Essential Utilities(WTRG) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported GAAP earnings of 0.28 per share, which was impacted by warmer-than-normal weather in Pittsburgh, leading to lower gas usage [4][12] - Operating revenues decreased due to a decline in natural gas commodity prices and lower water consumption compared to the previous year [12][18] - Year-to-date O&M expenses increased by 2.9%, with a quarterly O&M increase of 9 million year-over-year [12][15] Business Line Data and Key Metrics Changes - The water business experienced lower consumption, with a $9.7 million impact on water revenues compared to last year [12][45] - The natural gas business was significantly affected by warmer weather, which led to lower operating revenues [12][17] - Rate increases and surcharges contributed over$18 million, with $15 million from water and$3 million from gas [13] Market Data and Key Metrics Changes - The company is on track to invest between $1.3 billion and$1.4 billion in infrastructure improvements this year [8][22] - The company expects to raise approximately $250 million in equity through its ATM program in 2024 [24][32] Company Strategy and Development Direction - The company aims to invest approximately$7.2 billion in regulated infrastructure through 2028, with a compounded annual growth rate of about 8% for water and 10% for natural gas [22][23] - The company is pursuing low-interest loans and grants to fund infrastructure improvements and mitigate costs associated with PFOS mitigation [9][19] - The company is optimistic about future municipal acquisitions, with a strong pipeline of opportunities [21][50] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the regulatory developments in Pennsylvania, which are expected to facilitate future acquisitions [5][20] - The company remains focused on managing O&M expenses while continuing to invest in capital improvements [18][24] - Management acknowledged the impact of warmer-than-normal weather on financial results but remains optimistic about achieving long-term growth targets [17][22] Other Important Information - The company has received approval for approximately $133 million in low-interest loans and$59 million in grants for infrastructure projects [8][9] - The company is committed to reducing greenhouse gas emissions by 60% by 2035, with significant progress already made [24] Q&A Session Summary Question: What is the impact of the C-motion and PUC reform on legislative changes? - Management indicated that while progress has been made with the C-motion, legislative actions are still ongoing, and there is no current appetite to repeal Act 12 [25][26] Question: Any early feedback from public input hearings regarding the Pennsylvania rate case? - Management reported no surprising or concerning feedback from public hearings, emphasizing their commitment to affordability [27][28] Question: What is the expected tax rate for the balance of the year? - Management anticipates a slightly negative effective tax rate for 2024, moving towards breakeven in 2025 [29] Question: What is the status of the PFOS program and its implications? - Management confirmed that they are proceeding with PFOS mitigation efforts and are confident in recovering costs through regulatory mechanisms [30][31] Question: What is the outlook for M&A activity following the C-motion? - Management noted ongoing discussions with municipalities and expects increased activity once new guidelines are issued [50] Question: What are the expectations for earnings cadence in Q3 and Q4? - Management indicated that Q3 estimates may be high while Q4 estimates may be low, with weather impacts and pending rate cases influencing results [37][39]