Q4 2023 SJW Group Earnings Call

Okay.

Speaker Change: Good day and thank you for standing by welcome to the SJW Group 2023 financial results Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone you will then.

Operator: Good day, and thank you for standing by. Welcome to the SJW Group 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising you that your hand is raised.

Speaker Change: Here, an automated message if I see new your hand, just raised to withdraw your question. Please press star. One again. Please be advised today's conference is being recorded I would now.

Operator: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to one of your speakers today, Andrew Walters, Chief Financial Officer and Treasurer. Please go ahead.

Speaker Change: I'd like to hand, the conference over to one ear speakers today, Andrew Walters, Chief Financial Officer and Treasurer. Please go ahead.

Andrew Walters: Thank you operator welcome to the 2023 financial results conference call for the SJW group.

Andrew Walters: Thank you, operator. Welcome to the 2023 Financial Results Conference call for the SJW. I will be presenting today with Eric Thornburg, Chair of the Board, President, and Chief Executive Officer. For those who would like to follow along, slides accompanying our remarks are available on our website at sjwgroup.com. Before we begin today, I would like to remind you that this presentation and the related materials posted on our website are forward-looking statements. These statements are based on estimates and assumptions made by the company in light of its experience. Historical Trends, Current Conditions, and Expected Future Results, as well as other factors that the company believes are appropriate under the circumstances. However, many factors could cause a company's actual results and performance to differ materially from those expressed or implied by the four. For a description of some of the factors that could cause actual results to be different from statements in this presentation,

Andrew Walters: I will be presenting today with Eric Thornburg Chair of the board President and Chief Executive Officer.

Speaker Change: For those who would like to follow along slides accompanying our remarks are available on our website at SJW group Dot com.

Speaker Change: Before we begin today I would like to remind you that this presentation and the related materials posted on our website may contain forward looking statements.

Speaker Change: These statements are based on estimates and assumptions made by.

Speaker Change: The company in light of its experience historical trends current conditions and expected future results as well.

Speaker Change: Well as other factors that the company believes are appropriate under the circumstances.

Speaker Change: Many factors could cause the company's actual results and performance to differ materially from those expressed or implied by the forward looking statements.

Speaker Change: For a description of some of the factors that could cause actual results to be different from statements in this presentation.

Andrew Walters: We refer you to the financial results press release and to our most recent forms, 10-K, 10-Q, and 8-K filed with the Securities and Exchange Commission, copies of which may be obtained on our website. All forward-looking statements are made as of today in SJW Group, to update or revise such statements. You will have an opportunity to ask questions at the end of the presentation. As a reminder, this webcast is being recorded, and an archive of the webcast will be available until April 22nd. You can access the press release and the webcast on our corporate website. I will now turn the call over to Eric Thornburg. Welcome, everyone, and thank you for joining us. My name is Eric Thornburg, and it is my honor to serve as chair, president, and CEO of SJW Group.

We refer you to the financial results press release and to our most recent forms 10-K, 10-Q, and 8-K filed with the Securities and Exchange Commission copies of which may be obtained on our website.

Speaker Change: All forward looking statements are made as of today and SJW group disclaims any duty to update or revise such statements.

Speaker Change: We'll have an opportunity to ask questions at the end of the presentation.

Speaker Change: As a reminder, this webcast is being recorded and an archive of the webcast will be available until April 22024.

Speaker Change: Can access the press release and the webcast at our corporate website.

Speaker Change: I'll now turn the call over to Eric Thornburg Eric.

Eric W. Thornburg: Welcome everyone and thank you for joining US my name is Eric Thornburg and it is my honor to serve as chair President and CEO of SJW group.

Eric W. Thornburg: I'm pleased to share that we had another successful year. As our team continues to meet drinking water and environmental standards, deliver on our public health and environmental stewardship commitments, and provide high-quality water and exceptional service to customers. We also started and ended our 2023 financial performance on a strong note, delivering value for our shareholders through the continued execution of our proven growth strategy. In 2023, we secured constructive regulatory outcomes across our operations, including the cost of capital decision and the reimplementation of the water conservation memorandum account in California, water infrastructure and conservation adjustments in Connecticut, and the settlement of our Biddeford-Saco general rate case in Maine. We achieve 12% customer growth year over year in Texas. Since 2006, Texas Water has more than quadrupled its customers through organic growth and strategic acquisition and today serves more than 28,000 water connections and 950 wastewater connections. We invested $272 million in capital improvements, surpassing our planned expenditures announced at this time last year by $17 million.

Eric W. Thornburg: I'm pleased to share that we had another successful year as our team continues to meet drinking water and environmental standards deliver on our public health and environmental stewardship commitments and provide high quality water and exceptional service to customers.

Eric W. Thornburg: We also started and ended our 2023 financial performance on a strong note delivering value for our shareholders through the continued execution of our proven growth strategy.

In 2023.

Eric W. Thornburg: We secured constructive regulatory outcomes across our operations, including the cost of capital decision and the re implementation of the water conservation Memorandum account in California, water infrastructure and conservation adjustments in Connecticut, and the settlement of our <unk>.

Eric W. Thornburg: <unk> general rate case in Maine.

Eric W. Thornburg: We achieved 12% customer growth year over year in Texas.

Eric W. Thornburg: Since 2006, Texas water has more than quadrupled in customers through organic growth and strategic acquisitions and today serves more than 28000 water connections and 950 wastewater connections.

Eric W. Thornburg: We invested $272 million in capital improvements, surpassing our planned expenditures announced at this time last year by $17 million.

Eric W. Thornburg: Thanks to the efforts of our local teams, our investments in drinking water and wastewater infrastructure spanned the replacement of over 47 miles of water mains, to water treatment improvements, including a $14 million groundwater treatment facility in East Windsor, Connecticut, upgrades at our Park Shores Surface Water Treatment Facility in Kamal County, Texas, construction of an 800,000-gallon storage lagoon in Camden, Maine, and two 5-million-gallon storage tanks in California. We advanced our commitment to reduce operating costs by investing in capital projects that sustainably reduce operating expenses, like our asset management program in California. This program reduces unplanned repairs and maintenance expenses by leveraging technology, including artificial intelligence, to predict the failure of an asset and its resulting consequences.

Eric W. Thornburg: Thanks to the efforts of our local teams are investments in drinking water and wastewater infrastructure spanned the replacement of over 47 miles of water mains to water treatment improvements, including a $14 million groundwater treatment facility in East Windsor, Connecticut.

Eric W. Thornburg: Upgrades at our park shores surface water treatment facility and come all County, Texas construction of an 800000 gallons storage lagoon in Camden, Maine, and two 5 million gallon storage tanks in California.

Eric W. Thornburg: We advanced our commitment to reduce operating costs by investing in capital projects that sustainably reduce operating expenses like our asset management program in California.

Eric W. Thornburg: This program reduces unplanned repairs and maintenance expenses by leveraging technology, including artificial intelligence to predict the failure of an asset.

Eric W. Thornburg: And the resulting consequences.

Eric W. Thornburg: And we delivered earnings per diluted share of 59 cents in the fourth quarter and $2.68 for the year, well above our original forecast. In 2024, we will continue to execute on the key elements of our strategy to create meaningful value and drive future earnings growth. We will continue making strategic investments to maintain and improve our water supply and infrastructure and also focus on opportunities that reduce operating expenses. These include advanced leak detection and advanced metering infrastructure that promises to reduce field visits and fleet miles. Additional solar generation, battery energy storage systems, and expansion of our electric vehicle fleet. We will also see increased capital expenditures to remediate PER and polyfluoroalkyl substances, or PFA.

Eric W. Thornburg: And we delivered earnings per diluted share of <unk> 59 in the fourth quarter and $2 68 for the year well above our original forecast.

Eric W. Thornburg: In 2024, we will continue to execute on the key elements of our strategy to create meaningful value and drive future earnings growth.

Eric W. Thornburg: We will continue making strategic investments to maintain and improve our water supply and infrastructure and also focus on opportunities that will reduce operating expenses.

Eric W. Thornburg: These include advanced leak detection advanced metering infrastructure that promises to reduce field visits and fleet miles.

Eric W. Thornburg: Additional solar generation.

Eric W. Thornburg: Battery energy storage systems and expansion of our electric vehicle fleet.

Eric W. Thornburg: We will also see increased capital expenditures to remediate pur, and poly Fluoro alkyl substances, where people us.

Eric W. Thornburg: Approximately $230 million is estimated for PFAS treatment. And we remain intensely focused on working with regulators and stakeholders for constructive regulatory outcomes across our operation, such as the recently filed general rape case in California, the ongoing general rate case in Connecticut, and the System Improvement Charge in Texas, which we will discuss later in the call. For now, Andrew will review our financial results and regulatory updates in our state operations.

Eric W. Thornburg: Approximately $230 million is estimated for P fast treatment.

Eric W. Thornburg: And we remain intensely focused on working with regulators and stakeholders for constructive regulatory outcomes across our operations such as the recently filed general rate case in California.

Eric W. Thornburg: The ongoing general rate case in Connecticut.

Eric W. Thornburg: And the system improvement charge in Texas, which we will discuss later in the call.

Eric W. Thornburg: For now Andrew will review, our financial results and regulatory updates and our state operations Andrew.

Andrew Walters: Thank you Eric.

Andrew Walters: Thank you, Eric. Last evening after the market closed, we released our fourth quarter in 2023. A couple of items to note, quarter-over-quarter comparison. 2023 and 2022 operating results are affected by and reflect the delay in San Jose water coverage. 2022-2024 General.

Andrew Walters: Last evening after the market closed we released our fourth quarter and 2023 operating results.

Andrew Walters: Couple of items to note.

Andrew Walters: The quarter over quarter comparisons between the 2023 and 2022 operating results are affected by and reflect the delay in San Jose water Company's 2022 to 2024 general rate case decision.

Andrew Walters: As a reminder, while the California Public Utilities Commission approved the settlement agreement and San Jose Water Company recorded the authorized revenue increase from the general rate in the fourth quarter of 2020, the revenue increase was retroactive to January. This delay in recognizing the revenues authorized in the general rate case affected quarter-over-quarter comparisons. Also, in California, the CPUC authorized the re-implementation of the Water Conservation M.A. and Water Conservation Expense Management Account. October 20, 2021.

Andrew Walters: As a reminder, while the California public Utilities Commission approved the settlement agreement and San Jose Water Company recorded the authorized revenue increased from the general rate case.

Andrew Walters: In the fourth quarter of 2022, the revenue increase was retroactive to January one 2022.

Andrew Walters: This delay in recognizing the revenues authorized in the general rate case affected quarter over quarter comparisons in 2023.

Andrew Walters: Also in California, the CPUC authorized re implementation of the water conservation memorandum account or our W. CDMA and water conservation expense management account or a WC MAA.

In October 2023.

Andrew Walters: Thank you. These Revenue Expense Protection Mechanisms were retroactive to April 20, 2021, and are reflected entirely in the fourth quarter. Maine due to wet weather and lower industrial and in Texas due to water restrictions, trout. Now to the results for the quarter, fourth quarter reported revenue of $171.3 million and net income of $18.9 million for diluted EPS. This compares to 2022 quarterly revenue of $171.4 million and net income of $33.5 million, or diluted EPS of $1.09. For the full year of 2023, we reported revenue of $670.4, net income of $85 million, or diluted EPS of $2.00. This compares to 2022 revenue of $620.7 million, reflecting an 8% increase in COVID-19 cases in the U.S., and net income of $73.8 million, or diluted EPS of $2.42. Reflecting attention, it was driven in part by a $0.14 to the partial release of income tax.

Andrew Walters: These revenue expense protection mechanisms were retroactive to April 22023, and are reflected entirely in the fourth quarter results.

Andrew Walters: We saw reduced water usage in Maine, due to wet weather and lower industrial usage and in Texas due to water restrictions because of continuing drought conditions.

Andrew Walters: Now to the results for the quarter.

Andrew Walters: And our fourth quarter reported revenue of $171 3 million and net income of $18 9 million or diluted EPS of <unk> 59 per share.

This compares to 2022 quarterly revenue of 171, 4 million and net income of $33 5 million or diluted EPS of $1 nine per share.

Andrew Walters: For the full year of 2023, we reported revenue of $674 million and net income of $85 million.

Andrew Walters: Our diluted EPS of $2 68 per share.

Andrew Walters: This compares to 2022 revenue of $627 million, reflecting an 8% increase in net income of $73 8 million, reflecting a 15% increase or diluted EPS of $2 43 per share, reflecting a 10% increase what's driven in part by a 14th.

Andrew Walters: <unk> increase due to the partial release of income tax reserves.

Andrew Walters: As you can see the year to date increase in diluted earnings per share for 2023 was primarily driven by rate filings of $1 30 per share in California, and Maine as well as a water infrastructure and conservation adjustment increase in Connecticut that were effective in <unk>.

Andrew Walters: As you can see, the year-to-date... The estimated earnings per share for 2023 were primarily driven by rate filings of $1.30 per share in California and Maine, as well as a water infrastructure and conservation adjustment in Connecticut that were effective in 2020. Other factors include approximately $0.42 combined, split evenly between the partial release of income tax reserves that I mentioned a moment ago, lower maintenance and OII costs, and the impacts of lower customers and the WCMA office. Partially offsetting the increase was a higher water supply cost of $9,300, interest expense of $0.23 on short-term, new long-term debt, and a non-recurring 17 cent sale of non-utility property.

Andrew Walters: Thousand 23.

Andrew Walters: Other factors include approximately 42 combined split evenly between the partial release of income tax reserves that I mentioned, a moment ago, lower maintenance and overhead cost and the impacts of lower customer usage and the WC MAA offset.

Andrew Walters: Partially offsetting the increase was higher water supply cost of 93.

Andrew Walters: Interest expense of 23 on short term and new long term debt and a nonrecurring 17th Kane.

Andrew Walters: The sale of non utility property.

Andrew Walters: Yes.

Andrew Walters: Now a breakeven breakdown of the increase in revenue compared to 2022.

Andrew Walters: Revenue increase was mostly driven by $46 5 million accumulative rate filings and $5 7 million of regulatory mechanisms.

Andrew Walters: The revenue increase was partially offset by $6 $6 million decreased due to lower usage.

Andrew Walters: Turning to our water production expense there wasn't increase in water production expense when compared to 2022.

Andrew Walters: The increase was largely driven by $31 8 million in water supply cost primarily related to the rate increase from our water wholesaler valley water in California.

Andrew Walters: Now a breakdown of the increase in revenue compared to 2012. The revenue increase was mostly driven by $46.5 million in cumulative rate filings and $5.7 million in regulatory. The revenue increase was partially offset by $6.6 million into our water production. There was an increase in water production expense when compared to 2020. The increase was largely driven by $31.8 million in water supply costs, primarily related to the rate increase from our waterholes.

Andrew Walters: Partially offsetting the increase in expenses was a $9 $7 million decreased due to lower usage.

Andrew Walters: The 3% increase in total other operating expenses compared to the prior year was primarily driven by a $6 2 million gain on prior year sale that did not occur in 2023.

Andrew Walters: An increase in the allowance for customer credit losses, and the depreciation and amortization.

Andrew Walters: The increase was partially offset by reduced expenses with a significant portion of this reduction due to San Jose water company's continued focus on maturity.

Andrew Walters: Valley Water in California, partially offsetting the expenses was a $9.7 million. The 3% increase in total other operating expenses compared to the prior year was primarily driven by a $6.2 million gain on a prior year sale that did not occur, an increase in the allowance for customer credit losses, and depreciation.

Andrew Walters: The advanced asset management program, which includes infrastructure condition monitoring and assessments <unk>.

Proactive planned asset replacement versus a run to failure approach.

Andrew Walters: Additionally, advances in Sunny San Jose water company's leak detection technology deployed in the field as well as other enhanced leak detection capabilities in our field crews had together enabled the company to detect and repair leaks sooner avoiding significant costs associated with larger emergency main breaks in the distribution system.

Andrew Walters: The increase was partially offset by reduced expenses, with a significant portion of this reduction, to San Jose Water Company, focused on maturity of the Advanced Asset Management Program, which includes infrastructure condition monitoring and assessment and proactive planned asset replacement versus a run to failure. Additionally, advances in San Jose Water Company's leak detection technology deployed in the field, as well as other enhanced leak detection capabilities in our field, have together enabled the company to detect and repair leaks sooner, avoiding significant costs associated with larger emergency main breaks. Turning to our 2023 financial, Approximately $83 million in gross proceeds was raised in 2020 through our at-the-market program, including $5.7 million in the fourth quarter. Fifty million was for general corporate purposes, and the additional amount was raised for acquisitions that closed in the third quarter. At the end of the year, we had $171.5 million drawn on our $350 million bank lines of credit.

Andrew Walters: Yeah.

Andrew Walters: Turning to our 2023 financing activity.

Andrew Walters: Approximately $83 million in gross proceeds was raised in 2023 through our aftermarket program, including $5 7 million in the fourth quarter.

Andrew Walters: <unk> 50 million was for general corporate purposes, and the additional about was raised four acquisitions that closed in the third quarter.

Andrew Walters: At the end of the year, we had a $171 5 billion drawn on our $350 million bank lines of credit, leaving $178 5 billion available for short term financing of utility plant additions and operating activities.

Andrew Walters: The average borrowing rate for the line of credit advances during 2023 was approximately $6 two 9%.

Andrew Walters: Average borrowing rate in 2022 was approximately $3 four 1%.

Andrew Walters: The effective consolidated income tax rates for 2023, and 2022 were approximately 7% and 10% respectively.

Andrew Walters: Turning to the California update.

Andrew Walters: On January <unk> 2024.

Andrew Walters: San Jose.

Andrew Walters: Water company filed a general rate case application with the California Public Utilities Commission that will set rates for 2025 through 2027.

Andrew Walters: The application proposes a three year $540 million capital expenditure program that addresses several key needs, including treating P fast, which Eric mentioned earlier to meet drinking water standards being finalized by the U S EPA reducing.

Andrew Walters: $178.5 million available for short-term financing of utility plan additions and operating activities. The average borrowing rate for the line of credit was approximately 6.29% in 2023. The average barring rate in 2022 was approximately 3.41; effective consolidated income tax rates for 2023 and 2022 were approximately 7%, respect, training to the California. January 2, 2024.

Andrew Walters: Reducing greenhouse gas emissions through solar generation energy storage storage systems to replace diesel generators fleet electrification and advanced acoustic leak detection.

Andrew Walters: Plus advancing the Cpuc's environmental and social.

Andrew Walters: Justice Social Justice action plan to improve access to high quality water service climate, resiliency and economic and workforce development.

Andrew Walters: As of January one 2020 for San Jose Water Company has the benefit of our group insurance balancing account. The purpose of the account is to capture the difference between authorized and actual medical dental and opt out insurance costs.

Andrew Walters: San Jose Water Company filed a general rate case application with the California Public Utilities Commission to set rates for 2025, and stuff. The application proposes a three-year, $540 million capital expenditure program that addresses several..., treating PFOS, which Eric mentioned earlier, to meet drinking water, finalized by. Reducing Greenhouse Gas Emissions Through Solar Generation and Energy Storage Systems to replace diesel.

Andrew Walters: This is yet another regulatory mechanism that helps us to manage this escalating and unpredictable expense.

Andrew Walters: The 2020 for cost of capital mechanism adjustment was effective on January one 2024. It was triggered by 140 basis point increase in Moodys double a bond index between October one 2022 and September 32023.

Andrew Walters: The return on equity is now 10, 1%.

Andrew Walters: Fleet Electric and advanced, plus Advancing the CPUC's Environmental and Social Justice Social Justice Action Plan to improve access to high quality, Water Service, Climate Resiliency, and Economic and Development. As of January 1st, 2024, San Jose Water Company has the benefit of a group insurance balance. The purpose of the account is to capture the difference between authorized and actual medical, dental, and opt-out insurance costs.

Andrew Walters: Les a 20 basis point reduction due to the implementation of the water conservation memorandum account for the authorized for an authorized ROE of 981%.

Andrew Walters: The cost of debt is 528% in the authorized rate of return of 775%.

Andrew Walters: On February <unk> 2020 for San Jose Water company, along with three other class eight, California water utilities.

Andrew Walters: <unk> approval from the CPUC for a one year deferment in the 2020 for cost of capital filings.

Andrew Walters: With this decision the CPUC extended the initial filing deadline from May one 2024 to May one 2025 to help alleviate administrative processing costs for both the water utilities and the CPUC staff.

Andrew Walters: This is yet another regulatory mechanism that helps us to manage this escalating and unpredictable economy. The 2024 cost of capital mechanism adjustment was effective on January 1, triggered by 140 basis points, double A bond. October 1st, 2022, and September 30th, return on equity is now 10.01%, less a 20 basis point reduction due to the implementation of the Water Conservation Memorandum, for an authorized ROE of nine. Cost of debt is 5.28%, and the authorized rate of return is 7.75%; on February 2nd, 2024, San Jose Water Company, along with three other Class A California water agencies, approval for a one-year deferment. 2024 Cost of Capital, with this decision, the Board extended the initial filing deadline from May 1st, 2024. 2025, to help alleviate administrative processing costs for both the water utilities and... Sympathetic.

Andrew Walters: The approved deferral includes a provision.

Andrew Walters: That the water cost of capital mechanisms remain in place for 2025 and allows it to adjust up or down in accordance with the movement of the 100 basis points or more in the Moody's double a bond index between October one 2023 and September 32024.

Andrew Walters: You may recall, our advanced metering infrastructure project was authorized by the CPUC in 2022.

Andrew Walters: We're planning to invest approximately $29 million in the Ams project. In 2024. This is a approximately $100 million project that is separate from the general rate case capital budget and the majority of the installation is expected between 2024 and 2026.

Andrew Walters: Turning to Connecticut.

Andrew Walters: In Connecticut, We recently concluded the evidentiary hearings in our general rate case that was filed with the Connecticut public utility regulatory authority in October 2023.

Andrew Walters: Our request is for a $21 4 million or 18, 1% increase in annual revenues.

Andrew Walters: Approximately two thirds of the requested rate increases related to infrastructure investments.

Andrew Walters: The application also includes a proposal for expanding our low income water rate assistance program also known as rap for income eligible customers.

Andrew Walters: The approved deferral includes a probationary period that the water cost of capital will make place for 2025 and allows it to adjust up or down in accordance with the movement of 100 basis points or more. Double-A Bond, October 1st. September 30th, 2020. As you may recall, our advanced metering infrastructure project was authorized by the, We're planning to invest approximately $29 million in the AMI project in 2025. Approximately $100 million project that is separate from the general rate case capital budget, and the majority of the installation is expected, into Connecticut. In Connecticut, we recently concluded the evidentiary hearings in our general rate case filed with the Connecticut public on October 27th.

Andrew Walters: We were in the we were the first water utility in the state to offer this type of program and in 2023, we provided more than $70000 in customer assistance through rap.

Andrew Walters: We're hopeful that PURA will authorize a request expansion of this important program.

Andrew Walters: We expect a decision on the Connecticut General rate case at the end of June with any approved revenue increase to be effective on or about July. One 2024. The decision is not expected to be a significant driver of our 2024 financial results.

Andrew Walters: PURA approved a $1 one 9% increase in water infrastructure and conservation adjustment that was effective on October one 2023 increases generating approximately $1 $3 million in annualized revenues.

Andrew Walters: Last March we filed our general rate case in Maine water companies Biddeford Soco Division are requesting a $2 9 million increase in annualized revenues to cover the operating expenses and increased borrowing costs from constructing the new Soco River walk.

Andrew Walters: Our request is for $21.4 million, or 18.1% of the annual revenue, approximately two-thirds of the requested rate. The application also includes a proposal for expanding our low-income water rate assistance program, also known as WRAP, for income-eligible customers. We were the first water utility in the state to offer this type of program, and in 2023, we provided more than $70,000 in customer assistance. Ralph

Andrew Walters: <unk> Resource Center, the Maine Public Utilities Commission authorized a temporary rate increase in August of 2023, while the general rate case was being processed.

Andrew Walters: January 5th 2024 at the Maine Public Utility Commission approved a stipulation agreement between Maine water in the office of public advocate on our general rate case provisions of the approved stipulation agreement include Maine water's annualized revenue increase of $2 6 million effective January.

Andrew Walters: <unk> 2024.

The return on equity for better for Taco Division and for future filings of water infrastructure charges or wisc filings statewide is now nine 5% with an assumed 51% equity and 49% debt capital structure.

Andrew Walters: We're hopeful that PURA will authorize our request for expansion. We expect a decision on the Connecticut general rate case at the end of June with any approved revenue increase to be effective on or about July 1st, 2024. However, the decision is not expected to be a significant driver of our 2024 financial results.

Andrew Walters: There is a general rate case stay out provision with the benefit of Chocolate Division through January one 2027.

Andrew Walters: Stay out does not include whisk filings.

Andrew Walters: Main water expects a decision in the first quarter of 2024 on its whisk filing to recover $1 7 million and completed infrastructure investments in Camden in Rocklin divisions.

Andrew Walters: Pura approved a 1.19% increase in water infrastructure and conservation adjustment that was effective on October 1, 2012. The increase is generating approximately $1.3 million in annualized revenue. Last March, we filed our general rate case in Maine Water Company's Biddeford-Saco Division requesting a $2.9 million Sako River water rate. The Maine Public Utilities Commission authorized a temporary rating.

Andrew Walters: If approved as requested and would generate 158000 annualized revenues.

Andrew Walters: As Eric mentioned at the top of the call we have seen accelerated growth in Texas and the momentum continues.

Andrew Walters: In just the past year, we have seen increasing developer interest in our Texas service area is outstanding development units with the potential for new connections increased 47% to 22000 units today.

Andrew Walters: That's not surprising as Texas water cut.

Andrew Walters: Currently serves three of the five fastest growing counties in the United States. According to the U S Census Bureau.

Andrew Walters: With more than 28000 water connections and 950 wastewater connections in the area between Austin and San Antonio The company is quadruple that service connection since 2006, and we intend to continue this momentum through prudent acquisitions organic growth and securing strategic water resources such as the supply we.

Andrew Walters: August 2023, while the General Rake, process. On January 5, 2024, the Maine Public Utility Commission approved a stipulation. Maine Water and the Office of Public Advocates on Our Generation. Provisions of the approved stipulation agreement include Maine Water's annualized revenue of 2.6 million effective January 1st, 2020. Return on equity for the Biddeford-Saco division and for future filings of water infrastructure charges or WISC filings statewide is now 9.5% with an assumed 51% equity and 49% debt capital, General Rate Case Day Out provision with the Biddeford Taco Division through January 1, 2027. This data does not include WISC files.

Andrew Walters: <unk> in the third quarter.

Andrew Walters: In January we filed an application with the public utility Commission of Texas to acquire.

Andrew Walters: The three <unk> water company and Comal County that serves approximately 270 water connections.

Andrew Walters: On February 13th we received a proposed order from the public utility Commission of Texas on our application for a system improvement charge in Texas.

Andrew Walters: The proposed order authorized Texas water to add certain utility plant additions made since 2022 its rate base, thereby increase revenue and avoiding a general rate case in 2024.

Andrew Walters: Our system improvement charge filing in December 2022.

Andrew Walters: Projected an annualized revenue increase of $1 6 million with one year of the PUC with within one year of the PUC approval.

Andrew Walters: Our final order is expected as early as March seven 2024.

Andrew Walters: We have seen some recent improvement in the drought conditions in Texas, though the U S. Drop monitor continues to classify our service area has been in a state of moderate to extreme drought.

Andrew Walters: Mainwater expects a decision in the first quarter of 2024 on its WISC filing to recover $1.7 million in completed infrastructure investments in Camden and Rockport. If approved, as requested, it would generate $158,000 annually. Eric mentioned at the start of the call that we have seen accelerated growth in Texas. Just this past year, we have seen increasing developer interest in our Texas service area as outstanding development units, potential for a new connection. 47% 22,000 units today. That's not surprising as Texas water currently serves three of the five fastest growing counties in the United States, according to More than 28,000 water connections and 950 wastewater connections in the area between Austin and San Antonio.

Andrew Walters: Most of our service areas classified as stage, two or stage III drought conditions, while our small smaller portion is in the most severe stage for drought conditions.

Andrew Walters: We are targeting voluntary water use reductions that vary based on drought stage.

Andrew Walters: Overall, we have seen reduced usage in this service area compared to 2022 due to the drought.

Andrew Walters: With a diverse portfolio of water supply is a growing wastewater business and continued acquisitions to the customer base through organic growth and acquisitions. We are very pleased with Texas waters increased contributions to our consolidated earnings and remain optimistic about its prospects.

Andrew Walters: We are announcing our 2024 guidance of $2 68 to $2 78 of net income per diluted share, which is consistent with our non linear long term growth rate of 5% to 7%.

Andrew Walters: Equity issuance of $55 million to $65 million, excluding acquisition growth is to support a strong capital investment program.

Andrew Walters: The company has quadrupled its service connections since 2006, and we intend to continue this momentum, equity, and organic growth, and securing strategic water resources such as the supply we acquired in the third quarter. In January, we filed an application with the Public Utility Commission of Texas to acquire the 3009 Water Company in Komal County that serves approximately 270 customers on February 13th, a proposed order from the Public Utility Commission of Texas on our application. System Improvement Charge and TEC's proposed order authorized Texas Water to add certain utility plant additions, thereby increasing revenue by avoiding a general. Our system improvement charge filing in December 2020 projected an annualized revenue increase of 1.3 percent within one year. Our final order is expected as early as March 7th. We have seen some recent improvement in drought conditions in Texas, so the U.S. Drought Monitor continues to classify our service areas as moderate to extreme drought. Most of our service area is classified as Stage 2. Trautman, while our smaller portion is in the most severe stage four drought.

Andrew Walters: We maintain our five year capital investment outlook of $1 6 billion, which includes approximately $230 million in estimated P. Fast remediation based on the Epa's proposed maximum contaminant levels.

Andrew Walters: The factors underlying our 2024 guidance include a return on equity increase in California from 931% to $9 eight 1% net of the 20 basis points.

Andrew Walters: Re implementation of WC, MMA, which is effective already as of January one 2024.

Andrew Walters: The impact of the already completed that effort soco rate case with a nine 5% Roe.

Andrew Walters: 1% equity, 49% debt capital structure effective January one two.

Andrew Walters: <unk> thousand 24, as well as constructive regulatory decisions on current and prospective regulatory filings.

Andrew Walters: This includes strategic Reinvestments in the business in 2024, and the guidance range is consistent with our long term growth rates.

Andrew Walters: Further we reaffirm our stated long term growth rate of 5% to 7% that is anchored off our 2022 diluted earnings per share of $2 43.

Andrew Walters: Which is a non linear because of rate case cycles.

Andrew Walters: As investors consider our 2024 guidance, it's important to note that.

Andrew Walters: As we mentioned earlier.

Andrew Walters: There was a onetime release of <unk> 14 related to income tax reserves in 2023.

Andrew Walters: With that I will turn the call over to Eric.

Eric W. Thornburg: Thank you Andrew.

Eric W. Thornburg: Our 2020 for planned capital expenditures are $332 million.

Eric W. Thornburg: Across all four of our state operations, which includes the $29 million budgeted for advanced metering infrastructure in California.

Eric W. Thornburg: Approximately 65% of our annual capital budget will be recovered through preapproved projects and infrastructure recovery mechanisms.

Eric W. Thornburg: Approximately one third of our 2024 budgeted capital expenditures or nearly $114 million.

Andrew Walters: We're targeting voluntary water use reductions that vary based on drought. Overall, we.., service area compared to 20, drought. ________________ with a diverse portfolio of water supplies at Graina Wastewater. Acquisition

Eric W. Thornburg: It is targeted to water main replacement.

Eric W. Thornburg: This investment is vital to our principled approach of replacing 1% transmission and distribution mains each year.

Andrew Walters: Organic growth and acquisitions. We are very pleased with Texas Water's increased contributions to our consolidated and optimistic about its prospects. We're announcing our 2024 guidance of $2 cents to $2.75 in net income per diluted share, which is consistent with our non-linear long-term growth rate of 5 to 7%. Equity issuance of $55 million to $65 million, including Acquisition Growth, will support a strong capital investment program to maintain our five-year capital investment outlook of $1.6 billion, which includes approximately 230 million in estimated PFAS, opposed, and back Factors underlying our 2024 guide, turn on X. California from 9.31% to 9.81% net at the 20 basis points presentation of WCMA, which is effective already as of January 1st, 2020.

Eric W. Thornburg: The other projects commencing or scheduled for completion in 2024 reflect our commitment to invest in new or replacement treatment and storage systems that are designed and constructed to be more energy efficient and to meet changing operational challenges, including.

Eric W. Thornburg: Climate change.

Eric W. Thornburg: These projects include a multiyear pipeline project to bring new water supply from the recently acquired K T water resources to our customers in Texas.

Eric W. Thornburg: A water storage project at our Cambrian station in California.

Eric W. Thornburg: Two $8 3 million gallon tanks will be constructed to replace aging storage reservoirs that date back as far as $18 90.

Eric W. Thornburg: This multiyear project will enhance water quality conserve water and have lower maintenance costs.

In Connecticut work has started on a new groundwater treatment facility in South Berry.

Eric W. Thornburg: This is a new facility to remove iron and manganese that has caused episodes of discolored water for decades.

Andrew Walters: The impact of the already completed Biddeford-Saco rate, a 9.5% ROE, 51% equity, 49% capital structure effective January 1st. 2024, as well as constructive regulatory decisions on current and prospective regulatory filings. Also includes strategic reinvestments in the business in 2024 and the guidance range with our long-term growth. Further, we reaffirm our stated long-term growth rate of five to seven percent that is anchored off our 2022 diluted earnings per share of $2.40, nonlinear because of site. As investors consider our 2024 guidance, it's important to note that, as we mentioned earlier, there was a one-time release of $0.14. With that, I will turn the call over to Eric.

Eric W. Thornburg: Since Connecticut water acquired the system in 2017, we have been aggressively addressing the issue by optimizing water treatment and replacing water mains, but.

Eric W. Thornburg: But the treatment facilities necessary to achieve an efficient long term solution.

Eric W. Thornburg: In Maine, we're preparing this year for the construction of a solar array at our award winning soccer Rivard drinking water resource center in Biddeford.

Eric W. Thornburg: Solar generation is always been a part of the design plan.

Eric W. Thornburg: But the local electric utility infrastructure first needed updating.

Eric W. Thornburg: Our onsite solar generation will produce enough power to meet 100% of the resource centers energy needs as early as 2025.

Eric W. Thornburg: Additional solar generation in 2024 is also planned in California and Connecticut.

Eric W. Thornburg: San Jose Water company is also expanding the availability of recycled water for irrigation use.

Eric W. Thornburg: Thank you, Andrew. Our 2024 planned capital expenditures are $332 million across all four of our state operations, which includes the $29 million budgeted for advanced metering infrastructure in California. Approximately 65% of our annual capital budget will be recovered through pre-approved projects and infrastructure recovery mechanisms. Approximately one-third of our 2024 budgeted capital expenditures, or nearly $114 million, is targeted to water main replacement. This investment is vital to our principled approach of replacing 1% of transmission and distribution mains each year.

Approximately two miles of pipe will bring up to 440 acre feet of recycled water per year to a nearby golf course schools and parks.

Eric W. Thornburg: The potable water save through the use of recycled water for irrigation.

Eric W. Thornburg: Is it enough to meet the needs of more than 8000 people daily.

Speaker Change: One of the ways, we measure our impact and success as a company is how have we been a force for good.

Speaker Change: We use our core values to help us deliver benefits to our customers local communities employees and the environment.

Speaker Change: For example employee safety is Paramount.

Speaker Change: Our teams worked diligently to ensure our people are trained and equipped to safely do their jobs.

Speaker Change: In Connecticut, we were awarded the Connecticut Construction Industries Association Safety award for the 20th straight year.

Eric W. Thornburg: Other projects commencing or scheduled for completion in 2024 reflect our commitment to invest in new or replacement treatment and storage systems that are designed and constructed to be more energy efficient and to meet changing operational challenges, including climate change. These projects include a multi-year pipeline project to bring new water supply from the recently acquired KT Water Resources to our customers in Texas. Water Storage Project at our Cambrian Station in California. Two 8.3 million gallon tanks will be constructed to replace aging storage reservoirs that date back as far as 1890.

Speaker Change: While this is a great achievement, we're continually assessing how can we improve our best in class safety standards across our operations.

Speaker Change: Also as I've mentioned before we're a better utility because of our employees talent and hard work.

Speaker Change: So being recognized as an employer of choice is a top priority.

Speaker Change: Across SJW group are good place to work index as measured by an independent third Party survey of our employees is at World class levels.

Speaker Change: As a company, we recognize the breadth and richness of perspective that we gain by having diverse teams and partners.

Speaker Change: SJW group has a gender balanced board something only 12% of Russell 3000 companies can claim.

Eric W. Thornburg: This multi-year project will enhance water quality, conserve water, and have lower maintenance costs. In Connecticut, work has started on a new groundwater treatment facility in South Perry. This is a new facility to remove iron and manganese that has caused episodes of discolored water for decades. Since Connecticut Water acquired the system in 2017, we have been aggressively addressing the issue by optimizing water treatment and replacing water mains. But treatment facility is necessary to achieve an efficient long-term solution.

Speaker Change: And in 2023, we spent $63 million or approximately 21% of our addressable spend with diverse suppliers.

Speaker Change: I'm also proud to share that we've received recognition for our efforts.

Speaker Change: We were recognized for our watershed stewardship in California by the National Association of clean water agencies.

Speaker Change: We received an a rating from MSCI for our work on ESG matters.

Speaker Change: And our company was the highest ranked utility and the prestigious Newsweek Excellence 1000 index for 2024.

Eric W. Thornburg: In Maine, we're preparing this year for the construction of a solar array at our award-winning Saca River Drinking Water Resource Center in Biddeford. Solar generation has always been a part of the design plan, but the local electric utility infrastructure first needed updates. Our on-site solar generation will produce enough power to meet 100% of the Resource Center's energy needs as early as 2025. Additional solar generation in 2024 is also planned in California and Connecticut. San Jose Water Company is also expanding the availability of recycled water for irrigation use. Approximately 2 miles of pipe will bring up to 440 acre-feet of recycled water per year to a nearby golf course, schools, and park.

Speaker Change: Inclusion in the index is for exemplars of corporate excellence with a firm commitment to best practices and business and financial growth, while also serving customers stakeholders and communities with a dedication to social responsibility and ethical standards.

Speaker Change: It's a testament to the values of our company and our work to be a meaningful force for good.

Speaker Change: I can't say it enough, but our people make the difference at SJW group, they make us a better utility <unk>.

Speaker Change: Every year every quarter every day I continue to be inspired by the contributions of our talented teams across our national footprint.

Speaker Change: As they consistently provide an essential service with integrity reliability and peace of mind for our customers.

Speaker Change: I am confident our team's commitment to serving customers.

Eric W. Thornburg: The potable water is saved through the use of recycled water for irrigation and is enough to meet the needs of more than 8,000 people daily. One of the ways we measure our impact and success as a company is how have we been a force for good? We use our core values to help us deliver benefits to our customers, local communities, employees, and the environment. For example, employee safety is paramount. Our teams work diligently to ensure our people are trained and equipped to safely do their job.

Speaker Change: Our local communities and the environment, while creating value for shareholders. We will continue to reinforce our strong position.

Speaker Change: For a successful future.

Speaker Change: And with that I will turn the call back over to the operator.

Speaker Change: Thank you and as a reminder to ask a question at this time. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Speaker Change: One moment, while we compile our Q&A roster.

Speaker Change: And our first question is going to come from the line of Andy Stern Vince.

Eric W. Thornburg: In Connecticut, we were awarded the Connecticut Construction Industries Association Safety Award for the 20th straight year. While this is a great achievement, we're continually assessing how we can improve our best-in-class safety standards across our operations. Also, as I've mentioned before, we're a better utility because of our employees' talent and hard work. So being recognized as an employer of choice is a top priority. Across the SJW Group, our Good Place to Work Index, as measured by an independent third-party survey of our employees, is at world-class levels. As a company, we recognize the breadth and richness of perspective that we gain by having diverse teams and partners. SJW Group has a gender-balanced board, something only 12% of Russell 3000 companies can claim.

Speaker Change: With Seaport. Your line is open. Please go ahead.

Speaker Change: Thank you.

Speaker Change: I have to start with a question about Connecticut, Let me know.

Speaker Change: Almost about six years.

Speaker Change: You guys were approach.

Speaker Change: Water was approached by other source amount of resources.

Speaker Change: Selling aquarium.

Speaker Change: Just wonder how you guys see this asset I remember that back in 2000.

Speaker Change: Ever since I was talking about the complementary nature of the service territories of both our quarry in Connecticut water.

Speaker Change: That should not have changed the regulatory setup has changed however, and I'm just wondering.

Speaker Change: If you can comment at all about how you see aquarian.

Speaker Change: Thank you Angie and thanks for thanks for calling in today and.

Eric W. Thornburg: And in 2023, we spent $63 million, or approximately 21% of our addressable spend with diverse suppliers. I'm also proud to share that we've received recognition for our efforts. We were recognized for our watershed stewardship in California by the National Association of Clean Water Agencies. We received an A rating from MSCI for our work on ESG matters, and our company was the highest-ranked utility in the prestigious Newsweek Excellence 1000 Index for 2024. Inclusion in the index is for exemplars of corporate citizenship, with a firm commitment to best practices in business and financial growth, while also serving customers, stakeholders, and communities with a dedication to social responsibility and ethical standards. It's a testament to the values of our company and our work to be a meaningful force for good. I can't say it enough, but our people make the difference at SJW Group.

Speaker Change: Candidly I really out of an abundance of respect for every source, an aquarian and particularly the employees of requiring had been through a lot of a lot of <unk>.

Speaker Change: Sales over the years I will not comment specifically on this process, but as you know we've got a real proven growth strategy focused on investing capital and making acquisitions that create shareholder value and you have our commitment that we will continue to evaluate and assess all potential growth opportunities.

Speaker Change: That would create shareholder value.

Speaker Change: We won't pursue growth just for growth's sake, I think it's very important to be disciplined to that.

Speaker Change: And that would be the case here as well so we'll have more to say in the future but for now.

Speaker Change: We will have to leave it at that thank you.

Speaker Change: Okay, So maybe a little bit more about your pending rate case in Connecticut, and I understand that.

Speaker Change: Final decision is due in June but.

Speaker Change: We've seen some.

Speaker Change: Yeah.

Operator: They make us a better utility. Every year, every quarter, every day, I continue to be inspired by the contributions of our talented teams across our national footprint, as they consistently provide an essential service with integrity, reliability, and peace of mind for our customers. I'm confident our team's commitment to serving customers, our local communities, and the environment, while creating value for shareholders, will continue to reinforce our strong position for a successful future. And with that, I will turn the call back over to the operator.

Speaker Change: Very weak regulatory decisions on the on the electric and gas side most of them on the water side from Macquarie and so I'm just wondering if at this stage you can comment how you think the current rate cases going.

Speaker Change: And again, not a very big driver of earnings at least not this year, but again any any comment about how its been proceeding.

Speaker Change: Yeah, absolutely. Thank you Angie I'll start and then allow Andrew to contribute as well of course I.

Speaker Change: I am Super proud of our team I mean, I think looking back at some of the recent decisions with energy utilities, and then aquarium water of course.

Speaker Change: No, we really study that and learned and completely re imagined our rate process filing and if you're tuned into any one of those hearings I'm proud to say you would have seen a team that was really engaged.

Operator: Thank you. As a reminder, to ask a question at this time, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 again.

Speaker Change: And making every attempt to be transparent and honorable and to provide the commission the information that they need to make the decision.

Angie Storansky: One moment while we compile our Q&A roster, and our first question is going to come from the line of Angie Storansky with Seaport. Your line is open. Please go again.

Speaker Change: So I remain very optimistic that we will.

Angie Storansky: Thank you. I have to start with a question about Connecticut. I mean, it's been almost, what, six years since you guys were approached, well, Connecticut Water was approached by Eversource, and now Eversource is selling Aquarian. I just wonder, you know, how you guys see this asset. I remember back in 2018, Eversource was talking about the complementary nature of the service territories of both Aquarian and Connecticut Water. You know, that should not have changed. But the regulatory setup has changed, however, and I'm just wondering if you can comment at all about how you see Aquarius.

Speaker Change: Have a fair result that would be capital attractive and constructive and certainly we're going to find out more in may and in July but.

Speaker Change: Really proud of the team and.

Speaker Change: And I'll go back I mean, we've worked collaboratively with the public advocates office and the Commission and Commission the authority staff to pass such things as the water infrastructure conservation adjustment, we have full decoupling. There we still have a 270 day statutory period.

Speaker Change: Right. So there's a lot of really capital supportive regulatory tools, but but it's clear we've had a bit of a rough patch as utilities.

Eric W. Thornburg: Oh, thank you, Angie. Thanks for calling in today. And, you know, candidly, I'm really out of an abundance of respect for Eversource and Aquarian and, particularly, the employees of Aquarian who've been through a lot of sales over the years. I'll not comment specifically on this process.

Speaker Change: In the past year or so, but we're committed to continue to work with all parties to make it as constructive as we possibly can for our shareholders and customers. So so bottom line I am optimistic and feel very good about.

Eric W. Thornburg: But as you know, we've got a real proven growth strategy focused on investing capital and making acquisitions that create shareholder value. You have our commitment that we'll continue to evaluate and assess all potential growth opportunities that would create shareholder value, but we won't pursue growth just for growth's sake. I think it's very important to be disciplined in that.

Speaker Change: My team and the what we put forth in our rate filings Andrew.

Speaker Change: Phil mentioned anything Eric I think you covered it very well and I don't have anything to add to that so but Andrew can you add a little bit more maybe about.

Andrew Walters: When you mentioned your guidance for 'twenty four there was like a.

Eric W. Thornburg: And that would be the case here as well. So we'll have more to say in the future, but for now, we'll have to leave it at that. Okay, so maybe a little bit more about your pending rate case in Connecticut. I understand that the final decision is due in June, but we've seen some, you know, very weak regulatory decisions on the electric and gas sides, also on the water side from Aquarion. So, I'm just wondering if, at this stage, you can, you know, comment on how you think the current rate case is going. And again, not a very big driver of earnings, at least not this year. But again, any comment about how it's been proceeding? Yeah, absolutely. Thank you, Angie. I'll start and allow Andrew to contribute as well. Of course, I'm super proud of our team.

Reinvestment.

Andrew Walters: Mike I don't know how much just curious exactly.

Speaker Change: And I'm, assuming that that's somewhat of a drag on the 24 guidance is it.

Speaker Change: Pulling forward some.

Speaker Change: Expenses from 25, I mean, what is it and then if we could quantify the size of this.

Mike: Yes, I can't quantify the size of the off the top of my head for this call nor will I in the future, but what I can do is talk about.

Mike: The types of items that you've you've asked the question on so these are items that will help us strategically position ourselves for four additional future growth.

Mike: They can be things that help from a staff training physician to things that will allow us to invest in and other infrastructure and items that will help us reduce costs in the future. So they're meant to be investments that will help us.

Produce better results in the future.

Speaker Change: Thank you that's all I have.

Speaker Change: Thank you Angie thank you.

Thank you Anne one moment as we move on to our next question.

Eric W. Thornburg: I mean, I think, looking back at some of the recent decisions with energy utilities and then aquarium water, of course, you know, we really studied that and learned from it, and completely reimagined our rate process filing. And if you tuned into any one of those hearings, I'm proud to say you would have seen a team that was really engaged and making every attempt to be transparent and honorable and to provide the commission with the information that they needed to make the decision. And so I remain very optimistic that we will have a fair result, that it will be capital attractive and constructive, and certainly we're going to find out more in May and in July. But I'm really proud of the team. And I'll go back.

Speaker Change: And our next question is going to come from the line of Jonathan Reeder with Wells Fargo Securities. Your line is open. Please go ahead.

Hey, good morning, or afternoon, depending on where you're located.

Jonathan Reeder: Thank you Jonathan.

Jonathan Reeder: Yes can you remind us all Connecticut, water's capex budget that was outlined.

Jonathan Reeder: The pending JRC actually gets factored into pure as final order I know, it's not like California, where the CPUC actually approves three year Capex budget.

Jonathan Reeder: As far as the GIC process, there, but with PURA.

Jonathan Reeder: Indicate what level of spend over that period. It believes is appropriate.

Eric W. Thornburg: I mean, we've worked collaboratively with the Public Advocate's Office and the authority staff to pass such things as the Water Infrastructure Conservation Adjustment. We have full decoupling there. But we still have a 270-day statutory period to get rates.

Jonathan Reeder: Jonathan I think I think peer in the past, while they might give us. Some some comments in general is definitely not the same as California, where theres a specific approval process.

Jonathan Reeder: But we do and the interaction with staff and with the commissioners.

Eric W. Thornburg: So there are a lot of really capital-supportive regulatory tools, but it's clear we've had a bit of a rough patch as utilities in the past year or so. But we're committed to continuing to work with all parties to make it as constructive as we possibly can for our shareholders and customers. So, bottom line, I am optimistic and feel very good about my team and what we put forth in our rate filing. Andrew, did I fail to mention anything? Eric, I think you covered it very well. And I don't have anything to add.

Jonathan Reeder: And from time to time receive some some guidance.

Jonathan Reeder: As to where they may see some challenges in the future, but typically it's not focused on that it's really focused on what we have invested and whether that is a prudent use of our customers.

Jonathan Reeder: Money that they invest with us or provide to us.

Jonathan Reeder: Yeah.

Speaker Change: Okay and then.

Speaker Change: Yes, maybe asking the question a little differently, but.

Speaker Change: Just given the challenges in the Connecticut regulatory environment right now.

Speaker Change: Is that a state where SJW would want to increase.

Angie Storansky: Thank you. So, Andrew, can you add a little bit more maybe about, you know, when you mentioned your guidance for 24, there's this reinvestment, right? I don't know how much this is exactly, and I'm assuming that that's somewhat of a drag on the 24 guidance. Is it, you know, pulling forward some expenses from 25? I mean, what is it? And if we could quantify the size?

Speaker Change: Exposure.

Speaker Change: Versus.

Speaker Change: Texas, where growth was higher or potentially entering a new state.

Speaker Change: Yes fair question and.

Speaker Change: Again, I will not comment specifically on on the opportunity and the processes as its yet not completely defined and.

Speaker Change: But we do take a long term view of of constructive regulatory shaping and investment and so.

Andrew Walters: Yeah, I can't quantify the size off the top of my head for this call, nor will I in the future. But what I can do is talk about the types of items to ask the question. So these are items that will help us strategically position ourselves for additional future growth. They can be things that help from a staff training perspective to things that will allow us to invest in other infrastructure and things that will help us reduce costs in the future. So they're meant to be investments that will help us produce better results. Thank you. Thank you, Edgy.

Speaker Change: We will evaluate it very carefully once we understand fully the process and but thats all I have to say today, Jonathan Thank you.

Speaker Change: Alright, Thanks for taking my questions I appreciate it.

Speaker Change: Thank you Jonathan.

Speaker Change: Thank you and again, ladies and gentlemen, if you have a question at this time. Please press star one on your telephone one moment as we move on to our next question.

Speaker Change: And our next question comes from the line of Roger Liddell with clear Harbor asset management. Your line is open. Please go ahead.

Roger Liddell: Thank you good morning, gentlemen.

Roger Liddell: Hi, Roger so great to hear from you. Thank you.

Roger Liddell: I'm delighted to report it as good as this.

Angie Storansky: Thank you. Thank you, and one moment as we move on to our next question. And our next question is going to come from the line of Jonathan Reeder with Wells Fargo Securities. Your line is open. Please go ahead.

Roger Liddell: You know.

Particularly how long I've been concerned about the <unk> issues.

Roger Liddell: And other contaminants pizza.

Jonathan Reeder: Hey, good morning or afternoon, team, depending on where you're located, but yeah, can you remind us how Connecticut Water's CAPEX budget, which was outlined in the pending GRC actually gets factored into Pura's final order? You know, I know it's not like California where the CPUC actually approves a three-year CAPEX budget as part of the GRC process there, but will Pura, you know, indicate what level of spend over that period it believes is appropriate? Jonathan, I think, you know, PURE in the past, while they might give us some comments in general, it is definitely not the same as California, where there's a specific approval process. But we can, in the interaction with staff and with the commissioners, from time to time, receive some guidance as to where they may see some challenges in the future. But typically, it's not focused on that.

Roger Liddell: As good as it comes in terms of.

Roger Liddell: The signal.

Roger Liddell: Where the damage ignoring these things.

Roger Liddell: My concern is that.

Roger Liddell: Generally across the country, we're seeing.

Roger Liddell: Blow back.

Roger Liddell: More blow back on large rate request.

Roger Liddell: Then I can recall for a number of years, maybe it's selective amnesia.

Roger Liddell: But.

Roger Liddell: Yes.

Roger Liddell: And here are large numbers.

Roger Liddell: The.

Roger Liddell: $110 million in California is.

Roger Liddell: Once the <unk> hundred 20 <unk>.

Roger Liddell: By the way, Maine has had dreadful P funds contamination issues, perhaps it's not.

Roger Liddell: Biddeford Sacco area, where your other service territories, that's why as mentioned.

Roger Liddell: But anyway big box in play and so.

Roger Liddell: So well get back to me just seems.

Roger Liddell: Most cases.

Andrew Walters: It's really focused on what we have invested and whether that is a prudent use of our customers' money that they invest with us or provide. Okay, and then, you know, maybe asking the question a little differently. But, you know, just given the challenges in the Connecticut regulatory environment right now, is that a state where SJW would want to, you know, increase exposure versus, you know, Texas, where growth is higher, or potentially enter a new state? Yeah, fair question.

Roger Liddell: Complete uninformed.

Roger Liddell: The benefits the lifecycle cost versus the first cost.

Roger Liddell: Arguments.

So is there anything that you feel.

Roger Liddell: The.

The shareholder owned companies in particular.

Roger Liddell: But the industry can do more in terms of awakening to the public to the return on investment in <unk>.

Roger Liddell: Removal.

Eric W. Thornburg: And, you know, again, I'll not comment specifically on the opportunity and the process, as it's yet not completely defined, but we do take a long-term view of constructive regulatory shaping and investment, and so we'll evaluate it very carefully once we understand fully the process, but that's all I have to say today. Thanks. Alright, thanks for taking my questions. I appreciate it.

Roger Liddell: Control.

Roger Liddell: Hi.

Roger Liddell: It's going to be a big health payback isn't right away so what can be done.

Speaker Change: Yes, Thank you Roger and Youre right, you and I have spoken about this for for many years I think the biggest sea change is finally EPA has stepped forward with a proposed regulatory standard cans.

Speaker Change: Candidly up until that point.

Speaker Change: While many people wanted it resolved from a regulatory risk standpoint, a lot of commissions.

Eric W. Thornburg: Thank you, Doug. Thank you. And again, ladies and gentlemen, if you have a question at this time, please press star 11 on your telephone. One moment while we move on to our next question. And our next question comes from the line of Roger Liddell with Clear Harbor Asset Management. Your line is open, please go ahead. Thank you, and good morning, John. Hi, Roger.

Speaker Change: We're concerned about well why should we approve a rate increase had cost to customers. When there's in fact no standard for this contaminant theres not even complete.

Speaker Change: Completed health studies by by EPA and so.

Speaker Change: Now that that process is well underway, we have a proposed standard we expect that to get promulgated in final form.

Speaker Change: Then then that really sets the stage in and in our conversations with regulators, there's real alignment around hey, we need to get this done and get it done fast and it is a very aggressive timetable once had promulgated we have three years to complete treatment, we've taken many wells offline that.

Roger Liddell: Great to hear from you. Thank you. I'm delighted to get a report as good as this. What do you know? Eric, particularly how long I've been concerned about the PFAS issues and other contaminants, but PFAS as well, is as good as it gets in terms of the signal of or the damage of ignoring these things.

That are above a certain action levels, but we do have a lot of construction work to get accomplished over the next three years to completely resolve and remediate. This thing I will add that in.

Roger Liddell: So my concern is that, generally across the country, we're seeing blowback, I think more blowback on large rate requests than I can recall for a number of years. Maybe it's selective amnesia, but here are large numbers. 110 million in California is one thing. 120 in Connecticut.

Speaker Change: In Maine, we have been very fortunate in all of the testing the detailed testing we've done among cross all of our sources. There are we're fortunate so far not to have any NTP faas hits of any substance. We do operate a utility under contract are part of our management services agreement that does have a bit of an issue. So we are.

Roger Liddell: By the way, Maine has had dreadful PFAS contamination issues. Perhaps it's not in the Biddeford-Saco area or your other service territory, so that's why it isn't mentioned. But anyway, big bucks are in play. And the blowback, to me, just seems, in most cases, remarkably uninformed by the benefits, the life cycle cost versus the first cost, kinds of arguments. So, is there anything that you feel? The shareholder-owned companies, in particular, but the industry, can it do more in terms of awakening the public to the return on investment in PFAS? removal or control

Speaker Change: Work with them to help resolve that but.

We're committed to getting this done and behind us.

Speaker Change: And as you as well we've disclosed we also participate in the in the class action suit against the <unk> and the Dupont to help so that any cost we recover in that process, which frankly, we don't expect it to be big.

Speaker Change: Big.

Roger Liddell: There is going to be a big health payback, but it isn't right away. So what can be done? Yeah, thank you, Roger, and you're right.

Speaker Change: Fully anywhere close to fully recovering our costs, but whatever we do get full flow that back.

Eric W. Thornburg: You and I have spoken about this for many years. I think the biggest sea change is that, finally, EPA has stepped forward with a proposed regulatory standard. You know, candidly, up until that point, while many people wanted it resolved from a regulatory risk standpoint, a lot of commissions, you know, were concerned about, well, why should we approve a rate increase at cost to customers when there's, in fact, no standard for this contaminant? There's not even, you know, completed health studies by EPA.

Speaker Change: For the benefit of our customers of course to try to mitigate the rate impacts of it but I. Appreciate your question and your.

Speaker Change: And your interest and support in this important topic.

Speaker Change: Yes. Thank you thank.

Speaker Change: Thank you Roger.

Speaker Change: Thank you and I'm showing no further questions at this time and I would like to turn the conference back over to Eric Thornburg, Chief Executive Officer for any further remarks.

Eric W. Thornburg: And so now that that process is well underway, we have a proposed standard. We expect that to get promulgated in final form. Boy, then that really sets the stage.

Eric W. Thornburg: Thank you operator, and thank you all of you participating on today's call. We truly appreciate your interest and support of our organization and our people and if we can be of service to you in the future. Please reach out to Andrew Walters or Dan or myself, and we'll look forward to our next engagement. Thank you so much take care.

Eric W. Thornburg: And in our conversations with regulators, there's real alignment around, hey, we need to get this done and get it done fast. And it is a very aggressive timetable. Once that's promulgated, you know, we have three years to complete treatment. We've taken many wells offline that are above certain action levels.

Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: [music].

Eric W. Thornburg: But we do have a lot of construction work to get accomplished over the next three years to completely resolve and remediate this thing. I will add that in Maine, we've been very fortunate in all the testing, the detailed testing we've done among, across all of our sources there. We're fortunate so far not to have any PFAS hits of any substance.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Eric W. Thornburg: We do operate a utility under contract, as part of our management services agreement that does have a bit of an issue, so we'll work with them to help resolve that. We're committed to getting this done and behind us, and as you know, we also participate in the class action suit against the three M's and the DuPonts to help So any costs we recover in that process, which frankly we don't expect to be big, you know, fully anywhere close to fully recovering our costs, but whatever we do get, we'll flow that back for the benefit of our customers, of course, to try to mitigate the rate impacts I appreciate your question and your interest and support in this important topic. Thank you. Thank you, Roger.

Speaker Change: Sure.

Speaker Change: [music].

Eric W. Thornburg: Thank you, and I'm showing no further questions at this time, and I would like to turn the conference back over to Eric Thornburg, Chief Executive Officer, for any further remarks. Thank you, operator. Thank you, all of you participating in today's call. We truly appreciate your interest in supporting our organization, our people. And if we can be of service to you in the future, please reach out to Andrew Walters or Dan Meany or myself, and we'll look forward to our next engagement. Thank you so much.

Speaker Change: Thank you.

Speaker Change: [music].

Operator: Take care. This concludes today's conference call. Thank you for participating. You may now disconnect, and many others

Operator: Thank you. Thank you. Thanks for watching! ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Good day and thank you for standing by.

Operator: Welcome to the SJW Group 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising you that your hand is raised.

Speaker Change: Okay.

Speaker Change: [music].

Andrew Walters: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to one of your speakers today, Andrew Walters, Chief Financial Officer and Treasurer. Please go ahead.

Speaker Change: Okay.

Speaker Change: [music].

Andrew Walters: Thank you, operator. Welcome to the 2023 Financial Results Conference call for the SJW. I will be presenting today with Eric Thornburg, Chair of the Board, President, and Chief Executive Officer. For those who would like to follow along, slides accompanying our remarks are available on our website at sjwgroup.com. Before we begin today, I would like to remind you that this presentation and the related materials posted on our website are forward-looking statements. These statements are based on estimates and assumptions made by the company in light of its experience. Historical Trends, Current Conditions, and Expected Future Results, as well as other factors that the company believes are appropriate under the circumstances. However, many factors could cause a company's actual results and performance to differ materially from those expressed or implied by the four. For a description of some of the factors that could cause actual results to be different from statements in this presentation,

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Andrew Walters: We refer you to the financial results press release and to our most recent forms, 10-K, 10-Q, and 8-K, filed with the Securities and Exchange Commission, copies of which may be obtained on our website. All forward-looking statements are made as of today in SJW Group, and we do not intend to update or revise such statements. We will have an opportunity to ask questions at the end of the presentation. As a reminder, this webcast is being recorded, and an archive of the webcast will be available until April 22nd. You can access the press release and the webcast on our corporate website. I will now turn the call over to Eric Thornburg. Welcome, everyone, and thank you for joining us. My name is Eric Thornburg, and it is my honor to serve as chair, president, and CEO of SJW Group.

Eric W. Thornburg: I'm pleased to share that we had another successful year. As our team continues to meet drinking water and environmental standards, deliver on our public health and environmental stewardship commitments, and provide high-quality water and exceptional service to customers. We also started and ended our 2023 financial performance on a strong note, delivering value for our shareholders through the continued execution of our proven growth strategy. In 2023, we secured constructive regulatory outcomes across our operations, including the cost of capital decision and the reimplementation of the water conservation memorandum account in California, water infrastructure and conservation adjustments in Connecticut, and the settlement of our Biddeford-Saco general rate case in Maine. We achieved 12% customer growth year over year in Texas. Since 2006, Texas Water has more than quadrupled its customers through organic growth and strategic acquisition and today serves more than 28,000 water connections and 950 wastewater connections. We invested $272 million in capital improvements, surpassing our planned expenditures announced at this time last year by $17 million.

Speaker Change: Good day and thank you for standing by welcome to the SJW Group 2023 financial results Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone.

Speaker Change: Then here an automated message.

Speaker Change: Your hand, just raised to withdraw your question. Please press star one again, please be advised today's conference is being recorded.

Speaker Change: I would now like to hand, the conference over to one of your speakers today, Andrew Walters, Chief Financial Officer and Treasurer. Please go ahead.

Andrew Walters: Thank you operator welcome to the 2023 financial results conference call for the SJW group.

Andrew Walters: I will.

Andrew Walters: Resenting today with Eric Thornburg Chair of the Board, President and Chief Executive Officer.

Andrew Walters: For those who would like to follow along slides accompanying our remarks are available on our website at SJW group Dot com.

Andrew Walters: Before we begin today I would like to remind you that this presentation and the related materials posted on our website may contain forward looking statements.

Eric W. Thornburg: Thanks to the efforts of our local teams, our investments in drinking water and wastewater infrastructure spanned the replacement of over 47 miles of water mains, to water treatment improvements, including a $14 million groundwater treatment facility in East Windsor, Connecticut, upgrades at our Park Shores Surface Water Treatment Facility in Kamal County, Texas, construction of an 800,000-gallon storage lagoon in Camden, Maine, and two 5-million-gallon storage tanks in California. We advanced our commitment to reduce operating costs by investing in capital projects that sustainably reduce operating expenses, like our Asset Management Program in California. This program reduces unplanned repairs and maintenance expenses by leveraging technology, including artificial intelligence, to predict the failure of an asset and its resulting consequences.

Andrew Walters: These statements are based on estimates and assumptions made by the company in light of its experience historical trends current conditions and expected future results as well as other factors that the company believes are appropriate under the circumstances.

Andrew Walters: Many factors could cause the company's actual results and performance to differ materially from those expressed or implied by the forward looking statements.

Andrew Walters: For a description of some of the factors that could cause actual results to be different from statements. In this presentation. We refer you to the financial results press release and to our most recent forms 10-K, 10-Q, and 8-K filed with the Securities and Exchange Commission copies of which may be obtained on our.

Andrew Walters: Website.

Andrew Walters: All forward looking statements are made as of today and SJW group disclaims any duty to update or revise such statements.

Eric W. Thornburg: And we delivered earnings per diluted share of $0.59 in the fourth quarter and $2.68 for the year, well above our original forecast. In 2024, we will continue to execute on the key elements of our strategy to create meaningful value and drive future earnings growth. We will continue making strategic investments to maintain and improve our water supply and infrastructure and also focus on opportunities that reduce operating expenses. These include advanced leak detection and advanced metering infrastructure that promises to reduce field visits and fleet miles. Additional solar generation, battery energy storage systems, and expansion of our electric vehicle fleet. We will also see increased capital expenditures to remediate PER and polyfluoroalkyl substances, or PFA.

Andrew Walters: You will have an opportunity to ask questions at the end of the presentation.

Andrew Walters: As a reminder, this webcast is being recorded and an archive of the webcast will be available until April 22024.

Andrew Walters: You can access the press release and the webcast at our corporate website.

Andrew Walters: I will now turn the call over to Eric Thornburg Eric.

Welcome everyone and thank you for joining US my name is Eric Thornburg and it is my honor to serve as chair President and CEO of SJW group.

Eric W. Thornburg: I am pleased to share that we had another successful year as our team continues to meet drinking water and environmental standards deliver on our public health and environmental stewardship commitments and provide high quality water and exceptional service to customers.

Eric W. Thornburg: We also started and ended our 2023 financial performance on a strong note.

Eric W. Thornburg: Approximately $230 million is estimated for PFAS treatment. And we remain intensely focused on working with regulators and stakeholders for constructive regulatory outcomes across our operation, such as the recently filed general rape case in California, the ongoing general rate case in Connecticut, and the System Improvement Charge in Texas, which we will discuss later in the call. For now, Andrew will review our financial results and regulatory updates in our state operations.

Eric W. Thornburg: Delivering value for our shareholders through the continued execution of our proven growth strategy.

Eric W. Thornburg: In 2023.

We secured constructive regulatory outcomes across our operations, including the cost of capital decision and the re implementation of the water conservation Memorandum account in California, water infrastructure and conservation adjustments in Connecticut, and the settlement of our Biddeford saw.

Eric W. Thornburg: <unk> general rate case in Maine.

Eric W. Thornburg: We achieved 12% customer growth year over year in Texas.

Andrew Walters: Thank you, Eric. Last evening after the market closed, we released our fourth quarter in 2023. A couple of items to note, quarter-over-quarter comparison. 2023 and 2022 operating results are affected by and reflect the delay in San Jose water coupling.

Eric W. Thornburg: Since 2006, Texas water has more than quadrupled in customers through organic growth and strategic acquisitions and today serves more than 28000 water connections and 950 wastewater connections.

Eric W. Thornburg: We invested $272 million in capital improvements, surpassing our planned expenditures announced at this time last year by $17 million.

Andrew Walters: 2022 to 2024 general. As a reminder, while the California Public Utilities Commission approved the settlement agreement, San Jose Water Company recorded the authorized revenue increase from the general rate in the fourth quarter of 2020, but the revenue increase was retroactive to January. This delay in recognizing the revenues authorized in the general rate case affected quarter-over-quarter comparisons.

Eric W. Thornburg: Thanks to the efforts of our local teams are investments in drinking water and wastewater infrastructure span the replacement of over 47 miles of water mains to water treatment improvements, including a $14 million groundwater treatment facility in East Windsor, Connecticut.

Andrew Walters: Also in California, the CPUC authorized the re-implementation of the Water Conservation Memorandum, M.A., and Water Conservation Expense Management Account, effective October 2021.

Eric W. Thornburg: Upgrades at our park shores surface water treatment facility and come all County, Texas construction of an 800000 gallons storage lagoon in Camden, Maine, and $2 5 million gallon storage tanks in California.

Andrew Walters: Thank you. These Revenue Expense Protection Mechanisms were retroactive to April 20, 2021, and are reflected entirely in the fourth quarter. We saw reduced water usage in Maine due to wet weather and lower industrial activity, and in Texas due to water restrictions, trout.

Eric W. Thornburg: We advanced our commitment to reduce operating costs by investing in capital projects that sustainably reduce operating expenses like our asset management program in California.

Eric W. Thornburg: This program reduces unplanned repairs and maintenance expenses by leveraging technology, including artificial intelligence to predict the failure of an asset.

Andrew Walters: Now to the results for the quarter, fourth quarter reported revenue of $171.3 million and net income of $18.9 million for diluted EPS. This compares to 2022 quarterly revenue of $171.4 million and net income of $33.5 million, or diluted EPS of $1.09. For the full year of 2023, we reported revenue of $670.4, net income of $85,000, or diluted EPS of $2.00. This compares to 2022 revenue of $620.7 million, reflecting an 8% net income of $73.8 million, diluted EPS of $2.43, which was driven in part by a 14 cent increase due to the partial release of income tax. As you can see, the year-to-date, The estimated earnings per share for 2023 was primarily driven by rate filings of $1.30 per share in California and Maine, as well as a water infrastructure and conservation adjustment in Connecticut that were effective in 2020. Other factors include approximately $0.42 combined split evenly between the partial release of income tax reserves that I mentioned a moment ago, lower maintenance and OII costs, and the impacts of lower customer Title Microsoft Office Word Document MSWordDoc Word. Document.8, y'all.

Eric W. Thornburg: And the resulting consequences.

Eric W. Thornburg: And we delivered earnings per diluted share of <unk> 59 in the fourth quarter and $2 68 for the year well above our original forecast.

Eric W. Thornburg: In 2024, we will continue to execute on the key elements of our strategy to create meaningful value and drive future earnings growth.

Eric W. Thornburg: We will continue making strategic investments to maintain and improve our water supply and infrastructure.

Eric W. Thornburg: And also focus on opportunities that will reduce operating expenses.

Eric W. Thornburg: These include advanced leak detection advanced metering infrastructure that promises to reduce field visits and fleet miles additional solar generation.

Eric W. Thornburg: Battery energy storage systems and expansion of our electric vehicle fleet.

Eric W. Thornburg: We will also see increased capital expenditures to remediate pur, and poly Fluoro alkyl substances, where people has.

Eric W. Thornburg: <unk> $230 million is estimated for P fast treatment.

Eric W. Thornburg: And we remain intensely focused on working with regulators and stakeholders for constructive regulatory outcomes across our operations such as the recently filed general rate case in California.

Eric W. Thornburg: Ongoing general rate case in Connecticut.

Eric W. Thornburg: And the system improvement charge in Texas, which we will discuss later in the call.

Eric W. Thornburg: For now Andrew will review, our financial results and regulatory updates in our state operations Andrew.

Andrew Walters: Thank you Eric.

Last evening after the market closed we released our fourth quarter and 2023 operating results.

Andrew Walters: Partially offsetting the increase was higher water supply cost of $93.6 million, interest expense of $0.23 on short-term loans to Long-Term Debt, and a non-recurring $0.17 sale of non-utility products. A breakdown of the increase in revenue compared to 2012. The revenue increase was mostly driven by $46.5 million in cumulative rate filings and $5.7 million in regulatory. The revenue increase was partially offset by 6.6%; into our water production, there was an increase in water production expense when compared to 2020. The increase was largely driven by $31.8 million in water supply costs, primarily related to the rate increase from our waterholes. Valley Water in California, partially offsetting the expenses was a $9.7 million increase. Total other operating expenses compared to the prior year were primarily driven by a $6.2 million gain on a prior year sale that did not occur, an increase in the allowance for customer credit losses, and appreciation. The increase was partially offset by reduced expenses, with a significant portion of this reduction to San Jose Water Company focusing on the maturity of the Advanced Asset Management Program, which includes infrastructure condition monitoring and assessment.

Andrew Walters: A couple of items to note.

Andrew Walters: The quarter over quarter comparisons between the 2023 and 2022 operating results are affected by and reflect the delay in San Jose water Company's 2022 to 2024 general rate case decision.

Andrew Walters: As a reminder, while the California public Utilities Commission approved the settlement agreement in San Jose Water Company recorded the authorized revenue increased from the general rate case.

Andrew Walters: In the fourth quarter of 2022, the revenue increase was retroactive to January one 2022.

Andrew Walters: This delay in recognizing the revenues authorized in the general rate case affected quarter over quarter comparisons in 2023.

Andrew Walters: Also in California, the CPUC authorized re implementation of the water conservation memorandum account or WC, MAA and water conservation expense management accountable for WC MAA.

Andrew Walters: In October 2023.

Andrew Walters: These revenue expense protection mechanisms were retroactive to April 22023, and are reflected entirely in the fourth quarter results.

Andrew Walters: We saw reduced water usage in Maine, due to wet weather and lower industrial usage and in Texas due to water restrictions because of continuing drought conditions.

Speaker Change: Now to the results for the quarter.

Speaker Change: And our fourth quarter reported revenue of $171 3 million and net income of $18 9 million or diluted EPS of <unk> 59 per share.

This compares to 2022 quarterly revenue of 171, 4 million and net income of $33 5 million or diluted EPS of $1 nine per share.

Speaker Change: For the full year of 2023, we reported revenue of $674 million and net income of $85 million.

Andrew Walters: Proactive Planned Asset Replacement versus a Run to Failure Additionally, advances in San Jose Water Company's leak detection technology deployed in the field, as well as other enhanced leak detection capabilities in our field, have together enabled the company to detect and repair leaks sooner, avoiding significant costs associated with larger emergency main breaks turning toward 2023. Approximately $83 million in gross proceeds were raised in 2020 through our at-the-market program, including $5.7 million in the fourth quarter. $50 million was for general corporate purposes, and the additional amount was raised for acquisitions that closed in the third quarter. At the end of the year, we had $171.5 million drawn on our $350 million bank lines of credit.

Speaker Change: Our diluted EPS of $2 68 per share.

Speaker Change: This compares to 2022 revenue of $627 million, reflecting an 8% increase in net income of $73 8 million, reflecting a 15% increase or diluted EPS of $2 43 per share, reflecting a 10% increase what's driven in part by a 14th.

Speaker Change: <unk> increased due to the partial release of income tax reserves.

Speaker Change: As you can see the year to date increase in diluted earnings per share for 2023 was primarily driven by rate filings of $1 30 per share in California, and Maine as well as a water infrastructure and conservation adjustment increase in Connecticut that were effective in <unk>.

Speaker Change: 'twenty three.

Speaker Change: Other factors include approximately 42 combined split evenly between the partial release of income tax reserves that I mentioned, a moment ago, lower maintenance and OSI cost and the impacts of lower customer usage and the WC MAA offset.

Andrew Walters: $178.5 million available for short-term financing of utility plant additions and operating activities. The average borrowing rate for the line of credit advances during 2023 was approximately 6.29%, and the average barring rate in 2022 was approximately 3.41. The effective consolidated income tax rates for 2023 and 2022 were approximately 7%.

Partially offsetting the increase was higher water supply cost of 93.

Speaker Change: Interest expense of 23 on short term and new long term debt and a nonrecurring 17% gain.

Speaker Change: The sale of non utility property.

Speaker Change: Yeah.

Speaker Change: Now a breakeven breakdown of the increase in revenue compared to 2022.

Speaker Change: The revenue increase was mostly driven by $46 5 million accumulative rate filings and $5 7 million of regulatory mechanisms.

Speaker Change: The revenue increase was partially offset by $6 $6 million decreased due to lower usage.

Speaker Change: Turning to our water production expense there wasn't increase in water production expense when compared to 2022.

Speaker Change: The increase was largely driven by $31 8 million in water supply cost primarily related to the rate increase from our water wholesaler valley water in California.

Andrew Walters: Bye, turning to California. January 2, 2024. San Jose Water Company filed a general rate case application with the California Public Utilities Commission, setting rates for 2025, stuff. The application proposes a three-year, $540 million capital expenditure program that addresses several..., treating PFOS, which Eric mentioned earlier, to meet drinking water, finalized by. Reducing Greenhouse Gas Emissions Through Solar Generation. Energy Storage Systems Replace Diesel Generator

Speaker Change: Partially offsetting the increase in expenses was a $9 $7 million decreased due to lower usage.

Speaker Change: Yeah.

Speaker Change: The 3% increase in <unk>.

Speaker Change: Total other operating expenses compared to the prior year was primarily driven by a $6 2 million gain on prior year sale that did not occur in 2023.

Speaker Change: An increase in the allowance for customer credit losses, and the depreciation and amortization.

Speaker Change: The increase was partially offset by reduced expenses with a significant portion of this reduction due to San Jose water Company's continued focus on maturity of the advanced asset management program, which includes infrastructure condition monitoring and assessments <unk>.

Andrew Walters: Fleet, Electrical & Temperature Manual California Boats, and advanced, plus Advancing the CPUC's Environmental and Social Justice Action Plan to improve access to high-quality Water Service, Climate Resiliency, and Economic and Development. As of January 1st, 2024, San Jose Water Company has the benefit of a group insurance balance. The purpose of the account is to capture the difference between authorized and actual medical, dental, and opt-out insurance costs.

Speaker Change: Proactive planned asset replacement versus a run to failure approach.

Speaker Change: Additionally, advances in Sunny San Jose water company's leak detection technology deployed in the field as well as other enhanced leak detection capabilities in our field crews had together enabled the company to detect and repair leaks sooner avoiding significant costs associated with larger emergency main breaks in the distribution system.

Speaker Change: Yeah.

Speaker Change: Turning to our 2023 financing activity.

Speaker Change: Approximately $83 million in gross proceeds was raised in 2023 through our at the market program, including $5 7 million in the fourth quarter 15.

Andrew Walters: This is yet another regulatory mechanism that helps us to manage this escalating and unpredictable economy. The 2024 Cost of Capital Mechanism Adjustment was effective on January 1st, 2020, triggered by 140 basis points. Double A Bond.

Speaker Change: <unk> 50 million was for general corporate purposes, and the additional about was raised four acquisitions that closed in the third quarter.

Speaker Change: At the end of the year, we had a $171 $5 million drawn on our $350 million bank lines of credit, leaving a $178 5 billion available for short term financing of utility plant additions and operating activities.

Andrew Walters: October 1st, 2022, and September 30th, return on equity is now 10.01%, less a 20 basis point reduction due to the implementation of the Water Conservation Memorandum, for the authorized, for an authorized ROE of nine. The cost of debt is 5.28%, and the authorized rate of return is 7.75%; on February 2nd, 2024, San Jose Water Company, along with three other Class A California water utilities, need approval from the Board of Water and Power for a one-year deferment. 2024 Cost of Capital, with this decision, the Board extended the initial filing deadline from May 1st, 2024.

Speaker Change: The average borrowing rate for the line of credit advances during 2023 was approximately $6 two 9%.

Speaker Change: Average borrowing rate in 2022 was approximately $3 four 1%.

Speaker Change: The effective consolidated income tax rates for 2023, and 2022 were approximately 7% and 10% respectively.

Speaker Change: Turning to the California update.

Speaker Change: On January <unk> 2024.

Speaker Change: San Jose.

Speaker Change: Water company filed a general rate case application with the California Public Utilities Commission that will set rates for 2025 through 2027.

Speaker Change: The application proposes a three year $540 million capital expenditure program that addresses several key needs, including treating P fast, which Eric mentioned earlier to meet drinking water standards being finalized by the U S EPA reducing.

Speaker Change: Reducing greenhouse gas emissions through solar generation energy storage storage systems to replace diesel generators fleet electrification and advanced acoustic leak detection.

Andrew Walters: 2025, to help alleviate administrative processing costs for both the water utilities and.., staff. Approved deferral includes the provision that the water cost of capital takes place for 2025 and allows it to adjust up or down in accordance with the movement of 100 basis points or more. Double A Bond, October 1. September 30th, 2020.

Speaker Change: Plus advancing the Cpuc's environmental and social.

Speaker Change: Justice Social Justice action plan to improve access to high quality water service climate, resiliency and economic and workforce development.

Speaker Change: As of January one 2020 for San Jose Water Company has the benefit of our group insurance balancing account. The purpose of the account is to capture the difference between authorized and actual medical dental and opt out insurance costs.

Andrew Walters: You may recall our advanced metering infrastructure project was authorized by the We're planning to invest approximately $29 million in the AMI project in 2020, a approximately $100 million project that is separate from the general rate case capital budget, and the majority of the installation is expected in Connecticut. In Connecticut, we recently concluded the evidentiary hearings in our general rate case filed with the Connecticut public. I'm very happy we had him on our team on January 8th. We had some problems removing him. He did a little bit of frying and cooking in the pan.

Speaker Change: This is yet another regulatory mechanism that helps us to manage this escalating and unpredictable expense.

Speaker Change: The 2020 for cost of capital mechanism adjustment was effective on January one 2024. It was triggered by a 140 basis point increase in Moodys double AA Bond index between October one 2022 and September 32023.

Speaker Change: The return on equity is now $10 or 1% less.

Speaker Change: Les a 20 basis point reduction due to the re implementation of the water conservation memorandum account for the authorized for an authorized ROE of 981%.

Andrew Walters: So it looks like we're going to have to wait until Monday for the oil, which is different for wind turbine paperwork. We're going to need some oil. Do you want the risks? Yeah. And I would say don't. I would say we need oil on October 28th.

Speaker Change: The cost of debt is 528% in the authorized rate of return is 775%.

On February <unk> 2020 for San Jose Water company, along with three other class a California water utilities.

Andrew Walters: Our request is for $21.4 million, or 18.1% of the annual revenue, approximately two-thirds of the requested rate. The application also includes a proposal for expanding our low-income water rate assistance program, also known as WRAP, for income-eligible customers. We were the first water utility in the state to offer this type of program, and in 2023, we provided more than $70,000 in customer assistance. We're hopeful that PURA will authorize our request to expand. We expect a decision on the Connecticut general rate case at the end of June, with any approved revenue increase to be effective on or about July 1st, 2024. However, the decision is not expected to be a significant driver of our 2024 financial results.

Speaker Change: <unk> approval from the CPUC for a one year deferment in the 2020 for cost of capital filings.

Speaker Change: With this decision the CPUC extended the initial filing deadline from May one 2024 to May one 2025 to help alleviate administrative processing costs for both the water utilities and the CPUC staff.

Speaker Change: The approved deferral includes a provision.

Speaker Change: That the water cost of capital mechanisms remain in place for 2025 and allows it to adjust up or down in accordance with the movement of the 100 basis points or more in the Moody's double a bond index between October one 2023 and September 32024.

Speaker Change: You may recall, our advanced metering infrastructure project was authorized by the CPUC in 2022.

Speaker Change: We're planning to invest approximately $29 million in the Ami project. In 2024. This is a approximately $100 million project that is separate from the general rate case capital budget and the majority of the installation is expected between 2024 and 2026.

Andrew Walters: Pura approved a 1.19% increase in water infrastructure and conservation adjustment that was effective on October 1, 2012, increases generating approximately $1.3 million in annualized revenue. Last March, we filed our general rate case in Maine Water Company's Biddeford-Saco Division requesting a $2.9 million Sako River water rate. The Maine Public Utilities Commission authorized a temporary rating.

Speaker Change: Turning to Connecticut.

Speaker Change: In Connecticut, We recently concluded the evidentiary hearings in our general rate case that was filed with the Connecticut public utility regulatory authority in October 2023.

Speaker Change: Our request is for a $21 4 million or 18, 1% increase in annual revenues approximately two thirds of the requested rate increases related to infrastructure investments.

Andrew Walters: August 2023, while the General Rates, Frost. On January 5, 2024, the Maine Public Utility Commission approved a stipulation. Maine Water and the Office of Public Advocates on Our Generation. Provisions of the approved stipulation agreement include Maine Water's annualized revenue of 2.6 million effective January 1st, 2020. Return on equity for the Biddeford-Saco division and for future filings of water infrastructure charges or WISC filings statewide is now 9.5% with an assumed 51% equity and 49% debt capital, General Rate Case Day Out provision with the Biddeford Taco Division through January 1, 2027. Thea does not include WISC files.

Speaker Change: The application also includes a proposal for expanding our low income water rate assistance program also known as rap for income eligible customers.

Speaker Change: We were in the we were the first water utility in the state to offer this type of program and in 2023, we provided more than $70000 in customer assistance through rap.

Speaker Change: We are hopeful that PURA will authorize our request expansion of this important program.

Speaker Change: We expect a decision on the Connecticut General rate case at the end of June with any approved revenue increase to be effective on or about July. One 2024. The decision is not expected to be a significant driver of our 2024 financial results.

Speaker Change: PURA approved a $1 one 9% increase in water infrastructure and conservation adjustment that was effective on October one 2023 increases generating approximately $1 $3 million in annualized revenues.

Andrew Walters: Mainwater expects a decision in the first quarter of 2024 on its WISC filing to recover $1.7 million in completed infrastructure investments in Camden and Rockefeller. If approved, as requested, it would generate $158,000 in annualized... As Eric mentioned at the top of the call, we have seen accelerated growth in Texas in recent years. Just this past year, we have seen increasing developer interest in our Texas service area as outstanding development units and potential for new connections. 47% 22,000 units today. That's not surprising as Texas water currently serves three of the five fastest growing counties in the United States, according to More than 28,000 water connections and 950 wastewater connections in the area between Austin and San Antonio.

Speaker Change: Last March we filed our general rate case in Maine water companies Biddeford Soco Division are requesting a $2 9 million increase in annualized revenues to cover the operating expenses and increased borrowing costs from constructing the new Soco River walk.

Speaker Change: <unk> Resource Center, the Maine Public Utilities Commission authorized a temporary rate increase in August of 2023, while the general rate case was being processed.

Speaker Change: On January five 2024 at the Maine Public Utility Commission approved a stipulation agreement between Maine water and office of public advocate on our general rate case provisions of the approved stipulation agreement include Maine water's annualized revenue increase of $2 6 million effective January.

Speaker Change: <unk> 2024.

Speaker Change: The return on equity for better for Taco Division and for future filings of water infrastructure charges or wisc filings statewide is now nine 5% with an assumed 51% equity and 49% debt capital structure.

Andrew Walters: The company has quadrupled its service connections since 2006, and we intend to continue this momentum, organic growth, and securing strategic water resources such as the supply we acquired in the third quarter. In January, we filed an application with the Public Utility Commission of Texas to acquire the 3009 Water Company in Komal County that serves approximately 270 water companies. On February 13th, a proposed order from the Public Utility Commission of Texas on our application. System Improvement Charge in Texas. The proposed order authorized Texas Water to add certain utility plant additions. 20, rate, thereby increasing revenue in avoiding a general. Our system improvement charge filing in December 2020 projected an annualized revenue increase of $1.3 billion within one year. Our final order is expected as early as March 7th. We have seen some recent improvement in drought conditions in Texas, so the U.S. Drought Monitor continues to classify our service areas as moderate to extreme drought. Most of our service area is classified as Stage 2 or Stage 3 drought, while a smaller portion is in the most severe stage four drought. We're targeting voluntary water use reductions that vary based on the severity of the drought.

Speaker Change: There is a general rate case stay out provision with the benefit of Taco Division through January one 2027.

Speaker Change: Stay out does not include whisk filings.

Speaker Change: Maine water expects a decision in the first quarter of 2024 on its whisk filing to recover $1 7 million and completed infrastructure investments in Camden in Rocklin divisions.

Speaker Change: If approved as requested it would generate 158000 annualized revenues.

Speaker Change: As Eric mentioned at the top of the call we have seen accelerated growth in Texas and the momentum continues.

Speaker Change: In just the past year, we have seen increasing developer interest in our Texas service area is outstanding development units with the potential for new connections increased 47% to 22000 units today.

Speaker Change: That's not surprising as Texas water cut.

Speaker Change: Currently serves three of the five fastest growing counties in the United States. According to the U S Census Bureau.

Speaker Change: More than 28000 water connections and 950 wastewater connections in the area between Austin and San Antonio The company is quadruple that service connection since 2006, and we intend to continue this momentum through prudent acquisitions organic growth and securing strategic water resources such as the supply we.

Speaker Change: <unk> in the third quarter.

Speaker Change: In January we filed an application with the public utility Commission of Texas to acquire.

Speaker Change: The three <unk> water company and Comal County that serves approximately 270 water connections.

Speaker Change: On February 13th we received a proposed order from the public utility Commission of Texas on our application for a system improvement charge in Texas that.

Andrew Walters: Overall, we.. service area compared to 20, drought, with a diverse portfolio of water supplies at Grain and Wastewater. Acquisition, discuss, organic growth, and acquisitions. We are very pleased with Texas Water's increased contributions to our consolidated and optimistic about its process. We're announcing our 2020 guidance of $2.75 cents to $2.75. Net Income per Diluted Share, which is consistent with our non-linear, long-term growth rate of 5 to 7%.

The proposed order authorized Texas water to add certain utility plant additions made since 2022 its rate base, thereby increase revenue and avoiding a general rate case in 2024.

Speaker Change: Our system improvement charge filing in December 2022 projected an annualized revenue increase of $1 6 million with one year of the PUC with within one year of the PUC approval.

Speaker Change: Our final order is expected as early as March seven 2024.

Speaker Change: We have seen some recent improvement in the drought conditions in Texas. So the U S drop monitor continues to classify our service areas being in a state of moderate to extreme drought.

Andrew Walters: Equity issuance of $55 million to $65 million, including Acquisition Growth, will support a strong capital investment program to maintain our five-year capital investment outlook of $1.6 billion, which includes approximately 230 million in estimated PFAS. And as an introductory speaker, I welcome you to the conversation about the political factors underlying our 2024 guide, turn on X. California from 9.31% to 9.81% net at the 20 basis points, and presentation of WCMA, which is effective already as of January 1st, 2020. The impact of the already completed Biddeford-Saco rate, a 9.5% ROE. 51% equity, 49% capital structure effective January 1st.

Speaker Change: Of our service area is classified as stage, two or stage III drought conditions, while our smaller smaller portion is in the most severe stage for drought conditions.

Speaker Change: We're targeting voluntary water use reductions that vary based on drought stage.

Speaker Change: Overall, we have seen reduced usage in this service area compared to 2022 due to the drought.

Speaker Change: With a diverse portfolio of water supply is a growing wastewater business and continued acquisitions to the customer base through organic growth and acquisitions. We are very pleased with Texas waters increased contributions to our consolidated earnings and remain optimistic about its prospects.

Speaker Change: We are announcing our 2024 guidance of $2 68 to $2 78 of net income per diluted share, which is consistent with our non linear long term growth rate of 5% to 7%.

Speaker Change: Equity issuance of $55 million to $65 million, excluding acquisition growth is to support a strong capital investment program.

Speaker Change: We maintain our five year capital investment outlook of $1 6 billion, which includes approximately $230 million in estimated P. Fast remediation based on the Epa's proposed maximum contaminant levels.

Andrew Walters: 2024, as well as constructive regulatory decisions on current and prospective regulatory filings. Also includes strategic reinvestments in the business in 2024 and the guidance range, with our long-term growth. Further, we reaffirm our stated long-term growth rate of 5 to 7% that is anchored off our 2022 diluted earnings per share of $2, nonlinear because of site.

Speaker Change: Yeah.

Speaker Change: The factors underlying our 2024 guidance include a return on equity increase in California from 931% to $9 eight 1% net of the 20 basis points.

Speaker Change: Re implementation of <unk>, which was effective already as of January one 2024.

Speaker Change: The impact of the already completed that effort soco rate case with a nine 5% Roe.

Speaker Change: 1% equity, 49% debt capital structure effective January one.

Speaker Change: 24, as well as constructive regulatory decisions on current and perspective regulatory filings.

Eric W. Thornburg: As investors consider our 2024 guidance, it's important to note that, as we mentioned earlier, there was a one-time release of $0.14 for income tax. With that, I will turn the call over to Eric. Thank you, Andrew. Our 2024 planned capital expenditures are $332 million across all four of our state operations, which includes the $29 million budgeted for advanced metering infrastructure in California. Approximately 65% of our annual capital budget will be recovered through pre-approved projects and infrastructure recovery mechanisms. Approximately one-third of our 2024 budgeted capital expenditures, or nearly $114 million, is targeted to water main replacement. This investment is vital to our principled approach of replacing 1% of transmission and distribution mains each year.

Speaker Change: This includes strategic Reinvestments in the business in 2024, and the guidance range is consistent with our long term growth rate.

Speaker Change: Further we reaffirm our stated long term growth rate of 5% to 7% that is anchored off our 2022 diluted earnings per share of $2 43.

Speaker Change: Which is a non linear because of rate case cycles.

As investors consider our 2024 guidance, it's important to note that.

Speaker Change: As we mentioned earlier.

Speaker Change: There was a onetime release of <unk> 14 related to income tax reserves in 2023.

Speaker Change: With that I will turn the call over to Eric.

Eric W. Thornburg: Thank you Andrew.

Eric W. Thornburg: Our 2020 for planned capital expenditures are $332 million across all four of our state operations, which includes the $29 million budgeted for advanced metering infrastructure in California.

Eric W. Thornburg: Approximately 65% of our annual capital budget will be recovered through preapproved projects and infrastructure recovery mechanisms.

Eric W. Thornburg: Approximately one third of our 2024 budgeted capital expenditures or nearly $114 million.

Eric W. Thornburg: Is targeted to water main replacement.

Eric W. Thornburg: This investment is vital to our principled approach of replacing 1% transmission and distribution mains each year.

Eric W. Thornburg: Other projects commencing or scheduled for completion in 2024 reflect our commitment to invest in new or replacement treatment and storage systems that are designed and constructed to be more energy efficient and to meet changing operational challenges, including climate change. These projects include a multi-year pipeline project to bring new water supply from the recently acquired KT Water Resources to our customers in Texas. Water Storage Project at our Cambrian Station in California. Two 8.3 million gallon tanks will be constructed to replace aging storage reservoirs that date back as far as 1890.

Eric W. Thornburg: Other projects commencing or scheduled for completion in 2024 reflect our commitment to invest in new or replacement treatment and storage systems that are designed and constructed to be more energy efficient and to meet changing operational challenges, including.

Eric W. Thornburg: Climate change.

Eric W. Thornburg: These projects include a multiyear pipeline project to bring new water supply from the recently acquired Katie water resources to our customers in Texas.

Eric W. Thornburg: A water storage project at our Cambrian station in California.

Eric W. Thornburg: Two $8 3 million gallon tanks will be constructed to replace aging storage reservoirs that date back as far as $18 90.

Eric W. Thornburg: This multi-year project will enhance water quality, conserve water, and have lower maintenance costs. In Connecticut, work has started on a new groundwater treatment facility in South Perry. This is a new facility to remove iron and manganese that has caused episodes of discolored water for decades. Since Connecticut Water acquired the system in 2017, we have been aggressively addressing the issue by optimizing water treatment and replacing water mains. But the treatment facility is necessary to achieve an efficient long-term solution. In Maine, we're preparing this year for the construction of a solar array at our award-winning Saca River Drinking Water Resource Center in Biddeford. Solar generation has always been a part of the design plan.

This multiyear project will enhance water quality conserve water and have lower maintenance costs.

Eric W. Thornburg: In Connecticut work has started on a new groundwater treatment facility in South Berry.

Eric W. Thornburg: This is a new facility to remove iron and manganese that has caused episodes of discolored water for decades.

Eric W. Thornburg: Since Connecticut water acquired the system in 2017, we have been aggressively addressing the issue by optimizing water treatment and replacing water mains, but.

Eric W. Thornburg: But the treatment facility is necessary to achieve an efficient long term solution.

Eric W. Thornburg: In Maine, we're preparing this year for the construction of a solar array at our award winning soccer Rivard drinking water resource center in Biddeford.

Eric W. Thornburg: Solar generation is always been a part of the design plan.

Eric W. Thornburg: But the local electric utility infrastructure first needed updates. Our onsite solar generation will produce enough power to meet 100% of the Resource Center's energy needs as early as 2025. Additional solar generation in 2024 is also planned in California and Connecticut. San Jose Water Company is also expanding the availability of recycled water for irrigation use. Approximately 2 miles of pipe will bring up to 440 acre-feet of recycled water per year to a nearby golf course, schools, and park.

Eric W. Thornburg: But the local electric utility infrastructure first needed updating.

Eric W. Thornburg: Our onsite solar generation will produce enough power to meet 100% of the resource centers energy needs.

Eric W. Thornburg: Early as 2025.

Eric W. Thornburg: Additional solar generation in 2024 is also planned in California and Connecticut.

Eric W. Thornburg: San Jose Water company is also expanding the availability of recycled water for irrigation use.

Eric W. Thornburg: Approximately two miles of pipe will bring up to 440 acre feet of recycled water per year to a nearby golf course schools and parks.

Eric W. Thornburg: The potable water is saved through the use of recycled water for irrigation and is enough to meet the needs of more than 8,000 people daily. One of the ways we measure our impact and success as a company is how have we been a force for good? We use our core values to help us deliver benefits to our customers, local communities, employees, and the environment. For example, employee safety is paramount. Our teams work diligently to ensure our people are trained and equipped to safely do their job. In Connecticut, we were awarded the Connecticut Construction Industry Association Safety Award for the 20th straight year.

The potable water save through the use of recycled water for irrigation.

Eric W. Thornburg: Is it enough to meet the needs of more than 8000 people daily.

Speaker Change: One of the ways, we measure our impact and success as a company is how have we been a force for good.

Speaker Change: We use our core values to help us deliver benefits to our customers local communities employees and the environment.

Speaker Change: For example employee safety is Paramount.

Speaker Change: Our teams worked diligently to ensure our people are trained and equipped to safely do their jobs.

Speaker Change: In Connecticut, we were awarded the Connecticut Construction Industries Association Safety award for the 20th straight year.

Eric W. Thornburg: While this is a great achievement, we're continually assessing how we can improve our best-in-class safety standards across our operations. Also, as I've mentioned before, we're a better utility because of our employees' talent and hard work. So being recognized as an employer of choice is a top priority. Across the SJW Group, our Good Place to Work Index, as measured by an independent third-party survey of our employees, is at world-class level. As a company, we recognize the breadth and richness of perspective that we gain by having diverse teams and partners. SJW Group has a gender-balanced board, something only 12% of Russell 3000 companies can claim. And in 2023, we spent $63 million, or approximately 21% of our addressable spend, with diverse suppliers.

Speaker Change: While this is a great achievement, we're continually assessing how can we improve our best in class safety standards across our operations.

Speaker Change: Also as I've mentioned before we're a better utility because of our employees talent and hard work.

Speaker Change: So being recognized as an employer of choice is a top priority.

Speaker Change: Across SJW group are good place to work index as measured by an independent third Party survey of our employees is at World class levels.

Speaker Change: As a company, we recognize the breadth and richness of perspective that we gain by having diverse teams and partners.

Speaker Change: SJW group has a gender balanced board something only 12% of Russell 3000 companies can claim.

Speaker Change: And in 2023, we spent $63 million or approximately 21%.

Speaker Change: Of our addressable spend with diverse suppliers.

Eric W. Thornburg: I'm also proud to share that we've received recognition for our efforts. We were recognized for our watershed stewardship in California by the National Association of Clean Water Agencies. We received an A rating from MSCI for our work on ESG matters, and our company was the highest-ranked utility in the prestigious Newsweek Excellence 1000 Index for 2024. Inclusion in the index is for exemplars of corporate governance, with a firm commitment to best practices in business and financial growth while also serving customers, stakeholders, and communities with a dedication to social responsibility and ethical standards.

Speaker Change: I'm also proud to share that we've received recognition for our efforts.

Speaker Change: We were recognized for our watershed stewardship in California by the National Association of clean water agencies.

Speaker Change: We received an a rating from MSCI for our work on ESG matters.

Speaker Change: And our company was the highest ranked utility.

Speaker Change: And the prestigious Newsweek Excellence, one index for 2024.

Speaker Change: Inclusion in the index is for exemplars of corporate excellence with a firm commitment to best practices and business and financial growth, while also serving customers stakeholders and communities with a dedication to social responsibility and ethical standards.

Eric W. Thornburg: It's a testament to the values of our company and our work to be a meaningful force for good. I can't say it enough, but our people make the difference at SJW Group. They make us a better utility. Every year, every quarter, every day, I continue to be inspired by the contributions of our talented teams across our national footprint, as they consistently provide an essential service with integrity, reliability, and peace of mind for our customers. I'm confident our team's commitment to serving customers, our local communities, and the environment while creating value for shareholders will continue to reinforce our strong position for a successful future. And with that, I will turn the call back over to the operator. Thank you. As a reminder, to ask a question at this time, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 again.

Speaker Change: It's a testament to the values of our company and our work to be a meaningful force for good.

Speaker Change: I can't say it enough, but our people make the difference at SJW group.

Speaker Change: Make us a better utility.

Speaker Change: Every year every quarter every day I continue to be inspired by the contributions of our talented teams across our national footprint.

Speaker Change: As they consistently provide an essential service with integrity reliability and peace of mind for our customers.

Speaker Change: I am confident our team's commitment to serving customers our local communities and the environment, while creating value for shareholders. We will continue to reinforce our strong position.

Speaker Change: For a successful future.

Speaker Change: And with that I will turn the call back over to the operator.

Speaker Change: Thank you and as a reminder to ask a question at this time. Please press star one on your telephone and wait for your name to be announced.

Speaker Change: <unk>. Your question. Please press star one again.

Operator: One moment while we compile our Q&A roster, and our first question is going to come from the line of Angie Storanzinsky with Seaport. Your line is open. Please go again. Thank you. I have to start with a question about Connecticut.

Speaker Change: One moment, while we compile our Q&A roster.

Speaker Change: And our first question is going to come from the line of Andrew joined Vince.

Andrew Walters: With Seaport. Your line is open. Please go ahead.

Andrew Walters: Thank you.

Andrew Walters: I have to start with a question about Connecticut, Let me know.

Angie Storansky: I mean, it's been almost, what, six years since you guys were approached. Oh, well, Connecticut Water was approached by Eversource, and now Eversource is selling Aquarian. I just wonder, you know, how you guys see this asset. I remember, back in 2018, Eversource was talking about the complementary nature of the service territories of both Aquarian and Connecticut Water. You know, that should not have changed.

Andrew Walters: In almost six years.

Andrew Walters: You guys were approach.

Seaport: Water was approached by other source amount of resources.

Seaport: Selling aquarium.

Seaport: Just wonder how you guys.

Seaport: See this asset I remember back in 2000.

Seaport: Ever since I was talking about the complementary nature of the service territories of both our quarry in Connecticut water.

Seaport: That should not have changed the regulatory setup has changed however, and I'm just wondering.

Eric W. Thornburg: The regulatory setup has changed, however, and I'm just wondering if you can comment at all about how you see Aquarius. Oh, thank you, Angie. Thanks for calling in today. And, you know, candidly, I'm really out of an abundance of respect for Eversource and Aquarian, and particularly the employees of Aquarian who've been through a lot of sales over the years.

Seaport: If you can comment at all about how you see aquarian.

Speaker Change: Thank you Angie and thanks for thanks for calling in today and.

Candidly I really out of an abundance of respect for every source, an aquarium and particularly the employees of acquiring had been through a lot of a lot of <unk>.

Speaker Change: Sales over the years I will not comment specifically on this process, but as you know we've got a real proven growth strategy focused on investing capital and making acquisitions that create shareholder value and you have our commitment that we will continue to evaluate and assess all potential growth opportunities.

Eric W. Thornburg: I'll not comment specifically on this process, but as you know, we've got a real proven growth strategy focused on investing capital and making acquisitions that create shareholder value. You have our commitment that we'll continue to evaluate and assess all potential growth opportunities that would create shareholder value. But, you know, we won't pursue growth just for growth's sake.

That would create shareholder value.

Speaker Change: But we won't pursue growth just for growth's sake, I think it's very important to be disciplined to that.

Eric W. Thornburg: I think it's very important to be disciplined in that way, and that would be the case here as well. So, we'll have more to say in the future, but for now, you know, we'll have to leave it at that. Thank you. Okay, so maybe a little bit more about your pending rate case in Connecticut. I understand that the final decision is due in June, but we've seen some, you know, very weak regulatory decisions on the electric and gas sides, also on the water side from Aquarian. So I'm just wondering if, at this stage, you can, you know, comment on how you think the current rate case is going. And again, not a very big driver of earnings, at least not this year.

Speaker Change: And that would be the case here as well so we'll have more to say in the future but for now.

Speaker Change: We will have to leave it at that thank you.

Speaker Change: Okay, So maybe a little bit more about your pending rate case in Connecticut, I understand that.

Speaker Change: Final decision is due in June but.

Speaker Change: We've seen some.

Speaker Change: Yeah.

Speaker Change: Very weak regulatory decisions on the on the electric and gas side, most on the water side from Macquarie and so I'm just wondering if at this stage you can comment how you think the current rate cases go away.

Speaker Change: And again, not a very big driver of earnings at least not this year, but again any any comment about how its been proceeding.

Angie Storansky: But again, any comment about how it's been proceeding? Yeah, absolutely. Thank you, Angie. I'll start and allow Andrew to contribute as well, of course. I'm super proud of our team.

Speaker Change: Yeah, absolutely. Thank you Angie I'll start and then allow Andrew to contribute as well of course I.

Speaker Change: I am Super proud of our team I mean, I think looking back at some of the recent decisions with energy utilities, and then aquarium water of course.

Eric W. Thornburg: I mean, I think, looking back at some of the recent decisions with energy utilities and then aquarium water, of course, you know, we really studied that and learned from it, and completely reimagined our rate process filing. And if you tuned into any one of those hearings, I'm proud to say you would have seen a team that was really engaged and making every attempt to be transparent and honorable and to provide the commission with the information that they needed to make the decision. And so I remain very optimistic that we will have a fair result, that it will be capital attractive and constructive. And certainly, we're going to find out more in May and in July. But I'm really proud of the team.

Speaker Change: We really study that and learned and completely re imagined our rate process filing and a few tuned into any one of those hearings I'm proud to say you would've seen a team that was really engaged.

Speaker Change: And making every attempt to be transparent and honorable and to provide the commission the information that they need to make the decision and so I remain very optimistic that we will have.

Speaker Change: A fair result that would be capital attractive and constructive and certainly we're going to find out more in may and in July but.

Speaker Change: Really proud of the team and and.

Eric W. Thornburg: And I'll go back. I mean, we've worked collaboratively with the Public Advocate's Office, and the commission, and the authority staff to pass such things as the Water Infrastructure Conservation Adjustment. We have full decoupling there. But we still have a 270-day statutory period to get rates.

Speaker Change: And I'll go back I mean, we've worked collaboratively with the public advocates office and the Commission and Commission the authority staff to pass such things as the water infrastructure conservation adjustment, we have full decoupling. There we still have a 270 day statutory period to get.

Eric W. Thornburg: So there are a lot of really capital-supportive regulatory tools, but it's clear we've had a bit of a rough patch as utilities in the past year or so. But we're committed to continuing to work with all parties to make it as constructive as we possibly can for our shareholders and customers. So, bottom line, I am optimistic and feel very good about my team and what we put forth in our rate filing. Andrew, did I fail to mention anything? Eric, I think you covered it very well. And I don't have anything to add.

Speaker Change: Right. So there's a lot of really capital supportive regulatory tools, but.

Speaker Change: But it's clear we've had a bit of a rough patch as utilities.

Speaker Change: In the past year or so, but we're committed to continue to work with all parties to make it as constructive as we possibly can for our shareholders and customers. So so bottom line I am optimistic and feel very good about.

Speaker Change: My team and the what we put forth in our rate filings Andrew.

Speaker Change: Phil mentioned anything Eric I think you covered it very well and I don't have anything to add to that so.

Andrew Walters: Thank you. So, but Andrew, can you add a little bit more maybe about, you know, when you mentioned your guidance for 24, there's like a reinvestment, right? I don't know how much this is exactly, but I'm assuming that that's somewhat of a drag on the 24 guidance. Is it, you know, pulling forward some expenses from 25? I mean, what is it? And then we could quantify the size.

Speaker Change: But Andrew can you add a little bit more maybe about.

Andrew Walters: When you mentioned your guidance for 'twenty four there is that correct.

Andrew Walters: Reinvestment right.

Andrew Walters: I don't know how much this year is exactly.

Andrew Walters: And I'm, assuming that that's somewhat of a drag on.

Andrew Walters: The 24 guidance is it.

Pulling forward some.

Andrew Walters: Expenses from 25, I mean, what is it and then if we could quantify the size of this.

Andrew Walters: Yeah, I can't quantify the size off the top of my head for this call, nor will I in the future. But what I can do is talk about the types of items to ask the question. So these are items that will help us strategically position ourselves for additional future growth. They can be things that help from a staff training perspective to things that will allow us to invest in other infrastructure and things that will help us reduce costs in the future.

Speaker Change: Yes, I can't quantify the size of the off the top my head four for this call nor will I in the future, but what I can do is talk about.

The types of items that you've you've asked the question on so these are items that will help us strategically position ourselves for four additional future growth.

They can be things that help from a staff training position too.

Speaker Change: That will allow us to invest in and other infrastructure and items that will help us reduce costs in the future. So there. They are meant to be investments that will help us.

Andrew Walters: So they're meant to be investments that will help us produce better results. Thank you. Good morning.

Speaker Change: Produce better results in the future.

Speaker Change: Thank you that's all I have.

Angie Storansky: Thank you, Edgy. Thank you, and one moment as we move on to our next question. And our next question is going to come from the line of Jonathan Reeder with Wells Fargo Securities. Your line is open.

Speaker Change: Thank you Angie thank you.

Speaker Change: Thank you Anne one moment as we move on to our next question.

Speaker Change: And our next question is going to come from the line of Jonathan Reeder with Wells Fargo Securities. Your line is open. Please go ahead.

Jonathan Reeder: Please go ahead. Hey, good morning or afternoon, team, depending on where you're located, but yeah, can you remind us how Connecticut Water's CAPEX budget, which was outlined in the pending GRC actually gets factored into Pura's final order? You know, I know it's not like California where the CPUC actually approves a three-year CAPEX budget as part of the GRC process there, but will Pura, you know, indicate what level of spend over that period it believes is appropriate?

Jonathan Reeder: Hey, good morning, or afternoon, depending on where you're located but thank.

Jonathan Reeder: Thank you Jonathan.

Jonathan Reeder: Can you remind us all Connecticut, water's capex budget that was outlined in.

Jonathan Reeder: The pending JRC actually gets factored into pure as final order I know, it's not like California.

Jonathan Reeder: The CPUC actually approves three year Capex budget as.

Jonathan Reeder: As far as the GIC process, there, but with PURA.

Jonathan Reeder: Indicate what level of spend over that period. It believes is appropriate.

Andrew Walters: Jonathan, I think, you know, PURE in the past, while they might give us some comments in general, it is definitely not the same as California, where there's a specific approval process. But we do, in the interaction with staff and with the commissioners, can, from time to time, receive some guidance as to where they may see some challenges in the future. But typically, it's not focused on that.

Jonathan Reeder: Jonathan I think I think pure in the past, while they might give us. Some some comments in general is definitely not the same as California, where theres a specific approval process, but.

Jonathan Reeder: But we do and the interaction with staff and with the commissioners.

Jonathan Reeder: Can from time to time receive some some guidance as to where they may see some challenges in the future, but typically it's not focused on that it's really focused on what we have invested and whether that is a prudent use of our customers.

Eric W. Thornburg: It's really focused on what we have invested and whether that is a prudent use of our customers' money that they invest with us or provide. Okay, and then, you know, maybe asking the question a little differently. But, you know, just given the challenges in the Connecticut regulatory environment right now, is that a state where SJW would want to, you know, increase exposure versus, you know, Texas, where growth is higher, or potentially enter a new state? Yeah, fair question.

Jonathan Reeder: Many that they invest with us or provide to us.

Jonathan Reeder: Okay.

Speaker Change: Okay and then.

Speaker Change: Yes, maybe asking the question a little differently, but.

Speaker Change: Just given the challenges in the Connecticut regulatory environment right now.

Speaker Change: Is that a state where SJW would want to increase.

Exposure.

Speaker Change: Versus.

Speaker Change: Texas, where growth is higher or potentially entering a new state.

Yes fair question and.

Eric W. Thornburg: And, you know, again, I'll not comment specifically on the opportunity and the process, as it's yet not completely defined, but we do take a long-term view of constructive regulatory shaping and investment, and so we'll evaluate it very carefully once we understand fully the process. And but that's all I have to say today. Thank you. Alright, thanks for taking my questions. I appreciate it.

Speaker Change: Again, I will not comment specifically on on the opportunity and the processes as its yet not completely defined and.

Speaker Change: But we do take a long term view of of constructive regulatory shaping and investment and so.

We will evaluate it very carefully once we understand fully the process and but thats all I have to say today, Jonathan Thank you.

Speaker Change: Alright, Thanks for taking my questions I appreciate it.

Eric W. Thornburg: Thank you, Doug. Thank you. And again, ladies and gentlemen, if you have a question at this time, please press star 11 on your telephone. One moment as we move on to our next question. And our next question comes from the line of Roger Liddell with Clear Harbor Asset Management. Your line is open. Please go ahead.

Speaker Change: Thank you Jonathan.

Speaker Change: Thank you and again, ladies and gentlemen, if you have a question at this time. Please press star one on your telephone one moment as we move on to our next question.

Speaker Change: And our next question comes from the line of Roger Liddell with clear Harbor asset management. Your line is open. Please go ahead.

Roger Liddell: Thank you, and good morning, John. Hi, Roger. It's so great to hear from you. Thank you. I'm delighted to get a report as good as this, you know.

Roger Liddell: Thank you good morning, gentlemen.

Roger Liddell: Hi, Roger so great to hear from you. Thank you.

Roger Liddell: I'm delighted to report it as good as this.

Roger Liddell: You know.

Roger Liddell: Eric, particularly how long I've been concerned about the PFAS issues and other contaminants, but PFAS as well, is as good as it comes in terms of the signal of or the damage of ignoring these things. So my concern is that, Generally, across the country, we're seeing blowback, I think more blowback on large rate requests. Then I can recall for a number of years; maybe it's selective amnesia, and here are large numbers. 110 million in California is one thing. 120 in Connecticut

Roger Liddell: Eric, particularly how long.

Roger Liddell: Concerned about the <unk> issues.

Roger Liddell: And other contaminants pizza.

Roger Liddell: It is as good as it comes in terms of.

Roger Liddell: The signal.

Roger Liddell: Where the damage ignoring these things.

Roger Liddell: My concern is that.

Roger Liddell: Generally across the country, we're seeing.

Roger Liddell: Blow back.

Roger Liddell: More blow back on large rate request.

Roger Liddell: And then I can recall for a number of years, maybe it's selective amnesia.

Roger Liddell: But.

Roger Liddell: Good.

Roger Liddell: And here are large numbers.

Roger Liddell: The.

Roger Liddell: $110 million in California is.

Roger Liddell: Once the <unk> hundred 20, and Connecticut by the way, Maine has had dreadful <unk> contamination issues, perhaps it's not.

Roger Liddell: By the way, Maine has had dreadful PFAS contamination issues. Perhaps it's not in the Biddeford-Saco area or your other service territory, so that's why it isn't mentioned. But anyway, big bucks are in play. And the blowback, to me, just seems, in most cases, remarkably uninformed by the benefits, the life cycle cost versus the first cost, kinds of arguments. So, is there anything that you feel? The shareholder-owned companies, in particular, but the industry, can it do more in terms of awakening the public to the return on investment in PFAS? removal or control

Roger Liddell: Biddeford Sacco area or your other service territory. So that's why as mentioned.

Roger Liddell: But anyway Big box, you can play and.

Roger Liddell: So blow back to me just seems.

Roger Liddell: Most cases.

Roger Liddell: Complete uninformed.

Roger Liddell: The benefits the lifecycle cost versus the first cost.

Roger Liddell: Ms of arguments.

Speaker Change: So is there anything that you feel.

Speaker Change: The.

Speaker Change: The shareholder owned companies in particular.

Speaker Change: But the industry can do more in terms of awakening the public to the return on investment in PFS.

Speaker Change: Removal.

Roger Liddell: There is going to be a big health payback, but it isn't right away. So what can be done? Yeah, thank you, Roger. And you're right.

Speaker Change: Control.

Speaker Change: There is going to be a big health payback isn't right away so what can be done.

Speaker Change: Yes, Thank you Roger and Youre right, you and I have spoken about this for for many years I think the biggest sea change is finally EPA is step forward with the proposed regulatory standard cans.

Eric W. Thornburg: You and I have spoken about this for many years. I think the biggest sea change is that, finally, EPA has stepped forward with a proposed regulatory standard. You know, candidly, up until that point, while many people wanted it resolved from a regulatory risk standpoint, a lot of commissions, you know, were concerned about, well, why should we approve a rate increase at cost to customers when there's, in fact, no standard for this contaminant? There's not even, you know, completed health studies by EPA.

Speaker Change: Candidly up until that point.

Speaker Change: While many people wanted it resolved from a regulatory risk standpoint, a lot of commissions.

Speaker Change: We're concerned about well why should we approve a rate increase had cost to customers. When there's in fact no standard for this contaminant theres not even complete.

Speaker Change: Completed health studies by by EPA and so.

Eric W. Thornburg: And so now that that process is well underway, we have a proposed standard. We expect that to get promulgated in final form. Boy, then that really sets the stage.

Speaker Change: Now that that process is well underway, we have a proposed standard we expect that to get promulgated in final form.

Speaker Change: Boy, then that really sets the stage in and in our conversations with regulators, there's real alignment around hey, we need to get this done and get it done fast and it is a very aggressive timetable once had promulgated we have three years to complete treatment, we've taken many wells offline that.

Eric W. Thornburg: And in our conversations with regulators, there's real alignment around, hey, we need to get this done and get it done fast. And it is a very aggressive timetable. Once that's promulgated, you know, we have three years to complete treatment. We've taken many wells offline that are above certain action levels.

Speaker Change: That are above a certain action levels, but we do have a lot of construction work to get accomplished over the next three years to completely resolve and remediate. This thing I will add that in.

Eric W. Thornburg: But we do have a lot of construction work to get accomplished over the next three years to completely resolve and remediate this thing. I will add that in Maine, we've been very fortunate in all the testing, the detailed testing we've done among, across all of our sources there. We're fortunate so far not to have any PFAS hits of any substance.

Speaker Change: We've been very fortunate and all the testing the detailed testing we've done among cross all of our sources there.

Speaker Change: We're fortunate so far not to have any NTP faas hits of any substance, we do operate a utility under contract part of our management services agreement that does have a bit of an issue. So we will work with them to help resolve that but.

Eric W. Thornburg: We do operate a utility under contract, as part of our management services agreement that does have a bit of an issue, so we'll work with them to help resolve that. We're committed to getting this done and behind us, and as you know, we've disclosed We also participate in the class action suit against the three M's and the DuPonts to help So any costs we recover in that process, which frankly we don't expect to be big, you know, fully anywhere close to fully recovering our costs, but whatever we do get, we'll flow that back for the benefit of our customers, of course, to try to I appreciate your question and your interest and support in this important topic.

Speaker Change: We're committed to getting this done and behind Us and <unk>.

And as you as well we've disclosed we also participate in the in the class action suit against the <unk> and the Dupont to help so that any cost we recover in that process, which frankly, we don't expect it to be big.

Speaker Change: Big.

Speaker Change: <unk> fully anywhere close to fully recovering our costs, but whatever we do get full flow that back.

Speaker Change: For the benefit of our customers of course to try to mitigate the rate impacts of it but I. Appreciate your question and your and your interest and support in this important topic.

Speaker Change: Yes. Thank you thank.

Eric W. Thornburg: Thank you. Thank you, Roger. Thank you, and I'm showing no further questions at this time, and I would like to turn the conference back over to Eric Thornburg, Chief Executive Officer, for any further remarks. Thank you, operator. Thank you, all of you participating in today's call. We truly appreciate your interest in supporting our organization, our people. And if we can be of service to you in the future, please reach out to Andrew Walters or Dan Meany or myself, and we'll look forward to our next engagement. Thank you so much. Take care. This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change: Thank you Roger.

Speaker Change: Thank you and I'm showing no further questions at this time and I would like to turn the conference back over to Eric Thornburg, Chief Executive Officer for any further remarks.

Eric W. Thornburg: Thank you operator, and thank you all of you participating on today's call. We truly appreciate your interest and support of our organization and our people and if we can be of service to you in the future. Please reach out to Andrew Walters or Dan or myself, and we'll look forward to our next engagement. Thank you so much take care.

Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.