Essential Utilities, Inc. Q3 FY2024 earnings call

• Financial Performance: Posted $0.25 earnings per share for the quarter, which was above expectations. • Capital Investment: Invested $932.5 million through the end of the third quarter, with an expected total investment of $1.3 billion to $1.4 billion for the year to improve water, wastewater, and natural gas infrastructure. • Pennsylvania Rate Cases: - PNG rate case: Unanimously approved by the Pennsylvania PUC with an annualized revenue increase of $93 million and a weather normalization mechanism; however, the Office of the Consumer Advocate filed a petition for review. - Aqua Pennsylvania water rate case: Filed briefs on October 28, with a settlement agreement providing a total annualized revenue increase of $73 million for water and wastewater operations, with the East Whiteland acquisition excluded and to be litigated separately. • Guidance: Reinstated multiyear EPS guidance of 5% to 7% growth through 2027, excluding earnings from DELCORA. • Hurricane Helene Impact: In North Carolina, 90 systems were impacted, but 84 of them were back up within five days after the storm, with teams quickly responding, communicating with customers, and using drones for damage assessment.

In the third quarter of 2024, revenues totaled $435.3 million, marking a 6% increase compared to $411.3 million in the third quarter of 2023. The regulated water segment saw revenues increase nearly 8%, driven by higher volumes in some regions despite lower consumption in others. The regulated natural gas segment was impacted by warmer - than - normal weather leading to lower gas sales, but was offset by other factors such as rates, surcharges, and acquisitions in the water business. Year - to - date operating and maintenance (O&M) expenses are only up about 1% over the previous year, demonstrating operational efficiency.

• EPS Growth: Reinstated multiyear EPS guidance of 5% to 7% compound annual growth rate through 2027, excluding earnings from DELCORA. • 2025 EPS: Expect EPS to be between $2.07 and $2.11. • Long - term Capital Investment: Plan to make regulated infrastructure investment of about $7.8 billion over the next five years through 2029. • 2025 Capital Spending: Expected to be approximately $1.4 billion to $1.5 billion. • Segment Growth: - Regulated water segment rate - based growth: Compound annual growth rate of about 6% through 2029. - Regulated natural gas segment rate base growth: Compound annual growth rate of approximately 11% through 2029. - Combined rate - based growth: Over 8% compound annual growth rate through 2029.

• Pennsylvania Gas Rate Case Appeal: The Office of the Consumer Advocate appealed the PUC's order in the PNG case, with potential remand to the PUC; the outcome is uncertain, but the company is confident in the order. • PFAS Remediation: Uncertainties exist regarding the implementation timeline and federal aid for PFAS remediation, but the company intends to continue compliance and recovery through various means. • Acquisition Lull: There has been a temporary slowdown in acquisitions in Pennsylvania due to regulatory and valuation considerations, but it is expected to recover.

Q: Julien Dumoulin Smith asked about equity financing expectations and Moody's reaction.

A: Dan Schuller stated that they are staying close to the rating agencies, have already raised some equity on the ATM, and believe Moody's feels good about the plan. Christopher Franklin added that they feel confident Moody's is positive about their plan.

Q: Durgesh Chopra inquired about EPS growth and Moody's metrics.

A: Daniel Schuller explained that the EPS guidance relates to the midpoint of the 2024 guidance range and that they expect FFOs to debt to be above 12% in 2025, with the negative outlook from Moody's likely to be resolved in 2026.

Q: Travis Miller asked about PFAS and acquisitions.

A: Christopher Franklin said that PFAS limits are likely to remain at around four parts per trillion, and acquisitions in Pennsylvania are temporarily slowed due to regulatory and valuation factors but are expected to recover.

Q: Greg Cordell asked about the Peoples Gas appeal.

A: Christopher Franklin discussed the appeal process, noting that there are moving parts such as the upcoming Attorney General election in Pennsylvania, and the high probability of the PUC potentially supporting the existing order.

Q: Jonathan Reeder asked about water rate increase timing, 2025 EPS headwinds, CapEx breakdown, and drought concern.

A: Daniel Schuller said the water rate increase from the settlement will be effective in February 2025; 2025 EPS headwinds include increased purchased power costs and PFAS - related O&M costs; the $7.8 billion CapEx is slightly biased toward water; and the drought in Pennsylvania is not a major concern as it is not a high consumption period and there is no immediate financial impact.