to yesterday's press release and Form 10-K. Turning to liquidity, net cash provided by operating activities was $67.7 million for this year, as compared to $117.8 million for 2022. The decrease in operating cash flow was largely a result of a decrease in billed water consumption and a delay in receiving final water TRCs. However, Golden State Water has implemented new rates since July 31, 2023, and it is collecting surcharges to recover retroactive amounts due to the delays beginning in October of last year. In addition, cash flow from construction-related activities at ASUS decreased this year, resulting in timing differences between when the construction work is being performed and when payments are made to our contractors.
Excluding the three items mentioned above.
The consolidated earnings for the year what to.
$2 75 per share as compared to adjusted earnings of $2 34 per share for 2022.
An increase of 41 cents per share.
The change in earnings is largely a result of the rate increases for Golden State water.
Construction activity increases to managed revenue as U S P.
Partially offset by overall higher operating and interest expenses across all segments.
For more details on the annual results. Please refer to yesterday's press release and Form 10-K.
Turning to liquidity net cash provided by operating activities was $67 $7 million for this year as compared to $117 $8 million for 2022. The decrease in operating cash flow was largely as a result, the other day.
And bill, while the consumption and the delayed receipt and find out why the GIC.
However.
While there has implemented new rates since July 30, <unk> three <unk> is collecting surcharges to recover retroactive amount due to the delayed beginning in October of last year.
In addition, cash flow from construction related activities as U S decrease this year, representing timing differences of when the construction work is being performed and when the payments are made to our contractors.
Eva G. Tang: For investing activities, as Bob mentioned, our regulated utility invested a record-high $175.7 million on company-funded capital projects during 2023, and I would project company-funded capital expenditures at our regulated utility to be $160 to $200 million this year. AWR currently maintains a credit rating of A-Stable with Standard and Poor's Global Ratings, or S&P, while Golden State maintains an A-plus Stable Rating with S These are some of the highest credit ratings in the U.S. investor-owned water utility industry. As we mentioned in the prior quarters, American States Water intends to seek $150 to $200 million of additional capital over the next three years through equity offerings, which may include a market program. With that, I'll turn the call back to Bob. Thank you, Eva.
For investing activities as Bob mentioned, our regulated utility invested a record high of $175 $7 million on company funded capital projects during 2023.
Project Company funded capital expenditure at our regulated utility to be $160 million to $200 million this year.
We are currently maintaining a credit rating of AA stable with standard <unk> Poor's global ratings or S&P. While go to stay maintains AA plus stable rating with S&P and <unk> stable rating with Moody's investors service.
These are some highest credit ratings in the U S investor owned water utility industry.
As we mentioned in the prior quarters American States water's intends to seek a $150 million to $200 million of additional capital.
Over the next three years through equity offerings.
Which may include an at the market program.
With that I'll turn the call back to Bob.
Thank you Eva.
Robert J. Sprowls: We'll take a minute here and discuss a few key regulatory matters. As mentioned earlier, the CPUC adopted Golden State Water's general rate case decision in June of 2023. The final decision issued set new rates for 2022 through 2024, authorized the capital infrastructure budget of $404.8 million over the three-year rate cycle, adopted new operating expense levels, and allows for additional increases in adopted revenues for 2023 and 2024, subject to an earnings test and changes to the inflationary index values. In August of last year, Golden State Water filed its general rate case for water rates for the years 2025 through 2027. Among other things, Golden State Water requested capital budgets in this application of $611.4 million over the rate cycle. We also requested the continuation of mechanisms to accommodate fully decoupled revenues and sales and track differences between recorded and CPUC-authorized supply-related expenses.
I'll take a minute here and discuss a few key regulatory matters.
As mentioned earlier, the CPUC adopted Golden State Water's General rate case decision in June of 2023.
Final decision issued set new rates for 2022 through 2024.
<unk> capital infrastructure budget of $404 $8 million over the three year rate cycle.
Adopts new operating expense levels in.
And allows for additional increases and adopted revenues for 2023, and 2024 subject to an earnings test.
And changes to the inflationary index failures.
In August of last year Golden State water filed a general rate case for water rates for the years 2025 through 2027.
Among other things Golden State waters requested capital budgets in this application of 611 $4 million.
Over the rate cycle.
We also requested the continuation of mechanisms to accommodate fully decoupled revenues and sales.
Interact differences between recorded and CPUC authorized supply related expenses.
Robert J. Sprowls: A proposed decision in the Water General Rate Case is scheduled for the 4th quarter of 2024 with new rates to become effective January 1st, 2025. Also, in June of last year, the CPUC adopted the final decision in the cost of capital proceeding to set the new cost of capital for 2022 through 2024. The decision adopted a requested capital structure of 57% equity and 43% debt, a requested cost of debt of 5.1%, and a return on equity of 8.85%. It also allows for the continuation of the water cost of capital mechanism. In addition, based on the final decision, all adjustments to rates were prospective.
The proposed decision in the water general rate case is scheduled for the fourth quarter of 2024 with new rates to become effective January one 2025.
Also in June of last year, the CPUC adopt the final decision in the cost of capital proceeding to set the new cost of capital for 2022 through 2024.
The decision adopted our requested capital structure of 57% equity and 43% debt.
Requested cost of debt of five 1%.
The return on equity of 885%.
It also allows for the continuation of the water cost of capital mechanism.
In addition, based on the final decision all adjustments to rates where prospective.
Robert J. Sprowls: Golden State Water filed an advice letter that implemented the new cost of capital effective July 31st, 2023. They just mentioned that the decision allowed for the continuation of the water cost of capital mechanism. For the period from October 1st, 2021, through September 30, 2022, the Moody's AA utility bond rate increased by 102.8 basis points from the benchmark, which triggered the Water Cost of Capital Mechanism Adjustment by 51 B.C. Because the recently authorized cost of capital is prospective, Golden State Water's adopted return on equity increased from 8.85% to 9.36%, and its cost of debt decreased from 6.6% to 5.1 percent, effective July 31st, 2023. Additionally, for the period from October 1st, 2022 through September 30th, 2023, the Moody's AA utility bond rate increased by 139.7 basis points from the benchmark, which again triggered another water cost of capital mechanism adjustment.
Golden State water filed an advice letter that implemented the new cost of capital effective July 31 2023.
So just mentioned the decision allowed for the continuation of the water cost of capital mechanism.
For the period from October one 2021 through September 32022.
Moody's double AA utility bond rate increased by 102 basis points from the benchmark.
Which triggered the water cost of capital mechanism adjustment by 51 basis points.
Because the recently authorized cost of capital.
As prospective Golden State water's adopted return on equity increased from 885% to 936%.
And its cost of debt decreased from six 6% to.
To five 1%.
Effective July 31 2023.
Additionally for the period from October one 2022 through September 32023.
The Moody's double a utility bond rate increased by 139 seven basis points from the benchmark.
Which again triggered another water cost of capital mechanism adjustment.
Robert J. Sprowls: In November 2023, the CPUC approved Golden State Waters' filing to increase the 9.36% return on equity to 10.06%, effective January 1, 2024. Moving on to slide 16.
In November 2023, the CPUC approved Golden State water's filings to increase the 936% return on equity to 10.06% effective January one 2024.
Moving on to slide 16.
Robert J. Sprowls: As many of you know, investor-owned water utilities serving in California are required to file their cost of capital applications on a triennial basis, which means Golden State Water's next cost of capital application, scheduled to be filed on May 1st of this year for the years 2025 through 2027. However, Golden State Water, along with three other Class A investor-owned water utilities, filed a joint request with the CPUC to defer the cost of capital applications by one year, which was approved by the CPC on February 2nd of this year, joint request asks that the utilities keep the cost of capital currently authorized for 2024 in effect through 2025, and to file new cost of capital applications by May 1st, 2025, set the cost of debt, return on equity, and capital structure starting January 1, 2026.
As many of you know investor owned water utilities, serving in California are required to file their cost of capital applications on a tri annual basis.
Which means Golden state water's next cost of capital application.
The scheduled to be filed on May one of this year for the years 2025 through 2027.
However, Golden state water, along with three other class a investor owned water utilities filed a joint request with the CPUC to defer the cost of capital applications by one year.
Which was approved by the CPUC.
On February 2nd of this year.
The joint request asked that the utilities keeps the cost of capital currently authorized for 2024th in effect through 2025.
And to file new cost of capital applications by May one 2025 to.
To set the cost of debt return on equity and capital structure, starting January one 2026.
Robert J. Sprowls: Golden State Water's current authorized rate of return on rate base is 7.93%, which will continue to be in effect through December 31st, 2025. Additionally, Golden State Water's cost of capital mechanism will remain active through the one-year deferral period. Our electric utility subsidiary filed its general rate case on August 30, 2022, for new rates for the period 2023 through 2026. The application includes additional capital expenditures of $68.2 million for the four-year rate cycle and a new cost of capital.
Golden State Water's current authorized rate of return on rate base is 793%.
Which will continue to be in effect through December 31, 2025.
Additionally, Golden State water's cost of capital mechanism will remain active through.
Through the one year deferral period.
Our electric utility subsidiary filed its general rate case on August 32022 for new rates for the period 2023 through 2026.
The application includes additional capital expenditures of $68 $2 million for the four year rate cycle.
And a new cost of capital.
Robert J. Sprowls: We have also requested the recovery of more than $22 million in capital already spent related to the wildfire mitigation plan. The new rates, once approved, will be retroactive to January 1, 2023. Turning our attention to slide 17, we present the growth in Golden State Water's adopted average water rate base from 2018 through 2024. Golden State Water's adopted average rate base increased from $752.2 million in 2018 to $1,357,500,000 in 2024.
We have also requested the recovery of more than $22 million in capital already spent related to the wildfire mitigation plans.
The new rates once approved will be retroactive to January one 2023.
Turning our attention to slide 17, we present the growth in Golden State Water's adopted average water rate base from 2018 through 2024.
Golden State waters adopted average rate base increased from $752 2 million in 2018 to 1 billion 357 $5 million in 2024.
Robert J. Sprowls: That is a compound annual growth rate of 10.3% for the six-year period. Let's continue with ASUS. ASU projected earnings of $0.50 per share for the full year of 2023, as compared to 46 cents per share for 2022. The increase year-over-year was largely due to an increase in management fee revenue, resulting from their resolution of various economic price adjustments, and an increase in construction activity, partially offset by higher overall operating expenses and interest costs. ASUS contributed earnings of $0.12 per share for the fourth quarter of 2023, as compared to $0.17 per share for the same period in 2022. The decrease largely resulted from the timing of when construction work was performed in 2023 as compared to 2022.
That is a compound annual growth rate of 10, 3% for the six year period.
Let's continue to ask us.
The issue has contributed earnings of <unk> 50 per share for the full year of 2023.
As compared to <unk> 46 per share for 2022.
The increase year over year was largely due to an increase in management fee revenue.
Resulting from the resolution of various economic price adjustments.
And an increase in construction activity.
Partially offset by higher overall operating expenses and interest cost.
The issue has contributed earnings of <unk> 12 per share for the fourth quarter of 2023.
As compared to <unk> 17 per share for the same period in 2022.
The decrease largely resulted from the timing of when construction work was performed in 2023 as compared to 2022.
Robert J. Sprowls: As previously highlighted, ASUS had two contract award wins during 2023. The Naval Air Station Patuxent River contract has an estimated $349 million contract value over a 50-year period. It will be subject to an annual economic price adjustment. ASUS was also awarded a 15-year contract to serve Joint Base Cape Cod. Under this contract, ASUS will have the opportunity to perform work through the periodic issuance of task orders by the U.S. government for up to a maximum initial value of $45 million over a 15-year period, and it is also subject to annual economic price adjustments through September 2023. The first task order was issued with a value of $2.3 million to perform evaluation, construction, and transition services that are scheduled for completion in 2024.
As previously highlighted issue has had two contract award wins during 2023.
Naval Air Station Patuxent River contract has an estimated $349 million contract value over a 50 year period.
It will be subject to annual economic price adjustments.
<unk> was also awarded a 15 year contract to serve joint base Cape Cod.
Under this contract <unk> will have the opportunity to perform work through the periodic issuance of task orders by the U S government were.
We're up to a maximum initial value of $45 million.
Over a 15 year period.
It is also subject to annual economic price adjustments.
In September 2023, the first task order was issued with a value of $2 $3 million.
To perform an evaluation construction and transition services.
That are scheduled for completion in 2024.
Robert J. Sprowls: As I mentioned earlier, ASUS received new capital upgrade project awards of $24.1 million in 2023, or work that will be performed in the next few years on the military bases that existed at the end of 2022, with a solid performance expected for ASUS in 2024. We project ASUS to contribute $0.50 to $0.54 per share this year, which is $0.02 per share higher than the range for 2024 that we had discussed with you during our third quarter earnings call. We remain confident that we can effectively compete for new military-based contract awards based on our proven track record of managing water and wastewater-related services for military bases since 2004. I would like to turn our attention to dividends, which remain a compelling part of our investment story. The quarterly dividend rate has grown at a compound annual growth rate of 9.4% over the last five years from 2018 to 2023. These increases are consistent with our policy to achieve a compound annual growth rate in the dividend of more than 7% over the long term. That strong dividend history is something that the company is proud of and is a continuing asset to our shareholders.
As I mentioned earlier <unk> received new capital upgrade project awards of $24 $1 million in 2023.
For work that will be performed in the next few years.
On the military bases that existed at the end of 2022.
With a solid performance expected for <unk> in 2024.
We project <unk> to contribute.
50 to 54 per share.
This year.
Which is <unk> <unk> per share higher than our range for 2024 that we had Doug discussed with you during our third quarter earnings call.
We remain confident that we can effectively compete for new military base contract awards based on our proven track record of managing water and wastewater related services for military basis since 2004.
I would like to turn our attention to dividends, which remains a compelling part of our investment story.
Our quarterly dividend rate has grown at a compound annual growth rate of nine 4%.
Over the last five years from 2018 to 2023.
These increases are consistent with our policy to achieve a compound annual growth rate in the dividend of more than 7% over the long term.
Our strong dividend history is something that the company is proud of.
And it's a continuing asset to our shareholders.
Operator: I'd like to conclude our prepared remarks by thanking you for your interest in American States Water, and we'll now turn the call over to the operator for questions. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.
I'd like to conclude our prepared remarks by thanking you for your interest in American States water.
And we'll now turn the call over to the operator for questions.
We will now take your questions to ask a question you May Press Star then one on your telephone keypad.
If you are using a speakerphone please pick up your handset before pressing the keys.
Operator: To withdraw your question, please press star then 2. Once again, that was star then one to ask a question. And at this time, we will pause momentarily to assemble the roster. And our first question will come from Greg Orle of UBS. Please go ahead. Hello.
To withdraw your question. Please press Star then two.
Once again that with Star then one to ask a question at this time, we will pause momentarily to assemble the roster.
And our first question will come from Gregg <unk> of UBS. Please go ahead.
Greg Orle: Hi Greg. Oh, sorry. I'm on mute.
Hello, Hi.
Greg.
Greg Orle: Thank you. Okay. Hey, what's the schedule for the rate case?
Okay.
Hey, what's the schedule and the rate case, what are the milestones coming up on the you said the proposed decision in the fourth quarter.
Greg Orle: What are the milestones coming up on, you said, the proposed decision in the fourth quarter? Yeah, I would say the big issues are we're waiting for the public advocates report on the rate case. And that's, I think, due out by the end of February, and then we'll move forward there. I'm not sure hearings have been scheduled at this point.
Yes, I would say that the big the big issue is we're waiting for public Advocate's report on the rate case.
And Thats I think due out by the end of February.
And then and then.
Move forward there im not sure hearings have been scheduled at this point, but.
Robert J. Sprowls: But we'll be very interested to see what the public at the contested stage. Sorry, Greg. Hello, Craig. Yeah, yeah. And so I know one case where there was sort of a controversial or non-standard recommendation by Cal advocates in the case for one of your peers. Is that kind of what you're expecting in this case?
But we will be very interesting.
Public Advocate's has to say and started Greg Hello.
Craig.
Yes, yes.
I know.
There was sort of.
Controversial or non standard recommendation by Cal advocates.
And the.
Case for one of your peers.
Is that kind of what youre expecting in this case.
Greg Orle: Well, we're, you know, we're not really sure. You know, we... It's a little strange, you know, to see a...
Well, we're not really sure.
We.
It's a little strange to see a.
Robert J. Sprowls: Signed, Commissioner, Issue of, Alternate decision from the ALJ given. Commissioner's the assigned commissioner, but it's not unheard of. Um, We hope we hope we don't have something similar there, but you know, we do believe that the alternate decision in the Cal Water case does not reflect a balanced decision. And we'd like to see either the original proposed decision approved, or the Alternate Revised. I'm not exactly sure why it's headed down this path.
Assigned Commissioner issue.
Alternate decision from the LNG given that.
Commissioners the assigned commissioner, but it's not.
Unheard of.
We hope.
We hope we don't have something similar there.
<unk>.
We do believe that the alternative and the Cal water case does not reflect a balanced decision.
And we'd like to.
See the original proposed decision approved.
Or the alternate revised.
<unk>.
Not exactly sure why is headed down this path.
Robert J. Sprowls: Some of the things included in the decision are things that, you know, we've had included in our prior filings. So we're watching it closely as we can, as you would expect. Okay, thank you. Once again, if you would like to ask a question, please press star, then 1. That will conclude today's question and answer session. I would like to turn the conference back over to Bob Sprowls for any closing remarks. Thank you, Andrea. I just wanted to thank everybody that participated today for their participation and let them know that we look forward to speaking with them during the next quarter. Thank you, everyone. The conference is now concluded. Thank you for attending today's presentation, and you may now disconnect.
Hum.
Some of the things included in the decision are things that we've we've had included in our <unk>.
Prior filings so we're watching it closely as you can as you would expect growth.
Okay. Thank you.
Thank you Greg.
Once again, if you would like to ask a question. Please press Star then one.
That will conclude today's question and answer session I would like to turn the.
Conference back over to Bob Sprowls for any closing remarks.
Thank you Andrea just wanted to thank everybody that participated today for their participation and let them know that we look forward to speaking with them.
During the next quarter.
Thank you everyone.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.