The paragraph introduces the American Water's Third Quarter 2024 Earnings Conference Call, led by Aaron Musgrave, Vice President of Investor Relations. It discusses the conference's format, including prepared remarks followed by a Q&A session, and highlights that forward-looking statements about future performance will be made. These statements involve risks and uncertainties, and further details are available in the company's recent earnings release and Form 10-Q. The presentation will also include comments from President John Griffith on third-quarter results, year-to-date performance, 2025 EPS guidance, and longer-term targets.

In the paragraph, American Water executives outline their agenda for discussing the company's financial performance and future plans. David Bowler, the CFO, will review financial results, rate case updates, and long-term financial planning. Cheryl Norton, the COO, will address the new capital investment plan and its impact, including compliance with EPA regulations. The CEO, Susan Hardwick, will conclude with the company's investment strategy, followed by a Q&A session. John Griffith, the President, highlights the strong financial results for the third quarter of 2024, emphasizing earnings growth compared to the previous year. He praises David Bowler's and Cheryl Norton's roles in managing financial and business development activities.

The company affirms its 2024 EPS guidance of $5.25 to $5.30 per share, attributing part of this to additional interest income from an amended HOS note. A recent $230 million acquisition in Pennsylvania has added 15,000 new customers. The company has also initiated its 2025 earnings guidance of $5.65 to $5.75 per share, representing an 8% growth from 2024. It reaffirms long-term targets of 7% to 9% EPS and dividend growth rates, driven by a strategy focused on rate base growth, regulatory and capital execution, and operational excellence, including organic revenue growth opportunities and a regulated acquisition strategy.

The paragraph discusses American Water's strong position as a leading utility in terms of affordability and sustainability, which drives its competitive and sustainable shareholder returns. The company expects consistent EPS growth of 7% to 9% through 2029 and emphasizes its commitment to solving customer challenges, such as addressing PFAS and aging infrastructure. American Water's unique scale, geographic diversity, and expertise position it for strong earnings growth. A recent cybersecurity incident was noted, but it did not impact facilities or the company's financial condition. David Bowler, the new CFO, expresses enthusiasm for his role and looks forward to discussing financial results and plans.

The paragraph provides detailed year-to-date financial results for a company, highlighting increases in consolidated earnings per share. The rise in earnings is attributed to weather impacts, growth in general revenues, and changes in operating costs. Expenses such as O&M costs, production costs, general taxes, depreciation, and long-term financing costs have all increased due to factors like employee-related costs, capital investments, and recent financial activities such as note issuances. Additionally, there has been an increase in interest income from an amendment related to the sale of Homeowner Services. The company emphasizes its commitment to transparent reporting of growth metrics.

The paragraph discusses recent regulatory activities and rate cases in several states for a company. In New Jersey, an $80 million annual revenue settlement was approved with an allowed return on equity of 9.6% and a 55% equity layer. Missouri's rate case proposal for a full future test year was declined, but investments through May 2025 are recognized. In Illinois, a proposed decision suggests a 9.84% return on equity, with an expected final decision by December 17 and new rates by January 2025. In Virginia, a black box settlement resulted in a $15 million annual revenue increase. Overall, the paragraph highlights ongoing efforts and regulatory outcomes in different jurisdictions.

The settlement agreement includes a return on equity of 9.7% and an equity component of 45.67% in the capital structure, pending commission approval. A final decision on rates in California is expected on December 5, with new rates retroactive to January 1, 2024. A partial settlement was reached in November 2023 with the CPUC's Public Advocates Office about the revenue requirement, but rate design and the continuation of a revenue stabilization mechanism were not addressed. Decoupling remains important for California's conservation efforts. The company plans to review the order to decide on further actions related to decoupling. Looking towards 2025, growth is anticipated from returns on investments and acquisitions, with a new EPS guidance range of $5.65 to $5.75 per share. Additionally, careful management of operating costs will be vital for the growth strategy.

The paragraph discusses the company's expectations for operational and maintenance cost increases in 2025 due to factors like higher production costs and recent acquisitions. It emphasizes the importance of operating efficiencies to maintain customer affordability, aligning with regulatory and investor interests. Increased general taxes, depreciation, and long-term financing are linked to ongoing capital investments. The Military Services group (MSG) contributes to earnings growth, with its successful work leading to more government funding for projects. The company's debt-to-capital ratio and expected dividend payout ratio are within target ranges, affirming a strong financial position. The maturity of their $2.75 billion revolving credit facility has been extended to 2029, ensuring access to capital.

The paragraph discusses the company's strong liquidity, supported by diversified banking relationships, a regulated business model, and favorable credit ratings. It highlights a strategic approach to debt financing to manage cash flow and interest rate risk, aiding customer affordability. The updated five-year financing plan for 2025-2029 incorporates $2.5 billion in external equity issuances, an increase of $1.5 billion, contingent on market conditions. Equity financing will align with investment needs and financial stability. Plans for 2025 include $1.5-$2 billion in long-term debt financing, with no equity financing anticipated, offering flexibility to adapt to market changes.

Cheryl Norton discusses American Water's long-term capital investment plan, highlighting that the company plans to invest $3.3 billion in 2025 and a total of $17 to $18 billion from 2025 to 2029, which is $1 billion more than their previous five-year plan. This increase is due to the new compliance requirements of the EPA's lead and copper rule improvements (LCRI), finalized in October, which also mandates lead replacement by the end of 2037. The company is committed to meeting these standards to ensure water safety and will spend about $1 billion over five years on LCRI compliance, doubling their current annual spending, and another $1 billion on the EPA's PFAS rule. Overall, American Water anticipates investing $40 to $42 billion over the next decade in regulated systems and acquisitions, $5 billion more than the previous 10-year plan.

The paragraph outlines the company's significant investment plan focused on infrastructure renewal and replacement to ensure reliable and safe water service. The company aims to meet its $3.3 billion capital deployment goal, which supports customer service and affordability by driving consistent service reliability and water quality. Most of the capital is dedicated to replacing aging infrastructure, with additional funds allocated for system resilience and environmental compliance. Examples include addressing sewer overflow issues in Sheridan, Indiana, and constructing a large water storage tank in Hopewell, Virginia. Timely capital recovery is highlighted as crucial for minimizing customer rate increases and achieving consistent earnings growth.

The paragraph discusses American Water's ongoing capital investments in infrastructure to support the long-term growth of its regulated rate base and earnings, emphasizing the low-risk nature and high visibility of its plan. As the 50th anniversary of the SAFE Drinking Water Act approaches, the company acknowledges the need for continued work in improving drinking water issues. The company is committed to balancing necessary investments with customer affordability, keeping average residential water bills below 1% of median household income. In Pennsylvania, American Water expanded its affordability programs, increasing eligibility for discounted services and grants to assist more customers with low income.

Pennsylvania American Water has committed to increasing its shareholder contribution to the H2O Help to Others grant program by $3.5 million over five years following its acquisition of BASA. The company has closed six acquisitions totaling $349 million, adding almost 50,000 customers, including a major $230 million acquisition of the Butler Area Sewer Authority Wastewater System in Pennsylvania. The company is optimistic about further growth in Pennsylvania and other states, with 43,400 customer connections valued at $169 million under agreement. Notably, they received regulatory approval for acquisitions in Indiana and Maryland. Enhanced business development efforts have led to a growing acquisition pipeline, now encompassing over 1.5 million connections, up from 1.3 million.

Susan Hardwick concludes the discussion by highlighting American Water's strong execution track record and competitive advantages. Despite the presence of other reputable utility companies, she emphasizes American Water's unique combination of qualities that make it a compelling investment. These include top-tier performance in earnings and dividend growth, diverse geographic and regulatory presence that mitigates risk, and a low-risk capital plan focused on essential infrastructure renewal. The company's mission to provide safe, reliable, and affordable services aligns with delivering value to both customers and investors.

The excerpt is from a discussion involving American Water, which has been in operation since 1886. The company emphasizes its commitment to continue its work with urgency due to significant needs and to deliver strong returns for investors. The leadership acknowledges the role of a 6,500-member team and investor support in facilitating ongoing efforts. During a Q&A session, Richard Sunderland from JPMorgan asks about the $1.5 billion equity increase compared to the $1 billion increase in capital expenditures. Susan Hardwick explains that the equity is higher due to a growing investment plan and their focus on maintaining a strong balance sheet.

The paragraph discusses a financial plan involving a $1 billion increase in a five-year investment plan, explaining that even without this increase, they would still raise equity later in the plan period due to an 8% to 9% rate base growth. The company generates substantial internal cash flow and raises debt, but it consistently raises equity to fund a robust capital plan. Richard Sunderland inquires about the differences between last year's and this year's cash flow guidance, noting a $2 billion uptick last year compared to a $1 billion increase this year, and asks for further details on the assumptions and expectations underlying this change.

In the dialogue, David Bowler mentions that the company expects to become a cash taxpayer starting in 2025 due to the alternative minimum tax and enhanced capital investment efforts that generate more internal cash flow. Richard Sunderland appreciates the commentary, and Durgesh Chopra from Evercore ISI congratulates David Bowler and seeks insights on the company's strategy in Pennsylvania, specifically regarding capital expenditure (CapEx) and rate case filings. Susan Hardwick responds by stating that their capital planning is risk-based, focusing on areas with the greatest need, and confirms the intention to continue significant investments in Pennsylvania, with no changes from previous discussions.

In the paragraph, multiple discussions are taking place during a financial call, focusing on different financial and operational strategies. Susan highlights the company's plans for an 8% growth expectation in 2025 despite receiving a lower-than-expected Return on Equity (ROE) in a rate case. Durgesh Chopra asks about cash tax payments related to the Alternative Minimum Tax (AMT), to which David Bowler responds, estimating annual cash taxes around $100 million. Angie Storozynski inquires about the company’s approach to managing rising electricity costs. David Bowler explains the company’s strategy to mitigate these risks through long-term contracts extending to 2029, ensuring they are less impacted by potential price inflation. Angie then prompts a topic change towards growth rate extensions.

In the paragraph, David Bowler and John Griffith discuss how the company plans to address the loss of $0.20 in earnings beyond 2026 due to the cessation of interest income from a financial note. John Griffith explains that since 2021, they have accelerated their capital plan, allowing for more equity injection into operating companies, which generates additional regulated earnings. This strategy aims to replace the lost interest income. He notes that the original $720 million note, plus an earn-out payment, amounts to $795 million, which avoids the need for incremental capital issuance, like equity or debt. By doing this, they offset much of the lost interest income, effectively only needing to fill a remaining $0.03 earnings gap.

The paragraph discusses the management of financial strategies related to interest income and debt, including the possibility of a borrower calling a note earlier than its final maturity date of December 2026. It also addresses the strategy behind filing rate cases, particularly in Pennsylvania, noting that the frequency is driven by the need to make capital investments and recover those costs in a timely manner. The company aims to achieve its allowed Return on Equity (ROE) to drive earnings growth and emphasizes the importance of aligning investment with rate case filings to manage growth effectively.

The paragraph discusses American Water's strategy for recovering investments. They have mechanisms to recover 75% of investments more quickly through periodic adjustments, but the remaining investment still requires a traditional regulatory process. The need for timely recovery and the size of investments influence the cycle of rate cases. This strategy is based on investment needs rather than merely achieving a rate of return.

This summary was generated with AI and may contain some inaccuracies.