AMERICAN STATES WATER CO Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Quarterly Earnings: Consolidated earnings per share were $0.95 for the third quarter of 2024, compared to $0.85 in the same period of 2023. The water segment saw an increase due to a third-year rate increase and investment gains, while the electric segment was impacted by a pending rate decision.
• Infrastructure Investment: Regulated utilities invested $172.5 million year-to-date, with a projected $210 million to $230 million in capital expenditures for 2024.
• Settlements: Golden State Water and Cal Advocates settled rate cases. Golden State Water is authorized to invest $573.1 million in capital infrastructure over three years, and Bear Valley Electric's settlement authorizes $75.6 million in capital investment over 2023-2026.
• ASUS Awards: ASUS received $54 million in new capital upgrade projects YTD, up from $25.2 million in 2023, with confidence in competing for future military base contracts.
• Dividends: Quarterly dividend rate has a CAGR of 8.8% over 5 years, on pace for a 10-year CAGR of 8%.

Segment Performance

• Water Segment: Third quarter earnings per share were $0.84, compared to $0.72 in the third quarter of 2023. Revenue increased by $7.8 million due to a third-year water rate increase and higher authorized rate of return on rate base.
• Electric Segment: Earnings were $0.02 per share for the quarter, compared to $0.04 per share in 2023. Revenues remained consistent as the company awaited a decision on the electric rate case.
• ASUS: Earnings per share for the third quarter were consistent with 2023, with a slight decrease due to rounding. Year-to-date earnings were $0.44 per share, compared to $0.38 per share in the same period of 2023. ASUS is projected to contribute $0.54 to $0.57 per share in 2024 and $0.59 to $0.63 per share in 2025, with $54 million in new capital upgrade awards received YTD.

Guidance

• ASUS: Projected to contribute $0.54 to $0.57 per share in 2024 and $0.59 to $0.63 per share in 2025.
• Regulatory Settlements: Golden State Water's settlement projects increased revenues, and Bear Valley Electric's settlement awaits CPUC approval with retroactive rates possible for 2023 onwards.

Risks

• Regulatory Uncertainties: Pending decisions on electric rate cases and unresolved issues in water rate settlements could affect earnings.
• Interest Rate Fluctuations: Increase in interest expense due to higher average interest rates and borrowing levels.
• Construction Delays: Delays in project completions or issues with advice letter capital investments could impact revenue recovery.

Question and Answer

Q: How would year-to-date EPS have been affected if Bear Valley Electric's proposed decision was approved at the start of 2024, excluding retroactive 2023?

A: The estimated combined impact for 2023 and 2024 related to the settlement agreement is $0.05 to $0.07 per share.

Q: What drove the increase in ASUS's capital work authorized?

A: The increase is due to government funding, new bases contributing, and strong relationships with the government, though it's too early to determine if it's a new normal.

Q: What is the outlook for ASUS construction expense in 2025 given the higher awards?

A: Construction expense is managed with renewal and replacement work, and the $54 million award has a long runway, allowing better planning, but no huge jump is expected immediately.