Release Date: November 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Essential Utilities Inc (WTRG, Financial) reported a strong financial quarter with earnings per share of $0.25, surpassing expectations.
- The company achieved a significant capital investment of $932.5 million through the third quarter, with plans to invest $1.3 billion to $1.4 billion in infrastructure improvements this year.
- The Pennsylvania gas rate case approval included a $93 million annualized revenue increase and a weather normalization mechanism, providing financial stability.
- The company settled a Pennsylvania water rate case, resulting in a $73 million annualized revenue increase.
- Essential Utilities Inc (WTRG) reinstated its multiyear EPS guidance, projecting a 5% to 7% growth rate through 2027, excluding DELCORA earnings.
Negative Points
- The Office of the Consumer Advocate filed a petition for review of the Pennsylvania gas rate case approval, creating potential regulatory challenges.
- Quarterly earnings per share decreased from $0.30 in the third quarter of 2023 to $0.25 in 2024, partly due to the absence of prior year tax repair benefits.
- The company faces headwinds from increased purchased power costs and new PFAS-related chemical expenses.
- The DELCORA transaction remains delayed due to a federal bankruptcy court stay, impacting potential earnings inclusion.
- Moody's negative outlook on the company persists, with expectations to resolve it by 2026, contingent on financial performance improvements.
Q & A Highlights
Q: Can you clarify the equity financing expectations for 2024 and 2025, and how this aligns with rating agencies' outlooks?
A: Daniel Schuller, Executive Vice President and CFO, explained that Essential Utilities plans to raise $350 million between 2024 and 2025 through their ATM program. They are in close communication with rating agencies to ensure alignment, and they feel confident that Moody's is comfortable with their plan.
Q: Is there a shift from the earlier $1 billion multiyear equity plan?
A: Schuller clarified that the $1 billion ATM was intended for use over approximately three years, depending on acquisitions and other factors. The current $350 million plan for 2024 and 2025 is not a shift but rather a part of the broader strategy, allowing for flexibility in acquisitions.
Q: Regarding the DELCORA transaction, is there a timeline for its completion?
A: Christopher Franklin, Chairman and CEO, stated that while they have a strong asset purchase agreement, the process is delayed due to a federal bankruptcy court stay. They are confident in eventually closing the transaction but have removed its financial impact from current guidance due to the uncertainty.
Q: What is the starting point for the 5% to 7% EPS growth CAGR guidance?
A: Schuller indicated that the starting point is effectively the 2024 EPS guidance midpoint, which is approximately $1.97. This aligns with their 2025 EPS guidance range of $2.07 to $2.11.
Q: How is the Pennsylvania PUC handling PFAS-related costs, and how will these be recovered?
A: Franklin mentioned that they are assured of recovery for PFAS investments across states. Schuller added that they are seeking deferred accounting treatment, allowing them to place investments on the balance sheet for future recovery.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
