Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- American States Water Co (AWR, Financial) reached a settlement in principle with the Public Advocates Office of the California Public Utilities Commission for new water rates for 2025-2027.
- The settlement authorizes Golden State Water to invest approximately $573.1 million in capital infrastructure over the three-year cycle.
- Commencement of management of water and wastewater systems at two new military bases, Pax River and Joint Base Cape Cod, with significant contract values.
- Board approved an 8.3% increase in the third quarter cash dividend, reflecting confidence in long-term sustainable earnings growth.
- ASUS segment showed increased earnings due to higher management fee revenues and commencement of operations at new bases.
Negative Points
- Recorded earnings for the second quarter were lower compared to the same period last year due to higher operating expenses and interest costs.
- Delay in receiving a decision in the pending electric general rate case, impacting earnings.
- Higher administrative and general expenses due to regulatory filings and pending water general rate case proceedings.
- Increased interest expense due to higher average interest rates and borrowing levels.
- Challenges in engaging with the Public Advocates Office for settlement discussions in the Bear Valley Electric general rate case, causing delays.
Q & A Highlights
Q: What are the prospects of the CPUC reauthorizing fully decoupled rates following the California Supreme Court's decision?
A: We don't have a clear indication of how the CPUC is leaning. Governor Newsom signed a bill allowing us to ask for full decoupling, and the Supreme Court decision was in our favor. However, the CPUC could still deny the use of full decoupling. The outcome of California American's rate case, which is ahead of ours, might provide some insights.
Q: Any updates on the timing of the Bear Valley GRC decision?
A: Under PUC rules, a decision must be issued by September, but this date can be extended. We hope to get a decision by the end of the year, but it might not happen in the next month or two. The size of Bear Valley Electric relative to other companies likely affects the timing.
Q: How significant is the impact of the delayed Bear Valley GRC on your first half 2024 EPS?
A: The delay is significant, especially given higher interest costs and the need to cover rate base investments without recovery. We haven't disclosed the exact impact, but the requested increase is substantial. The delay means we could see 21 months' worth of increases once approved.
Q: Any insights into potential new base additions for ASUS?
A: The Army and Air Force are evaluating whether to continue with 50-year utility privatization contracts. We don't expect new privatizations from them this year but anticipate some next year. The Navy remains interested in continuing the process. Currently, no 50-year contracts are on the street, but there might be one-off opportunities like the JBCC contract.
Q: Do 15-year contracts come quicker than 50-year ones?
A: The first 15-year contract took years to finalize, but now that a template is established, future contracts might be quicker. However, these contracts often don't go through the Defense Logistics Agency Energy, leading to some reinvention of the process each time.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
