Q1 2024 American States Water Co Earnings Call

May 8, 2024

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the American States Water Company conference call discussing the company's first quarter of 2024 results. The call is being recorded.

Ladies and gentlemen, thank you for standing by and welcome to the American States Water Company Conference call discussing the company's first quarter 2024 results. The call is being recorded if you would like to listen to the replay of this call. It will begin this afternoon at five P. M. Eastern time and run through Wednesday may 15th of 2024 on the Companys web.

Operator: If you would like to listen to the replay of this call, it will begin this afternoon at 5 p.m. Eastern Time and run through Wednesday, May 15th, 2024 on the company's website at www.aswater.com. The slides that the company will be referring to are also on the website. This call will be limited to one hour.

Operator: Site at Www Dot a S water dotcom.

Operator: Slides that the company will be referring to are also on the website.

Operator: This call will be limited to one hour presenting today from American States water company are Mr. Bob Sprowls, President and Chief Executive Officer, and Mr. <unk>, Senior Vice President Finance and Chief Financial Officer.

Operator: Presenting today from American States Water Company are Mr. Bob Sprowls, President and Chief Executive Officer, and Ms. Eva Tang, Senior Vice President in Finance and Chief Financial Officer. As a reminder, certain matters discussed during this conference call may be forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Please review a description of the company's risk and uncertainties in our most recent 10-K and Form 10-Q, on file with the Securities and Exchange Commission.

Operator: As a reminder, certain matters discussed during this conference call maybe forward looking statements intended to qualify for the safe Harbor from liability established by the private Securities Litigation Reform Act of 1995. Please review please.

Operator: Please review a description of the company's risks and uncertainties in our most recent 10-K and Form 10-Q on file with the Securities and Exchange Commission.

Operator: In addition, this conference call will include a discussion of certain measures that are not prepared in accordance with generally accepted accounting principles or GAAP in the United States and constitute non-GAAP financial measures under SEC rules. These non-GAAP financial measures are derived from constant consolidated financial information, but not presented an hour.

Operator: Our financial States statements that are prepared in accordance with GAAP for more details. Please refer to the press release at this time I would like to turn the call over to Mr. Bob Sprowls, President and Chief Executive Officer of American States Water Company. Please go ahead Sir.

Operator: In addition, this conference call will include a discussion of certain measures that are not prepared in accordance with General Accepted Accounting Principles, or GAAP, in the United States and constitute non-GAAP financial measures under SEC Rules. These non-GAAP financial measures are derived from consolidated financial information but are not presented in our financial statements that are prepared in accordance with GAAP.

Operator: For more details, please refer to the press release. At this time, I would like to turn the call over to Mr. Rob Sprowls, President and Chief Executive Officer of American States Water Company. Please go ahead, sir.

Robert J. Sprowls: Thank you Chuck.

Robert J. Sprowls: Thank you, Chuck. Welcome, everyone. And thank you for joining us today. I'll begin with some brief comments on the quarter. Eva will then discuss some financial details, and then I'll wrap it up with updates on regulatory activity, ASUS, dividends, and then we'll take your questions. It was a solid quarter for the company as we continue to invest in our regulated utilities and began water and wastewater operations on two new military bases in April.

Robert J. Sprowls: Welcome everyone and thank you for joining us today.

Robert J. Sprowls: Again with some brief comments on the quarter Eva will then discuss some financial details.

Robert J. Sprowls: And then I'll wrap it up with updates on regulatory activity.

Robert J. Sprowls: Dividends.

Robert J. Sprowls: And then we will take your questions.

Robert J. Sprowls: It was a solid quarter for the company as we continue to invest in our regulated utilities and began water and wastewater operations at two new military bases in April.

Robert J. Sprowls: Let's first briefly discuss our earnings for the first quarter of 2024. Recorded diluted earnings for the quarter decreased by 31 cents per share from the same period in 2023, for a 2 cent per share increase as adjusted.

Eva: Let's first briefly discuss our earnings for the first quarter of 2024.

Robert J. Sprowls: Accorded diluted earnings for the quarter decreased by 31 per share from the same period in 2023.

Robert J. Sprowls: Core <unk> per share increase as adjusted.

Robert J. Sprowls: $0.02 per share; higher adjusted earnings were largely from the third year 2024 water rates approved in the final decision in Golden State Water's general rate, partially offset by lower construction activities at ASUS, due to timing differences in performing work, and the delay in the electric general rate case decision. Eva will discuss the adjusted results in more detail. At the regulated utilities, we continue to invest in our infrastructure to strengthen our water and electric system and remain focused on operating the water and electric businesses safely, efficiently, and for the long term.

Robert J. Sprowls: <unk> per share higher adjusted earnings were largely from the third year 2024 water rates approved in the final decision in Golden State Water's General rate case.

Robert J. Sprowls: Partially offset by lower construction activities at <unk>.

Robert J. Sprowls: Due to timing differences and performing work.

Robert J. Sprowls: And the delay in the electric general rate case decision.

Robert J. Sprowls: Steven will discuss the adjusted results in more detail.

Robert J. Sprowls: At the regulated utilities, we continue to invest in our infrastructure to strengthen our water and electric systems.

Robert J. Sprowls: And remain focused on operating the water and electric businesses safely efficiently and for the long term.

Robert J. Sprowls: We are committed to the goal of spending $160 to $200 million this year at our regulated utility. We are very pleased to have begun operations of the water and wastewater systems on two new military bases in April, as we successfully completed our transition at Naval Air Station Patuxent River or Pax River, located in Maryland, and Joint Base Cape Cod in Massachusetts.

Robert J. Sprowls: We are committed to the goal of spending $160 million to $200 million this year at our regulated utilities.

Robert J. Sprowls: We're very pleased to have begun operations of the water and wastewater systems on two new military bases in April.

Robert J. Sprowls: As we successfully completed our transitions.

Robert J. Sprowls: At Naval Air station.

Robert J. Sprowls: River or Pax River located in Maryland.

Robert J. Sprowls: And joint base Cape Cod in Massachusetts.

Robert J. Sprowls: Tax River provides our contracted services segment with a 50-year firm fixed price contract estimated at $349 million. Well, Joint Base Cape Cod is a 15-year contract, of up to a maximum firm fixed price value of $75 million, through the issuance of annual task orders. We look forward to supporting both installations.

Robert J. Sprowls: Further it provides our contracted services segment with a 50 year firm fixed price contract.

Robert J. Sprowls: Estimated at $349 million.

Robert J. Sprowls: While joint base Cape Cod is a 15 year contract.

Robert J. Sprowls: Of up to a maximum firm fixed price value of $75 million.

Robert J. Sprowls: Through the issuance of annual task orders.

Robert J. Sprowls: We look forward to supporting both installations and consider it a privilege to leverage our broad utility expertise to.

Robert J. Sprowls: We consider it a privilege to leverage our broad utility expertise to make significant contributions to the military and their respective missions at these locations. With that, I'll turn the call over to Eva to discuss the quarterly earnings and liquidity. Thank you, Bob. Hello, everyone.

Eva: To make significant contributions to the military and their respective missions at these locations.

Robert J. Sprowls: With that I'll turn the call over to Eva to discuss the quarterly earnings and liquidity.

Eva G. Tang: Let me start with our first quarter financial results. Consolidated earnings as recorded were $0.62 per share for the first quarter as compared to $0.93 per share for the first quarter of 2023. Also included in the result of last year's first quarter was 38 cents per share related to the recording of retroactive rates from the proposed decision in the water generation case for the full year of 2022. In addition, during the first quarter of last year, we recorded a loss of $0.05 per share associated with the revenue subject to refund as a result of the lower cost of debt related to the pending cost of capital proceeding at the time, which was subsequently reversed in June 2023 upon receiving the final decision in the cost of capital proceeding, which made all adjustments to rates prospective.

Eva: Thank you Bob Hello, everyone. Let me start it laid out first quarter financially healthy.

Eva G. Tang: Excluding these two items, adjusted consolidated earnings for the first quarter of 2023 were $0.60 per share as compared to recorded earnings of $0.62 per share this year, an increase of $0.02 per share. For our water utility, Golden State Water Company, reported earnings were $0.48 per share as compared to $0.74 per share for the first quarter of 2023. Both items just discussed impacted earnings at the water segment loss.

Eva G. Tang: Consolidated I mean, absolutely corrugate.

Eva G. Tang: Two cents per share for the first quarter.

Eva G. Tang: Excellent.

Speaker Change: Yeah for the first quarter of F 'twenty.

Eva G. Tang: Included in the retelling of last years first quarter.

Eva G. Tang: <unk> per share.

Speaker Change: The recording of retroactive rate proposed decision into why they can't in a rate case for the full year oftentimes. Thank you Kim.

Eva G. Tang: In addition, during the first quarter of last year, we recorded a loss of five cents per share.

Eva G. Tang: Shane.

Eva G. Tang: Revenues subject to re factor, how can we get lower cost of debt related to the pending cause of Catholic capsules like eating at the time <unk> subsequently we vote.

Eva G. Tang: 23.

Eva G. Tang: If I notice they are seeing the cost of capital.

Eva G. Tang: That makes all of that gets me to a pushback.

Eva G. Tang: Excluding these two items I guess at the consolidated first.

Eva G. Tang: First quarter of 2023.

Eva G. Tang: 50 cents per share as compared to call. It 60.

Eva G. Tang: As a teacher cents per year this year.

Eva G. Tang: The increase of two cents per share.

Eva G. Tang: While the utility at Golden State Water company appointed why 48 cents per share as compared to 74 cents per share for the first quarter of <unk> Suisse.

Speaker Change: I didn't get impacted.

Eva G. Tang: The water sector last year.

Eva G. Tang: So factoring the same effect from the two adjusted items for 2023, earnings for the first quarter of 2024 at Golden State Water were $0.48 per share, which was an increase of $0.07 per share as compared to adjusted earnings of $0.41 per share for the first quarter of last year. Since 2024 is the third year of the GRC rate cycle, Golden State Water received third-year rate increases effective January 1, 2024. So the $0.07 per share increase in 2024 largely represents increases in water revenue and other income from gains generated from investments held for a retirement plan, partially offset by increases in operating and interest expense.

Eva G. Tang: No factoring.

Eva G. Tang: In fact on that too I guess, either for like trying to trying to Italy.

Eva G. Tang: The first quarter of two I came before it goes on to say what it was like eight cents per share, which was an increase of 7%.

Speaker Change: Yeah, that's cool.

Speaker Change: So I guess Oh.

Eva G. Tang: 0.1 cents per share for second quarter of last year.

Eva G. Tang: There's plenty of time for that so yeah, I'd say T. I C E rate cycle Golden State water, we seek rate.

Eva G. Tang: Rate increases effective January one 2024.

Eva G. Tang: Seven cents per share increase in 2010 before largely represents increases while their revenue.

Eva G. Tang: Other income gain generated investment how it slightly cabinets that.

Eva G. Tang: Partially offset by increases.

Eva G. Tang: Interest expense.

Eva G. Tang: Our electric segment earnings were $0.05 per share for the first quarter as compared to $0.06 per share for the same period in 2023, largely resulting from not having new rates in effect as we await the pending electric GRC that will set new rates for 2023 through 2026, while also experiencing continued increases in overall operating expenses and interest costs. When a decision is issued in the Electric DRC, new rates are expected to be retroactive to January of 2023, and cumulative adjustment will be recorded at that time. Earnings from SUS decreased $0.02 per share for the quarter, largely due to timing differences between when construction work was performed and when the same period of Triton 3.

Eva G. Tang: Our electric segment.

Eva G. Tang: Four five cents per share for the second quarter.

Eva G. Tang: Characteristics cents per share for the same period.

Speaker Change: No actually we are not having new ways in fact.

Eva G. Tang: The way, we await the painting electric T. I C that was sets new rates for like twice each like he's going to.

Eva G. Tang: Two two I can state.

Speaker Change: Oh, So you may have seen continued increases.

Eva G. Tang: Operating expenses and interest costs.

Eva G. Tang: When that decision is the issue.

Eva G. Tang: Electric T. I C E rate I expect it to retroactive to January of 'twenty tanker suite and cumulative adjustment wilkie with quite good at that time.

Eva G. Tang: I mean from ex U S decreased two cents per share for the quarter largely timing differences of when construction work was performed at when comparing to the first quarter.

Eva G. Tang: Yes.

Eva G. Tang: At the same period of time paints to me.

Eva G. Tang: Bob will discuss it in more detail later. Losses from our parent company were $0.03 per share for the quarter as compared to losses of $0.02 per share for the same period in 2023, largely due to an increase in interest expense. [inaudible] Consolidated revenue for the first quarter decreased by $26.1 million as compared to the same period in 2023. Revenue for the water segment decreased by $22.4 million, mainly due to $30.3 million recorded in the first quarter of 2023, which represented the impact of retroactive new rates for the full year of 2022 as a result of the proposed decision issued by CPUC in April of last year on Golden State Water's general rate cases at the time, partially offset by increases in water revenue in 2024; this is the third year of the rate rating.

Eva G. Tang: Bob will discuss in more detail later.

Eva G. Tang: That's it's a parent company it was <unk> <unk> per share for the quarter as compared to losses of two cents per share for same period in 2023, largely due to an increase in interest expense.

Eva G. Tang: Something else right.

Eva G. Tang: Consolidated revenue for the first quarter decreased by $26 $1 million.

Eva G. Tang: Compared to the same period in 2023.

Eva G. Tang: Revenue for the wireless sector.

Eva G. Tang: <unk> decreased by $22 $4 million, mainly due to $3 million recorded in the first quarter of 2023, which will be presented the impact of retroactive new rate for the full year of 2008, two as a result of their proposed decision issued by the CPUC in April.

Speaker Change: Yeah, I won't go into the state water general rate cases at a time.

Eva G. Tang: Partially offset by increases in a lot of revenue.

Speaker Change: Oh, Yes, I tried before.

Eva G. Tang: The increase there.

Eva G. Tang: Electric revenue decreased slightly as we await a decision on the electric generator while there was a decrease in revenue from ASU by $3 million, largely due to timing differences in performing construction work. Turning to slide 9 and looking at total operating expenses other than supply costs. Consolidated expenses decreased $2.2 million as compared to the first quarter of 2023. The decrease was largely attributable to a decrease in construction costs at ASUS, resulting from lower construction activity due to timing differences of when construction work was performed in 2024 as compared to Q1 of 2023, partially offset by higher administrative. Interest expense, net of interest income, increased by $3.2 million due to a higher interest rate during the quarter and increases in overall Other income, net of other expenses, increased by $700,000, largely because of a higher gain recorded on investment help to fund one of the companies' retirement plans in the first quarter.

Eva G. Tang: Electric revenue decreased for the IV as we await a decision on the electric general rate case, while there was a decrease in revenue from U S up to $8 million largely due to timing differences and performing construction work.

Eva G. Tang: Turning to slide nine and looking at total operating expenses other than supply costs.

Eva G. Tang: Consolidated expenses decreased $2 $2 million as compared to the first quarter of 2023. The decrease was largely attributable to a decrease in construction costs at a U S.

Eva G. Tang: He tells you can find our construction activities due to timing differences of when construction work was performed in 2024 as compared to Q1 of 2023, partially offset by higher administrative and general expenses.

Eva G. Tang: Interest expense net of interest income increased by $3 $2 million due to higher interest rates during the quarter, increasing over our borrowing levels.

Eva G. Tang: Other income net of other expenses increased by $700000.

Eva G. Tang: Largely because of higher gains recorded that definitely helped to fund one of company's retirement plans in the first quarter.

Eva G. Tang: Slide 10 shows the ETS bridge, comparing Recorded and Adjusted ETS for the first quarter of 2024 against Adjusted ETS for 2023, turning to liquidity. Net cash provided by operating activity was $45.8 million, as compared to $7 million for the first quarter of 2023. The increasing operating cash flow was largely a result of Golden State Water having implemented new rates in 2023 and 2024 and the collection of surcharges to recover retroactive revenue from 2022 through July 30, 2023.

Eva G. Tang: Slide 10 shows the EPS bridge comparing recorded adjusted EPS for the first quarter of 2024 against adjusted EPS for 2023.

Eva G. Tang: Cutting it truly Quaker team now.

Eva G. Tang: Net cash provided by operating activities was $45 $8 million as compared to $7 million for the first quarter of 2023.

Eva G. Tang: Increasing operating cash flow was largely as a result of Golden state water have been implemented new rates in <unk> and 'twenty 'twenty four.

Eva G. Tang: And the collection of surcharges to recover retroactive revenue from 'twenty to 'twenty two through July 2023.

Eva G. Tang: In addition, cash used for construction-related activities at SUS decreased this year due to timing differences. It actually decreased this year due to timing differences between when the construction work is being performed and when payments are made to our contractors.

Eva G. Tang: In addition, cash used for construction related activity at U S decrease this year.

Eva G. Tang: Due to timing differences.

Eva G. Tang: Actually increase that this year.

Speaker Change: Hum decreases yeah I'm sorry.

Eva G. Tang: Due to the timing differences of when the construction work is being performed and when payments are made to a contractor.

Eva G. Tang: For investing activities, our regulated utility invested $47.6 million in company-funded capital projects during the first quarter, and we project company-funded capital expenditures at our regulated utility to be $160 to $200 million this year. In February, American States Water entered into an equity distribution agreement to sell common shares through an ad market offering program. This program allows the company, at its sole discretion, to sell up to $200 million dollars over a three-year period.

Eva G. Tang: For investing activities, a regulated utility invested $47 $6 million.

Eva G. Tang: Company funded capital projects during the first quarter and we project the company funded capital expenditure at our regulated utility to be $162 million to $200 million. This year.

Eva G. Tang: In February and March.

Eva G. Tang: Because states water entered into an aggregate distribution agreements.

Eva G. Tang: They'll come on shares.

Eva G. Tang: At the market offering program.

Eva G. Tang: This program allows the company at its sole discretion to sell up to 200 million.

Eva G. Tang: Dollars over a three year period during the first quarter AWP I raised proceeds of approximately $16 million net of issuance costs.

Eva G. Tang: During the first quarter, AWR raised proceeds of approximately $16 million net of insuring costs. American States Water currently maintains a credit rating of A-Stable with Standard & Poor's Global Ratings, or S&P, while Golden State Water maintains an A-plus stable rating with S&P and an A-2 stable rating with Moody's Investor Service.

Eva G. Tang: American States water currently maintaining our credit rating of AA stable, we extend to enforce global ratings.

Eva G. Tang: S&P, while at Golden State water and maintained a stable rating with S&P and <unk> at eight two stable rating with Moody's Investor service.

Eva G. Tang: These are some of the highest credit ratings in the U.S. investor-owned water utility industry. With that, I'll turn the call back to Bob. Thank you, Eva.

Eva G. Tang: These are some of the highest credit ratings in the U S investor owned water utility industry.

Eva G. Tang: With that I'll turn the call back to Bob.

Bob: Thank you Eva I'll discuss a few key regulatory matters.

Robert J. Sprowls: In August 2023, Golden State water filed its general rate case for water rates for the years 2025 through 2027.

Robert J. Sprowls: Among other things Golden State water requested capital budgets in this application of $611 $4 million over the rate cycle.

Robert J. Sprowls: We also requested the continuation of mechanisms to accommodate fully decoupled revenues and sales and track differences between recorded and CPUC-authorized supply-related expenses. A proposed decision in the Water General Rate Case is scheduled for the fourth quarter of 2024, with new rates to become effective January 1st, 2025. In June of last year, the CPUC adopted a final decision in Golden State Water's cost-to-capital proceeding, where all changes to rates were to be implemented prospectively.

Bob: We also requested the continuation of mechanisms to accommodate fully decoupled revenues in sales and.

Robert J. Sprowls: <unk> differences between recorded and CPUC authorized.

Robert J. Sprowls: Supply related expenses.

Robert J. Sprowls: A proposed decision in the water general rate case is scheduled for the fourth quarter of 2024.

Robert J. Sprowls: With new rates to become effective January one 2025.

Robert J. Sprowls: In June of last year, the CPUC adopted a final decision in Golden State water's cost of capital proceeding.

Robert J. Sprowls: We're all changes to rates were to be implemented prospectively.

Robert J. Sprowls: As a result, Golden State Water maintained an authorized return on rate base of 7.91% for the first seven months of 2023 and 7.53% for the remaining five months of the year, reflecting an authorized return on equity of 9.36% and a cost of debt of 5.1%, which was a reduction from 6.6%, effective January 1st, 2024.

Robert J. Sprowls: As a result Golden state water.

Robert J. Sprowls: Entailed an authorized return on rate base of 791% for.

Robert J. Sprowls: For the first seven months of 2023.

Robert J. Sprowls: And 753%.

Robert J. Sprowls: For the remaining five months of the year.

Robert J. Sprowls: Reflecting an authorized return on equity of $9 three 6%.

Robert J. Sprowls: Cost of debt of five 1%.

Robert J. Sprowls: Which was a reduction from six 6%.

Robert J. Sprowls: The authorized return on equity was increased 10.06% as a result of the water cost of capital mechanism being triggered for 2024, and the authorized return on rate base was increased to 7.93%. [inaudible] As many of you know, investor-owned water utilities serving in California are required to file their cost of capital applications on a triennial basis, which means Golden State Water's next cost of capital application was scheduled to be filed on May 1st, 2024, for the years 2025 through 2027.

Robert J. Sprowls: Effective January one 2024.

Robert J. Sprowls: <unk> return on equity was increased 10.06%.

Robert J. Sprowls: As a result of the water cost of capital mechanism being triggered for 2024.

Robert J. Sprowls: And the authorized return on rate base increase to 793%.

Robert J. Sprowls: Excuse me.

Robert J. Sprowls: As many of you know investor owned water utilities, serving in California are required to file their cost of capital applications on a triennial basis.

Robert J. Sprowls: Which means Golden State waters next cost of capital application was scheduled to be filed on May one 2024 for.

Robert J. Sprowls: For the years 2025 through 2027.

Robert J. Sprowls: However, Golden State Water, along with three other Class A investor-owned water utilities, filed a joint request with the CPUC to postpone the cost of capital applications by one year, which was approved by the PUC on February 2nd of this year. The joint request asks that the utilities keep the cost of capital currently authorized for 2024 in effect through 2025 and file new cost of capital applications by May 1st, 2025 to set the cost of debt, return on equity, and capital structure starting January 1, 2026.

Robert J. Sprowls: However, Golden state water, along with three other class a investor owned water utilities filed a joint request with the CPUC to postpone the cost of capital applications by one year.

Robert J. Sprowls: Which was approved by the PUC on February <unk> of this year.

Robert J. Sprowls: The joint request asset utilities keep through cost of capital currently authorized for 2024 in effect through 2025.

Robert J. Sprowls: And to file new cost of capital applications by May one 2025.

Robert J. Sprowls: To set the cost of debt return on equity and capital structure, starting January one 2026.

Robert J. Sprowls: Additionally, Golden State Water's water cost to capital mechanism will remain at through the one-year deferral period. Additionally, our electric utility subsidiary filed its general rate case application on August 30th, 2022 for new rates for the period 2023 through 2026. The application includes additional capital expenditures of $68.2 million for the four-year rate cycle and a new cost of capital.

Robert J. Sprowls: Additionally, Golden State water's water cost of capital mechanism will remain active through the one year deferral period.

Robert J. Sprowls: We have also requested recovery of more than $23.5 million in capital already spent related to the wildfire mitigation plan. The new rates, once approved, will be retroactive to January 1st, 2023. A decision on the general rate case is scheduled to be issued by the end of the third quarter of this year. As many of you know, the U.S. EPA recently announced the final National Primary Drinking Water Regulation and established maximum contaminant levels for PFAS substances in drinking water. The regulation established maximum contaminant levels that range from 4 to 10 parts per trillion.

Robert J. Sprowls: Our electric utility subsidiary filed its general rate case application on August 32022 for new rates for the period 2023 through 2026.

Robert J. Sprowls: The application includes additional capital expenditures of $68 $2 million for the four year rate cycle.

Robert J. Sprowls: The new cost of capital.

Robert J. Sprowls: We have also requested recovery of more than $23 $5 million.

Robert J. Sprowls: Capital already spent related to the wildfire mitigation plans.

Robert J. Sprowls: The new rates once approved will be retroactive to January one 2023.

Robert J. Sprowls: The decision on the general rate case is scheduled to be issued by the end of the third quarter of this year.

Robert J. Sprowls: The final rule will require public water systems to implement PFAS monitoring and reporting by April of 2027, and where exceedances are identified, to implement solutions within five years, by April of 2029, to reduce PFAS levels to below regulated contaminant levels. Currently, there are more than 40 wells at Golden State Water Company. COUGH COUGH, that have exceeded one or more of the PFAS maximum contaminant levels. Assuming $2 to $5 million per well, that results in approximately $80 to $200 million of capital expenditure.

Robert J. Sprowls: As many of you know the U S. EPA recently announced the final national primary drinking water regulations.

Robert J. Sprowls: And establish maximum contaminant levels for <unk> substances in drinking water.

Robert J. Sprowls: Regulation establishes met established maximum contaminant levels that range from four to 10 parts per trillion.

Robert J. Sprowls: Final rule will require public water systems to implement <unk> monitoring.

Robert J. Sprowls: And reporting by April of 2027.

Robert J. Sprowls: And we're exceedances are identified to implement solutions within five years.

Robert J. Sprowls: By April of 2029.

Robert J. Sprowls: We reduced <unk> levels to below regulated contaminant levels.

Robert J. Sprowls: Currently there are more than 40 wells at Golden State water company.

Robert J. Sprowls: [laughter].

Robert J. Sprowls: That have exceeded one or more of the <unk> maximum contaminant levels.

Robert J. Sprowls: Assuming $2 million to $5 million per well that results in approximately $80 million to $200 million of capital expenditures.

Robert J. Sprowls: With these new regulations, we expect to see an increase in Golden State Water's capital investments, as well as operations and maintenance expenses over the next five years to comply with these rules. The CPUC rate making process provides global state water utilities with the opportunity to recover prudently incurred capital and operating costs in future filings associated with achieving water quality standards. We believe that such incurred and expected future costs should be authorized for recovery by the CPUC.

Robert J. Sprowls: With these new regulations, we expect to see an increase to Golden state waters capital investments as well as operations and maintenance expenses over the next five years to comply with these rules.

Robert J. Sprowls: CPUC ratemaking process provides golden state water.

Robert J. Sprowls: What's the opportunity to recover prudently incurred capital and operating costs in future filings associated with achieving water quality standards.

Robert J. Sprowls: We believe that such incurred and expected future cost.

Robert J. Sprowls: Should be authorized for recovery by the CPUC.

Robert J. Sprowls: Okay.

Robert J. Sprowls: Turning our attention to slide 14, we present the growth in Golden State waters, and the adopted average water rate base for 2018 through 2024. The Authorized Average Rate Base increased from $752.2 million in 2018, to $1,357,500,000 in 2024. That's a compound annual growth rate of 10.3% for the six-year period. ASUS contributed earnings of $0.13 per share for the first quarter of this year, compared to $0.15 per share for the same period last year. The decrease was largely due to a decrease in construction activity, resulting from the timing difference of when construction work was performed in 2024 as compared to the same period in 2023, partially offset by an increase in management fee revenue, As previously highlighted, ASUS successfully transitioned the water and wastewater systems at two new military bases in April.

Robert J. Sprowls: Turning our attention to slide 14, we present the growth in Golden State Water's adopted average water rate base through 2018 through 2024.

Robert J. Sprowls: Golden State waters authorized average rate base.

Robert J. Sprowls: The increase from $752 $2 million in 2018.

Robert J. Sprowls: 1 billion $357 $5 million in 2024.

Robert J. Sprowls: That's a compound annual growth rate of 10, 3%.

Robert J. Sprowls: For the six year period.

Robert J. Sprowls: <unk> contributed earnings of <unk> 13 per share for the first quarter of this year.

Robert J. Sprowls: As compared to <unk> 15 per share for the same period last year.

Robert J. Sprowls: The decrease was largely due to a decrease in construction activities, resulting from the timing difference of when construction work was performed in.

Robert J. Sprowls: In 2024 is the same compared to the same period.

Robert J. Sprowls: In 2023.

Robert J. Sprowls: Partially offset by an increase in management fee revenue.

Robert J. Sprowls: <unk> from the resolution of various economic price adjustments.

Robert J. Sprowls: Previously highlighted.

Speaker Change: She has successfully excuse me just a second.

Robert J. Sprowls: Yeah.

Robert J. Sprowls: As previously highlighted.

Robert J. Sprowls: Successfully transitioned to water and wastewater systems at two mills to new military basis in April.

Robert J. Sprowls: Under the contract, the joint base, Cape Cod; ASUS will perform work through the annual issuance of task orders by the U.S. government over a 15-year period. After completion of the transition at Joint Base Cape Cod, the U.S. government awarded a task order valued at $4.1 million to ASUS for the first year of operations, Maintenance and Renewal and Replacement Services of the Water and Wastewater Systems, and increased the estimated maximum value of the contract to $75 million.

Robert J. Sprowls: Under the contract with joint base Cape Cod.

Robert J. Sprowls: Hey, S. U S will perform work through the annual issuance of task orders by the U S government over a 15 year period.

Robert J. Sprowls: After completion of the transition at joint base Cape Cod.

Robert J. Sprowls: S government awarded a task order valued at $4 $1 million.

Robert J. Sprowls: For the first year of operations.

Robert J. Sprowls: Maintenance and renewal and replacement services of the water and wastewater systems.

Robert J. Sprowls: And increase the estimated maximum value of the contract to $75 million.

Robert J. Sprowls: Although subject to further adjustments as task orders are issued, we continue to project ASUS to contribute $0.50 to $0.54 per share this year, and we remain confident that we can effectively compete for new military-based contract awards. Based on our proven track record of managing water and wastewater-related services for military bases since 2004, I would like to turn our attention to dividends, which remain a compelling part of our investment story. Our quarterly dividend rate has grown at a compound annual growth rate, or CAGR, of 9.4% over the last five years.

Robert J. Sprowls: Subject to further adjustments as task orders are issued.

Robert J. Sprowls: We continue to project <unk>.

Robert J. Sprowls: Has to contribute 50 to 54 per share this year and we remain confident that we can effectively compete for new military base contract Awards.

Robert J. Sprowls: Based on our proven track record of managing water and wastewater related services.

Robert J. Sprowls: For military basis since 2004.

Robert J. Sprowls: I would like to turn our attention to dividends, which remains a compelling part of our investment story.

Robert J. Sprowls: Our quarterly dividend rate has grown at a compound annual growth rate or CAGR of nine 4%.

Robert J. Sprowls: Over the last five years from 2018 through 2023.

Robert J. Sprowls: 2018-2023. These increases are consistent with our policy to achieve a compound annual growth rate of and a dividend of more than 7% over the long term. It is something that the company is proud of, and is a continuing asset to our shareholders. I'd like to conclude our prepared remarks by thanking you for your interest in American States Water. And we'll now turn the call over to the operator for questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone.

Robert J. Sprowls: These increases are consistent with our policy to achieve a compound annual growth rate in the dividend of more than 7% over the long term.

Robert J. Sprowls: Our strong dividend history is something that the company is proud of.

Robert J. Sprowls: And is it continuing asset to our shareholders.

Robert J. Sprowls: I'd like to conclude our prepared remarks by thanking you for your interest in American States water.

Speaker Change: I will now turn the call over to the operator for questions.

Robert J. Sprowls: Thank you we will now begin the question and answer session.

Robert J. Sprowls: To ask a question you May Press Star then one on your Touchtone phone.

Operator: If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been answered, and you would like to withdraw your question, please press star, then 2. And at this time, we'll pause momentarily to assemble our roster. And the first question will come from Jonathan Reeder with Wells Fargo. Please go ahead.

Robert J. Sprowls: If youre using a speakerphone please pick up your handset before pressing the keys.

Jonathan Garrett Reeder: If at any time your question has been addressed.

Operator: Your question. Please press Star then two.

Jonathan Garrett Reeder: And at this time, we'll pause momentarily to assemble our roster.

Operator: And the first question will come from Jonathan Reeder with Wells Fargo. Please go ahead.

Jonathan Garrett Reeder: Hey Bob and Eva, how are you doing today? Good job. Thank you. Thanks. How about you? Not too bad, not too bad at all.

Jonathan Garrett Reeder: Hey, Bob and Eva how are you doing today.

Jonathan Garrett Reeder: Good Jonathan.

Jonathan Garrett Reeder: Thank you and how about you.

Jonathan Garrett Reeder: Towards the end of earnings season, it's always a good thing. A couple questions I wouldn't mind going through. First off, how large was the third year rate increase from the 2022 to 2024 GRC? I don't believe I saw that in the K or the Q, but I think the settlement you reached was about $13.2 million. Jonathan, so you are asking the rain increases for this year? 24 over 23.

Jonathan Garrett Reeder: Not too bad not too bad at all towards the end of earnings season, It's always a good thing.

Speaker Change: Couple of questions, though I wouldn't mind going through.

Jonathan Garrett Reeder: First of all how large was the third year rate increases from the 2022 to 2024 <unk> I don't believe I saw that in the K or the Q.

Speaker Change: The settlement you had reach outlined Mike $13 2 million.

Jonathan Garrett Reeder: Yeah.

Jonathan Garrett Reeder: Yeah, Jonathan So you seem to have any increase in fitness here 24 over 23.

Jonathan Garrett Reeder: Yes.

Jonathan Garrett Reeder: I think, you know, first quarter, our increases... Are you asking for the entire year, Jonathan? Yeah. Yeah.

Jonathan: Well I think first quarter are increasing.

Jonathan Garrett Reeder: Are you asking for the entire year, Jonathan Yeah, Yeah, what's the annual amount I mean, I think the settlement you know had outlined $13 2 million, but I know thats all it is.

Jonathan Garrett Reeder: What's the annual amount? I mean, I think the settlement, you know, had outlined $13.2 million, but I know that's always, you know, subject to adjustment for inflationary factors, the earnings test, stuff like that. We may need to get back to you, Jonathan.

Jonathan Garrett Reeder: Subject to adjustment or inflationary factors, Darren and stuff like that.

Speaker Change: We may need to get back to you Jonathan on that yeah.

Eva G. Tang: Yeah, I think the first quarter is about $3.5 million. So we'll get back to you on that one, Jonathan, for the full year. Okay, thank you. And then where exactly do things stand with the electric GRC?

Jonathan Garrett Reeder: I think our first quarter.

Eva G. Tang: It's about.

Eva G. Tang: So eight five so we'll get back to you on that one.

Eva G. Tang: Full year, Okay. Thank you and then.

Eva G. Tang: Where exactly do things stand with like the electric.

Robert J. Sprowls: Are you just waiting for a PD at this point? All the work in the case has been done. We're waiting for a PD. Settlement discussions continue, but, You know, it's one of the issues we have with Bear Valley Electric is we're so small. Sometimes it's difficult to get the attention of the Public Advocate's Office.

Eva G. Tang: <unk> are you just waiting for a PD at this point.

Robert J. Sprowls: We are all the all the work and the case has been done for waiting for PD.

Robert J. Sprowls:

Robert J. Sprowls: Settlement discussions continue but.

Robert J. Sprowls: Yeah.

Robert J. Sprowls: It's one of the issues.

Robert J. Sprowls: Have with Bear Valley electric as we are so small.

Robert J. Sprowls: But sometimes it's difficult to get the attention of.

Robert J. Sprowls: The public advocates office.

Robert J. Sprowls: They, you know, they. The Bear Valley is so small relative to the big electric companies, although they've been nice to work with, but we continue to work through that. It's possible we could get to a settlement. It's also possible..., a proposed decision will come out.

Robert J. Sprowls: <unk>.

Robert J. Sprowls: Okay.

Robert J. Sprowls: Fair value is so small relative to the.

Robert J. Sprowls: <unk> electric.

Robert J. Sprowls: So.

Robert J. Sprowls: Okay.

Robert J. Sprowls: Nice to work with but we continue to work through that its possible we could get to a settlement. It's also possible.

Robert J. Sprowls: Proposed decision will come out.

Jonathan Garrett Reeder: Okay, I mean, are you optimistic that it will? I mean, I think the statutory deadline has been extended a couple of times now, you know, the latest is September 30. Are you optimistic that it actually gets done by then? Or, you know, since settlement discussions are potentially still taking place? You know, is it likely to, you know, even extend beyond that?

Robert J. Sprowls: Okay.

Robert J. Sprowls: Are you optimistic that it.

Jonathan Garrett Reeder: I think the statutory deadline has been extended a couple of times now the latest as of September 30.

Jonathan Garrett Reeder: Are you optimistic that it actually gets done by then or settlement.

Jonathan Garrett Reeder: <unk> or potentially taking place.

Jonathan Garrett Reeder: Is it likely to even extend beyond.

Robert J. Sprowls: Well, they have assigned a second ALJ to the case, so I think there's a pretty good chance it'll get done by then. (Inaudible) You know, if we were to reach a settlement, that may be something that slows the case down a little bit, but... So, you know, it's hard to say.

Jonathan Garrett Reeder: Well they have assigned a second ALJ to the case so I.

Robert J. Sprowls: I think there's a pretty good chance it will it'll get done by then.

Robert J. Sprowls: Unless.

Robert J. Sprowls: You know if before we were to reach a settlement that may be something that slows the case down a little bit but.

Robert J. Sprowls: So it's hard to say again.

Robert J. Sprowls: Again, the size of the company is part of the factor here. Yeah, I mean, for the size of the company, it's a pretty significant case, though, correct? I mean, there's a lot of capital between the wildfire mitigation stuff and everything. It's kind of in there where I mean, is that it if you're able to kind of, go into it all? Is that perhaps what is perhaps making the case more drawn out? Or, you know, challenges reaching settlement? Yeah, I think it's I think it's a fair statement. Jonathan

Robert J. Sprowls: The size of the company is as part of the factor here. So.

Robert J. Sprowls: Yes.

Robert J. Sprowls: For the size of the company.

Robert J. Sprowls: It's a pretty significant case, though correct I mean, theres a lot of capital between the wildfire mitigation stuff and everything is kind of in there where does that fit.

Robert J. Sprowls: If you're able to kind of.

Robert J. Sprowls: Go and do it at all is that what is perhaps making.

Robert J. Sprowls: More drawn out.

Robert J. Sprowls: Or challenges reached settlement, Yeah, I think it's I think it's a fair stay.

Robert J. Sprowls: Statements Jonathan.

Jonathan Garrett Reeder: So we're basically, as far as I know, the last electric utility to file its rate case after wildfire mitigation plans got put in place. And so that first year increase is fairly significant because there's a significant amount of unrecovered costs. We have north of $23 million of unrecovered wildfire mitigation capital expenditures. So I think that's part of the difficulty. And because we're the last one.

Robert J. Sprowls: So we're basically.

Jonathan: As far as I know, it's kind of our last electric utility to file this rate case after wildfire mitigation plans got put in place.

Jonathan Garrett Reeder: And so that first year increase is.

Jonathan Garrett Reeder: Fairly significant because there is significant amount of unrecovered costs.

Jonathan Garrett Reeder: We have north of $23 million of Unrecovered wildfire mitigation capital expenditures.

Speaker Change: Right. So I think that that's part of the difficulty.

Jonathan Garrett Reeder: Uh huh.

Jonathan Garrett Reeder: And because we're in the last one.

Robert J. Sprowls: There's more, I would say there are more years accumulated in the wildfire mitigation plan, unrecovered catbacks, than perhaps the bigger companies. Okay. So I think that's part of the delay. We've had delays on the Bear Valley electric case in the past, too, due to pre-wildfire mitigation plan expenditures. So I'd say some of it is because, you know, it's the first year is fairly significant, and then a part of it is just... You know, in some cases, we're having to compete with the big electric companies for the attention of public advocates on settlement. Yeah, no, in some respects, it's good to not be on the PAO's radar, though, right?

Jonathan Garrett Reeder: There is more I would say theres more years accumulated in the wildfire mitigation plan.

Robert J. Sprowls: Unrecovered Capex.

Robert J. Sprowls: Capex.

Robert J. Sprowls: And then perhaps the bigger companies.

Robert J. Sprowls:

Robert J. Sprowls: Okay, that's what I think that that's part of the way.

Robert J. Sprowls: We've had delays on the bear Valley electric case in the past too.

Robert J. Sprowls: Pre wildfire mitigation plan expenditures, so I'd say some of it is because it's you know it.

Robert J. Sprowls: The.

Robert J. Sprowls: That first year is fairly significant and then.

Robert J. Sprowls: Or it is just.

Robert J. Sprowls: <unk>.

Robert J. Sprowls: You know in some cases were.

Robert J. Sprowls: We're having to compete with.

Robert J. Sprowls: The big electric companies for the attention of the public advocates on settlement discussions.

Speaker Change: Yeah no.

Robert J. Sprowls: In some respects, it's good to not beyond the PAA was right.

Jonathan Garrett Reeder: No, right. It's always, I would say it's always been a little bit of an advantage for beer rally. We're just going to have to be patient. That group has got a lot of work to do, and we feel for them. You know, we're very understanding of, uh.., www.youtube.com.au There's only so much time to do so many things.

Speaker Change: Right, it's always but I would say, it's always been a little bit of an advantage for <unk>.

Speaker Change: Right right, you're just going to have we're just gonna have to be patient.

Jonathan Garrett Reeder: Right.

Jonathan Garrett Reeder: So that group has got a lot of work to do and we feel for him in.

Jonathan Garrett Reeder: We are very understanding of.

Jonathan Garrett Reeder: What they have to deal with so yeah.

Jonathan Garrett Reeder: Have a good working relationship with them is just.

Jonathan Garrett Reeder: There's only so many so much time to do so many things I think.

Jonathan Garrett Reeder: Yep. Okay. In terms of PFAS, does the pending Golden State Water case include any of that 80 to 200 million in anticipated PFAS related CAPEX? It does not, Jonathan, although we have requested to expand. We have a memo account established to track O&M costs associated with PFAS. In our water general rate case, we're requesting to expand the memo account to include carrying costs for capital projects as well. So there is that in the rate case, although there isn't.

Jonathan Garrett Reeder: Yep, Okay in terms of P boss does the pending Golden state water.

Jonathan Garrett Reeder: <unk> include any of that 80 to 200 million of anticipated <unk> related capex.

Jonathan Garrett Reeder: It does not Jonathan although.

Jonathan Garrett Reeder: We haven't we have requested to expand we have a memo account.

Jonathan Garrett Reeder: <unk>.

Jonathan Garrett Reeder: Established a track O&M costs associated with P fast.

Jonathan Garrett Reeder: In our water general rate case, we're requesting to expand the memo account to include carrying costs for capital projects as well. So there is that in the rate case, although there arent.

Jonathan Garrett Reeder: PFAS-related capital. So the capital request, I guess, in the memo account, it would just track the financing costs or whatever related to PFAS, is that right? Yeah, financing costs are operating costs if we have to buy material to maintain the well. [inaudible] in addition to what we are having authorized in the race.

Jonathan Garrett Reeder: <unk> related capex.

Jonathan Garrett Reeder: So the.

Jonathan Garrett Reeder: The capital request I guess.

Jonathan Garrett Reeder: <unk> account it would just track.

Jonathan Garrett Reeder: Financing costs or whatever related to parse that right.

Jonathan Garrett Reeder: Yeah financing caused our operating you know flat to buy materials to maintain good way out.

Jonathan Garrett Reeder: Those kinds of things.

Jonathan Garrett Reeder: In addition to what the way I.

Jonathan Garrett Reeder: Having also right.

Jonathan Garrett Reeder: Okay, I'm trying to remember because I know Cal water is trying to get there is expanded to capital costs. That request was denied, but their request was outside of the general rate case. So is this something that the commission is more likely to approve as part of the rate case, do you think? Well, I, you know, the big trigger point in a lot of regulatory jurisdictions is whether there's an MCL out. Yeah, and now that we have one, although it's pretty far along in the rate case process. Hopefully, we can get it.

Jonathan Garrett Reeder: Okay, I'm trying to remember because I know Cal water is trying to get there has expanded the capital costs that request.

Jonathan Garrett Reeder: Denied their request was outside of the general rate case, so right.

Jonathan Garrett Reeder: The Commission is.

Jonathan Garrett Reeder: More likely to approve as part of the rate case.

Jonathan Garrett Reeder: Well I.

Jonathan Garrett Reeder: You know the big a big trigger point in a lot of.

Jonathan Garrett Reeder: Regulatory jurisdictions is whether there is an mcl out there.

Jonathan Garrett Reeder: And now that we have one although it's.

Jonathan Garrett Reeder:

Jonathan Garrett Reeder: We're pretty far along in the rate case process.

Jonathan Garrett Reeder: Hopefully we can get.

Jonathan Garrett Reeder: Carrying costs recovered.

Robert J. Sprowls: And Jonathan, most of the costs right now that we track in the memo account, which we have already for the OEM, are testing-related costs. You know, we have to test all the wells to determine how many wells are over the MCL level. So we are tracking those incremental costs in our memo account right now. Okay.

Jonathan Garrett Reeder: Hey, Jonathan most of the cost right now we're tracking a memo account, which we have already for the O N E.

Robert J. Sprowls: Uh huh.

Robert J. Sprowls: Test testing maintenance costs.

Robert J. Sprowls: All the way out to determine how many wells are Oh, my God CLO level. So we're tracking those incremental parking on my model right now.

Jonathan Garrett Reeder: And then just kind of curious how the final PFAS rule might impact ASUS construction work going forward. Is that something that's going to drive, you know, more work than what we've seen over the past, you know, five years? Yeah, so right now. I think we have.

Robert J. Sprowls: Right.

Jonathan: Okay, and then just kind of curious how the final P fast rule.

Jonathan Garrett Reeder: Mike impact, Yes U S. Construction work going forward is that something thats going to drive.

Jonathan Garrett Reeder: More work than what we've seen over the past five years.

Jonathan Garrett Reeder: Yeah.

Jonathan Garrett Reeder: Yes, so right now.

Jonathan Garrett Reeder: <unk>.

Jonathan Garrett Reeder: I think we have.

Jonathan Garrett Reeder: G fast related issues at only one military base.

Jonathan Garrett Reeder: Okay.

Speaker Change: Yeah. So.

Robert J. Sprowls: Okay. Yeah, so I wouldn't, I wouldn't think it's a needle mover at this point, but yeah. That's a misunderstanding on my part. For some reason, I was thinking that, you know, military bases were somewhere where this was kind of common.

Speaker Change: So I wouldn't I wouldn't think it's a needle mover at this point.

Robert J. Sprowls: Okay. That's a misunderstanding my apart for some reason I was thinking that you know military bases or somewhere where the business kind of call. It. So.

Jonathan Garrett Reeder: Last question, more of a clerical question, the joint base Cape Cod contract: did that get up to the $75 million level? I was thinking the initial announcement only indicated it was $45 million. Your memory is very good, Jonathan.

Robert J. Sprowls: Last question more of a clerical the joint base Cape Cod contract did that.

Jonathan Garrett Reeder: Get up to the $75 million level.

Jonathan Garrett Reeder: I was thinking of the initial announcement only indicated it was $45 million.

Jonathan Garrett Reeder: It got moved up, and we're glad to see it. Okay, and that was just one of those.

Jonathan Garrett Reeder: Your memory is very good Jonathan.

Jonathan: Got it got moved up yeah, I'm glad to see it.

Jonathan Garrett Reeder: Okay and that was just one of those.

Jonathan Garrett Reeder: Not the economic price adjustment but, Sorry, the equitable adjustment or something like that. I think there was a sort of better understanding of the work that will need to be done. Okay. All right. Well, great. Thank you so much for taking the time to answer my questions.

Jonathan Garrett Reeder: Not the economic price adjustment, but ER.

Jonathan Garrett Reeder: Sorry.

Jonathan Garrett Reeder: The equitable adjustment or something like that.

Jonathan Garrett Reeder: I think there was a sort of a better understanding of the work that will need to be done.

Jonathan Garrett Reeder: Okay.

Jonathan Garrett Reeder: Alright, great. Thank you so much for taking the time to answer my questions I wanted to get back to you Jonathan on your first question about rate increases.

Jonathan Garrett Reeder: I want to get back to you, Jonathan, on your first question about 30-year rate increases. Okay. So if you look at our explanation, the press release, the first quarter rate increase while revenue increased by about $5.2 million, mostly due to the 30-year rate increase. So on an annual basis, I think that top number, revenue number, is about $24 million increase compared to 2023, but that's including the higher ROE. You know, recall that we have a 10.06 ROE this year compared to 9.36.

Jonathan Garrett Reeder: Hey.

Jonathan Garrett Reeder: So overall, the revenue increase for both the third-year rate increase and the higher LE is about $24 million, but, you know, we also have higher supply costs to associate with it. Okay, that's helpful. Yeah, I mean, I can back into the difference between the ROE one and get to that 24.

Jonathan Garrett Reeder: So if you look at our expectation that perhaps may be the first quarter of rate increases.

Jonathan Garrett Reeder: While the revenue increased by about $5 $2 million, mostly due to the failure rate increases so on the annual basis I think that top number revenue number is about $24 million increase compared to 2023, but that including the high I E.

Jonathan Garrett Reeder: Recall that we have that pinpoint staked out this year compared to $9 two asics. So so overall I'd say rather than increase for both.

Jonathan Garrett Reeder: Our rate increases.

Jonathan Garrett Reeder: And the higher all in it's about time to $4 million.

Jonathan Garrett Reeder: But we also have higher supply costs to associated with it so.

Speaker Change: Okay. That's that's helpful. Yes.

Jonathan Garrett Reeder: I come back into the difference between the ROE you on them to get to that 24. So thank you. Thank you for that.

Jonathan Garrett Reeder: I think Eva was referring to the 10-Q.

Jonathan Garrett Reeder: The press release.

Speaker Change: Got you.

Jonathan Garrett Reeder: This concludes our question and answer session I would like to turn the conference back over to Mr. Bob Sprowls for any closing remarks. Please go ahead Sir.

Speaker Change: Thank you Chuck I just wanted to.

Speaker Change: I'd say to everyone. Thank you all for your participation today, and we look forward to speaking with you next quarter.

Speaker Change: Thank you all.

Jonathan Garrett Reeder: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Jonathan Garrett Reeder: Okay.

Jonathan Garrett Reeder: [music].

Jonathan Garrett Reeder: Yeah.

Jonathan Garrett Reeder: [music].

Speaker Change: Ladies and gentlemen, thank you for standing by and welcome to the American States Water Company Conference call discussing the company's first quarter 2024 results. The call is being recorded if you would like to listen to the replay of this call. It will begin this afternoon at five P. M. Eastern time and run through Wednesday may 15th of 2024 on the Companys website.

Eva G. Tang: So thank you. Thank you for that, Eva. I think Eva was referring to the 10-Q, not the press release. This concludes our question and answer session. I would like to turn the conference back over to Mr. Bob Sprowls for any closing remarks. Please go ahead, sir.

Operator: Thank you, Chuck. I just wanted to say to everyone, thank you all for your participation today, and we look forward to speaking with you next quarter. Thank you all. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. © BF-WATCH TV 2021, ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Ladies and gentlemen, thank you for standing by. Welcome to the American States Water Company conference call discussing the company's first quarter of 2024 results. The call is being recorded.

Operator: Right at Www Dot a S water dot com.

Operator: Slides that the company will be referring to are also on the website.

Operator: This call will be limited to one hour presenting today from American States water company are Mr. Bob Sprowls, President and Chief Executive Officer, and MS. Eva Tang Senior Vice President and Finance and Chief Financial Officer.

Operator: Please review a description of the company's risks and uncertainties in our most recent 10-K and Form 10-Q on file with the Securities and Exchange Commission.

Operator: In addition.

Operator: This conference call will include a discussion of certain measures that are not prepared in accordance with generally accepted accounting principles or GAAP in the United States and constitute non-GAAP financial measures under SEC rules. These non-GAAP financial measures are derived from consolidated financial information, but not presented in our financial states.

Operator: <unk> that are prepared in accordance with GAAP for more details. Please refer to the press release at this time I would like to turn the call over to Mr. Bob Sprowls, President and Chief Executive Officer of American States Water Company. Please go ahead Sir.

Speaker Change: Thank you Chuck.

Robert J. Sprowls: Thank you, Chuck. Welcome, everyone. And thank you for joining us today. I'll begin with some brief comments on the quarter. Eva will then discuss some financial details, and then I'll wrap it up with updates on regulatory activity, ASUS, dividends, and then we'll take your questions. It was a solid quarter for the company as we continued to invest in our regulated utilities and began water and wastewater operations on two new military bases in April.

Robert J. Sprowls: Welcome everyone and thank you for joining us today I'll begin with some brief comments on the quarter. Eva will then discuss some financial details.

Robert J. Sprowls: And then I'll wrap it up with updates on regulatory activity.

Robert J. Sprowls: S dividends.

Eva: And then we'll take your questions.

Robert J. Sprowls: It was a solid quarter for the company as we continue to invest in our regulated utilities and began water and wastewater operations at two new military bases in April.

Eva: Let's first briefly discuss our earnings for the first quarter of 2024.

Robert J. Sprowls: Accorded diluted earnings for the quarter decreased by 31 per share from the same period in 2023.

Robert J. Sprowls: Core <unk> per share increase as adjusted.

Robert J. Sprowls: <unk> per share higher adjusted earnings were largely from the third year 2024 water rates approved in the final decision and Golden State water General rate case.

Robert J. Sprowls: Partially offset by lower construction activities at <unk>.

Robert J. Sprowls: Due to timing differences and performing work.

Robert J. Sprowls: And the delay in the electric general rate case decision.

Robert J. Sprowls: David will discuss the adjusted results in more detail.

Robert J. Sprowls: At the regulated utilities, we continue to invest in our infrastructure.

Robert J. Sprowls: <unk>, our water and electric systems.

Robert J. Sprowls: And remain focused on operating the water and electric businesses safely efficiently and for the long term.

Robert J. Sprowls: We are committed to the goal of expanding $160 million to $200 million this year at our regulated utilities.

Robert J. Sprowls: We're very pleased to have begun operations of the water and wastewater systems on two new military bases in April.

Robert J. Sprowls: As we successfully completed our transition.

Robert J. Sprowls: At Naval Air Station, Patuxent River, or Pax River located in Maryland.

Robert J. Sprowls: And joint base Cape Cod in Massachusetts.

Robert J. Sprowls: Thanks River provides our contracted services segment with a 50 year firm fixed price contract.

Robert J. Sprowls: Estimated at $349 million.

Robert J. Sprowls: While joint base Cape Cod is a 15 year contract.

Robert J. Sprowls: Of up to a maximum firm fixed price value of $75 million.

Robert J. Sprowls: The issuance of annual task orders.

Robert J. Sprowls: We look forward to supporting both installations and consider it a privilege to leverage our broad utility expertise.

Eva: To make significant contributions to the military and their respective missions at these locations.

Robert J. Sprowls: With that I'll turn the call over to Eva to discuss the quarterly earnings and liquidity.

Eva: Thank you Bob Hello, everyone, Let me start with our first quarter financially.

Eva G. Tang: Consolidated <unk> as recorded.

Eva G. Tang: Two cents per share for the first quarter as compared to 93.

Eva G. Tang: Therefore first quarter F 'twenty.

Eva G. Tang: Included in the retelling of last years first quarter.

Eva G. Tang: For sure.

Eva G. Tang: The recording of retroactive rate.

Eva G. Tang: Its position in the water general rate case for the full year of climate. Thank you Tim.

Eva G. Tang: In addition, during the first quarter of last year.

Eva G. Tang: We recorded a loss of five cents per share associated with the revenue subject to refund how can we offer a lower cost of debt related to the pending cause of Catholic capital proceeding at the time.

Eva G. Tang: Subsequently we vote.

Eva G. Tang: 2023 apparel, receiving a final decision in the cost of capital for next meeting that made our adjustment to rate perspective.

Eva G. Tang: Excluding these two items adjusted consolidated influx last quarter of 2023, or <unk> 60 per share as compared to <unk> 62 per share this year.

Eva G. Tang: Increase of two cents per share.

Eva G. Tang: What are you currently at Golden State Water company, we appointed 148 cents per share as compared to 74 cents per share for the first quarter of <unk>.

Eva G. Tang: Both items just discussed impacted at the water segment last year.

Eva G. Tang: So factoring the same effect from the two adjusted items for 2023, earnings for the first quarter of 2024 at Golden State Water were $0.48 per share, which was an increase of $0.07 per share, as compared to adjusted earnings of $0.41 per share for the first quarter of last year. Since 2024 is the third year of the GRC rate cycle, Golden State Water received third-year rate increases effective January 1, 2024. So the $0.07 per share increase in 2024 largely represents increases in water revenue and other income from gains generated from investments held for a retirement plan, partially offset by increases in operating and interest expense.

Eva G. Tang: No factory.

Eva G. Tang: In fact to adjusted items for trying to trying to clean earnings for the first quarter of 'twenty came for it to go in and say what it was like <unk> <unk> per share, which was an increase of seven cents per share as compared to I guess.

Eva G. Tang: 41 cents per share for the second quarter of last year.

Eva G. Tang: Since 2010 before.

Eva G. Tang: T I C E rate cycle Golden State water received.

Eva G. Tang: Rate increases effective January one 2024.

Eva G. Tang: The seven cents per share increase in 2010 before the RGD representing increase in water revenue and other income fund gain generated investment how it slightly cabinets that.

Eva G. Tang: Partially offset by increases in.

Eva G. Tang: And interest expense.

Eva G. Tang: Our electric segment earnings were <unk> <unk> per share for the second quarter.

Eva G. Tang: Some characteristics.

Eva G. Tang: For the same period in <unk>.

Eva G. Tang: No actually retarget them, not having new ways in fact.

Eva G. Tang: The way, we await the painting electric Tid that was sets new rates for 2023 into 2026.

Eva G. Tang: We're also experiencing continued increases.

Eva G. Tang: Our operating expenses and interest costs.

Eva G. Tang: When a decision is issued in the Electric DRC, new rates are expected to retroactive to January of 2023, and cumulative adjustments will be recorded at that time. Earnings from its U.S. operations decreased $0.02 per share for the quarter, largely from timing differences between when construction work was performed when compared to the first quarter of this year with the same period of 2003. Bob will discuss it in more detail later. Losses from our parent company were $0.03 per share for the quarter as compared to losses of $0.02 per share for the same period in 2023, largely due to an increase in interest expense.

Eva G. Tang: When a decision is issued in the electric geography.

Eva G. Tang: I expect it to retroactive to January of 'twenty, three and cumulative adjustment will be recorded at that time.

Eva G. Tang: I mean from an U S decreased two cents per share for the quarter today.

Eva G. Tang: Timing differences of when construction work was performed at when comparing to the first quarter of this year.

Eva G. Tang: With the same period of time Henk sweet spot.

Eva G. Tang: Bob will discuss in more detail later.

Eva G. Tang: Losses from our parent company <unk> per share for the quarter as compared to losses of <unk> <unk> per share for the same period in 2023, largely due to an increase in interest expense.

Eva G. Tang: Moving on slide eight.

Eva G. Tang: [inaudible] Consolidated revenue for the first quarter decreased by $26.1 million as compared to the same period in 2023. Revenue for the water segment decreased by $22.4 million, mainly due to $30.3 million recorded in the first quarter of 2023, which represented the impact of retroactive new rates for the full year of 2022 as a result of the proposed decision issued by the CTUC in April of last year on Golden State Water's general rate cases at the time, partially offset by increases in water revenue in 2024; this is the third year of rate increases.

Eva G. Tang: Consolidated revenue for the first quarter decreased by $26 1 million gallon.

Eva G. Tang: Is that the compared to the same period in 2023.

Eva G. Tang: Revenue for the wireless.

Eva G. Tang: Segment decreased by $22 $4 million, mainly due to $38 three.

Eva G. Tang: $3 million recorded in the first quarter of 2023, which we presented the impact of retroactive new rate for the full year of 2010 two.

Eva G. Tang: As a result of the proposed decision issued by the CPUC in April of last year I won't go into the state water general rate cases at the time.

Eva G. Tang: Partially offset by increases in water revenue.

Eva G. Tang: Is 94.

Eva G. Tang: Rate increases.

Eva G. Tang: Electric revenue decreased slightly as we await a decision on the electric generator, while there was a decrease in revenue from ASU by $3 million, largely due to timing differences in performing construction work. Turning to slide 9 and looking at total operating expenses other than supply costs. Consolidated expenses decreased $2.2 million as compared to the first quarter of 2023. The decrease was largely attributable to a decrease in construction costs at ASUS, resulting from lower construction activity due to timing differences of when construction work was performed in 2024 as compared to Q1 of 2023, partially offset by higher administrative. Interest expense, net of interest income, increased by $3.2 million due to a higher interest rate during the quarter and increases in overall Other income, net of other expenses, increased by $700,000, largely because of a higher gain recorded on investment help to fund one of the company's retirement plans in the first quarter.

Eva G. Tang: Electric revenue decreased.

Eva G. Tang: As we await a decision on the electric general rate case.

Eva G. Tang: There was a decrease in revenue from U S a $3 million largely due to timing differences.

Eva G. Tang: Farming construction work.

Eva G. Tang: Turning to slide nine and looking at total operating expenses other than supply costs.

Eva G. Tang: Consolidated expenses decreased $2 $2 million as compared to the first quarter of 2023. The decrease was largely attributable to a decrease in construction costs at a U S.

Eva G. Tang: Retail in fact, lower construction activity due to timing differences of when construction work was performed in 2024 as compared to Q1 of 2023.

Eva G. Tang: Partially offset by higher administrative and general expenses.

Eva G. Tang: Interest expense net of interest income increased by $3 $2 million.

Eva G. Tang: Two higher interest rate during the quarter and increases in overall borrowing level.

Eva G. Tang: Other income net of other expenses increased by $700000 largely because of higher gains recorded to our investment to pharma.

Eva G. Tang: <unk> of company to a carbon plants in the first quarter.

Eva G. Tang: Slide 10 shows the EPS bridge comparing recorded adjusted EPS for the first quarter of 2024 against adjusted EPS for 2023.

Eva G. Tang: Slide 10 shows the EPS bridge, comparing recorded and adjusted ETS for the first quarter of 2024 against adjusted ETS for 2023. Turning to liquidity, Net cash provided by operating activity was $45.8 million, as compared to $7 million for the first quarter of 2023. The increasing operating cash flow was largely a result of Golden State Water having implemented new rates in 2023 and 2024 and the collection of surcharges to recover retroactive revenue from 2022 through July 30, 2023.

Eva G. Tang: Cutting into the Quaker team.

Eva G. Tang: Net cash provided by operating activities was $45 $8 million as compared to $7 million for the first quarter of 2023.

Eva G. Tang: Increasing operating cash flow was largely as a result of Golden state water have been implemented new rates in toy trains three and 2024.

Eva G. Tang: And the collection of surcharges to recover retroactive revenue of about 22002 through July 2023.

Eva G. Tang: In addition, cash used for construction related activity at ex U S decrease this year.

Eva G. Tang: Due to timing differences.

Eva G. Tang: Actually increased fitness.

Eva G. Tang: Decreases yes, sorry.

Eva G. Tang: Due to timing differences of when the construction work is being performed and when payments are made.

Eva G. Tang: Our contracted.

Eva G. Tang: For investing activities, our regulated utility invested $47.6 million in company-funded capital projects during the first quarter, and we project company-funded capital expenditures at our regulated utility to be $160 to $200 million this year. In February, American States Water entered into an accredited distribution agreement to sell common shares through an ad market offering program. This program allows the company, at its sole discretion, to sell up to $200 million dollars over a three-year period.

Eva G. Tang: For investing activities, a regulated utility invested $47 $6 million.

Eva G. Tang: Company funded capital projects during the first quarter and we project the company funded capital expenditure at our regulated utility to be $162 million to $200 million. This year.

Eva G. Tang: In February and March.

Eva G. Tang: As states water entered into an aggregate distribution agreements to sell common shares.

Eva G. Tang: At the market offering program.

Eva G. Tang: This program allows the company at its sole discretion to sell up to $200 million.

Eva G. Tang: Over a three year period during the first quarter AWS I raised proceeds of approximately $16 million net of issuance costs.

Eva G. Tang: American States water currently maintaining our credit rating of <unk> stable, we extend to enforce global ratings.

Eva G. Tang: S&P, while at Golden State water and maintained a stable rating with S&P.

Eva G. Tang: Eight eight <unk> stable rating with Moody's Investor service.

Eva G. Tang: These are some of the highest credit ratings in the U.S. investor-owned water utility industry. With that, I'll turn the call back to Bob. Thank you, Eva.

Eva G. Tang: These are some of the highest credit ratings in the U S investor owned water utility industry.

Eva G. Tang: With that I'll turn the call back to Bob.

Robert J. Sprowls: I'll discuss a few key regulatory matters. In August 2023, Golden State Water filed its general rate case for water rates for the years 2025 through 2027. Among other things, Golden State Water requested capital budgets in this application for $611.4 million. We also requested the continuation of mechanisms to accommodate fully decoupled revenues and sales and track differences between recorded and CPUC-authorized supply-related expenses. A proposed decision in the water general rate case is scheduled for the fourth quarter of 2024, with new rates to become effective January 1st, 2025.

Bob: Thank you Eva I'll discuss a few key regulatory matters.

Robert J. Sprowls: In August 2023, Golden State water filed its general rate case for water rates for the years 2025 through 2027.

Robert J. Sprowls: Among other things Golden State water requested capital budgets in this application of $611 $4 million over the rate cycle.

Robert J. Sprowls: We also requested the continuation of mechanisms to accommodate fully decoupled revenues in sales and track differences between recorded and CPUC authorized supply related expenses.

Robert J. Sprowls: A proposed decision in the water general rate case is scheduled for the fourth quarter of 2024.

Robert J. Sprowls: With new rates to become effective January one 2025.

Robert J. Sprowls: In June of last year, the CPUC adopted a final decision in Golden State Water's cost-to-capital proceeding, where all changes to rates were to be implemented prospectively. As a result, Golden State Water maintained an authorized return on rate base of 7.91% for the first seven months of 2023 and 7.53% for the remaining five months of the year, reflecting an authorized return on equity of 9.36% and a cost of debt of 5.1%, which was a reduction from 6.6%.

Robert J. Sprowls: In June of last year, the CPUC adopted a final decision in Golden State water's cost of capital proceeding.

Robert J. Sprowls: We're all changes to rates were to be implemented prospectively.

Robert J. Sprowls: As a result Golden state water.

Robert J. Sprowls: Maintaining an authorized return on rate base of 791% for the first seven months of 2023.

Robert J. Sprowls: 753% for.

Robert J. Sprowls: The remaining five months of the year.

Robert J. Sprowls: Reflecting an authorized return on equity of 936% and.

Robert J. Sprowls: And cost of debt of five 1%.

Robert J. Sprowls: Which was a reduction from six 6%.

Robert J. Sprowls: The effect of January 1st, 2024, the authorized return on equity was increased to 10.06% as a result of the water cost of capital mechanism being triggered for 2024, and the authorized return on the rate base was increased to 7.93%. [inaudible] As many of you know, investor-owned water utilities serving in California are required to file their cost of capital applications on a triennial basis, which means Golden State Water's next cost of capital application was scheduled to be filed on May 1st, 2024, for the years 2025 through 2027.

Robert J. Sprowls: Effective January one 2024.

Robert J. Sprowls: <unk> return on equity was increased to 10.06%.

Robert J. Sprowls: As a result of the water cost of capital mechanism being triggered for 2024.

Robert J. Sprowls: And the authorized return on rate base increased to 793%.

Speaker Change: Excuse me.

Robert J. Sprowls: As many of you know investor owned water utilities, serving in California are required to file their cost of capital applications on a triennial basis.

Robert J. Sprowls: Which means Golden State waters next cost of capital application was scheduled to be filed on May one 2024 for.

Robert J. Sprowls: For the years 2025 through 2027.

Robert J. Sprowls: However, Golden state water, along with three other class a industrial water utilities filed a joint request with the CPUC to postpone the cost of capital applications by one year.

Robert J. Sprowls: Which was approved by the PUC on February <unk> of this year.

Robert J. Sprowls: The joint request asset the utilities keep through cost of capital currently authorized for 2024 in effect through 2025.

Robert J. Sprowls: And to file new cost of capital applications by May one 2025.

Robert J. Sprowls: To set the cost of debt return on equity and capital structure, starting January one 2026.

Robert J. Sprowls: Additionally, Golden State Water's water cost to capital mechanism will remain active through the one-year deferral period. Additionally, our electric utility subsidiary filed its general rate case application on August 30th, 2022 for new rates for the period 2023 through 2026. The application includes additional capital expenditures of $68.2 million for the four-year rate cycle and a new cost of capital.

Robert J. Sprowls: Additionally, Golden State water's water cost of capital mechanism will remain active through the one year deferral period.

Robert J. Sprowls: We have also requested recovery of more than $23.5 million in capital already spent related to the wildfire mitigation plan. The new rates, once approved, will be retroactive to January 1st, 2023. The decision on the general rate case is scheduled to be issued by the end of the third quarter of this year. As many of you know, the U.S. EPA recently announced the final National Primary Drinking Water Regulation and established maximum contaminant levels for PFAS substances in drinking water. The regulation established maximum contaminant levels that range from 4 to 10 parts per trillion.

Robert J. Sprowls: Our electric utility subsidiary filed its general rate case application on August 32022 for new rates for the period 2023 through 2026.

Robert J. Sprowls: The application includes additional capital expenditures of $68 $2 million for the four year rate cycle.

Robert J. Sprowls: A new cost of capital.

Robert J. Sprowls: We have also requested recovery of more than $23 $5 million.

Robert J. Sprowls: Capital already spent related to the wildfire mitigation plan.

Robert J. Sprowls: The new rates once approved will be retroactive to January one 2023.

Robert J. Sprowls: The decision on the general rate case is scheduled to be issued by the end of the third quarter of this year.

Robert J. Sprowls: As many of you know the U S. EPA recently announced the final national primary drinking water regulations.

Robert J. Sprowls: that have exceeded one or more of the PFAS maximum contaminant levels. Assuming $2 to $5 million per well, that results in approximately $80 to $200 million of capital expenditure. With these new regulations, we expect to see an increase in Golden State Water's capital investments, as well as operations and maintenance expenses over the next five years to comply with these rules. The CPUC rate making process provides Golden State Water with the opportunity to recover prudently incurred capital and operating costs in future filings associated with achieving water quality standards.

Robert J. Sprowls: And established maximum contaminant levels for <unk> substances in drinking water.

Robert J. Sprowls: The regulation establishes established maximum contaminant levels that range from four to 10 parts per trillion.

Robert J. Sprowls: Final rule will require public water systems to implement <unk> monitoring.

Robert J. Sprowls: And reported by April of 2027.

Robert J. Sprowls: And we're exceedances are identified to implement solutions within five years by April of 2029.

Robert J. Sprowls: We reduced <unk> levels to below regulated contaminant level.

Robert J. Sprowls: Currently there are more than 40 wells at Golden State water company.

Robert J. Sprowls: Okay.

Robert J. Sprowls: Sure.

Robert J. Sprowls: That have exceeded one or more of the <unk> maximum contaminant level.

Robert J. Sprowls: Assuming $2 million to $5 million per well that results in approximately $80 million to $200 million of capital expenditures.

Robert J. Sprowls: CPUC ratemaking process provides golden state water with the opportunity to recover prudently incurred capital and operating costs in future filings associated with achieving water quality standards.

Robert J. Sprowls: We believe that such incurred and expected future costs should be authorized for recovery by the CPUC. Turning our attention to slide 14, we present the growth in Golden State waters and the adopted average water rate base for 2018 through 2024. The Authorized Average Rate Base is increased from $752.2 million in 2018, to $1,357,500,000 in 2024. That's a compound annual growth rate of 10.3% for the six-year period. ASUS contributed earnings of $0.13 per share for the first quarter of this year, compared to $0.15 per share for the same period last year. The decrease was largely due to a decrease in construction activity, resulting from the timing difference of when construction work was performed in 2024 as compared to the same period in 2023, partially offset by an increase in management fee revenue, resulting from the resolution of various economic price adjustments, previously highlighted, ASUS successfully, excuse As previously highlighted, ASUS successfully transitioned the water and wastewater systems at two new military bases in April.

Robert J. Sprowls: We believe that such incurred and expected future cost.

Robert J. Sprowls: Should be authorized for recovery by the CPUC.

Robert J. Sprowls: Turning our attention to slide 14, we present the growth in Golden State Water's Adair.

Robert J. Sprowls: <unk> average water rate base for 2018 through 2024.

Robert J. Sprowls: Golden State waters authorized average rate base.

Robert J. Sprowls: The increase from $752 $2 million in 2018.

Robert J. Sprowls: The 1 billion $357 $5 million in 2024.

Robert J. Sprowls: That's a compound annual growth rate of 10, 3%.

Robert J. Sprowls: For the six year period.

Robert J. Sprowls: <unk> contributed earnings of <unk> 13 per share for the first quarter of this year.

Robert J. Sprowls: As compared to <unk> 15 per share for the same period last year.

Robert J. Sprowls: The decrease was largely due to a decrease in construction activity, resulting from the timing difference of when construction work was performed in.

Robert J. Sprowls: In 2024 is the same compared to the same period.

Robert J. Sprowls: In 2023.

Robert J. Sprowls: Partially offset by an increase in management fee revenue.

Robert J. Sprowls: <unk> from the resolution of various economic price adjustments.

Robert J. Sprowls: Previously highlighted.

Speaker Change: She has successfully excuse me just a second.

Robert J. Sprowls: Okay.

Robert J. Sprowls: Previously highlighted.

Robert J. Sprowls: <unk> successfully transitioned water and wastewater system that to move to new military basis in April.

Robert J. Sprowls: Under the contract, the joint base Cape Cod and ASUS will perform work through the annual issuance of task orders by the U.S. government over a 15-year period. After completion of the transition at Joint Base Cape Cod, the U.S. government awarded a task order valued at $4.1 million to A.S.U.S. for the first year of operations. Maintenance and Renewal and Replacement Services of the Water and Wastewater Systems and increase the estimated maximum value of the contract to $75 million.

Robert J. Sprowls: Under the contract with joint base Cape Cod.

Robert J. Sprowls: <unk> will perform work through the annual issuance of task orders by the U S government over a 15 year period.

Robert J. Sprowls: After completion of the transition at joint base Cape Cod.

Robert J. Sprowls: S government awarded a task order valued at $4 $1 million.

Robert J. Sprowls: For the first year of operations.

Robert J. Sprowls: Maintenance and renewal and replacement services of the water and wastewater systems.

Robert J. Sprowls: And increase the estimated maximum value of the contract to $75 million.

Robert J. Sprowls: Subject to further adjustments as task orders are issued, we continue to project ASUS to contribute $0.50 to $0.54 per share this year, and we remain confident that we can effectively compete for new military-based contract awards, based on our proven track record of managing water and wastewater-related services.

Robert J. Sprowls: Subject to further adjustments as task orders are issued.

Robert J. Sprowls: We continue to project <unk>.

Robert J. Sprowls: Has to contribute 50 to 54 per share this year and we remain confident that we can effectively compete for new military base contract Awards.

Robert J. Sprowls: Based on our proven track record of managing water and wastewater related services.

Robert J. Sprowls: Military Bases since 2004. I would like to turn our attention to dividends, which remain a compelling part of our investment story. Our quarterly dividend rate has grown at a compound annual growth rate, or CAGR, of 9.4% over the last five years.

Robert J. Sprowls: For military basis since 2004.

Robert J. Sprowls: I would like to turn our attention to dividends, which remains a compelling part of our investment story.

Robert J. Sprowls: Our quarterly dividend rate has grown at a compound annual growth rate or CAGR of nine 4%.

Robert J. Sprowls: Over the last five years from 2018 through 2023.

Robert J. Sprowls: 2018-2023. These increases are consistent with our policy to achieve a compound annual growth rate of and a dividend of more than 7% over the long term. It is something that the company is proud of, and is a continuing asset to our shareholders. I'd like to conclude our prepared remarks by thanking you for your interest in American States Water. I will now turn the call over to the operator for questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone.

Robert J. Sprowls: These increases are consistent with our policy to achieve a compound annual growth rate in the dividend of more than 7% over the long term.

Robert J. Sprowls: Our strong dividend history is something that the company is proud of.

Robert J. Sprowls: And as a continuing asset to our shareholders.

Robert J. Sprowls: I'd like to conclude our prepared remarks by thanking you for your interest in American States water.

Robert J. Sprowls: I will now turn the call over to the operator for questions.

Speaker Change: Thank you we will now begin the question and answer session.

Robert J. Sprowls: To ask a question you May Press Star then one on your Touchtone phone.

Robert J. Sprowls: If youre using a speakerphone please pick up your handset before pressing the keys.

Jonathan Garrett Reeder: If at any time your question has been addressed.

Jonathan Garrett Reeder: First of all your question. Please press Star then two.

Jonathan Garrett Reeder: And at this time, we'll pause momentarily to assemble our roster.

Operator: And the first question will come from Jonathan Reeder with Wells Fargo. Please go ahead.

Jonathan Garrett Reeder: Hey, Bob and Eva how are you doing today.

Jonathan Garrett Reeder: Good job. Thank you. How about you? Not too bad, not too bad at all.

Jonathan Garrett Reeder: Good Jonathan.

Jonathan Garrett Reeder: Thank you and how about you.

Jonathan Garrett Reeder: Towards the end of earnings season, it's always a good thing. Here are a couple questions I wouldn't mind going through. First off, how large was the third year rate increase from the 2022 to 2024 GRC? I don't believe I saw that in the K or the Q, but I think the settlement you had reached was around $13.2 million. So you are, Jonathan, so you are asking for the rate increase for this year? Twenty-four over twenty-three. Twenty-three.

Jonathan Garrett Reeder: Not too bad not too bad at all.

Jonathan Garrett Reeder: Towards the end of earnings season, it's always a good thing.

Jonathan Garrett Reeder: Couple of questions I wouldn't mind going through.

Jonathan Garrett Reeder: First off how large was the third year rate increases from the 2022 to 2024 <unk> I don't believe I saw that in the K or the Q.

Jonathan Garrett Reeder: The settlement you had reach outline like $13 2 million.

Jonathan Garrett Reeder: Yeah, Jonathan So you are asking of any increase in equipment here 24 over 2000 <unk> yeah.

Jonathan Garrett Reeder: Yeah. I think, you know, first quarter, our increases... Are you asking for the entire year, Jonathan? Yeah. Yeah. What's the annual amount?

Speaker Change: Well I think you know first quarter.

Jonathan Garrett Reeder: Increasing.

Jonathan Garrett Reeder: Are you asking for the entire year, Jonathan Yeah, Yeah, what what's the annual amount I mean, I think the settlement.

Jonathan Garrett Reeder: I mean, I think the settlement, you know, had outlined $13.2 million, but I know that's always, you know, subject to adjustment for, you know, inflationary factors, the earnings test, stuff like that. We may need to get back to you, Jonathan. Yeah, I think the first quarter is about $3.5 million.

Jonathan Garrett Reeder: Joe had outlined $13 2 million, but I know that's all it is.

Speaker Change: Subject to adjustment for it.

Jonathan Garrett Reeder: Larry factors, Darren and stuff like that.

Speaker Change: We may need to get back to you Jonathan on that.

Speaker Change: Yeah, I think first quarter.

Jonathan Garrett Reeder: It's about between.

Speaker Change: Between 5 million and so we'll get back to you on that one.

Eva G. Tang: So we'll get back to you on that one, Jonathan, for the full story. Okay, thank you. And then where exactly do things stand with the electric GRC?

Eva G. Tang: Full year, Okay. Thank you and then.

Eva G. Tang: Where exactly do things stand with like the electric.

Robert J. Sprowls: Are you just waiting for a PD at this point? All the work in the case has been done. We're waiting for a PD. Settlement discussions continue, but, you know, it. One of the issues we have with Bear Valley Electric is we're so small, and sometimes it's difficult to get the attention of the Public Advocate's Office. They, you know, they.

Eva G. Tang: <unk> are you just waiting for a PD at this point.

Robert J. Sprowls: We are all of the all the work and the case has been done for waiting for PD.

Robert J. Sprowls:

Robert J. Sprowls: We.

Robert J. Sprowls: Settlement discussions continue but.

Robert J. Sprowls: Yeah.

Robert J. Sprowls: It's one of the issues.

Robert J. Sprowls: With Bear Valley electric as we are so small.

Robert J. Sprowls: But sometimes it's difficult to get the attention of.

Robert J. Sprowls: The public advocates office.

Robert J. Sprowls: <unk>.

Robert J. Sprowls: Okay.

Robert J. Sprowls: Their value is so small relative to the big elect, although they've been nice to work with, but we continue to work through that. It's possible we could get to a settlement. It's also possible... and the proposed decision will come out. Okay, I mean, are you optimistic that it will? I mean, I think the statutory deadline has been extended a couple of times now, you know, the latest is September 30. Are you optimistic that it will actually get done by then?

Robert J. Sprowls: Fair value is so small relative to the.

Speaker Change: <unk> electric.

Robert J. Sprowls: So.

Robert J. Sprowls: Although.

Robert J. Sprowls: It's been nice to work with but we continue to work through that its possible we could get to a settlement. It's also possible.

Robert J. Sprowls: A proposed decision will come out.

Jonathan Garrett Reeder: Or, you know, since settlement discussions are potentially still taking place? You know, is it likely to, you know, even extend beyond? Well, they have assigned a second ALJ to the case, so I think there's a pretty good chance it'll get done by then. (Inaudible) You know, if we were to reach a settlement, that may be something that slows the case down a little bit, but... So, you know, it's hard to say again.

Robert J. Sprowls: Okay.

Robert J. Sprowls: I mean are you optimistic that it I mean, I think I think the statutory deadline has been extended a couple of times now the latest as of September 30.

Jonathan Garrett Reeder: Are you optimistic that it actually gets done by then or.

Jonathan Garrett Reeder: Settlement discussions are potentially still taking place.

Jonathan Garrett Reeder: Is it likely to even extend beyond.

Jonathan Garrett Reeder: Well they have assigned a second ALJ to the case.

Jonathan Garrett Reeder: I think there is a pretty good chance it will it will get done by then.

Jonathan Garrett Reeder: Unless you.

Jonathan Garrett Reeder: Before we were to reach a settlement that may be something that slows the case down a little bit but.

Jonathan Garrett Reeder: So it's hard to say again.

Robert J. Sprowls: The size of the company is part of the factor here. Yeah, but for the size of the company, it's a pretty significant case, though, correct? I mean, there's a lot of capital between the wildfire mitigation stuff and everything, so it's kind of in there where I mean, is that it, if you're able to kind of, go into it all, is that perhaps what is perhaps making the case more drawn out or, you know, challenges reaching settlement?

Jonathan Garrett Reeder: The size of the company as part of the factor here so.

Robert J. Sprowls: Yes.

Robert J. Sprowls: For the size of the company.

Robert J. Sprowls: It's a pretty significant case, though correct your maintenance, there's a lot of capital between the wildfire mitigation stuff and everything it's kind of been there where does that fit.

Robert J. Sprowls: If youre able to kind of.

Robert J. Sprowls: Go and do it at all is that what is perhaps making.

Robert J. Sprowls: More drawn out.

Robert J. Sprowls: Or you know challenges reached settlement Yeah, I think it's I think it's a fair stay.

Robert J. Sprowls: Yeah, I think it's a fair statement, Jonathan, that we're basically, as far as I know, it's kind of the last electric utility to file its rate case after wildfire mitigation plans got put in place. And so that first year increase is fairly significant because there's a significant amount of unrecovered costs. We have north of $23 million of unrecovered wildfire mitigation capital expenditures.

Robert J. Sprowls: Statements Jonathan.

Robert J. Sprowls: So we're basically.

Robert J. Sprowls: As far as I know, it's kind of our last electric utility to file this rate case after wildfire mitigation plans got put in place.

Robert J. Sprowls: And so that first year increase is.

Robert J. Sprowls: Fairly significant because there is significant amount of unrecovered costs.

Robert J. Sprowls: We have north of $23 million of Unrecovered wildfire mitigation capital expenditures.

Jonathan Garrett Reeder: So I think that's part of the difficulty, and because we're the last one. There are more, I would say there are more years accumulated in the wildfire mitigation plan, unrecovered catbacks, than perhaps the bigger companies. So I think that's part of the delay. We've had delays on the Bear Valley Electric case in the past, too, with pre-wildfire mitigation plan expenditures. So I'd say some of it is because, You know, it's the... That first year is fairly significant, and then a part of it is just... You know, in some cases, we're, you know, we're having to compete with.

Speaker Change: Right. So I think that that's part of the difficulty.

Jonathan Garrett Reeder: Yeah.

Jonathan Garrett Reeder: And because we're in the last one.

Jonathan Garrett Reeder: There is more I would say theres more years accumulated in the wildfire mitigation plan.

Jonathan Garrett Reeder: Unrecovered Capex.

Jonathan Garrett Reeder: Then perhaps the bigger companies.

Jonathan Garrett Reeder:

Jonathan Garrett Reeder: Okay. So I think that's part of the delay.

Jonathan Garrett Reeder: We've had delays on the bear Valley electric case in the past too.

Jonathan Garrett Reeder: Pre wildfire mitigation plan expenditures, so I'd say some of it is because it's.

Jonathan Garrett Reeder: It's the.

Jonathan Garrett Reeder: That first year is fairly significant and then.

Jonathan Garrett Reeder: Part of it is just.

Jonathan Garrett Reeder: In some cases, we are.

Jonathan Garrett Reeder: We're having to compete with.

Jonathan Garrett Reeder: The big electric companies want the attention of public advocates on settlement. Yeah, no, in some respects, it's good to not be on the PAO's radar, though, right? No, right. It's always, I would say it's always been a little bit of an advantage for Bear Valley.

Jonathan Garrett Reeder: The big electric companies for the attention of the public advocates on settlement discussions.

Speaker Change: Yeah no.

Jonathan Garrett Reeder: In some respects, it's good but not beyond the <unk>.

Jonathan Garrett Reeder: Right, it's always but I would say, it's always been a little bit of an advantage for bear Valley electric.

Robert J. Sprowls: We're just going to have to be patient. That group has got a lot of work to do, and we feel for them. You know, we're very understanding of, uh... There's only so much time to do so many things.

Speaker Change: You're just going to have to we're just going to have to be patient.

Robert J. Sprowls: Right.

Robert J. Sprowls: So that group has got a lot of work to do and we feel forum.

Robert J. Sprowls: We are very understanding of.

Robert J. Sprowls: What they have to deal with so we have a good working relationship with them. It's just.

Robert J. Sprowls: Only so many so much time to do so many things I think.

Jonathan Garrett Reeder: Yep. Okay. In terms of PFAS, does the pending Golden State Water case include any of that 80 to 200 million in anticipated PFAS-related CapEx? It does not, Jonathan, although we have it.

Robert J. Sprowls: Yep, Okay in terms of <unk> costs.

Jonathan Garrett Reeder: Does the pending Golden state water.

Jonathan Garrett Reeder: <unk> include any of that 80 to 200 million of anticipated <unk> related capex.

Jonathan Garrett Reeder: It does not Jonathan although.

Robert J. Sprowls: We have requested to expand. We have a memo account, and we established a track on M costs associated with P5. In our water general rate case, we're requesting to expand the memo account to include carrying costs for capital projects as well. So there is that in the rape case, although there isn't.

Jonathan Garrett Reeder: We haven't we have requested to expand we have a memo account.

Robert J. Sprowls: Established a track O&M costs associated with P fast.

Robert J. Sprowls: In our water general rate case, we're requesting to expand the memo account to include carrying costs for capital projects as well. So there is that in the rate case, although there arent.

Robert J. Sprowls: <unk> related capex.

Robert J. Sprowls: So the capital request, I guess, in the memo account, it would just track the financing costs or whatever related to PFAS, is that right? Yeah, financing costs are operational, you know, if we have to buy material to maintain the well. [inaudible] in addition to what we are, have been authorized in Wraith. Okay, I'm trying to remember because I know Cal water is trying to get there is expanded to capital costs. That request was denied, but their request was outside of the general rate case. So is this something that the commission is more likely to approve as part of the rate case, do you think? The big trigger point in a lot of regulatory jurisdictions is whether there's an MCL option.

Robert J. Sprowls: So the.

Robert J. Sprowls: Capital request I guess in the memo account it would just track the financing costs or whatever related to your boss alright.

Robert J. Sprowls: Yes financing caused all operating.

Robert J. Sprowls: I have to buy material absolutely to maintain good way out.

Robert J. Sprowls: Those kinds of things.

Robert J. Sprowls: Jason to lead the way.

Robert J. Sprowls: Having also right.

Robert J. Sprowls: Okay, I'm trying to remember because I know Cal water is trying to get <unk> expanded the capital costs that request.

Robert J. Sprowls: Denied their request was outside of the general rate case, so right.

Robert J. Sprowls: Something that the commission is more likely to approve as part of the rate case.

Robert J. Sprowls: Well.

Robert J. Sprowls: The big a big trigger point and Lana.

Robert J. Sprowls: Regulatory jurisdictions is whether there is an mcl out there.

Robert J. Sprowls: Yeah, and now that we have one, although it's pretty far along in the rate case process. Hopefully, we can get. [inaudible] And Jonathan, most of the costs right now we track in the memo account, which we have already for the OEM, are testing-related costs. You know, we have to test all the wells to determine how many wells are over the MCL level.

Robert J. Sprowls: And now that we have one although it's.

Robert J. Sprowls: We're pretty far along in the rate case process.

Robert J. Sprowls: <unk>.

Robert J. Sprowls: Hopefully we can get.

Robert J. Sprowls: Carrying costs recovered.

Robert J. Sprowls:

Robert J. Sprowls: And Jonathan most of the cost right now we're tracking the memo account, which we have already for the O N E.

Speaker Change: Uh huh.

Robert J. Sprowls: Test testing maintenance costs.

Robert J. Sprowls: All the way out to determine how many wells.

Robert J. Sprowls: Oh again see how level. So we're tracking those incremental positing a memo account right now.

Eva G. Tang: So, we are tracking those incremental costs in our memo account right now. Right. Okay. And then I was just kind of curious how the final PFAS rule might impact ASUS construction work going forward.

Eva G. Tang: Right.

Speaker Change: Okay, and then just kind of curious how the final P fast rule.

Eva G. Tang: Might impact U S. Construction work going forward is that something thats going to drive.

Jonathan Garrett Reeder: Is that something that's going to drive, you know, more work than we've seen over the past, you know, five years? Yeah, so right now. I think we have.

Jonathan Garrett Reeder: More work than what we've seen over the past five years.

Jonathan Garrett Reeder: Yes, so right now.

Jonathan Garrett Reeder: <unk>.

Jonathan Garrett Reeder: I think we have.

Jonathan Garrett Reeder: G fast related issues at only one military base.

Robert J. Sprowls: Okay, yeah, so, I wouldn't, I wouldn't think it's a needle mover at this point, but yeah. Okay, I have to misunderstand my part. For some reason, I was thinking that, you know, military bases were somewhere where this was kind of common.

Jonathan Garrett Reeder: Okay.

Speaker Change: Yeah. So.

Robert J. Sprowls: So I wouldn't I wouldn't think it's a needle mover at this point, but yeah.

Speaker Change: Okay. That's a misunderstanding on my part for some reason I was thinking that you know.

Robert J. Sprowls: Military bases and somewhere where the business kind of college.

Jonathan Garrett Reeder: Last question, more of a clerical question, the Joint Base Cape Cod contract, did that get up to the $75 million level? I was thinking the initial announcement only indicated it was $45 million. Your memory is very good, Jonathan. It got moved up, yes.

Robert J. Sprowls: Last question more of a clerical the joint base, Cape Cod contracts that get up to the $75 million level.

Jonathan Garrett Reeder: I was thinking of the initial announcement only indicated it was $45 million.

Jonathan Garrett Reeder: Your memories very good Jonathan.

Jonathan Garrett Reeder: Got it got moved up.

Jonathan Garrett Reeder: I'm glad to see it.

Jonathan Garrett Reeder: Glad to see it. Okay, and that was just one of those. Not the economic price adjustment, but... Sorry, the equitable adjustment or something like that.

Jonathan Garrett Reeder: Okay and that was just one of those.

Jonathan Garrett Reeder: Not the economic price adjustment.

Jonathan Garrett Reeder: Yes.

Jonathan Garrett Reeder: Alright.

Jonathan Garrett Reeder: The equitable adjustment or something like that.

Robert J. Sprowls: I think there was a sort of better understanding of the work that needed to be done. All right. Well, great. Thank you so much for taking the time to answer my questions. I want to get back to you, Jonathan, on your first question about 30-year rate increases. Okay. So if you look at our explanation, the press release, the first quarter rate increase while revenue increased by about $5.2 million, mostly due to the 30-year rate increase.

Jonathan Garrett Reeder: I think there was a better understanding of the work that will need to be done.

Robert J. Sprowls: Okay.

Speaker Change: Alright, great. Thank you so much for taking the time to answer my questions I wanted to get back to you Jonathan on your first question about rate increases.

Robert J. Sprowls: Okay.

Robert J. Sprowls: So if you look at it.

Robert J. Sprowls: No explanation that perhaps may be the first quarter of rate increases.

Robert J. Sprowls: While the revenue increased by about $5 $2 million, mostly due to the failure rate increases so on the annual basis I think that top number revenue number is about $24 million increase compared to 2023, but that including the high I E.

Robert J. Sprowls: So on an annual basis, I think that top number revenue number is about $24 million increase compared to 2023, but that's including the higher ROE. You know, recall that we have a 10.06 ROE this year compared to 9.36. So, overall, the revenue increase for both the third year rate increase and the higher LE is about $24 million, but we also have higher supply costs to associate with it. Okay, that's helpful. Yeah, I mean, I can back into the difference between the ROE one and get to that 24.

Robert J. Sprowls: Call that we have that pinpoint staked out this year compared to $9. Two six so so overall I'd say rather than increase for both.

Robert J. Sprowls: Rate increases.

Robert J. Sprowls: The higher all in is about $24 million.

Robert J. Sprowls: But.

Robert J. Sprowls: I will have higher supply costs to assembly.

Robert J. Sprowls: So he can't wait that sells.

Speaker Change: Okay. That's that's helpful. Yes.

Speaker Change: I can back into it.

Eva G. Tang: So thank you. Thank you for that, Eva. I think Eva was referring to the 10-Q, not the press release.

Robert J. Sprowls: The difference between the ROE.

Speaker Change: To get to that 24. So thank you. Thank you for that.

vivo: I think vivo is referring to the 10-Q not the press release.

Speaker Change: Got you.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Mr. Bob Sprowls for any closing remarks. Please go ahead, sir.

Eva G. Tang: This concludes our question and answer session I would like to turn the conference back over to Mr. Bob Sprowls for any closing remarks. Please go ahead Sir.

Robert J. Sprowls: Thank you, Chuck. I just wanted to say to everyone, thank you all for your participation today, and we look forward to speaking with you next quarter. Thank you all. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Robert J. Sprowls: Thank you Chuck I just wanted to.

Robert J. Sprowls: I'd say to everyone. Thank you all for your participation today, and we look forward to speaking with you next quarter.

Robert J. Sprowls: Thank you all.

Robert J. Sprowls: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Q1 2024 American States Water Co Earnings Call

Request a DemoDemo

AWR

American States Water

Earnings