AMERICAN STATES WATER CO Q2 FY2024 earnings call

Management Statement and Operational Highlights

• Golden State Water reached a settlement in principle with CAL Advocates for its general rate case, authorizing ~$573.1 million in capital infrastructure over 3 years. Pending CPUC approval, with decision expected by end 2024 and new rates effective Jan 2025.
• Contracted services segment started managing water/wastewater systems at new military bases: 50-year contract for Naval Air Station Patuxent River ($378M) and 15-year contract for Joint Base Cape Cod (up to $75M).
• Board approved an 8.3% dividend increase, annualizing to $1.86 per share.
• Regulated utilities aim to spend $170 million to $200 million on capital expenditures this year.

Segment Performance

• Water Utility (Golden State Water): Q2 2024 reported earnings were $0.67 per share, down from $0.91 per share in Q2 2023. Revenue decreased $6.5 million mainly due to reversal of estimated revenues subject to refunds ($9.3 million) and favorable non-recurring regulatory adjustments ($2 million), partially offset by third-year water rate increases.
• Electric Segment: Q2 2024 earnings were $0.01 per share, down from $0.03 per share in Q2 2023, due to awaiting electric rate case decision and higher operating expenses and interest costs.
• Contracted Services (ASUS): Q2 2024 earnings increased $0.07 per share, driven by higher management fees, commencement of operations at new military bases, and construction timing differences. Year-to-date earnings were $0.32 per share, with a projection of $0.50-$0.54 per share for 2024.

Guidance

• Golden State Water's rate case decision expected by end 2024, with new rates effective Jan 2025.
• ASUS projected to contribute $0.50 to $0.54 per share in 2024.
• Electric rate case decision pending, with new rates expected to be retroactive to Jan 2023 once decided.

Risks

• Uncertainty in CPUC's decision on fully decoupled rates in Golden State Water's rate case.
• Delayed decision in Bear Valley Electric's general rate case impacting earnings.
• Higher interest costs affecting rate base recovery in regulated utilities.

Question and Answer

Q: What are the prospects of the CPUC reauthorizing fully decoupled rates?

A: Uncertain at this point, but the Cal American case will be instructive as it is a year ahead. The PUC could still deny full decoupling, but the Supreme Court's favorable ruling and Governor Newsom's bill supporting decoupling are positive factors.

Q: Update on the timing of Bear Valley Electric's general rate case?

A: Decision is due by end 2024, but it is likely to take longer. The case is complicated by higher interest costs and wildfire mitigation costs, and the commission has many other cases to handle.

Q: Potential new base additions at ASUS?

A: No expected contract awards in 2024 by the big three military branches. 15-year contracts like Joint Base Cape Cod may be quicker but still not immediate. The template for 15-year contracts is established, but awards are not anticipated in 2024.