Q2 2024 American States Water Co Earnings Call

August 7, 2024

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

Operator: If you would like to listen to a replay of this call, it will begin this afternoon at 5 p.m. Eastern time and run through Wednesday, August 14, 2024, on the company's website, www.ASWater.com. The slides that the company will be referring to are also available on the website. All participants will be in a listen-only mode.

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Speaker Change: Ladies and gentlemen, thank you for standing by. Welcome to the American States Water Company conference call discussing the company's second quarter 2024 results.

Speaker Change: The call is being recorded. If you would like to listen to a replay of this call we'll begin this afternoon at 5 p.m. Eastern Time and run through Wednesday August 14th 2024 on the company's website www.aswater.com

Speaker Change: The slides that the company will be referring to are also available on the website.

Operator: Should you need assistance, please email conference specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the star key and then one.

Speaker Change: All participants will be in a listen-only mode. Should you need assistance, please email a competent specialist by pressing the star key followed by zero.

Speaker Change: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one. To withdraw your questions, you may press star and two.

Operator: To withdraw your questions, you may press star and two. Your call will be limited to one hour. Presenting today from American States Water Company are Bob Sprowls, President and Chief Executive Officer, and Eva Tang, Senior Vice President of Finance and Chief Financial Officer. As a reminder, certain matters discussed during this conference call may be forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995.

Speaker Change: Today's call will be limited to one hour.

Speaker Change: Presenting today from American States Water Company are Bob Sprowls, President and Chief Executive Officer, and Eva Tang, Senior Vice President of Finance and Chief Financial Officer.

Speaker Change: 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.

Operator: Please review a description of the company's risks and uncertainties in our most recent Form 10-K and Form 10-Q on file with the Securities and Exchange Commission. In addition, this conference call will include a discussion of certain measures that are not prepared in accordance with generally accepted accounting principles, or GAAP, in the United States and constitute non-GAAP financial measures under SEC Rule 10b-15. 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.

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

Speaker Change: 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.

Speaker Change: 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'd like to turn the floor over to Bob Sprowls, President and Chief Executive Officer of American States Water Company. Thank you, Jamie. Welcome, everyone, and thank you for joining us today.

Speaker Change: For more details, please refer to the press release.

Bob Sprowls: At this time, I'd like to turn the floor over to Bob Sprowls, President and Chief Executive Officer of American States Water Company.

Bob Sprowls: Thank you, Jamie.

Robert Sprowls: 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. The second quarter was notably productive for the company, as our largest subsidiary, Golden State Water, reached a settlement in principle with the Public Advocates Office of the California Public Utilities Commission, or Cal Advocates for short. In connection with Golden State Water's general rate case, which will set new water rates for the years 2025 to 2027.

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

Bob Sprowls: I'll begin with some brief comments on the quarter.

Bob Sprowls: 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.

Robert Sprowls: As a result of these efforts, on July 12th, the company and Cal advocates filed a joint motion to adopt the settlement agreement with the California Public Utilities Commission, or CPUC. The proposed settlement agreement, if approved by the CPC, resolves most of the issues related to the 2025 annual revenue requirement, leaving only two unresolved issues, which will be discussed later. Among other things, the settlement authorized Golden State Water to invest approximately $573.1 million in capital infrastructure over the three-year capital cycle.

Speaker Change: The second quarter was notably productive for the company, as our largest subsidiary, Golden State Water, reached a settlement in principle with the Public Advocates Office of the California Public Utilities Commission.

Bob Sprowls: or Cal Advocates for short, in connection with Golden State Water's general rate case that will set new water rates for the years 2025 to 2027.

Bob Sprowls: As a result of these efforts, on July 12th, the company and Cal advocates filed a joint motion to adopt the settlement agreement with the California Public Utilities Commission or CPUC.

Bob Sprowls: Proposed settlement agreement, if approved by the CPC, resolves most of the issues related to the 2025 annual revenue requirement, leaving only two unresolved issues.

Bob Sprowls: which will be discussed later.

Bob Sprowls: Among other items, the settlement authorized Golden State Water to invest approximately $573.1 million in capital infrastructure over the three-year capital cycle.

Speaker Change: This allows the company to continue to provide safe and reliable water utility service to our customers.

Speaker Change: We're also very pleased that our contracted services segment commenced management of the water and wastewater systems on our two military bases.

Speaker Change: On two new military bases in April , as we successfully completed our transitions at Naval Air Station Patuxent River, also known as Pax River, and Joint Base Cape Cod.

Robert Sprowls: For the systems at Pax River, we have a 50-year firm fixed price contract, with an initial estimated value at $349 million, which was increased to $378 million in July upon completion of a joint inventory adjustment. The contract to serve Joint Base Cape Cod is for 15 years, with a maximum firm fixed price value of $75 million through the issuance of annual task orders. We look forward to supporting both installations and consider it a privilege to leverage our broad utility expertise to make significant contributions to the military and their respective missions at these locations.

Speaker Change: For the systems at Pax River, we have a 50-year firm fixed price contract with an initial estimated value at $349 million.

Speaker Change: which was increased to $378 million in July upon completion of a joint inventory adjustment.

Speaker Change: Contract to serve Joint Base Cape Cod is for 15 years with a maximum firm fixed price value of 75 million dollars through the issuance of annual task orders.

Speaker Change: We look forward to supporting both installations and consider it a privilege to leverage our broad utility expertise to make significant contributions to the military and their respective missions at these locations.

Robert Sprowls: This was a unique quarter where recorded earnings for the second quarter were lower compared to the recorded and adjusted earnings for the second quarter of last year due to the unfavorable effects of higher operating expenses, some of which were due to timing, and higher interest costs.

Speaker Change: This was a unique quarter where recorded earnings for the second quarter were lower compared to the recorded and adjusted earnings for the second quarter of last year.

Speaker Change: as the unfavorable effects of higher operating expenses.

Speaker Change: some of which is due to timing.

Robert Sprowls: Favorable non-recurring water regulatory adjustments recorded in the second quarter of 2023 and a delay in receiving a decision in the pending electric general rate case were partially offset by an increase in third-year 2024 water rates and Higher Earnings at ASUS. 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 systems and remain focused on operating the water and electric businesses safely, efficiently, and for the long term. We are committed to the goal of spending $170 to $200 million on capital expenditures this year at our regulated utility.

Speaker Change: higher interest costs

Speaker Change: Favorable non-recurring water regulatory adjustments recorded in the second quarter of 2023.

Speaker Change: and a delay in receiving a decision in the pending electric general rate case.

Speaker Change: were partially offset by an increase in third year 2024 water rates.

Speaker Change: and Higher Earnings at ASUS.

Speaker Change: Eva will discuss the adjusted results in more detail.

Eva Tang: At the regulated utilities, we continue to invest in our infrastructure to strengthen our water and electric systems and remain focused on operating the water and electric businesses safely, efficiently, and for the long term.

Eva Tang: We are committed to the goal of spending $170 to $200 million on capital expenditures this year at our regulated utilities.

Robert Sprowls: I'm also pleased to report that last week our board approved another sizable dividend increase by increasing the company's third quarter cash dividend to $0.46 and $0.55 per share from $0.43 per share. The annualized dividend rate after this increase is $1.862 per share, which represents an 8.3% increase from the current annualized dividend rate of $1.72 per share. The significant dividend increase reflects our board's confidence in the company's ability to achieve long-term, sustainable earnings growth.

Eva Tang: I'm also pleased to report that last week our board approved another sizable dividend increase.

Eva Tang: by increasing the company's third quarter cash dividend.

Eva Tang: to $0.46 and $0.55 per share from $0.43 per share.

Eva Tang: The annualized dividend rate after this increase is $1.862 per share.

Eva Tang: which represents an 8.3% increase from the current annualized dividend rate of $1.72 per share.

Eva Tang: The significant dividend increase reflects our board's confidence in the company's ability to achieve long-term, sustainable earnings growth.

Robert Sprowls: We believe a growing dividend allows the company to attract capital for investments in its infrastructure that enable us to provide safe and reliable service to our customers and return value to our shareholders. American States Water has paid dividends every year since 1931, increasing the dividends received by shareholders each calendar year now for 70 consecutive years, which places it in an exclusive group of companies on the New York Stock Exchange that have achieved that result.

Eva Tang: We believe a growing dividend allows the company to attract capital for investments in its infrastructure that enable us to provide safe and reliable service to our customers and return value to our shareholders.

Eva Tang: American States Water has paid dividends every year since 1931, increasing the dividends received by shareholders each calendar year now for 70 consecutive years.

Eva Tang: which places it in an exclusive group of companies on the New York Stock Exchange that have achieved that result.

Eva Tang: With that, I will turn the call over to Eva to discuss earnings and liquidity. Consolidated earnings as recorded were $0.85 per share for the second quarter as compared to $1.04 per share for the second quarter of 2023. Included in the result of last year's second quarter was $0.18 per share related to the impact of the final cost of capital decision for the water sector, which made all the necessary adjustments to raise perspective. The cost of capital decision results in the reversal in June of 2023 of revenues subject to refund of $9.3 million or $0.18 per share, recorded during 2022 and the first quarter of 2023.

Eva Tang: With that, I will turn the call over to Eva to discuss earnings and liquidity.

Eva Tang: Thank you, Bob. Hello, everyone. Let me start with our second quarter results.

Eva Tang: Consolidated earnings as recorded were $0.85 per share for the second quarter as compared to $1.04 per share for the second quarter of 2023.

Eva Tang: included in the result of last year's second quarter was 18 cents per share related to the impact of the final cost of capital decision for the water segment.

Eva Tang: that made all adjustment to raise perspective.

Eva Tang: The cost of capital decisions resulted in the reversal in June of 2023 of revenues subject to refunds of $9.3 million or $0.18 per share, recorded during 2022 and the first quarter of 2023.

Eva Tang: During this item, adjusted consolidated earnings for the second quarter of 2023 were $0.86 per share as compared to recorded earnings of $0.85 per share for the second quarter, a decrease of one cent per share. For our water utility, Golden State Water, reported earnings were $0.67 per share as compared to $0.91 per share for the second quarter of 2021.

Eva Tang: During this item, Adjusted Consolidated Earnings for the second quarter of 2023 were $0.86 per share as compared to Recorded Earnings of $0.85 per share for this second quarter.

Eva Tang: a decrease of one cent per share. For our water utility, Golden State Water reported earnings were $0.67 per share as compared to $0.91 per share for the second quarter of 2023.

Eva Tang: Factoring in the same effects from the adjusted item for 2023, earnings for the second quarter of 2024 at Golden State Water were $0.67 per share, a decrease of $0.06 per share as compared to adjusted earnings of $0.73 per share for the second quarter of last year. The $0.06 per share decrease was largely due to favorable, non-recurring regulatory adjustments recorded during the second quarter of last year that did not recur this year, higher operating and interest expenses, and lower other income, with less gains generated from investment held for a retirement plan, partially offset by an increase in third-year water rates in 2024. Lastly, there was also a decrease in earnings of approximately $0.01 per share due to the dilutive effects of the issuance of equity under AWR and the market offering program.

Eva Tang: factoring in the same effects from the Justice Item for 2023.

Eva Tang: earnings for the second quarter of 2024 at Golden State Water were $0.67 per share, a decrease of $0.06 per share as compared to adjusted earnings of $0.73 per share for the second quarter of last year.

Eva Tang: The $0.06 per share decrease was largely due to favorable, non-recurring regulatory adjustments recorded during the second quarter of last year that did not recur this year.

Eva Tang: Higher operating and interest expenses and lower other income, with less gains generated from investment held for a retirement plan, partially offset by an increase in third-year water rates in 2024.

Eva Tang: Lastly, there was also a decrease in earnings of approximately $0.01 per share due to the dilutive effects from the issuance of equity under AWR and the market offering program.

Eva Tang: Our electric segment earnings were $0.01 per share for the quarter as compared to $0.03 per share for cent areas in 2023, largely resulting from not having new rates in effect as we await the pending electric TRC that will set new rates for 2023 to 2026, while also experiencing continued increases in overall operating expenses. The Bulletproof Executive 2013, When a decision is issued in the Electric GRC, new rates are expected to be retracted to January 2023, and cumulative adjustments will be recorded at that time.

Eva Tang: Our electric segment earnings were $0.01 per share for the quarter, as compared to $0.03 per share for the same period in 2023.

Eva Tang: Largely resulting from not having new rates in effect as we await the pending Electric TRC that will set new rates for 2023-2026, while also experiencing continued increases in overall operating expenses and interest costs.

Eva Tang: When a decision is issued in the Electric GRC, new rates are expected to be retracted to January 2023, and cumulative adjustments will be recorded at that time.

Eva Tang: Earnings from as U.S. increased $0.07 per share for the quarter largely from higher management fee revenues resulting from the resolution of various economic price adjustments, timing of when construction work was performed compared to the same period last year, and the commencement of operation at the two new bases, which bath works best for. However, consolidated revenue for the second quarter decreased by $2.1 million as compared to 2023. Revenues for the water segment decreased by $6.5 million, mainly due to the reversal of previously recorded estimated revenues subject to refunds as a result of final cost capture decisions of $9.3 million recorded in the second quarter of 2023 and favorable non-recurring regulatory adjustments of approximately $2 million, also recorded during the second quarter of last year, partially offset by increasing water revenues largely due to third-year rate increases for this year. Electric revenues decreased slightly as we await a decision on the electric general rate case, while there was an increase in revenues from S.U.S.

Speaker Change: Earnings from ASUS increased $0.07 per share for the quarter, largely from higher management fee revenues resulting from the resolution of various economic price adjustments.

Speaker Change: Timing of when construction work was performed compared to the same period last year And the commencement of operations at the two new bases, which Bob will discuss further.

Bob Sprowls: Consolidated the revenue for the second quarter decreased by 2.1 million dollars as compared to 2023.

Bob Sprowls: Revenues for the water segment decreased by $6.5 million, mainly due to the reversal of previously recorded estimated revenues subject to refunds.

Bob Sprowls: as a result of final cost capital decisions of $9.3 million recorded in the second quarter of 2023 and favorable non-recurring regulatory adjustments of approximately $2 million.

Bob Sprowls: also recorded during the second quarter of last year, partially offset by increasing water revenues, largely due to third-year rate increases for this year.

Bob Sprowls: Electric revenues decreased slightly as we await a decision on the electric generator case. While there was an increase in revenues from S.U.S. of 4.5 million dollars, largely due to higher management fee revenues.

Eva Tang: of $4.5 million, largely due to higher management fee revenues resulting from the resolution of various economic price adjustments and the commencement of operations at the two new bases and timing differences in performing construction work. Turning to slide 10, and looking at total operating expenses other than supply costs, consolidated expenses increased $4.4 million as compared to the second quarter of 2023.

Bob Sprowls: resulting from the resolution of various economic price adjustments and the commencement of operations at the two new bases and timing differences in performing construction work.

Bob Sprowls: Turning to slide 10 and looking at total operating expenses other than supply cost.

Bob Sprowls: Consolidated expenses increased $4.4 million as compared to the second quarter of 2023. The increase was largely attributable to an increase in other operating expenses, largely related to the commencement of operations at a new basis.

Eva Tang: The increase was largely attributable to an increase in other operating expenses, largely related to the commencement of operations at the new base, due in large part to favorable property tax adjustments recorded in the second quarter of 2023, with no such adjustments this year, and higher administrative and general expenses due mostly to higher outside services costs related to the pending water general rate case. Seeding and Other Regulatory Filing In addition, there was an increase in expenses that corresponding and offsetting increases in surcharge revenues to recover previously incurred costs, resulting in no impact on our nation.

Bob Sprowls: an increase to poverty and other taxes.

Bob Sprowls: in large part to favorable property tax adjustments recorded in the second quarter of 2023 with no such adjustments this year.

Bob Sprowls: and higher administrative and general expenses due mostly to higher outside services costs related to the pending water general rate case proceedings and other regulatory filing.

Bob Sprowls: In addition, there was an increase in expenses that have corresponding and offsetting increases in surcharges revenues to recover previously incurred costs, resulting in no impact earnings.

Eva Tang: Interest expense, net of interest income, increased by $2.1 million due to increases in average interest rates and overall borrowing levels during the quarter. Other income, net of other expenses, decreased by $200,000 largely because of lower gains recorded on investments held to fund a retirement plan during this quarter.

Bob Sprowls: Interest expense, net of interest income, increased by $2.1 million due to increases in average interest rates and overall borrowing level during the quarter.

Bob Sprowls: Other income, net of other expenses decreased by $200,000, largely because of lower gains recorded on investment held to fund a retirement plan in this quarter.

Eva Tang: Slide 11 shows the ETS bridge, comparing recorded and adjusted ECS for the second quarter of 2024 against adjusted ECS for 2025. Consolidated year-to-day earnings as recorded were $1.47 per share as compared to $1.97 per share for the same period of 2023. Included in the result of the first quarter of last year was $0.38 per share related to the impact of retroactive rates on the final decision in the Water GRD for the full year of 2022 and the reversal of $0.13 per share for revenue subject to refund recorded in 2022 as a result of the final cost of capital decision.

Bob Sprowls: Slide 11 shows the ETS bridge comparing recorded and adjusted ECS for the second quarter of 2024 against adjusted ECS for 2023.

Bob Sprowls: Consolidated year-to-day earnings as recorded were $1.47 per share as compared to $1.97 per share for the same period of 2003.

Bob Sprowls: included in the result of the first quarter of last year was 38 cents per share related to the impact of retroactive rates on the final decision in the Water GRC for the full year of 2022.

Bob Sprowls: and the reversal of $0.13 per share for revenue subject to refund recorded in 2022 as a result of the final cost of capital decision in June last year.

Eva Tang: Thank you. Including these two items mentioned above from the year-to-date 2023 earnings, recorded and adjusted, consolidated earnings for the six-month end of June 30, 2024, were $1.47 per share as compared to adjusted earnings of $1.46 per share for the same period in 2024, an increase of $0.01 per share. Turning to liquidity on slide 13. Net cash provided by operating activities was $70.5 million for the first half of 2024 as compared to $17.8 million for the same period of 2023.

Bob Sprowls: excluding these two items mentioned above from the year-to-date 2023 earnings.

Bob Sprowls: Recorded and adjusted consolidated earnings for the 6-month end of June 30, 2024 were $1.47 per share as compared to adjusted earnings of $1.46 per share for the same period in 2023.

Bob Sprowls: an increase of $0.01 per share.

Eva Tang: The increase in operating cash flow was largely a result of Golden State Water having implemented new rates in 2023 and 2024, as well as the collection of a surcharge to recover retroactively from 2022 to July 30, 2023. The increase in cash flows from operating activity also resulted from differences in the timing of billing and cash flow for construction work at military bases in the U.S. and the timing of its vendor payment for investing activities.

Bob Sprowls: Turning to liquidity on slide 13.

Bob Sprowls: Net cash provided by operating activities was $70.5 million for the first half of 2024 as compared to $17.8 million for the same period of 2023.

Bob Sprowls: The increase in operating cash flow was largely as a result of Golden State Water having implemented new rates in 2023 and 2024, as well as the collection of surcharge to recover retroactive revenues from 2022 through July 30, 2023.

Bob Sprowls: The increase in cash flows from operating activity also resulted from differences in timing of billing and cash receipts for construction work at military bases at US and the timing of its vendor payment

Eva Tang: Our regulated utility invested $105.1 million in company-funded capital projects during the first half of 2024 and will project company-funded capital expenditures at our regulated utility to be $170 to $200 million. American State Water's ad market offering program to sell common shares remains ongoing as this program allows us, at our sole discretion, to sell up to $200 million over a three-year period. During the first half of 2024, AWR raised proceeds of approximately $32 million net of issuing costs.

Bob Sprowls: For investing activities, our regulated utility invested $105.1 million on company-funded capital projects during the first half of 2024 and will project company-funded capital expenditures at our regulated utilities.

Bob Sprowls: to be $170 to $200 million this year.

Speaker Change: American State Water's ad market offering program to sell common shares remain ongoing, as this program allows us, at its sole discretion, to sell up to $200 million over a three-year period.

Speaker Change: During the first half of 2024, AWR raised proceeds of approximately $32 million net of issuing costs.

Eva Tang: In June, Golden State Water issued $65 million in unsecured private placement notes with a coupon rate of 5.5 percent, maturing in June of 2027. 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 ratings with S&P and an A-2 stable rating with Moody's Investors Service.

Speaker Change: In June , Gozo State Water issued $65 million in unsecured private placement notes with a coupon rate of 5.5 percent, maturing in June of 2027.

Speaker Change: 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 the A-Plus Stable Ratings with S&P and A-Two Stable Ratings with Moody's Investors Service.

Eva Tang: Each of these ratings has been affirmed in 2024. These are some of the highest credit ratings in the U.S. Investor-Owned Water Utility Index. With that, I'll turn the call back to Bob. Thank you, Eva.

Speaker Change: Each of these ratings has been affirmed during 2024. These are some of the highest credit ratings in the U.S. investor-owned water utility industry.

Speaker Change: With that, I'll turn the call back to Bob.

Robert Sprowls: I will start with Golden State Water's Settlement Agreement with Cal Advocates on Golden State's General Rate. As I mentioned earlier, Golden State Water and Cal Advocates filed a joint motion in July to adopt a settlement agreement between the two parties, in connection with the general rate that determines water rates for the years 2025 through 2027. If approved, the settlement resolves most of the issues related to the 2025 annual revenue requirement. The settlement authorizes Golden State Water to invest approximately $573.1 million in capital infrastructure over the three-year capital cycle.

Bob Sprowls: Thank you, Eva.

Bob Sprowls: I will start with Golden State Water's settlement agreement with Cal Advocates on Golden State's general rate case.

Bob Sprowls: As I mentioned earlier, Golden State Water and Cal Advocates filed a joint motion in July to adopt a settlement agreement between the two parties in connection with the general rate case.

Robert Sprowls: This amount, as settled, includes $17.7 million of advice letter capital investments to be filed for revenue recovery during the second and third year attrition increases when those projects are completed. In addition, the settlement agreement authorizes advice letter capital investments already under construction at the beginning of 2023. $58.2 million will be filed for revenue recovery during the second and third year attrition increases when those projects are completed. Excluding revenues for Advice Letter Capital Projects, adopted operating revenues, less water supply costs, for 2025 are projected to increase by approximately $23 million when compared to 2024. Also, there are potential additional revenue increases of approximately $20 million for each of the years 2026 and 2027, based on inflation factors without factoring in the revenues from those advice-lit capital projects.

Bob Sprowls: that determines water rates for the years 2025 through 2027.

Bob Sprowls: If approved, the settlement resolves most of the issues related to the 2025 annual revenue requirement.

Bob Sprowls: The settlement authorizes Golden State Water to invest approximately $573.1 million.

Bob Sprowls: and Capital Infrastructure over the three-year capital cycle.

Bob Sprowls: This amount has settled.

Bob Sprowls: includes $17.7 million of advice letter capital investments to be filed for revenue recovery during the second and third year attrition increases when those projects are completed.

Bob Sprowls: In addition, the settlement agreement authorizes Adviceletter Capital Investments, already under construction at the beginning of 2023, of $58.2 million,

Bob Sprowls: to be filed for revenue recovery during the second and third year attrition increases.

Bob Sprowls: when those projects are completed.

Bob Sprowls: Excluding revenues for advice letter capital projects

Bob Sprowls: adopted operating revenues, less water supply costs.

Bob Sprowls: for 2025 are projected to increase by approximately $23 million.

Bob Sprowls: when compared to 2024.

Bob Sprowls: Also, there are potential additional revenue increases of approximately $20 million.

Bob Sprowls: for each of the years 2026 and 2027 based on inflation factors.

Bob Sprowls: without factoring in the revenues from those advice litter capital projects.

Robert Sprowls: The two remaining unresolved 2025 revenue requirement issues relate to the sales forecast and supply metrics. In addition, there were four regulatory mechanisms that Golden State Water requested and are being litigated. First, a full sales and revenue decoupling mechanism and a full cost balancing account for water supply. Second, a failed reconciliation mechanism.

Bob Sprowls: i

Bob Sprowls: Two remaining unresolved 2025 revenue requirement issues relate to the sales forecast and supply mix.

Bob Sprowls: In addition, there were four regulatory mechanisms that Golden State Water requested.

Bob Sprowls: and are being litigated.

Speaker Change: First, a full sales and revenue decoupling mechanism and full cost balancing account for water supply. Thank you. Thank you.

Speaker Change: Second, a failed reconciliation mechanism.

Robert Sprowls: Third, a supply mix adjustment mechanism, and a request to modify the existing PFAS memorandum account to track carrying costs on capital investments needed to comply with the new PFAS regulations. The decision in the Water General Rate Case is scheduled to be issued by the end of 2024, with new rates to become effective on January 1st, 2025. As you may know, in 2020, the CPUC issued a decision that mandated the discontinuation of existing full revenue decoupling mechanisms, also known as the Water Revenue Adjustment Mechanism and the Modified Cost Balance.

Speaker Change: Third, a supply mix adjustment mechanism.

Speaker Change: And fourth, a request to modify the existing PFAS memorandum account to track carrying costs on capital investments needed to comply with the new PFAS regulations.

Speaker Change: A decision in the Water General Rate Case is scheduled to be issued by the end of 2024 with new rates to become effective January 1, 2025.

Speaker Change: As you may know, in 2020, the CPC issued a decision

Speaker Change: that mandated the discontinuation of existing full revenue decoupling mechanisms.

Speaker Change: also known as the Water Revenue Adjustment Mechanism and the Modified Cost Balancing Account.

Robert Sprowls: A modified cost balancing account allows Golden State Water to recover costs from the supply mix and rate changes from wholesale suppliers. In response to the procedures the CPUC followed in arriving at this decision, Golden State Water, and three other Investor-Owned Water Utilities and the California Water Association, each filed a petition in 2021. The California Supreme Court, to review the CPUC's decision-making processes that resulted in discontinuing the use of the Water Revenue Adjustment Mechanism and the Modified Cost Balance, the court issued a ruling that set aside the previously issued order by the CPUC and vacated portions of the CPUC's decision related to the discontinued use of both mechanisms.

Speaker Change: Modified cost balancing account allows Golden State Water to recover costs from the supply mix and rate changes from wholesale suppliers.

Speaker Change: In response to the procedures the CPUC followed in arriving at this decision

Speaker Change: Golden State Water, and three other investor-owned water utilities, and the California Water Association. Each filed a petition in 2021 with the California Supreme Court.

Speaker Change: To review the CPUC's decision-making processes that resulted in discontinuing the use of the Water Revenue Adjustment Mechanism and Modified Cost Balancing Account.

Speaker Change: Last month, the court issued a ruling that set aside the previously issued order by the CPUC and vacated portions of the CPUC's decision related to the discontinued use of both mechanisms.

Robert Sprowls: As mentioned, Golden State Water has continued to request the use of both mechanisms in this general rate case application, which is subject to CPUC approval. Our electric utilities 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.

Speaker Change: As mentioned, Golden State Water has continued to request the use of both mechanisms in this general rate case application, which is subject to CPUC approval.

Speaker Change: Our electric utility subsidiary filed its general rate case application on August 30th, 2022.

Speaker Change: for new rates for the period 2023 through 2026.

Robert Sprowls: $68.2 million for the four-year rate cycle and a new cost cap. We have also requested the recovery of more than $23.5 million, and capital already spent related to the wildfire mitigation. The new rates, once approved, will be retroactive to January 1st, 2023. The decision on the electric general rate case is scheduled to be issued in 2024. Turning our attention to slide 17, we present the growth in gold state waters.

Speaker Change: The application includes additional capital expenditures of $68.2 million for the four-year rate cycle and a new cost of capital.

Speaker Change: We have also requested the recovery of more than $23.5 million in capital already spent related to the wildfire mitigation plans.

Speaker Change: The new rates, once approved, will be retroactive to January 1, 2023.

Speaker Change: The decision on the electric general rate case is scheduled to be issued in 2024.

Speaker Change: Turning our attention to slide 17, we present the growth in Gold State Waters.

Robert Sprowls: Adopted Average Water Rate Base. 2018-2024. Golden State Water's authorized average rate base increased from $752.2 million in 2018, to $1,357,500,000 in 2024.

Robert Sprowls: That is a compound annual growth rate of 10.3% for this six-year period. Golden State Water anticipates a robust and sustained growth in its rate base over the next few years. Let's continue with ASUS. I'm pleased to announce that ASUS contributed earnings of $0.19 per share for the second quarter of 2024, as compared to $0.12 per share for the same period in 2023.

Speaker Change: Adopted Average Water Rate Base.

Speaker Change: from 2018 to 2024.

Speaker Change: Golden State Water's Authorized Average Rate Base increased from $752.2 million in 2018.

Speaker Change: to $1,357,500,000 in 2024.

Speaker Change: That is a compound annual growth rate of 10.3% for this six-year period.

Speaker Change: Golden State Water anticipates a robust and sustained growth in its rate base in the next few years.

Robert Sprowls: The increase was largely due to higher management fee revenue resulting from the resolution of various economic price adjustments and the Commencement of Operations at the New Basin, and an increase in construction activity from timing differences when construction work was performed in 2024 as compared to the same period in 2023. Partially offset by higher overall operating expenses, including construction expenses, and higher interest costs. For the year-to-date, June 2024, ASUS's earnings were $0.32 per share as compared to $0.27 per share for the same period in 2023.

Speaker Change: Let's continue to ASUS.

Speaker Change: I'm pleased to announce that ASUS contributed earnings of $0.19 per share for the second quarter of 2024, as compared to $0.12 per share for the same period in 2023.

Speaker Change: The increase was largely due to higher management fee revenue resulting from the resolution of various economic price adjustments.

Speaker Change: and the commencement of operations at the new bases.

Speaker Change: And an increase in construction activity from timing differences of when construction work was performed in 2024 as compared to the same period of 2023.

Speaker Change: Partially offset by higher overall operating expenses.

Speaker Change: excluding construction expenses and higher interest costs.

Speaker Change: For the year-to-date June 2024, ASUS's earnings were $0.32 per share as compared to $0.27 per share for the same period in 2023.

Robert Sprowls: 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. Now, I would like to turn our attention to dividends, which I touched on earlier. Last week, we announced an 8.3% increase in the third quarter dividends.

Speaker Change: We continue to project ASUS to contribute $0.50 to $0.54 per share this year.

Speaker Change: 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.

Speaker Change: I would like to turn our attention to dividends, which I touched on earlier.

Speaker Change: Last week, we announced an 8.3% increase in the third quarter dividend.

Robert Sprowls: This increase is consistent with our policy to achieve a compound annual growth rate of more than 7% over the long term. The strong dividend history is something that the company is proud of and is a continued asset to our shareholders. This strong track record has allowed us to achieve an 8.8% compound annual growth rate in our quarterly dividend rate to shareholders over the last five years since the third quarter of 2019.

Speaker Change: This increase is consistent with our policy to achieve a compound annual growth rate in the dividend of more than 7% over the long term.

Speaker Change: Our strong dividend history is something that the company is proud of and is a continued asset to our shareholders.

Speaker Change: This strong track record has allowed us to achieve an 8.8% compound annual growth rate in our quarterly dividend rate to shareholders over the last five years since the third quarter of 2019.

Robert Sprowls: 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. Ladies and gentlemen, at this time, we'll begin the question and answer session. To ask a question, you may press the star and then one on the touch screen telephone. To withdraw your questions, you may press star and two. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality.

Speaker Change: 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.

Speaker Change: Ladies and gentlemen, at this time, we'll begin the question and answer session. To ask a question, you may press star and then one, using a touchscreen telephone. To withdraw your questions, you may press star and two.

Speaker Change: If you are using a speakerphone, we do ask that you please pick up a handset prior to pressing the keys to ensure the best sound quality.

Operator: Once again, that is the star and then one to join the question queue, will pause momentarily to assemble the roster. And our first question today comes from Jonathan Reeder from Wells Fargo. Please go ahead with your question. Hi Bob and Eva, how are you guys today? Good. Jonathan. How about you? Yeah, not too bad at all.

Speaker Change: Once again, that is star and then one to join the question queue.

Speaker Change: We'll pause momentarily to assemble the roster.

Speaker Change: i

Speaker Change: And our first question today comes from Jonathan Reeder from Wells Fargo. Please go ahead with your question.

Jonathan Reeder: Just about the earnings, so... Almost done. Yep. Wanted to ask you, like, what do you believe the prospects are of the CPUC, you know, reauthorizing fully decoupled rates? Has there been any indication of how, you know, commissioners might be leaning following the California Supreme Court's decision? And do you expect that the California Americans rate case will be the first indication of how the CPUC is thinking? Yeah, so we don't really know how the PUC is leaning at this point.

Jonathan Reeder: Hi Bob and Eva, how are you guys today?

Speaker Change: Almost done.

Jonathan Reeder: Yep. Wanted to ask you, like, what do you believe the prospects are of the CPUC, you know, reauthorizing fully decoupled rates?

Speaker Change: Has there been any indication of how commissioners might be leaning following the California Supreme Court's decision? And do you expect that California Americans Rate case will be the first indication of how the CPUC is thinking?

Speaker Change: Yeah, so we don't really know how the PUC is leaning at this point.

Jonathan Reeder: You know, we do have Governor Newsom signing the bill to allow us to ask for full decoupling. We do have the Supreme Court case that came back in the utilities' favor. So those are two things on the plus side.

Speaker Change: You know, we do have Governor Newsom signing the bill to allow us to ask for full decoupling. We do have the Supreme Court case that came back in the utilities' favor. So those are two things on the plus side.

Robert Sprowls: But I, you know, it's still, I think, a question mark at this point; I believe the PUC can still possibly deny the use of full decoupling. I do think it will be instructive to hear where they come out on the Cal-American case. They're a year ahead of us in that case. I can just sort of speak a little bit about our case. Jonathan, but just a comment or two when the Public Advocate's Office denied our request for the full RAM in their report, almost singularly citing the 2020 and the Lyra case decisions. Our company has now filed a motion to strike that because the decision with regard to removing the ram has been made by HRSA, NHTSA, and the government to push back to the PUC. So,

Speaker Change: But I, you know, it's still I think a question mark at this point. I believe the PUC can still possibly deny the use of the PUC, the use of full decoupling.

Speaker Change: I do think it will be instructive to hear where they come out on the Cal-American case. They're a year ahead of us in that case.

Speaker Change: I can just sort of speak a little bit about our case, Jonathan, but just a comment or two.

Speaker Change: When the Public Advocate's Office denied our request for the full RAM in their report,

Speaker Change: They almost singularly cited to the 2020 Lyra case decision.

Speaker Change: The company, our company has now filed a motion to strike that because the

Speaker Change: Lyra decision with regard to removing the ram has been

Speaker Change: I guess, eliminated or...

Robert Sprowls: What we struggle with is what's in the record at this point to say that we don't deserve to get the full rate. But the PUC will. I mean, they'll follow the rules, but we're kind of in a little bit of new territory. Yeah, no, and I think the, and not surprisingly, I guess, PAO's testimony is obviously pretty consistent with CalAmericans, you know, citing that 2020 order that, you know, is no longer valid. So it does make it interesting.

Speaker Change: What we struggle with is what's in the record at this point to say that we don't deserve to get the full RAM.

Speaker Change: But the PUC will do, I mean they'll follow the rules, but it's just kind of in a little bit of new territory I would say.

Speaker Change: Yeah, no, I think the, and not surprisingly, I guess, PAO's testimony, you know, is obviously pretty consistent.

Speaker Change: with Cal Americans, you know, citing that 2020 order that, you know, is no longer valid. So it does make it interesting.

Jonathan Reeder: Switching to your other GRC, for Bexar Valley, or sorry, Bexar Valley, any update on the timing of that? I know after Q1 you mentioned how it's tough to, you know, kind of even get PAO to engage in settlement discussions, just given the small size and PAO being, you know, stretched thin with some of the larger electrics. Any kind of updates on what's going on there? Yeah, so the decision has to be, under PUC rules, a decision has to be issued in September. However, as you know, Jonathan, they do have the ability to move that date out.

Speaker Change: Switching to your other GRC, for bare value, any, or sorry, bare value.

Speaker Change: Any update on the timing of that? I know after Q1, you mentioned how it's tough to, you know, kind of even get PAO to engage in settlement discussions, just given the small size and PAO being, you know, stretched thin with some of the larger electrics. Any kind of updates on what's going on there?

Speaker Change: Yeah, so a decision has to be, under PUC rules, a decision has to be issued in September . However, as you know, Jonathan, they do...

Speaker Change: have the ability to move that date out.

Robert Sprowls: So, I don't really know, you know; we aren't getting a strong feeling that there's a proposed decision in the offing, but... I think the size of the company there relative to what the Commissioner has to deal with probably works against us in terms of getting a decision more quickly than we would like... We hope to get a decision by the end of the year, but I doubt if it'll be in the next month or Yeah. Is that kind of a similar situation with, you know, trying to engage in settlement discussions but still haven't been able to? really get PAO's attention there for similar reasons.

Speaker Change: So, I don't really know, you know, we aren't getting a strong feeling that there's a proposed decision in the offing, but...

Jonathan Reeder: I think the size of the company there relative to what the commission has to deal with probably works against us in terms of getting a

Jonathan Reeder: decision more quickly than what, you know, I'd

Jonathan Reeder: We hope to get a decision by the end of the year, but I doubt if it will be in the next month or two.

Jonathan Reeder: Yeah.

Speaker Change: Is that kind of a similar situation with, you know, trying to engage in settlement discussions still haven't been able to...

Speaker Change: really get PAO's attention there for similar reasons.

Jonathan Reeder: Yes, we've, you know, we've struggled. We've been working on this for quite some time, and... We do get the sense that we're clearly not on the top of their to-do list. Yeah, you know, whenever one of the bigger companies files something, you know, it's a we got to do. They got to deal with those things. And we understand that we understand they don't have enough people and they, The three big electric companies are so much bigger than Bear Valley Electric. It's all pretty logical, to be honest.

Speaker Change: Yes, we, you know, we, we struggled.

Speaker Change: You know, we've been working on this for quite some time, and...

Speaker Change: We do get the sense we're clearly not on the top of their to-do list. You know, just whenever one of the bigger companies files something, you know, it's, hey, we've got to do...

Speaker Change: You know, they've got to deal with those things and we understand that.

Speaker Change: The three big electrics are so much bigger than Bear Valley Electric.

Robert Sprowls: And we've been very, I would say, understanding. And, you know, they're a good group to work with. It's just we understand they get pulled in a lot of different directions. Yeah, no, I mean, it's logical.

Speaker Change: It's all pretty logical, to be honest, and we've been very, I would say, understanding.

Speaker Change: They're a good group to work with, it's just we understand they get pulled in a lot of different directions.

Jonathan Reeder: But at the same time, I mean, it does impact not just your business but your customers. And then, you know, the pancaking of rates and everything like that when a decision is finally, you know, kind of handed down. That's right. And we, you know, we make that argument with them a lot. And they they understand it and don't, You know, they don't push back on that argument. It's just, They can only do what they can do, I think, is probably the way to look at it. I am preaching to the choir here.

Speaker Change: Yeah, no, I mean, it's logical. But at the same time, I mean, it does impact not just your business, but then your customers. And then, you know, the pancaking of rates and everything like that, when a decision is finally, you know, kind of handed.

Speaker Change: That's right, Jonathan, and we make that argument with them a lot, and they understand it and don't, you know, they don't push back on that argument.

Jonathan Reeder: They can only do what they can do, I think, is probably the way to look at it.

Jonathan Reeder: So yeah, any sense of like how big of an impact the delayed, you know, Bear Valley GRC, you know, has had on your first half-decade EPS? Um, I know the recovery of the wildfire mitigation costs made this case larger than it has been in the past. Um, obviously, it depends on, like, what the outcome would be. So maybe, you know, ask a different way.

Speaker Change: Preaching to the choir here so yeah any sense of like how big of an impact like the delayed you know Bear Valley GRC you know has had on like your first half 24 EPS

Speaker Change: You know, I know the recovery of the wildfire mitigation costs made this case larger than, you know, it has been in the past. Obviously, it depends on, like, what the outcome.

Jonathan Reeder: If the case was approved as filed, like, how big of a bump would it be or would it have been to the, you know, first half 24 EPS or full year 24 EPS? Well, another thing to throw into the mix relative to prior rape cases is that just the interest costs are higher these days than they were. So we're having, you know, a cover rate base that's in the ground that isn't Um, Yeah, I we really aren't.

Speaker Change: would be. So maybe, you know, ask the different way if the case was approved as filed, like, how big of a bump would it be or would it have been to the, you know, first half 24 EPS or full year 24 EPS?

Speaker Change: Well, you know, another thing to throw into the mix relative to...

Speaker Change: for joining on this webcast. Thank you and come back later.

Speaker Change: You know, just the interest costs are higher these days than they were.

Speaker Change: And so we're having to, you know, cover a significant amount of rate base that's in the ground that isn't...

Speaker Change: We aren't getting a recovery of.

Jonathan Reeder: We really should not go public with how big the impact might be. It's just probably a bit, a little bit dangerous to do that given that the requested increase is pretty significant and there's, sort of have to wait and see what the proposed and final decisions look like in this case. Right, I mean, Bear Valley, you know, three cents lower on a year-to-date basis. And you know, had you had the relief, I would assume you would expect Bear Valley to be large, you know, last year. So Yeah, just trying to get a sense of when we hopefully do get an order by year end and we get that retroactive component, you know, how helpful that would be. I mean, it's not immaterial at this point.

Speaker Change: Yeah, we really are not, we really are not going public with how big the impact might be.

Speaker Change: It's probably a little bit dangerous to do that, given that...

Speaker Change: Requested increase is pretty significant and there's

Speaker Change: Just sort of have to wait and see what the proposed and final decisions look like in this case, I think.

Speaker Change: Right. I mean, Bear Valley, it's, you know, three cents lower on a year-to-date basis and, you know, had you had the relief, I would assume you would expect Bear Valley to be large, you know, last year or so.

Speaker Change: Just trying to get a sense, you know, when we hopefully do get an order by year end and we get that retroactive component, you know, how helpful that would be. I mean, it's not immaterial at this point, I don't think.

Jonathan Reeder: I don't, Oh no, it's very significant. It's very significant for Bear Valley Electric, I would say. And we're putting a lot of work into the mitigation plan, you know, based on funding that ourselves at this point into the final. Eva Tang, Jonathan Reeder, Well, if you're looking at the 2024 effect, of course.

Speaker Change: Oh no, it's very significant. It's very significant for Bear Valley Electric, I would say.

Speaker Change: And we're putting a lot of work on the mitigation plan, you know, based on the data.

Speaker Change: and PUC Regulation and we're funding that ourselves at this point until the final decision comes about. Yeah, and think about it, there's...

Eva Tang: Let's say we go all the way to the end of September; that's 21 months of delay, so you're going to get 21 months worth of increase that, I'm sure it'll be an increase, how large it is. We are a bit surprised that it's taking this long given that, you know, the way I think about it, and I haven't studied the big electric companies, but I believe we are one of the last companies to come in for a rate case since the wildfire mitigation activities started in a big way. So,

Speaker Change: Well, if you're looking at the 2024 effect, of course...

Speaker Change: Let's say we could go all the way to the end of September , that's 21 months delay, so you're going to get

Speaker Change: 21 months worth of

Speaker Change: increase that

Speaker Change: We think it will be an increase. I'm sure it will be an increase. It's just how large it is.

Speaker Change: We are a bit surprised that it's taking this long, given that...

Speaker Change: You know, the way I think about it, and I haven't studied the big electrics, but I believe we are one of the last companies to come in for a rate case since the wildfire mitigation program.

Speaker Change: activities started in a big way.

Robert Sprowls: One would think the commission would have dealt with it for three or four or five companies prior to us coming forward. I think that's an advantage for us in that. Early they're going to expect that that first year increase is going to be very sizable. And And we, you know, we've made the argument that, listen, it's potentially going to be higher for us than other companies because we've gone the longest without that increase.

Speaker Change: So one would think that a commission would.

Speaker Change: have dealt with this.

Speaker Change: for

Speaker Change: three or four or five companies prior to us coming forward.

Speaker Change: I think that's an advantage for us in that

Speaker Change: Early they're going to expect that that first-year increase is going to be very sizable.

Speaker Change: And we, you know, we've made the arguments that, listen, it's potentially going to be higher for us than other companies because we've gone the longest without that.

Robert Sprowls: But again, I'm The Commission will do what they're going to do, and they have... I do have great respect for all the things they have to deal with there at the commission. A big state with a lot of issues to regulate, and there are only five commissioners to deal with it. Yeah, okay. Last question for me here then. Any insight into potential new base additions at ASUS? I mean, I think the Cape Cod award, which is a 15-year variety, kind of snuck up on us.

Speaker Change: increase.

Speaker Change: But, uh...

Speaker Change: Again, I'm

Speaker Change: The Commission will do what they're going to do, and they have...

Speaker Change: I do have great respect for all the things they have to deal with there at the Commission.

Speaker Change: It's a big state with a lot of issues to regulate, and there's only five commissioners to deal with it.

Speaker Change: Yeah, yeah. Okay, last question for me here then. Any insight into potential new base additions at ASUS? I mean, I think the Cape Cod award, you know, which is a 15-year variety kind of snuck up on us.

Jonathan Reeder: Well, yes, I can talk a little bit about that. We have a sense that the Army and the Air Force have sort of taken this strategic pause to evaluate whether this, whether the typical utility privatization contract, a 50-year variety, is something they want to..., continue to do. We have a sense from meetings that have been held, public meetings, that they're both interested in moving forward on utility privatization.

Speaker Change: Well, yes, I can talk a little bit about that.

Speaker Change: You know, the Army and the Air Force had sort of taken this strategic pause to evaluate

Speaker Change: Whether the typical utility privatization contract, the 50-year variety, is something they want to...

Speaker Change: continue to do. We have a sense from meetings that have been held, public meetings, that they're both interested in moving forward on utility privatizations.

Jonathan Reeder: With that said, I don't think we have a belief that there'll be a new privatization from either the Army or the Air Force on the street this year, but we would look to next year to see some new utility privatization. As we've talked in the past, the Navy has embraced the 50-year utility privatization activities.

Speaker Change: With that said, I don't think we have a belief that there'll be a new privatization from either the

Speaker Change: Army or the Air Force on the street this year, but we would look to next year to see some new utility privatizations there.

Robert Sprowls: They are. Although it isn't going to be a lot, they are very interested in continuing that process. At this point, I don't believe there's a single, 50-Year Utility Privatization Contract. Now there is, there is talk, you know, there is potentially, like the JBCC contract. I don't think there'll be any. Personally, I don't think there'll be any contract awards in 2024 by any of the three of the big three. And of course, JBCC is the Air National Guard, so it would be sort of a fourth arm of the department. I don't know if that's helpful, John. Yeah, no, it is. So do the 15-year ones.

Speaker Change: Although it isn't going to be a bunch, they are very interested in continuing that process.

Speaker Change: At this point, I don't believe there's a single...

Speaker Change: 50-year utility privatization contract on the street.

Speaker Change: Now there is, there is talk, you know, there is potentially...

Speaker Change: these one-offs like the JBCC contract but

Speaker Change: I don't think there will be any, personally I don't think there will be any.

Speaker Change: contract awards in

Speaker Change: 2024.

Speaker Change: by any of the three of the, any of the big three. And of course, JBCC is Air National Guard, so it would be sort of a fourth arm of the Department of Defense.

Speaker Change: I don't know if that's helpful, Jonathan.

Jonathan Reeder: Do those potentially come quicker than the 50-year in terms of the lead-up and the way that they're kind of competitively bid and all that? Well, I just say the first one did not. We worked on that for years and years. But we felt like we were the pioneers, and we, and our partner, developed Now, the template is out there, and it's possible these will be done more quickly, but more quickly than they had been done, not more quickly than your standard utility private.

Jonathan Reeder: Yeah, no, it is. So do the 15-year ones.

Speaker Change: Do those potentially come quicker than the 50-year in terms of, you know, the lead up and the way that they're, you know, kind of competitively bid and all that?

Speaker Change: Well, I'll just say the first one did not.

Speaker Change: years and years. But we were, we felt like we were the pioneer and we, we and our partner developed the template for that.

Speaker Change: Now, the template is out there, and it's possible these will be done more quickly, but...

Speaker Change: More quickly than they had been done, not more quickly than your standard utility privatization.

Jonathan Reeder: One other thing, the standard utility privatization typically runs through the Vents Logistics Agency Energy. They're sort of the one group that manages the standard 50-year utility privatization. On these exchange agreements, or the one we did, it's... It's sort of based on who's doing it, and it typically doesn't roll through the DLA.

Speaker Change: One other thing, the standard utility privatization typically runs through the Vents Logistics Agency Energy. They're sort of the one group that manages...

Speaker Change: The standard 50-year utility privatization.

Speaker Change: On these exchange agreements, or the one we did, it's, you know, it's sort of...

Robert Sprowls: So there's always a little bit of. Reinventing the Wheel, I guess it will go on. So, like I said, we've worked with our partner to establish the template, and it should be quicker to do. I do agree there's an appetite for them. Okay, but it doesn't sound like anything imminent, though, so, okay. I would say that's a good assessment.

Jonathan Reeder: Yeah. All right. Thanks for the additional color.

Speaker Change: So there's always a little bit of...

Speaker Change: Reinventing the wheel, I guess it will go on. So.

Speaker Change: But, like I said, we've worked with our partner to establish the template and it should be quicker to do the second one than the first one.

Speaker Change: I completely agree there's an appetite for that.

Speaker Change: Okay, but it doesn't sound like anything imminent though, so, okay.

Jonathan Reeder: I'm looking forward to seeing you in San Diego here in a month or so. As are we, Jonathan. All right. Thank you. Once again, if you would like to ask a question, please press star and then one. To withdraw your questions, you may press star and two.

Speaker Change: Yeah, I would say that's a good assessment.

Speaker Change: Yeah. All right. Thanks for the additional color. Looking forward to seeing you in San Diego here in a month or so.

Johnson: As are we, Jonathan.

Johnson: All right, thank you. Thank you.

Speaker Change: Once again, if you would like to ask a question, please press star and then 1. To withdraw your questions, you may press star and 2.

Operator: And ladies and gentlemen, at this time, if there are no additional questions, I'd like to turn the floor back over to Bob Sprowls for any closing comments. Yes, thank you, Jamie. And I just want to thank everyone for their participation today and, let you know, we look forward to speaking with you next quarter. Thank you, everyone.

Speaker Change: And ladies and gentlemen, at this time, in showing no additional questions, I'd like to turn the floor back over to Bob Sprowls for any closing comments.

Bob Sprowls: Yes, thank you, Jamie. And I just want to thank everyone for their participation today and.

Bob Sprowls: Let you know, we look forward to speaking with you next quarter.

Robert Sprowls: And ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines. Beep Beep, [music] Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music, [music] Ladies and gentlemen, thank you for standing by. Welcome to the American States Water Company conference call discussing the company's second quarter 2024 results. The call is being recorded.

Bob Sprowls: Thank you, everyone.

Operator: If you would like to listen to a replay of this call, it will begin this afternoon at 5 p.m. Eastern time and run through Wednesday, August 14th, 2024 on the company's website, www.ASWater.com. The slides that the company will be referring to are also available on the website. All participants will be in a listen-only mode. Should you need assistance, please email a competent specialist by pressing the star key followed by

Speaker Change: And ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.

Speaker Change: ? ? ? ? ? ? ? ? ?

Speaker Change: Music Music Music Music Music Music Music Music Music

Speaker Change: www.mytrendyphone.co.uk

Speaker Change: Thanks for watching!

Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the star and then one. To withdraw your questions, you may press star and two. Your call will be limited to one hour. Presenting today from American States Water Company are Bob Sprowls, President and Chief Executive Officer, and Eva Tang, Senior Vice President of Finance and Chief Financial Officer. As a reminder, certain matters discussed during this conference call may be forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995.

Speaker Change: Ladies and gentlemen, thank you for standing by. Welcome to the American States Water Company conference call discussing the company's second quarter 2024 results.

Speaker Change: The call is being recorded. If you would like to listen to a replay of this call, it will begin this afternoon at 5 p.m. Eastern Time and run through Wednesday, August 14, 2024 on the company's website, www.ASWater.com.

Speaker Change: The slides that the company will be referring to are also available on the website.

Speaker Change: All participants will be in a listen-only mode. Should you need assistance, please email a conference specialist by pressing the star key followed by zero.

Speaker Change: Today's call will be limited to one hour.

Operator: Please review a description of the company's risks and uncertainties in our most recent Form 10-K and Form 10-Q on file with the Securities and Exchange Commission. In addition, this conference call will include a discussion of certain measures that are not prepared in accordance with generally accepted accounting principles, or GAAP, in the United States and constitute non-GAAP financial measures under SEC Rule 10b-15. 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.

Speaker Change: 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.

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

Speaker Change: 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.

Speaker Change: For more details, please refer to the press release.

Bob Sprowls: At this time, I'd like to turn the floor over to Bob Sprowls, President and Chief Executive Officer of American States Water Company.

Bob Sprowls: Thank you, Jamie.

Bob Sprowls: Welcome, everyone, and thank you for joining us today.

Bob Sprowls: I'll begin with some brief comments on the quarter.

Bob Sprowls: 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.

Speaker Change: or Cal Advocates for short, in connection with Golden State Water's general rate case that will set new water rates for the years 2025 to 2027.

Speaker Change: As a result of these efforts, on July 12th, the company and Cal advocates filed a joint motion to adopt the settlement agreement with the California Public Utilities Commission, or CPUC.

Speaker Change: Proposed settlement agreement, if approved by the CPC, resolves most of the issues related to the 2025 annual revenue requirement, leaving only two unresolved issues, which will be discussed later.

Speaker Change: Among other items, the settlement authorized Golden State Water to invest approximately $573.1 million in capital infrastructure over the three-year capital cycle.

Robert Sprowls: This allows the company to continue to provide safe and reliable water utility service to our customers. We're also very pleased that our contracted services segment, Commence Management of the Water and Wastewater Systems on our two military bases, on two new military bases in April, as we successfully completed our transition at Naval Air Station Patuxent River, also known as Pax River, and Joint Base Cape Cod. For the systems at Pax River, we have a 50-year firm fixed price contract with an initial estimated value of $349 million, which was increased to $378 million in July upon completion of a joint inventory adjustment.

Speaker Change: This allows the company to continue to provide safe and reliable water utility service to our customers.

Speaker Change: so

Speaker Change: We're also very pleased that our contracted services segment commenced management of the water and wastewater systems on our two military bases.

Speaker Change: on two new military bases in April , as we successfully completed our transitions at Naval Air Station Patuxent River, also known as Pax River, and Joint Base Cape Cod.

Speaker Change: For the systems at Pax River, we have a 50-year firm fixed price contract.

Speaker Change: with an initial estimated value at $349 million.

Speaker Change: which was increased to $378 million in July upon completion of a joint inventory adjustment.

Robert Sprowls: The contract to serve Joint Base Cape Cod is for 15 years, with a maximum firm fixed price value of $75 million, through the issuance of annual task orders. We look forward to supporting both installations and consider it a privilege to leverage our broad utility expertise to make significant contributions to the military and their respective missions at these locations. This was a unique quarter where recorded earnings for the second quarter were lower compared to the recorded and adjusted earnings for the second quarter of last year due to the unfavorable effects of higher operating expenses, some of which were due to timing, and higher interest costs.

Speaker Change: The contract to serve Joint Base Cape Cod is for 15 years, with a maximum firm fixed price value of $75 million.

Speaker Change: through the issuance of annual task orders.

Speaker Change: This was a unique quarter where recorded earnings for the second quarter were lower compared to the recorded and adjusted earnings for the second quarter of last year.

Speaker Change: as the unfavorable effects of higher operating expenses,

Speaker Change: some of which is due to timing.

Speaker Change: higher interest costs

Speaker Change: Favorable non-recurring water regulatory adjustments recorded in the second quarter of 2023.

Speaker Change: and a delay in receiving a decision in the pending electric general rate case.

Speaker Change: We're partially offset by an increase in third year 2024 water rates.

Speaker Change: and Higher Earnings at ASUS.

Speaker Change: Eva will discuss the adjusted results in more detail.

Eva Tang: We are committed to the goal of spending $170 to $200 million on capital expenditures this year at our regulated utilities.

Robert Sprowls: I'm also pleased to report that last week, our board approved another sizable dividend increase by increasing the company's third quarter cash dividend to $0.46 and $0.55 per share from $0.43 per share. The annualized dividend rate after this increase is $1.862 per share, which represents an 8.3% increase from the current annualized dividend rate of $1.72 per share. This significant dividend increase reflects our board's confidence in the company's ability to achieve long-term, sustainable earnings growth.

Eva Tang: I'm also pleased to report that last week our board approved another sizable dividend increase.

Eva Tang: by increasing the company's third quarter cash dividend.

Eva Tang: to $0.46 and $0.55, 100 cents per share, from $0.43 per share.

Eva Tang: The annualized dividend rate after this increase is $1.862 per share.

Eva Tang: which represents an 8.3% increase from the current annualized dividend rate of $1.72 per share.

Eva Tang: The significant dividend increase reflects our board's confidence in the company's ability to achieve long-term, sustainable earnings growth.

Robert Sprowls: We believe a growing dividend allows the company to attract capital for investments in its infrastructure that enable us to provide safe and reliable service to our customers and return value to our shareholders. American States Water has paid dividends every year since 1931, increasing the dividends received by shareholders each calendar year, now for 70 consecutive years, which places it in an exclusive group of companies on the New York Stock Exchange that have achieved that result. With that, I will turn the call over to Eva to discuss earnings and liquidity. Thank you, Bob. Hello everyone.

Eva Tang: American States Water has paid dividends every year since 1931, increasing the dividends received by shareholders each calendar year now for 70 consecutive years.

Eva Tang: which places it in an exclusive group of companies on the New York Stock Exchange that have achieved that result.

Eva Tang: With that, I will turn the call over to Eva to discuss earnings and liquidity.

Eva Tang: Let me start with our second quarter results. Consolidated earnings as recorded were $0.85 per share for the second quarter as compared to $1.04 per share for the second quarter of 2023. Included in the result of last year's second quarter was $0.18 per share related to the impact of the final cost of capital decision for the water sector, which made all the necessary adjustments to raise perspective. The cost of capital decision results in the reversal in June of 2023 of revenues subject to refund of $9.3 million or $0.18 per share, recorded during 2022 and the first quarter of 2023.

Eva Tang: Thank you, Bob. Hello, everyone. Let me start with our second quarter results.

Eva Tang: Consolidated earnings as recorded were $0.85 per share for the second quarter as compared to $1.04 per share for the second quarter of 2023.

Eva Tang: included in the result of last year's second quarter was 18 cents per share related to the impact of the final cost of capital decision for the water segment that made all adjustment to rate prospective.

Eva Tang: The cost of capital decision resulted in the reversal in June of 2023 of revenues subject to refunds of $9.3 million, or $0.18 per share, recorded during 2022 and the first quarter of 2023.

Eva Tang: During this item, adjusted consolidated earnings for the second quarter of 2023 were $0.86 per share as compared to recorded earnings of $0.85 per share for this second quarter, a decrease of one cent per share. For our water utility, Golden State Water, reported earnings were $0.67 per share as compared to $0.91 per share for the second quarter of 2021.

Eva Tang: During this item, Adjusted Consolidated Earnings for the second quarter of 2023 were $0.86 per share as compared to Recorded Earnings of $0.85 per share for this second quarter.

Eva Tang: a decrease of one cent per share. For our water utility, Golden State Water reported earnings were 67 cents per share as compared to 91 cents per share for the second quarter of 2023.

Eva Tang: Factoring in the same effects from the adjusted item for 2023, earnings for the second quarter of 2024 at Golden State Water were $0.67 per share, a decrease of $0.06 per share as compared to adjusted earnings of $0.73 per share for the second quarter of last year. The $0.06 per share decrease was largely due to favorable, non-recurring regulatory adjustments recorded during the second quarter of last year that did not recur this year, higher operating and interest expenses, and lower other income, with less gains generated from investment held for a retirement plan, partially offset by an increase in third-year water rates in 2024. Lastly, there was also a decrease in earnings of approximately $0.01 per share due to the dilutive effect of the issuance of equity under AWR and the market offering program.

Eva Tang: Factoring in the same effects from the adjusted item for 2023.

Eva Tang: The $0.06 per share decrease was largely due to favorable non-recurring regulatory adjustments recorded during the second quarter of last year that did not recur this year.

Eva Tang: higher operating and interest expenses, and lower other income, with less gains generated from investment held for a retirement plan, partially offset by an increase in third-year water rates in 2024.

Eva Tang: Lastly, there was also a decrease in earnings of approximately $0.01 per share due to the dilutive effects from the issuance of equity under AWR and the market offering program.

Eva Tang: Our electric segment earnings were $0.01 per share for the quarter as compared to $0.03 per share for the same period in 2023, largely resulting from not having new rates in effect as we await the pending electric TRC that will set new rates for 2023 through 2026, while also experiencing continued increases in overall operating expenses, excluding interest cost. When a decision is issued in the Electricity GRC, new rates are expected to be retracted to January 2023, and cumulative adjustments will be recorded at that time.

Eva Tang: Our electric segment earnings were $0.01 per share for the quarter, as compared to $0.03 per share for the same period in 2023.

Eva Tang: largely resulting from not having new rates in effect as we await the pending electric GRC that will set new rates for 2023 to 2026.

Eva Tang: while also experiencing continued increases in overall operating expenses and interest costs.

Eva Tang: When a decision is issued in the Electric GRC, new rates are expected to be retracted to January 2023, and cumulative adjustments will be recorded at that time.

Eva Tang: Earnings from the U.S. increased $0.07 per share for the quarter largely from higher management fee revenues resulting from the resolution of various economic price adjustments, timing of when construction work was performed compared to the same period last year, and the commencement of operations at the two new bases, which Bob will discuss further. However, consolidated revenue for the second quarter decreased by $2.1 million as compared to the same period last year.

Speaker Change: Earnings from as U.S. increased $0.07 per share for the quarter largely from higher management fee revenues resulting from the resolution of various economic price adjustments.

Speaker Change: Timing of when construction work was performed compared to the same period last year and the commencement of operation at the two new bases, which Bob will discuss further.

Bob Sprowls: Consolidated the revenue for the second quarter, decreased by $2.1 million as compared to 2023.

Eva Tang: Revenues for the water segment decreased by $6.5 million, mainly due to the reversal of previously recorded estimated revenues subject to refunds as a result of final cost of capital decisions of $9.3 million recorded in the second quarter of 2023 and favorable non-recurring regulatory adjustments of approximately $2 million, also recorded during the second quarter of last year, partially offset by increasing water revenues largely due to third-year rate increases for this year. Electric revenues decreased slightly as we await a decision on the electric general rate case, while there was an increase in revenues from S.U.S.

Speaker Change: Revenues for the water segment decreased by $6.5 million, mainly due to the reversal of previously recorded estimated revenues subject to refunds as a result of final cost of capital decisions of $9.3 million.

Bob Sprowls: recorded in the second quarter of 2023 and favorable non-recurring regulatory adjustments of approximately $2 million, also recorded during the second quarter of last year.

Bob Sprowls: partially offset by increasing water revenues largely due to third year rate increases for this year.

Bob Sprowls: Electric revenues decreased slightly as we await a decision on the electric generator.

Speaker Change: While there was an increase in revenues from S.U.S. of $4.5 million, largely due to higher management fee revenues resulting from the resolution of various economic price adjustments.

Speaker Change: and the commencement of operations at the two new bases and timing differences in performing construction work.

Speaker Change: Turning to slide 10 and looking at total operating expenses other than supply cost.

Speaker Change: Consolidated expenses increased $4.4 million, as compared to the second quarter of 2023. The increase was largely attributable to an increase in other operating expenses, largely related to the commencement of operations at a new basis.

Eva Tang: The increase was largely attributable to an increase in other operating expenses, largely related to the commencement of operations at the new base, and an increase in poverty and other taxes due, in large part, to favorable property tax adjustments recorded in the second quarter of 2023, with no such adjustments this year, and higher administrative and general expenses due mostly to higher outside services costs related to the pending water generator. Seeding and Other Regulatory Filing

Speaker Change: and increase to poverty and other taxes.

Speaker Change: do in large part to favorable property tax adjustments recorded in the second quarter of 2023 with no such adjustments this year.

Speaker Change: and Higher Administrative and General Expenses.

Speaker Change: due mostly to higher outside services costs related to the pending water generated proceedings and other regulatory fighting.

Eva Tang: In addition, there was an increase in expenses that had corresponding and offsetting increases in surcharge revenues to recover previously incurred costs, resulting in no impact to earnings. Interest expense, net of interest income, increased by $2.1 million due to increases in average interest rates and overall borrowing levels during the quarter. Other income net of other expenses decreased by $200,000 largely because of lower gains recorded on investments held to fund a retirement plan in this quarter.

Speaker Change: In addition, there was an increase in expenses that have corresponding and offsetting increases in surcharges revenues to recover previously incurred costs, resulting in no impact earnings.

Speaker Change: Interest expense, net of interest income, increased by $2.1 million due to increases in average interest rates and overall borrowing level during the quarter.

Speaker Change: Other income, net of other expenses, decreased by $200,000 largely because of lower gains recorded on investment held to fund a retirement plan in this quarter.

Eva Tang: Slide 11 shows the ETS bridge, comparing recorded and adjusted ECS for the second quarter of 2024 against adjusted ECS for 2025. Consolidated year-to-date earnings as recorded were $1.47 per share as compared to $1.97 per share for the same period of 2003. Included in the result of the first quarter of last year was $0.38 per share related to the impact of retroactive rates on the final decision in the Water GRD for the full year of 2022 and the reversal of $0.13 per share for revenue subject to refund recorded in 2022 as a result of the final cost of capital decision.

Speaker Change: Slide 11 shows the ETS bridge comparing recorded and adjusted ETS for the second quarter of 2024 against adjusted ETS for 2023.

Speaker Change: i

Speaker Change: Consolidated year-to-date earnings as recorded were $1.47 per share as compared to $1.97 per share for the spent period of 2003.

Speaker Change: Included in the result of the first quarter of last year was $0.38 per share related to the impact of retroactive rates on the final decision in the Water GRC for the full year of 2022.

Speaker Change: and the reversal of $0.13 per share for revenue subject to refund recorded in 2022 as a result of the final cost of capital decision in June last year.

Eva Tang: June 5, including these two items mentioned above from the year-to-date 2023 earnings, recorded and adjusted consolidated earnings for the six-month end of June 30, 2024, were $1.47 per share as compared to adjusted earnings of $1.46 per share for the same period in 2024, an increase of $0.01 per share. Turning to liquidity on slide 13. Net cash provided by operating activities was $70.5 million for the first half of 2024 as compared to $17.8 million for the same period of 2023.

Speaker Change: excluding these two items mentioned above from the year-to-date 2023 earnings.

Speaker Change: Recorded and adjusted consolidated earnings for the 6-month end of June 30, 2024 were $1.47 per share as compared to adjusted earnings of $1.46 per share for the same period in 2023, an increase of $0.01 per share.

Speaker Change: Turning to liquidity on slide 13.

Speaker Change: Net cash provided by operating activities was $70.5 million for the first half of 2024 as compared to $17.8 million for the same period of 2023.

Eva Tang: The increasing operating cash flow was largely a result of Goza State Water having implemented new rates in 2023 and 2024, as well as the collection of a surcharge to recover retroactive revenue, from 2022 through July 30, 2023. The increase in cash flows from operating activity also resulted from differences in the timing of billing and cash flow for construction work at military bases in the U.S. and the timing of his vendor payment for investing activities.

Speaker Change: The increase in operating cash flow was largely as a result of Golden State Water having incremented new rates in 2023 and 2024, as well as the collection of surcharge to recover retroactive revenues from 2022 through July 30, 2023.

Speaker Change: The increase in cash flows from operating activities also resulted from differences in timing of billing and cash receipts for construction work at military bases at the U.S. and the timing of its vendor payments.

Eva Tang: Our regulated utility invested $105.1 million in company-funded capital projects during the first half of 2024, and we project company-funded capital expenditures at our regulated utility to be $170 to $200 million. American State Water's ad market offering program to sell common shares remains ongoing as this program allows us, at our sole discretion, to sell up to $200 million over a three-year period. During the first half of 2024, AWR raised proceeds of approximately $32 million net of issuing costs.

Speaker Change: For investing activities, our regulated utility invested $105.1 million on company-funded capital projects during the first half of 2024, and we project company-funded capital expenditures at our regulated utilities.

Speaker Change: to be $170 to $200 million this year.

Speaker Change: i

Speaker Change: American State Water's ad market offering program to sell common shares remain ongoing as this program allows us at its sole discretion to sell up to 200 million dollars over three year period.

Speaker Change: During the first half of 2024, AWR raised proceeds of approximately $32 million net of issuing costs.

Eva Tang: In June, Golden State Water issued $65 million in unsecured private placement notes with a coupon rate of 5.5%, maturing in June of 2027. 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 ratings with S&P and an A-2 stable rating with Moody's Investors Survey.

Speaker Change: In June , Golden State Water issued $65 million in unsecured private placement notes with a coupon rate of 5.5 percent, maturing in June of 2027.

Speaker Change: 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 A-Plus Stable Ratings with S&P and A-Two Stable Ratings with Moody's Investors Service.

Speaker Change: Each of these ratings has been affirmed during 2024. These are some of the highest credit ratings in the U.S. industry.

Speaker Change: With that, I'll turn the call back to Bob.

Robert Sprowls: I will start with Golden State Water's Settlement Agreement with Cal Advocates on Golden State's General Rate. As I mentioned earlier, Golden State Water and Cal Advocates filed a joint motion in July to adopt a settlement agreement between the two parties, in connection with the General Rate that determines water rates for the years 2025 through 2027. If approved, the settlement resolves most of the issues related to the 2025 annual revenue requirement. The settlement authorizes Golden State Water to invest approximately $573.1 million.

Bob Sprowls: Thank you, Eva.

Bob Sprowls: I will start with Golden State Water's settlement agreement with Cal Advocates on Golden State's general rate case.

Bob Sprowls: As I mentioned earlier, Golden State Water and Cal Advocates filed a joint motion in July to adopt the settlement agreement between the two parties in connection with the general rate case.

Bob Sprowls: that determines water rates for the years 2025 through 2027.

Bob Sprowls: If approved, the settlement resolves most of the issues related to the 2025 annual revenue requirement.

Bob Sprowls: The settlement authorizes Golden State Water to invest approximately $573.1 million.

Bob Sprowls: and Capital Infrastructure over the three-year capital cycle.

Bob Sprowls: This amount as settled.

Bob Sprowls: includes $17.7 million of advice letter capital investments to be filed for revenue recovery during the second and third year attrition increases when those projects are completed.

Bob Sprowls: In addition, the settlement agreement authorizes Adviceletter Capital Investments, already under construction at the beginning of 2023, of $58.2 million.

Bob Sprowls: to be filed for revenue recovery during the second and third year attrition increases.

Bob Sprowls: when those projects are completed.

Bob Sprowls: Excluding revenues for advice letter capital projects.

Bob Sprowls: Adopted operating revenues, less water supply costs.

Bob Sprowls: for 2025 are projected to increase by approximately $23 million.

Bob Sprowls: when compared to 2024.

Bob Sprowls: Also, there are potential additional revenue increases of approximately $20 million.

Bob Sprowls: for each of the years 2026 and 2027.

Bob Sprowls: based on inflation factors without factoring in the revenues from those advice litter capital projects.

Bob Sprowls: The two remaining unresolved 2025 revenue requirement issues relate to the sales forecast and supply mix.

Robert Sprowls: Second, the sales reconciliation mechanism. Third, a supply mix adjustment mechanism, and a request to modify the existing PFAS memorandum account to track carrying costs on capital investments needed to comply with the new PFAS regulation. The decision in the Water General Rate Case is scheduled to be issued by the end of 2024, with new rates to become effective January 1st, 2025. As you may know, in 2020, the CPC issued a decision that mandated the discontinuation of existing full revenue decoupling mechanisms, also known as the Water Revenue Adjustment Mechanism and the Modified Cost Balance. A modified cost balancing account allows Golden State Water to recover costs from the supply mix and rate changes from wholesale suppliers.

Bob Sprowls: In addition, there were four regulatory mechanisms that Golden State Water requested.

Bob Sprowls: and are being litigated.

Speaker Change: First, a full sales and revenue decoupling mechanism and full cost balancing account for water supply. For more information visit www.fema.gov

Speaker Change: Second, the sales reconciliation mechanism.

Speaker Change: Third, a supply mix adjustment mechanism.

Speaker Change: And fourth, a request to modify the existing PFAS memorandum account to track carrying costs on capital investments needed to comply with the new PFAS regulations.

Speaker Change: A decision in the Water General Rate Case is scheduled to be issued by the end of 2024 with new rates to become effective January 1, 2025.

Speaker Change: As you may know, in 2020, the CPUC issued a decision

Speaker Change: that mandated the discontinuation of existing full revenue decoupling mechanisms, also known as the Water Revenue Adjustment Mechanism and the Modified Cost Balancing Account.

Speaker Change: A modified cost balancing account allows Golden State Water to recover costs from the supply mix and rate changes from wholesale suppliers.

Robert Sprowls: In response to the procedures the CPUC followed in arriving at this decision, Golden State Water and three other investor-owned water utilities and the California Water Association filed a petition in 2021. The California Supreme Court, to review the CPUC's decision-making processes that resulted in discontinuing the use of the water revenue adjustment mechanism and modified cost balance, the court issued a ruling that set aside the previously issued order by the CPUC and vacated portions of the CPUC's decision related to the discontinued use of both mechanisms.

Speaker Change: In response to the procedures the CPUC followed in arriving at this decision

Speaker Change: Golden State Water, and three other investor-owned water utilities and the California Water Association, each filed a petition in 2021.

Speaker Change: with the California Supreme Court.

Speaker Change: to review the CPUC's decision-making processes that resulted in discontinuing the use of the Water Revenue Adjustment Mechanism and Modified Cost Balance Account.

Robert Sprowls: As mentioned, Golden State Water has continued to request the use of both mechanisms in this general rate case application, which is subject to CPUC approval. 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.

Speaker Change: i

Speaker Change: As mentioned, Golden State Water has continued to request the use of both mechanisms in this general rate case application, which is subject to CPUC approval.

Speaker Change: Our electric utilities subsidiary filed its general rate case application on August 30th, 2022.

Speaker Change: for new rates for the period 2023 through 2026.

Speaker Change: The application includes additional capital expenditures of $68.2 million for the four-year rate cycle and a new cost of capital.

Speaker Change: We have also requested the recovery of more than $23.5 million in capital already spent related to the wildfire mitigation plans.

Speaker Change: The new rates, once approved, will be retroactive to January 1, 2023.

Speaker Change: The decision on the electric general rate case is scheduled to be issued in 2024.

Speaker Change: Turning our attention to slide 17, we present the growth in Gold State Waters.

Robert Sprowls: 2018-2024. Golden State Water's authorized average rate base increased from $752.2 million in 2018 to $1,357,500,000. In 2024, that is a compound annual growth rate of 10.3% for the six-year period. Golden State Water anticipates a robust and sustained growth in its rate base over the next few years. Let's continue to ASUS. I'm pleased to announce that ASU has contributed earnings of $0.19 per share for the second quarter of 2024, as compared to $0.12 per share for the same period in 2023.

Speaker Change: Adopted average water rate base.

Speaker Change: from 2018 to 2024.

Speaker Change: Golden State Water's Authorized Average Rate Base increased from $752.2 million in 2018.

Speaker Change: to $1,357,500,000 in 2024.

Speaker Change: That is a compound annual growth rate of 10.3% for this six-year period.

Speaker Change: Golden State Water anticipates a robust and sustained growth in its rate base in the next few years.

Speaker Change: Let's continue to ASUS.

Speaker Change: I'm pleased to announce that ASUS contributed earnings of $0.19 per share for the second quarter of 2024 as compared to $0.12 per share for the same period in 2023.

Robert Sprowls: The increase was largely due to higher management fee revenue resulting from the resolution of various economic price adjustments and the Commencement of Operations at the New Basin, and an increase in construction activity from timing differences when construction work was performed in 2024 as compared to the same period of 2023, largely offset by higher overall operating expenses, including construction expenses, and higher interest costs. For the year-to-date June 2024, ASUS's earnings were $0.32 per share as compared to $0.27 per share for the same period in 2023.

Speaker Change: The increase was largely due to higher management fee revenue resulting from the resolution of various economic price adjustments.

Speaker Change: and the commencement of operations at the new bases.

Speaker Change: And an increase in construction activity from timing differences of when construction work was performed in 2024 as compared to the same period of 2023.

Speaker Change: partially offset by higher overall operating expenses.

Speaker Change: excluding construction expenses and higher interest costs.

Speaker Change: For the year-to-date June 2024, ASUS's earnings were $0.32 per share as compared to $0.27 per share for the same period in 2023.

Robert Sprowls: 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 I touched on earlier. Last week, we announced an 8.3% increase in third-quarter dividends. This increase is consistent with our policy to achieve a compound annual growth rate of more than 7% in the dividend over the long term.

Speaker Change: We continue to project ASUS to contribute $0.50 to $0.54 per share this year.

Speaker Change: and we remain confident that we can effectively compete for new military-based contract awards.

Speaker Change: based on our proven track record of managing water and wastewater related services for military bases since 2004.

Speaker Change: I would like to turn our attention to dividends, which I touched on earlier.

Speaker Change: Last week, we announced an 8.3% increase in the third quarter dividend.

Speaker Change: This increase is consistent with our policy to achieve a compound annual growth rate in the dividend of more than 7% over the long term.

Robert Sprowls: The strong dividend history is something that the company is proud of and is a continued asset to our shareholders. This strong track record has allowed us to achieve an 8.8% compound annual growth rate in our quarterly dividend rate to shareholders over the last five years since the third quarter of 2019. 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.

Speaker Change: A strong dividend history is something that the company is proud of and is a continued asset to our shareholders.

Speaker Change: 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.

Robert Sprowls: Ladies and gentlemen, at this time, we'll begin the question and answer session. To ask a question, you may press star and then one on a touch screen telephone. To withdraw your question, you may press star and two. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality.

Speaker Change: Ladies and gentlemen, at this time we'll begin the question and answer session. To ask a question, you may press star and then one, using a touch screen telephone. To withdraw your questions, you may press star and two.

Speaker Change: If you are using a speakerphone, we do ask that you please pick up a handset prior to pressing the keys to ensure the best sound quality.

Speaker Change: Once again that is star and then one to join the question queue.

Speaker Change: We'll pause momentarily to assemble the roster.

Speaker Change: And our first question today comes from Jonathan Reeder from Wells Fargo. Please go ahead with your question.

Jonathan Reeder: Good, Jonathan. How about you? Yeah, not too bad at all.

Jonathan Reeder: Hi Bob and Eva, how are you guys today?

Robert Sprowls: Just about the earnings, so... Almost done. Yep. Wanted to ask you, like, what do you believe the prospects are of the CPUC, you know, reauthorizing fully decoupled rates? Has there been any indication of how, you know, commissioners might be leaning following the California Supreme Court's decision? And do you expect that the California Americans rate case will be the first indication of how the CPUC is thinking? Yeah, so we don't really know how the PUC is leaning at this point.

Speaker Change: Almost done.

Speaker Change: Yep. Wanted to ask you, like, what do you believe the prospects are of the CPUC, you know, reauthorizing fully decoupled rates?

Speaker Change: Has there been any indication of how commissioners might be leaning following the California Supreme Court's decision? And do you expect the California Americans rate case will be the first indication of how the CPUC is thinking?

Speaker Change #100: Yeah, so we don't really know how the PUC is leaning at this point.

Robert Sprowls: You know, we do have Governor Newsom signing the bill to allow us to ask for full decoupling. We do have the Supreme Court case that came back in the utilities' favor. So those are two things on the plus side.

Speaker Change #100: You know, we had, we do have the.

Speaker Change #100: Governor Newsom signing the bill to allow us to ask for full decoupling. We do have the Supreme Court case that came back in the utilities favor. So those are two things on the plus side.

Robert Sprowls: But I, you know, it's still, I think, a question mark at this point. I believe the PUC can still possibly deny the use of full decoupling. I do think... It will be instructive to hear where they come out on the Cal-American case. They're a year ahead of us in that case. I can just sort of speak a little bit about our case. Jonathan, but just a comment or two.

Speaker Change #100: But I, you know, it's still I think a question mark at this point. I believe the PUC can still possibly deny the use of the PUC, the use of full decoupling.

Speaker Change #100: I do think it will be instructive to hear where they come out on the Cal-American case. You know, they're a year ahead of us in that case.

Speaker Change #100: I can just sort of speak a little bit about our case, Jonathan, but just a comment or two.

Robert Sprowls: We're in the Public Advocate's Office denied our request for the full RAM in their report, almost singularly citing the 2020 and the Lyra case decisions. Our company has now filed a motion to strike that because the decision with regard to removing the RAM has been all of them were, I guess eliminated or, pushed back to the PUC. So, what we struggle with is what's in the record at this point to say that we don't deserve to get the full record.

Speaker Change #100: When the Public Advocate's Office denied our request for the full RAM in their report,

Speaker Change #100: They almost singularly cited to the 2020 Lyra case decision.

Speaker Change #100: Our company has now filed a motion to strike that because the

Speaker Change #100: Lyra decision with regard to removing the ram has been

Speaker Change #101: I guess, eliminated or...

Speaker Change #101: What we struggle with is what's in the record at this point to say that we don't deserve to get the full RAM.

Jonathan Reeder: But the PUC will do. I mean, they'll follow the rules, but we're kind of in a little bit of new territory. Yeah, no, and I think the, and not surprisingly, I guess, PAO's testimony, you know, is obviously pretty consistent with CalAmericans, you know, citing that 2020 order that, you know, is no longer valid. So, it does make it interesting. Switching to your other GRC, for bear value, or sorry, bear value. Any update on the timing of that?

Speaker Change #102: But the PUC will do, I mean, they'll follow the rules, but it just, we're kind of in a little bit of new territory, I would say.

Speaker Change #102: Yeah, no, I think the, and not surprisingly, I guess, PAO's testimony, you know, is obviously pretty consistent.

Speaker Change #102: with Cal Americans, you know, citing that 2020 order that, you know, is no longer valid. So it does make it interesting.

Speaker Change #103: Switching to your other GRC, for bare value, sorry, bare value.

Jonathan Reeder: I know after Q1, you mentioned how it's tough to, you know, kind of even get PAO to engage in settlement discussions, just given the small size and PAO being, you know, stretched thin with some of the larger electrics. Any kind of updates on what's going on there?

Speaker Change #104: Any update on the timing of that? I know after Q1, you mentioned how it's tough to, you know, kind of even get PAO to engage in settlement discussions, just given the small size and PAO being, you know, stretched thin with some of the larger electrics. Any kind of updates on what's going on there?

Robert Sprowls: Yeah, so, under PUC rules, a decision has to be issued in September. However, as you know, Jonathan, they do have the ability to move that date out. So, I don't really know, you know; we aren't getting a strong feeling that there's a proposed decision in the offing, but... I think the size of the company there relative to what the Commissioner has to deal with probably works against us in terms of getting. We hope to get a decision by the end of the year, but I doubt if it'll be in the next month or two.

Speaker Change #104: Yeah, so a decision has to be, under PUC rules, a decision has to be issued in September . However, as you know, Jonathan, they do...

Speaker Change #105: have the ability to move that date out.

Speaker Change #106: So I don't really know, you know, we aren't getting a strong feeling that there's a proposed decision in the offing, but...

Jonathan Reeder: I think the size of the company there relative to what the commission has to deal with probably works against us in terms of getting a

Jonathan Reeder: decision more quickly than what, you know,

Jonathan Reeder: We hope to get a decision by the end of the year, but I doubt if it will be in the next month or two.

Jonathan Reeder: Yeah. Is that kind of a similar situation with, you know, trying to engage in settlement discussions but still haven't been able to really get PAO's attention there for similar reasons?

Jonathan Reeder: Yeah.

Speaker Change #107: Is that kind of a similar situation with you know trying to engage in settlement discussions still haven't been able to really get PAO's attention there for similar reasons?

Robert Sprowls: Yes, we've, you know, we've struggled. We've been working on this for quite some time, and we do get the sense that we're clearly not on the top of their to-do list. Yeah, you know, whenever one of the bigger companies files something, you know, it's a we got to do. They got to deal with those things. And we understand that we understand they don't have enough people and they. The three big electric companies are so much bigger than Bear Valley Electric. It's all pretty logical, to be honest.

Speaker Change #107: Yes, we've, you know, we've struggled. You know, we've been working on this for quite some time.

Speaker Change #107: We do get the sense we're clearly not on the top of their to-do list. You know, whenever one of the bigger companies files something, you know, it's, hey, we've got to do...

Speaker Change #108: They've got to deal with those things and we understand that.

Speaker Change #108: The three big electrics are so much bigger than Bear Valley Electric.

Jonathan Reeder: And we've been very, I would say, understanding. And, you know, they're a good group to work with. It's just we understand they get pulled in a lot of different directions. Yeah, no, I mean, it's logical.

Speaker Change #108: It's all pretty logical, to be honest, and we've been very, I would say, understanding.

Speaker Change #108: And, you know, they're a good group to work with, it's just, we understand they get pulled in a lot of different directions.

Robert Sprowls: But at the same time, I mean, it does impact not just your business but your customers. And then, you know, the pancaking of rates and everything like that when a decision is finally, you know, kind of handed down. That's right. And we, you know, we make that argument with them a lot. And they, they, they understand it and don't. You know, they don't push back on that argument. It's just, they can only do what they can do, I think, is probably the way to put it. Preaching to the choir here.

Speaker Change #109: Yeah, no, I mean, it's logical. But at the same time, I mean, it does impact not just your business, but then your customers. And then, you know, the pancaking of rates and everything like that when a decision is finally, you know, kind of handed.

Speaker Change #109: That's right, Jonathan, and we make that argument with them a lot, and they understand it, and don't, you know, they don't push back on that argument, it's just...

John: They can only do what they can do, I think, is probably the way to look at it.

Jonathan Reeder: So, yeah, any sense of, like, how big of an impact, like, the delayed, you know, Bear Valley GRC, you know, has had on, like, your first half-decade EPS? I know the recovery of the wildfire mitigation costs made this case larger than it has been in the past. Obviously, it depends on what the outcome would be, so maybe ask the question another way if the case was approved as filed, like how big of a bump would it be or would it have been to the first half 24 EPS or full year 24 EPS?

Speaker Change #111: Preaching to the choir here so yeah any sense of like how big of an impact like the delayed you know Bear Valley GRC you know has had on like your first half 24 EPS

Speaker Change #112: You know, I know the recovery of the wildfire mitigation costs made this case larger than, you know, it has been in the past. Obviously, it depends on, like, what the outcome.

Speaker Change #113: would be. So maybe, you know, ask the different way if the case was approved as filed, like how big of a bump would it be or would it have been to the, you know, first half 24 EPS or full year 24 EPS?

Robert Sprowls: Well, you know, another thing to throw into the mix relative to prior rape cases is just that interest costs are higher these days than they were. So we're having a rate base that's in the ground that isn't. Um, Yeah, I we really aren't. We really don't go public with how big the impact might be. It's just probably a bit, a little bit dangerous to do that given that the requested increase is pretty significant, and there's... sort of have to wait and see what the proposed and final decisions look like in this case.

Speaker Change #114: Well, you know, another thing to throw into the mix relative to...

Speaker Change #114: prior rape cases to

Speaker Change #115: You know, just the interest costs are higher these days than they were.

Speaker Change #115: And so we're having to, you know, cover a significant amount of...

Speaker Change #116: rate base that's in the ground that isn't

Speaker Change #116: We aren't getting a recovery of.

Speaker Change #117: Yeah, we really are not, we really are not going public with how big the impact might be.

Speaker Change #118: It's probably a little bit dangerous to do that, given that...

Speaker Change #118: The requested increase is pretty significant and there's

Speaker Change #118: Just sort of have to wait and see what the proposed and final decisions look like in this case, I think.

Robert Sprowls: Right, I mean, Bear Valley, you know, three cents lower on a year-to-date basis. And you know, had you had the relief, I would assume you would expect Bear Valley to be large, you know, last year. So, Yeah, just trying to get a sense of when, when we hopefully do get an order by year end and we get that retroactive component, you know, how helpful that would be. I mean, it's not immaterial at this point.

Speaker Change #119: Right. I mean, Bear Valley, it's, you know, three cents lower on a year-to-date basis, and, you know, had you had the relief, I would assume you would expect Bear Valley to be large, you know, last year or so.

Speaker Change #120: Just trying to get a sense, you know, when we hopefully do get an order by year end and we get that retroactive component, you know, how helpful that would be. I mean, it's not immaterial at this point, I don't think.

Robert Sprowls: Oh no, it's very significant. It's very significant for Bear Valley Electric, I would say. And we're putting a lot of work into a mitigation plan, you know, based on funding that ourselves at this point. Well, if you're looking at the 2024 effect, of course, let's say we go all the way to the end of September, that's 21 months of delay, so you're going to get 21 months worth of increase that, I'm sure it'll be an increase, how large it is.

Speaker Change #121: Oh no, it's very significant. It's very significant for Bear Valley Electric, I would say.

Speaker Change #122: And we're putting a lot of work for a mitigation plan, you know, based on the data.

Speaker Change #123: PUC regulation and we're funding that ourself at this point until the final decision comes about. Yeah, and think about it, there's

Speaker Change #124: Well, if you're looking at the 2024 effect, of course...

Speaker Change #125: Let's say we could go all the way to the end of September that's 21 months delay, so you're going to get

Speaker Change #125: 21 months worth of

Speaker Change #125: increase that

Speaker Change #126: I mean, we think it will be an increase. I'm sure it will be an increase. It's just how large it is.

Robert Sprowls: We are a bit surprised that it's taking this long given that, you know, the way I think about it, and I haven't studied the big electric companies, but I believe we are one of the last companies to come in for a rate case since the wildfire mitigation activities started in a big way. One would think the commission would have dealt with it or three or four or five companies prior to us coming forward. I think that's an advantage for us in that. Early on, they're going to expect that that first year increase is going to be very sizable. And

Speaker Change #126: We are a bit surprised that it's taking this long, given that...

Speaker Change #127: You know, the way I think about it, and I haven't studied the big electrics, but I believe we are one of the last companies to come in for a rate case since the wildfire mitigation activities started in a big way.

Speaker Change #127: So, one would think the commission would...

Speaker Change #127: have dealt with this.

Speaker Change #127: or

Speaker Change #127: three or four or five companies prior to us coming forward.

Speaker Change #127: I think that's an advantage for us in that

Speaker Change #127: Surely they're going to expect that that first-year increase is going to be very sizable.

Jonathan Reeder: And we, you know, we've made the argument that, listen, it's potentially going to be higher for us than other companies because we've gone the longest without that. But again, I'm The Commission will do what they're going to do, and I do have great respect for all the things they have to deal with there at the Commission. A big state with a lot of issues to regulate, and there are only five commissioners to deal with it.

Speaker Change #127: And, you know, we've made the arguments that, listen, it's potentially going to be higher for us than other companies because we've gone the longest without that.

Speaker Change #127: increase.

Speaker Change #127: but

Speaker Change #127: Again, I'm

Speaker Change #127: The Commission will do what they're going to do, and I do have great respect for all the things they have to deal with there at the Commission. It's a big state with a lot of issues to regulate, and there's only five commissioners to deal with it.

Jonathan Reeder: Yeah, okay. Last question for me here then. Any insight into potential new base additions at ASUS? I mean, I think the Cape Cod award, which is a 15-year variety, kind of snuck up on us.

Speaker Change #128: Yeah, yeah. Okay, last question for me here then. Any insight into potential new base additions at ASUS? I mean, I think the Cape Cod award, you know, which is a 15-year variety kind of snuck up on us.

Robert Sprowls: Well, yes, I can talk a little bit about that. We have a sense that the Army and the Air Force have sort of taken this strategic pause to evaluate whether this, whether the typical utility privatization contract, a 50-year variety, is something they want to..., continue to do. We have a sense from meetings that have been held, public meetings, that they're both interested in moving forward on utility privatization.

Speaker Change #129: Well, yes, I can talk a little bit about that. We have a sense that the...

Speaker Change #129: You know, the Army and the Air Force had sort of taken this strategic pause to evaluate

Speaker Change #129: Whether the typical utility privatization contract, the 50-year variety, is something they want to...

Speaker Change #130: continue to do. We have a sense from meetings that have been held, public meetings, that they're both interested in moving forward on utility privatizations.

Robert Sprowls: With that said, I don't think we have a belief that there'll be a new privatization from either the Army or the Air Force on the street this year, but we would look to next year to see some new utility privatization. As we've talked in the past, the Navy has embraced the 50-year utility privatization activities.

Speaker Change #130: With that said, I don't think we have a belief that there'll be a new privatization from either the

Speaker Change #130: Army or the Air Force on the street this year, but we would look to next year to see some new utility privatizations there.

Robert Sprowls: They are, Although it isn't going to be a bunch, they are very interested in continuing that process. At this point, I don't believe there's a single, 50-Year Utility Privatization Contract. Now there is, there is talk, you know, there is potentially these one-offs like the JBCC contract, but, personally, I don't think there'll be any contract awards in 2024 by any of the three of the big three.

Speaker Change #130: Although it isn't going to be a bunch, they are very interested in continuing that process.

Speaker Change #130: At this point, I don't believe there's a single...

Speaker Change #130: 50-year utility privatization contract on the street.

Speaker Change #131: Thank you. Bye-bye.

Speaker Change #132: Now there is, there is talk, you know, there is potentially...

Speaker Change #132: He's one-off like the JBCC contract, but...

Speaker Change #133: I don't think there will be any, personally I don't think there will be any.

Speaker Change #133: Contract awards in

Robert Sprowls: And of course, JBCC is the Air National Guard, so it would be sort of a fourth arm of the department. I don't know if that's helpful, John. Yeah, no, it is. So do the 15-year ones.

Speaker Change #133: 2024.

Speaker Change #133: by any of the three of the, any of the big three. And of course, JBCC is Air National Guard, so it would be sort of a fourth arm of the Department of Defense.

Speaker Change #133: I don't know if that's helpful, Jonathan.

Jonathan Reeder: Do those potentially come quicker than the 50-year in terms of the lead-up and the way that they're kind of competitively bid and all that? Well, I will just say that the first one did not. We worked on that for years and years. But we were, we felt like we were the pioneers, and we, we and our partner developed, looked at the target first. Now, the template is out there, and it's possible these will be done more quickly, but more quickly than they have been done, not more quickly than your standard utility private. One other thing, the standard utility privatization typically runs through events, logistics, agency, and energy. They're sort of the one group that manages. The standard 50-year utility private

Jonathan Reeder: Yeah, no, it is. So do the 15-year ones.

Speaker Change #134: Do those potentially come quicker than the 50-year in terms of, you know, the lead up and the way that they're, you know, kind of competitively bid and all that?

Speaker Change #135: Well, I'll just say the first one did not.

Speaker Change #136: years and years. But we were, we felt like we were the pioneer and we, we and our partner developed the template for that.

Speaker Change #136: Now, the template is out there, and it's possible these will be done more quickly, but...

Speaker Change #137: More quickly than they had been done, not more quickly than your standard utility privatization.

Speaker Change #137: One other thing, the standard utility privatization typically runs through the Vents Logistics Agency Energy. They're sort of the one group that manages...

Robert Sprowls: On these exchange agreements, or the one we did, it's... It's sort of based on who's doing it, and it typically doesn't roll through the DLA. So there's always a little bit of. Reinventing the wheel, I guess it will go on. So, like I said, we've worked with our partner to establish the template, and it should be quicker to do. To a degree, there is an appetite for them.

Speaker Change #137: The standard 50-year utility privatization.

Speaker Change #137: On these exchange agreements, or the one we did, it's, you know, it's sort of...

Speaker Change #137: based on who's doing it, and it typically doesn't roll through the DLAE.

Speaker Change #137: So there's always a little bit of...

Speaker Change #137: Reinventing the wheel, I guess it will go on.

Speaker Change #137: But, like I said, we've worked with our partner to establish the template and it should be quicker to do the second one than the first one.

Jonathan Reeder: Okay, but it doesn't sound like anything imminent, so, okay. I would say that's a good assessment. Yeah. All right. Thanks for the additional color. Looking forward to seeing you in San Diego here in a month or so.

Speaker Change #137: I do agree there's an appetite for that.

Speaker Change #138: okay it doesn't sound like anything given it though so okay

Speaker Change #139: Yeah, I would say that's a good assessment.

Speaker Change #140: Yeah. All right. Thanks for the additional color. Looking forward to seeing you in San Diego here in a month or so.

Robert Sprowls: As are we, Jonathan. All right. Thank you. Thank you. Once again, if you would like to ask a question, please press star and then one. To withdraw your question, you may press star and two.

Johnson: As are we, Jonathan.

Johnson: All right, thank you. Thank you.

Speaker Change #141: Once again, if you would like to ask a question, please press star and then 1. To withdraw your questions, you may press star and 2.

Robert Sprowls: And ladies and gentlemen, at this time, if there are no additional questions, I'd like to turn the floor back over to Bob Sprowls for any closing comments. Yes, thank you, Jamie. And I just want to thank everyone for their participation today and, let you know, we look forward to speaking with you next quarter. Thank you, everyone. And ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We do thank you for joining us. You may now disconnect your lines.

Speaker Change #142: And ladies and gentlemen, at this time, in showing no additional questions, I'd like to turn the floor back over to Bob Sprowls for any closing comments.

Bob Sprowls: Yes, thank you, Jamie. And I just want to thank everyone for their participation today and...

Bob Sprowls: Let you know, we look forward to speaking with you next quarter.

Speaker Change #143: Thank you, everyone.

Speaker Change #144: And ladies and gentlemen with that we'll conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.

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