Release Date: October 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SJW Group (SJW, Financial) reported a 10% increase in revenue for Q3 2024, driven by rate increases and higher pass-through water costs.
- Net income increased by 7% compared to the same quarter in 2023, reflecting strong financial performance.
- The company has invested $252 million year-to-date in water and wastewater utility infrastructure, advancing its five-year plan of $1.6 billion.
- SJW Group (SJW) received recognition as one of America's Greenest Companies 2025 by Newsweek, highlighting its commitment to sustainability.
- The company secured an $8 million grant through the Grid Resilience and Innovation Partnerships Program to enhance operational resilience and reduce energy costs.
Negative Points
- Higher water production expenses increased by 16% compared to 2023, impacting overall costs.
- The company faces challenges in meeting new water quality standards and replacing aging infrastructure while maintaining affordability.
- Drought conditions in Texas have led to lower water usage, affecting revenue from that region.
- SJW Group (SJW) experienced higher maintenance, administration, and general costs, contributing to an 8% increase in total operating expenses year-over-year.
- The company is dealing with regulatory challenges, including unresolved issues in the California Public Utilities Commission settlement agreement.
Q & A Highlights
Q: Can you discuss the usage trends in Texas and how they align with the 2024 guidance assumptions? Are they on track, ahead, or behind? Also, how do these trends and recent developments position you for 2025 relative to the 5% to 7% long-term growth rate?
A: Andrew Walters, Chief Financial Officer, explained that Texas has experienced decreased usage due to conservation efforts, which impacts the total dollar amount but is not significant enough to adjust the guidance range. For 2025, despite ongoing drought conditions, the settled rate case and full-year Connecticut rate case are expected to support the long-term growth rate. The California rate increase for 2025 is expected to be more gradual, which benefits both customers and the company's earnings growth.
Q: Regarding the tariff consolidation effort in Maine, how long might the process take, and would it require a rate case after approval?
A: Andrew Walters noted that while it's early to comment on rate levels, the consolidation is a strategic move to streamline operations and reduce regulatory burden. It will allow costs to be distributed across a larger customer base, benefiting both the company and the Maine Public Utility Commission. The process will reduce the number of rate cases filed, improving efficiency.
Q: Are there any updates on SJW Group's interest in acquiring Aquarion, and what is the potential timeline?
A: Eric Thornburg, CEO, stated that SJW Group remains interested in Aquarion, with Eversource expected to announce the successful bidder by the end of 2024. Regulatory approval would likely commence in 2025. SJW Group believes the acquisition would be beneficial for shareholders but remains disciplined in its approach.
Q: How influential are concerns from Connecticut towns regarding RWA's interest in buying Aquarion on the process?
A: Eric Thornburg acknowledged the concerns, noting that municipalities might worry about decreased property tax receipts if a quasi-municipal utility acquires Aquarion. While it's a significant issue, it may not be determinative. Community leaders could be concerned, but adjustments could be made to address these concerns.
Q: Is there any exposure to data centers in California or other jurisdictions, and how might they impact water demand?
A: Eric Thornburg indicated that while data centers might not significantly increase water volume for cooling, they could drive infrastructure demands due to economic development and growth in the surrounding communities. The impact would be more secondary, related to supporting community growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
