UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

1 Water Street, Camden, NJ 08102-1658

Statements included in Item 1—Business, Item 1A—Risk Factors, and Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations, and in other sections of this Annual Report on Form 10-K, or incorporated by reference into this Form 10-K,therein, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. In some cases, these forward-looking statements can be identified by words with prospective meanings such as “intend,” “plan,” “estimate,” “believe,” “anticipate,” “expect,” “predict,” “project,” “propose,” “assume,” “forecast,” “likely,” “uncertain,” “outlook,” “future,” “pending,” “goal,” “objective,” “potential,” “continue,” “seek to,” “may,” “can,” “should,” “will” and “could” or the negative of such terms or other variations or similar expressions. Forward-looking statements may relate to, among other things: the Company’s future financial performance, liquidity and cash flows; the timing and amount of rate and revenue adjustments, including through general rate case filings, filings for infrastructure surcharges and other governmental agency authorizations and proceedings, and filings to address regulatory lag; the Company’s ability to execute its current and long-term business, operational, capital expenditures and growth plans and portfolio optimization strategies, includingstrategies; the timing and outcome of pending or future acquisition activity, the completion of the announced sale of the Company’s New York subsidiary and the amount of proceeds anticipatedability to be received therefrom;achieve organic customer growth; the ability of the Company’s California subsidiary to obtain adequate alternative water supplies in lieu of diversions from the Carmel River; the amount, allocation and allocationtiming of projected capital expenditures and related funding requirements; the Company’s ability to repay or refinance debt; the ability to execute its currentfuture impacts of increased or increasing financing costs, inflation and long-term business, operational and capital expenditures strategies; itsinterest rates; the Company’s ability to finance current and projected operations, capital expendituresexpenditure needs and growth initiatives by accessing the debt and equity capital markets;markets and sources of short-term liquidity; the outcome and impact on the Company of governmental and regulatory investigations and proceedings and related potential fines, penalties and other sanctions; the ability to meet or exceed the Company’s stated environmental and sustainability goals, including its greenhouse gas (“GHG”) emission reduction, water delivery efficiency and water system resiliency goals; the ability to complete, and the timing and efficacy of, the design, development, implementation and improvement of technology and other strategic initiatives; the impactsCompany’s ability to the Company of the current pandemic health event resulting from the novel coronavirus (“COVID-19”);comply with new and changing environmental regulations; the ability to capitalize on existing or future utility privatization opportunities; trends in the water and wastewater industries in which the Company operates, including macro trends with respect to the Company’s efforts related to customer, technology and work execution; regulatory, legislative, tax policy or legal developments; and impacts that future significant tax legislation may have on the Company and on its business, results of operations, cash flows and liquidity.

Forward-looking statements are predictions based on the Company’s current expectations and assumptions regarding future events. They are not guarantees or assurances of any outcomes, financial results, levels of activity, performance or achievements, and readers are cautioned not to place undue reliance upon them. These forward-looking statements are subject to a number of estimates, assumptions, known and unknown risks, uncertainties and other factors. The Company’s actual results may vary materially from those discussed in the forward-looking statements included herein as a result of the factors discussed under Item 1A—Risk Factors, and the following important factors:

Presented in the table below is a geographic summary of the Regulated Businesses’ operating revenues and the number of customers the Company serves, by type of service, for and as of the year ended December 31, 2020:2023:

The vast majority of the Company’s regulated water customers are metered, which allows the Company to measure and bill for its customers’ water usage, typically on a monthly basis. The Company employs a variety of methods of customer meter reading to monitor consumption. These methods range from meters with mechanical registers where consumption is manually recorded by meter readers, to meters with electronic registers capable of transmitting consumption data to proximity devices or via radio frequency to mobile or fixed network data collectors. The Company’s wastewater customers are billed either a flat rate or based upon their water consumption.

Residential customers make up a substantial portion of the Company’s customer base in all of the states in which it operates. The Company also serves (i) commercial customers, such as food and beverage providers, commercial property developers and proprietors, and energy suppliers, (ii) fire service customers, where the Company supplies water through its distribution systems to public fire hydrants for firefighting purposes and to private fire customers for use in fire suppression systems in office buildings and other facilities, (iii) industrial customers, such as large-scale manufacturers, mining and production operations, (iv) public authorities, such as government buildings and other public sector facilities, including schools and universities, and (v) other utilities and community water and wastewater systems in the form of bulk contracts for the supply of water or the treatment of wastewater for their own customers.

The following chart depictsPresented in the allocationtable below is a breakout of the Company’s Regulated Businesses’ operating revenue of $3,255 million by type, including a breakout of the total water services revenues by class of customer, for the yearyears ended December 31, 2020:2023, 2022 and 2021:

Periodic changes in customer rates generally occur through the filing of a rate case by the utility with the PUC. The timing of rate case filings is typically determined by either periodic requirements in the regulatory jurisdiction or by the utility’s need to increase its revenue requirement to recover capital investment costs, changes in operating revenues, operating costs or other market conditions. The Company attempts to minimize “regulatory lag,” which is the time between the occurrence of an event that triggers a change in the utility’s revenue requirement and the recognition in rates of that change.

A fundamental aspect of the Company’s growth strategy is to pursue acquisitions of water and/or wastewater systems in geographic proximity to areas where the Company operates its Regulated Businesses.Businesses, see Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information. The proximity of acquisition opportunities to the Company’s regulated footprint allows it to integrate and manage the acquired systems and operations primarily using the Company’s existing management (although the Company typically retains the majority, if not all, of the employees of the acquired systems) and to achieve operational efficiencies and prioritize capital investment needs. The Company’s current customer mix of 93%91% water and 7%9% wastewater also presents strategic opportunities for wastewater growth and systems consolidation, allowing the Company to add wastewater customers where it already serves water customers. The Company intends to continue to expand its regulated footprint geographically by acquiring water and wastewater systems in its existing markets and, if appropriate, pursuing acquisition opportunities in certain domestic markets where the Company does not currently operate its Regulated Businesses. Before entering new regulated markets, the Company will evaluate the business and regulatory climates to ensure that it will have the opportunity to achieve an appropriate rate of return on its investment while maintaining its high standards for providing safe, reliable and affordable services to its customers, as well ascustomers. The Company will also evaluate whether there is a line of sight to grow the Company’s base customers to sufficient scale in a new regulated market so that it can attain efficiencies and promote customer affordability after entering thea new domestic market.

Increasingly stringent environmental, health and safety, cybersecurity and water quality and water accountability regulations, the amount of infrastructure in need of significant capital investment, financial challenges and industry legislation are several elements, among others, that may drive more municipalities to consider selling their water and wastewater assets.

The Company’s regulated subsidiaries in New Jersey, including municipalIndiana, and investor-ownedMissouri have versions of water quality or safety accountability acts which require operational or safety and security standards for water and wastewater utilities with more than 500 service connections. Thisserving a certain number of customers. In New Jersey, the law imposes requirements in areas such as cybersecurity, asset management, water quality reporting, remediation of notices of violation, and hydrant and valve maintenance. The WQAAmaintenance and cybersecurity. In Indiana, the law requires water and wastewater utilities to conduct rate analyses, develop capital asset management plans and conduct cybersecurity and water loss audits. In Missouri, the most senioract requires water manager, or either the executive director for municipal utility authorities or the mayor or chief executive officer for municipally owned public water systems,and wastewater utilities to certify that the system meets the requirements under the WQAA. In an effort to strengthen accountability under the WQAA, the New Jersey Senate held three hearings on the WQAA during 2020. The New Jersey Assembly has also heard legislation to strengthen the WQAA in one committee,create cybersecurity, valve inspection and referral to the Assembly Appropriations Committee is pending.hydrant inspection programs.

The Company’s regulated subsidiaries in California, Illinois, Indiana, Iowa, Kentucky, Maryland, Missouri, New Jersey, Pennsylvania, Tennessee, Virginia and West Virginia have access to fair market valueutility valuation legislation and regulation for private sector investment in public sector water and wastewater systems. The Company supports full optionality for municipalities, including state legislation that enables the consolidation of the largely fragmented water and wastewater industries through third-party fair market valuations of purchased property. Fair market value assessment of water and wastewater systems is an alternative to the traditional depreciated original cost method of valuation, which allows the Company to offer municipalities a purchase price for their system assets that is reflective of the assets’ fair market value, while providing the Company with increased opportunity to recover the purchase price over the life of the purchased system assets, subject to PUC approval.

Consolidated tariffs use a unified rate structure for systems owned and operated by a single utility, which may or may not be physically interconnected. Consolidated tariff pricing moderates the impact of periodic fluctuations in local costs and promotes a more universal water infrastructure investment in a state.jurisdiction. As a result, consolidated tariffs can make it easier to incorporate new systems into an existing utility, support economies of scale for even the smallest of systems and prioritize capital needs across the state.jurisdiction. Overall, the Company believes that consolidated tariffs bring cost-effective, high qualityhigh-quality services to a larger number of customers. TwelveEleven of the Company’s regulated jurisdictions currently have some form of consolidated tariff pricing, including California, Illinois, Indiana, Iowa, Kentucky, Maryland, Missouri, New Jersey, New York, Pennsylvania, Virginia and West Virginia.

As such, the Regulated Businesses are periodically subject to condemnation proceedings in the ordinary course of business. For example, a citizens group in Monterey, California successfully added “Measure J” to the November 2018 election ballot asking voters to decide whether the Monterey Peninsula Water Management District (the “MPWMD”) should conduct a feasibility study concerning the potential purchase of the Monterey water service system assets (the “Monterey system assets”) of the Company’s California subsidiary and, if feasible, to proceed with(“Cal Am”) are the subject of a purchase of those assets without an additional public vote. This service territory represents approximately 40,000 customers. Inpotential condemnation action by the Monterey Peninsula Water Management District (the “MPWMD”) stemming from a November 2018 Measure J was certified to have passed. In August 2019, the MPWMD’s General Manager issued a report that recommends that the MPWMD board (1) develop criteria to determine which water systems should be considered for acquisition; (2) examine the feasibility of acquiring the Monterey system assets and consider public ownership of smaller systems only if the MPWMD becomes the owner of a larger system; (3) evaluate whether the acquisition of the Monterey system assets by the MPWMD is in the public interest and sufficiently satisfies the criterion of “feasible” as provided in Measure J; (4) ensure there is significant potential for cost savings before agreeing to commence an acquisition; and (5) developballot initiative. For more fully alternate operating plans before deciding whether to consider a Resolution of Necessity.

Furthermore, the law in certain jurisdictions in which the Regulated Businesses operate provides for eminent domain rights allowing private property owners to file a lawsuit to seek just compensation against a public utility, if a public utility’s infrastructure has been determined to be a substantial cause of damage to that property. In these actions, the plaintiff would not have to prove that the public utility acted negligently. In California, for example, lawsuits have been filed in connection with large-scale natural events such as wildfires. Some of these lawsuits have included allegations that infrastructure of certain utilities triggered the natural event that resulted in damage to the property. In some cases, the PUC has allowed certain costs or losses incurred by the utility to be recovered from customers in rates, but in other cases such recovery in rates has been disallowed. Also, the utility may have obtained insurance that could respond to some or all of such losses, although the utility would be at risk for any losses not ultimately subject to rate or insurance recovery or losses that exceed the limits of such insurance.

Presented in the table below are the percentages of water supply by source type for the Company’s Top SevenFive States individually and the Regulated Businesses collectively for the year ended December 31, 2020:2023:

The Company evaluates quality, quantity, growth needs and alternate sources of water supply as well as transmission and distribution capacity to provide water service to its customers. Water supply is seasonal in nature and weather conditions can have a pronounced effect on supply. In order to ensure that the Company has adequate water supply, it uses long-term planning processes and maintains contingency plans to minimize the potential impact on service caused by climate variability and a wide range of weather fluctuations. The Company reviews current climate science and global models related to temperature, precipitation and sea level rise on an ongoing basis. Where actionable forecasts are available, the Company will use this information in its comprehensive planning studies and asset management plans. These studies and plans, which are used by the Company to develop its asset management and system reliability strategies, assess the climate risk and resiliency of the Company’s water and wastewater systems over short-, medium- and long-term time horizons, and include evaluations of the availability of water supplies and system capacity against a number of different factors, projections and estimates.

In connection with supply planning for most surface or groundwater sources, the Company employs models to determine safe yields under different rainfall and drought conditions. Surface and ground water levels are routinely monitored so that supply capacity deficits may, to the extent possible, be predicted and mitigated through demand management and additional supply development. In California, where the state has recently experienced a multi-year drought, the Company utilizes multiple water supply options including numerous ground water wells in multiple aquifers as well as various long-term purchase water agreements with regional water suppliers to optimize supplies while assuring resiliency during dry years. An example of the Company’s use of long-term planning to ensure that it has adequate water supply is its involvement in the Monterey Peninsula Water Supply Project (the “Water Supply Project”) in California. The Water Supply Project includes the construction of a desalination plant, to be owned by the Company’s California subsidiary,Cal Am, and the construction of wells that would supply water to the desalination plant. In addition, the Water Supply Project also includes the California subsidiary’sCal Am’s purchase of water from a groundwater replenishment project (the “GWR Project”) between Monterey One Water (formerly known as the Monterey Regional Water Pollution Control Agency) and the MPWMD. The Water Supply Project is intended, among other things, to fulfill obligations of the California subsidiaryCal Am to eliminate unauthorized diversions from the Carmel River as required under orders of the California State Water Resources Control Board (the “SWRCB”). For more information, see Item 3—Legal Proceedings—Alternative Water Supply in Lieu of Carmel River Diversions and Note 17—16—Commitments and Contingencies—Contingencies—Alternative Water Supply in Lieu of Carmel River Diversions, in the Notes to the Consolidated Financial Statements.

The Company maintains an environmental program that includes responsible business practices focused on compliance with environmental laws and regulations and the effective use of natural resources, recognizing that drinking water standards have generally, over time, increased in number and become increasingly more stringent. As newer or stricter standards are introduced, the Company’s capital and operating costs needed to comply with them will likely increase. The Company incurs substantial costs associated with compliance with the environmental, health and safety, and water quality standards to which its operations are subject and the Company invests in technology solutions for enhanced detection and monitoring of water quality issues. The Company estimates that it will make capital expenditures of approximately $725$900 million over the next five years, including $155and $200 million in 2021, for2024, to address water quality issues; most of which are focused on compliance with environmental control facilities, which the Company defines for this purpose as any project (or portion thereof) that involves the preservation of air, water or land.laws and regulations. The Company believes that its operations are materially in compliance with, and in many cases surpass, minimum standards required by applicable environmental laws and regulations.

To help formulate the basis for future regulations, the EPA has the authority to require monitoring for additional, unregulated contaminants under the Unregulated Contaminant Monitoring Rule (the “Monitoring Rule”). The Company’s facilities have participated in the data gathering effort for the Monitoring Rule in previous rounds, which occurs every five years, including the fourth round that concluded at the end of 2020. There are millions of other chemical compounds that are not regulated, many of which lack a testing methodology, occurrence data, health effects information and/or cost effective treatment options. The process of developing new drinking water standards is long and complex, but the Company actively participates with the EPA and other water industry groups by sharing research and water quality operational knowledge. See Item 1—Business—Research and Development—Contaminants of Emerging Concern for additional information.

To effect the removal or inactivation of microbial contaminants, the EPA has established various rules to improve the disinfection and filtration of drinking water and to reduce consumers’ exposure to disinfectants and/or the by-products of their use in the disinfection process. Examples of these rules are the Long-Term 2 Enhanced Surface Water Treatment Rule (the “Long-Term 2 Rule”), the Stage 2 Disinfectants and Disinfection Byproduct Rule, and the Ground Water Rule, which is applicable to systems providing water from underground sources. In 2016, the revised Total Coliform Rule implemented a “find and fix” process where exceeding bacterial trigger levels requires an assessment to correct any sanitary defects. The Company is within the EPA’s time frame for compliance with allstandards and rules developed under the regulation of these standards,the Safe Drinking Water Act, which includes sample collection, data analysis, and, in some instances engineering planning and implementation of treatment enhancements. Recent monitoring as required by the Long-Term 2 Rule has indicated that approximately 30 of the Company’s surface water systems have recently completed or need to implement additional disinfection protection mechanisms against Cryptosporidium. In many cases, this will involve installing ultraviolet light disinfection systems, and although several plants have already completed assessments and upgrades, an estimated $150 million to $250 million of investment will still be required to upgrade the remaining facilities for Cryptosporidium disinfection. Further, the EPA is actively considering regulationsdevelopment of a new regulation for a number of contaminants, including strontium, hexavalent chromium, fluoride, nitrosamines, some pharmaceuticalsperchlorate and certain volatile organic compounds.updates to the current microbial and disinfection byproduct regulations. The Company does not anticipate that any such regulations, if enacted, will require implementation in 2021.

On December 21, 2021, the EPA finalized revisionsannounced next steps to strengthen the LCR (the “Revised LCR”)regulatory framework on January 15, 2021 that are designed to provide more effective protection of public health by reducing exposure to lead and copper in drinking water.water, including implementing the Lead and Copper Rule Revisions (“LCRR”) and indicated an intent to finalize the Lead and Copper Rule Improvements (“LCRI”) which were proposed on December 6, 2023, prior to October 16, 2024, the initial compliance date in the LCRR. The Company is in the process of reviewing the Revised LCR and will be developingexecuting an implementation strategy to comply with the new requirements, which are mandated by January 2024.initial LCRR requirement to complete a lead service line inventory. Capital expenditures and operating costs associated with compliance with any of thesethe LCRI will be determined once the EPA finalizes the rule, revisions cannot be presently determined until the Company’s review of the new rule is completed, but as previously noted, costs associated with compliance with federal water quality regulations have been traditionally recognized by PUCs as appropriate for inclusion in establishing rates.

Research and Development

The Company’s Research and Development Program

The Company continues to leverage its expertise and collaborates with the EPA and state agencies to help establish effective environmental, health and safety, and water quality standards and regulations. This relationship includes the sharing of the Company’s research, such as its treatment and distribution system optimization research and its national water quality monitoring data. The Company’s engagement with the EPA provides it with early insight into emerging regulatory issues and initiatives, thereby allowing the Company to anticipate and to accommodate its future compliance requirements. The Company also frequently engages with the Centers for Disease Control and Prevention, other state environmental agencies, and national and international water research foundations. The Company believes that continued R&D activities are critical for providing safe, reliable and affordable services, as well as maintaining its leadership position in the industry, which provides the Company with a competitive advantage as it seeks business and operational growth.

The Chemicals Abstract Service Registry contains over 173204 million registered chemicals, with an estimated 1,400 species of disease-causing microbes that can affect humans. The Company is continually investigating new substances and contaminants, employing a team of scientists, engineers and public health professionals to identify threats to its water supply, to act on emerging regulations and new health advisories, and to evaluate the benefits of alternative or advanced treatment technologies. The Company utilizes water quality testing equipment and implements new and emerging technologies to help detect potential water supply contamination issues. Examples of the Company’s efforts include:

To uphold thissupport the Company’s commitment to safety, the Company’s employees completed over 100,000approximately 157,000 hours of employee safety training, including physical security and cybersecurity training, during 2020. Additionally, through frequent labor-management meetings,2023. To support and enhance the Company’s safety culture, the Company encourages open exchanges to explore new ways to further enhance safetyalso collaborates on the job. All employeeslocal, regional, and national levels with its labor union partners. Employees are empowered to supportdemonstrate safety leadership by takingutilizing a number of safety practices embedded in the time they need to complete a task safelyCompany’s culture, such as the use of (i) daily and to usepre-meeting safety messages, (ii) “Stop Work Authority” — the(the power to stop working immediately and mitigate a hazard whenever they believean employee believes a task is unsafe —unsafe), and (iii) a peer-to-peer program in which employees observe and coach each other to addressencourage safe work. For 2023, the hazard or issue with management. This authority is stated on the backCompany had an ORIR injury rate of every employee’s identification badge.

Supporting Employees DuringThis commitment to safety also includes building a culture of well-being where all employees can feel emotionally safe and live a healthy lifestyle. Through well-being education, the COVID-19 PandemicCompany is able to encourage employees to take preventative actions and increase participation in annual well-care exams and cancer screenings. In 2023, the Company introduced an enhanced wellness program platform to increase overall engagement and to leverage the use of mobile technologies. As a result, 34% of enrolled employees reached the highest participation level in the wellness program (compared to 19% in 2022). In addition, the mobile-ready platform presented an opportunity to engage more front-line employees in a user-friendly way.

As an essential business that must continue to provide water and wastewater services during the COVID-19 pandemic, the Company focused on the care and safetypart of its employees, contractors, vendors and others who work at or visit the Company’s worksites. Furthermore,APP, the Company has supported employee healthincluded diversity goals intended to increase the representation of women in, and safety by instituting work-from-home guidelines for all non-essential employees, providing safety trainingthe ethnic and resources, pausing most work-related travel that required air, train or overnight stays, implementing social distancing, requiringracial diversity of, the useCompany’s workforce. The goals measure the percentage of face coverings at work,females and encouraging good hygiene and frequent hand-washing and cleaning of work areas. racial/ethnic diversity among the Company’s workforce based on voluntary self-identification.

InclusionDuring 2023, the Company continued to focus on creating a culture that respects and Diversity

The Company maintains active membershipspartnerships with groups such as Hiring our Heroes, Military Spouse Employment Partnership, American Corporate Partners, (ACP), CEO Action for Diversity and Inclusion, Disability:IN, Paradigm for Parity, and Out and Equal, to further enhance its ability to recruit and retain diverse employees. Among this year’sits recognitions, the Company was namedhonored as a 2020 Noteworthy Company by DiversityInc, a leading2023 VETS Indexes 3-Star Employer and earned the 2024 Military Friendly® Gold Employer designation for the Company’s efforts in hiring and supporting U.S. ranker of companies by diversity, equitymilitary veterans. American Water was also recognized as the first utility to receive the Friendly Forces 5 STAR Reservist Friendly Employer award, the highest employer rating for Guard service personnel and inclusion. reservists.

The Company was also a top scorer onin the 20202023 Disability Equality Index for the fifth consecutive year and was recognized by U.S. Veterans Magazine50/50 Women on Boards™ for a gender-balanced board of directors, Fortune’s Modern Board 25 Ranking, as well as a veteran-friendly companyChampion of Board Diversity with distinction by the Forum of Executive Women. The Company was also named a 2023 Best of the Decade honoree by Minority Business News USA and as an organization with a veteran-friendly supplier diversity program.

To assist these efforts, the Company has established an InclusionThe Company’s five Employee Business Resource Groups (“EBRGs”), which represent diverse employee demographics (Women, African American/Black, LGBTQ+, and Diversity Advisory Council, which oversees the formation of employee business resource groupsDisabilities/Caregivers, with Military added in 2023), strive to support the Company’s inclusioncreate measurable and diversity efforts. In 2019, the Company’s Inclusion and Diversity Advisory Council launched the Inclusion and Diversity Champions Network, where employees serve as liaisons with other local workforces. Furthermore, in October 2020, the Company named its first Chief Inclusion Officer,long-lasting positive impacts on employees’ careers, as well as its first Director, Inclusion and Diversity, reflecting the Company’s views onculture and communities in which it serves. EBRG members participate in events and awareness activities throughout the year, which highlight the importance of building an inclusive and equitable culture. For example, employees may participate in monthly meetings with a focus on various related topics, including career development, psychological safety, cultural awareness or business objectives. EBRG members also have the opportunity to impact the communities in which the Company serves through service projects, including the annual Juneteenth Unity Walk that supported the National Alliance on Mental Illness, an organization that provides advocacy, education, and support for, and public awareness of, mental illness, and projects supported by a partnership with Girl Scout troops to promote environmental stewardship and the importance of careers in science, technology, engineering and mathematics, among others.

All employees who average 30 hours or more per week are eligible for full-time benefits. Approximately 89% of all benefit eligible employees are enrolled in the Company’s healthcare benefits. Full-time employees pay approximately 16% of the total premium cost of medical, dental and vision coverage. To reinforce the Company’s commitment to inclusion, diversity and diversity.equity, the Company’s medical benefits include coverage for applied behavior analysis, autism treatment, transgender services and hearing aids, as well as a fertility assistance benefit. In addition, in 2023, the Company increased its paid family leave benefit for employees from two weeks to six weeks.

In addition to required role-based training, managers assist employees to identify professional development opportunities, utilizing a framework of on-the-job learning, social learning and formal learning, to help them attempt to reach their full potential and grow their careers. Additionally, in 2020, approximately 59% ofTo further support employees’ growth and development, during 2023, the Company’s internalCompany expanded the employee transfersprofile fields within its employee information system to allow employees to showcase their achievements, contributions and promotions were diverse (defined as female, minority, disability, military, military spouse, and LGBTQ+ status, based on employee self-identification), which reflects the Company’s commitment to employee development and career growthaspirations, as well as the Company’s focus on inclusionto support identification of developing and reflecting the communities in which the Company operates.key talent.

Developing talent and ensuringto provide a pipelinepathway to executive leadership is a critical priority for the Company. During 2020,2023, the Company engaged in succession planning activities for the Company’s critical positionsbusiness-critical and executive leaders.business-impact positions. These succession plans seek tosupport the Company’s business continuity plans and goals, through the identification and development of current and future leaders, and promote diversity, as well as retention and talent development priorities.

In addition to succession planning for executive and senior leadership roles, in 2023, the Company conducted local and enterprise-wide talent reviews, identifying top and emerging talent with a focus on diversity, strengths, gaps and development needs against the critical skills needed for certain roles. Through these talent review processes, business leaders identified a pool of high-potential employees, which will assist the Company in providing continuedsupporting their career goals and aspirations and promote more effective employee experience and talent retention efforts. The Company also utilizes annual six-month mentoring programs designed to accelerate emerging leaders’ abilities to demonstrate leadership capabilities and relationships, with the guidance of an experienced executive mentor. Finally, in 2023, the Company, together with an outside vendor, initiated a new pilot program, called Accelerate for Impact, to support development of its high-potential employees’ key competencies. Accelerate for Impact provides select high-potential employees the growthopportunity to engage in social learning activities and futureto complete self-directed, online coursework that culminates with a capstone project.

As of December 31, 2020,2023, approximately 45%47% of the Company’s workforce was represented by unions, which include 72under 73 collective bargaining agreements with 14 different unions. Additionally, as of December 31, 2020,In 2023, the Company is in the initial stages of negotiating five newrenegotiated 21 collective bargaining agreements which would cover approximately 400 employees.that were set to expire during the year. During 2021, 172024, 21 of the Company’s collective bargaining agreements will be expiringexpire in accordance with their terms and the Company expects to be able to negotiate these agreements during the courseyear. In addition, the Company’s national benefits agreement, which expires on July 31, 2028, covers approximately 3,000 of the year.Company’s union-represented employees and their families and provides them with healthcare and other benefits. The Company also collaborates with union leadership on topics such as safety, customer, technology and employee benefits in forums such as the Joint Healthcare Committee, National Labor Management Committee and the annual Labor Management Conference. In 2023, the Company initiated a joint effort with certain of these labor unions and the Federal Mediation and Conciliation Service to host local discussions among management and union leaders with the goal of supporting and enhancing constructive relationships with these unions.

Risks Related to Our Industry and Business Operations

Our ability to successfully implement our business plan and strategy depends on the rates authorized by the various state PUCs. We periodically file rate increase applications with state PUCs. The ensuing administrative process may be lengthy and costly. Our rate increase requests may or may not be approved, or may be partially approved, and any approval may not occur in a timely manner. Moreover, a PUC may not approve a rate request toin an extentamount that is sufficient to:

In any of these cases, our business, financial condition, results of operations, cash flows and liquidity may be adversely affected. Even if the rates approved are sufficient, we face the risk that we will not achieve the rates of return on our invested capital to the extentequity permitted by state PUCs. This could occur if certain conditions exist, including, but not limited to, (i) water usage is less than the level anticipated in establishing rates, (ii) customers increase their conservation efforts, or(iii) we experience negative impactsunusual or emergent situations, events or conditions, (iv) we experience a significant increase in customers without recovery of the COVID-19 pandemic,operating and other costs associated with serving them, or ifa decrease in customers that causes a decrease in operating revenue, or (v) our investments or expenses prove to be higher than the levels estimated in establishing rates. It may be difficult to predict the outcome or impact of these events on us or the actions that may be taken by the PUCs or other governmental authorities in response thereto.

We incur substantial operating and capital costs on an ongoing basis to comply with environmental, water quality and health and safety laws and regulations. These laws and regulations and their enforcement, have become more stringent over time, and new or stricter requirements, such as the anticipated EPA drinking water regulations for PFAS, the LCRR and the proposed LCRI, could increase our costs. Although we may seek to recover ongoing compliance costs in our Regulated Businesses through customer rates, there can be no guarantee that the various state PUCs or similar regulatory bodies that govern our Regulated Businesses would approve rate increases that would enable us to recover such costs or that such costs will not materially and adversely affect our financial condition, results of operations, cash flows and liquidity.

Attention is being given to contaminants of emerging concern, including, without limitation, chemicals and other substances that currently do not have any regulatory standard in drinking water or have been recently created or discovered (including by means of scientific achievements in the analysis and detection of trace amounts of substances). Examples of sources of contaminants include, but are not limited to, newly created chemical compounds (including, for example, manufactured nanomaterials); human and veterinary products; perfluorinated and polyfluorinated compounds;PFAS; bacteria, microbes, viruses, (including the current novel coronavirus), amoebae and other pathogens; and residual by-products of disinfection. We rely upon governmental agencies to set appropriate regulatory standards to protect the public from these and other contaminants, and our role is to provide service that meets these standards, if any. In some of our states, PUCs may disapprove of cost recovery, in whole or in part, for implementation of treatment infrastructure for a contaminant in the absence of a regulatory standard. Furthermore, given the rapid pace at which these contaminants are being created and/or discovered, we may not be able to detect and/or mitigate all such substances in our drinking water system or supplies, which could have a material adverse impact on our financial condition, results of operations and reputation. In addition, we believe these contaminants maywill continue to form the basis for additional or increased federal or state regulatory initiatives and requirements in the future, which could significantly increase the cost of our operations.

Government restrictions on water use may also result in decreased use of water services, even if our water supplies are sufficient to serve our customers, which may adversely affect our financial condition, results of operations and cash flows. Seasonal and other drought conditions that may impact our water services are possible across all of our service areas. Governmental restrictions imposed in response to a drought may apply to all systems within a region independent of the supply adequacy of any individual system. Responses may range from voluntary to mandatory water use restrictions, rationing restrictions, water conservation regulations, and requirements to minimize water system leaks. While expenses incurred in implementing water conservation and rationing plans may generally be recoverable provided the relevant PUC determines they were reasonable and prudent, we cannot assurebe certain that any such expenses incurred will, in fact, be fully recovered. Moreover, reductions in water consumption, including those resulting from installation of equipment or changed consumer behavior, may persist even after a drought has ended and restrictions are repealed and the drought has ended,lifted, which could adversely affect our business, financial condition, results of operations and cash flows.

Because of the uncertainty of weather volatility related to climate variability, we cannot predict its potential impact on our business, financial condition, results of operations, cash flows and liquidity. Furthermore, both Federal and state laws and regulations have been enacted or proposed that seek to reduce or limit GHGgreenhouse gas emissions and require or would require additional reporting, monitoring and monitoring,disclosure, and these regulations may become more pervasive or stringent in light of changing governmental agendas and priorities, although the exact nature and timing of these changes is uncertain. Although some or all potential expenditures and costs associated with the impact of climate variability and related laws and regulations on our Regulated Businesses could be recovered through rates, infrastructure replacement surcharges or other regulatory mechanisms, there can be no assurance that state PUCs would authorize rate increases to enable us to recover such expenditures and costs, in whole or in part.

While these mechanisms have mitigated or reduced regulatory lag in several of our regulated states, we continue to seek expansionapproval of regulatory practices to mitigate or reduce regulatory lag in those jurisdictions that have not approved them. Furthermore, PUCs may fail to adopt new surcharges and existing mechanisms may not continue in their current form, or at all, or we may be unable or become ineligible to continue to utilize certain of these mechanisms in the future. Although we intend to continue our efforts to expandseek state PUC approval of surchargesconstructive regulatory practices to address issues ofmitigate or reduce regulatory lag, our efforts may not be successful, or even if partially successful, they may not completely address our regulatory lag, in which case our business, financial condition, results of operations, cash flows and liquidity may be materially and adversely affected.

abatement benefit, (iii) the amount of taxes owed or paid, including as a result of the Corporate Alternative Minimum Tax provisions, (iv) the timing of tax effects on rates or (v) the ability to utilize our net operating loss carryforwards;

We have risks associated with aging infrastructure, including water and sewer mains, pumping stations and water and wastewater treatment facilities. Additionally, we may have limited information regarding buried and newly acquired assets, which

could challenge our ability to conduct efficient asset management and maintenance practices. Assets that have aged beyond their expected useful lives may experience a higher rate of failure. Failure of aging infrastructure could result in increased capital expenditures and O&M costs,expenses and negatively impact our future O&M efficiency ratio.other costs. In addition, failure of aging infrastructure may result in property damage, and in safety, environmental and public health impacts. To the extent that any increased costs or expenditures are not fully recovered in rates, our results of operations, liquidity and cash flows could be negatively impacted.

We also are required from time to time to decommission, repair or upgrade the dams that we own. The cost of such repairs or upgrades can be and has been material. The federal and state agencies that regulate our operations may adopt rules and regulations requiring us to dismantle our dams, which also could entail material costs. Although in most cases the PUC has permitted recovery of expenses and capital investment related to dam rehabilitation, we might not be able to recover costs of repairs, upgrades or dismantling through rates in the future. The inability to recover these costs or delayed recovery of the costs as a result of regulatory lag can affect our financial condition, results of operations, cash flows and liquidity.

The negotiation and execution of potential acquisitions as well as the integration of acquired systems or businesses with our existing operations could require us to incur significant costs and cause diversion of our management’s time and resources. Future acquisitions by us could result in, among other things:

Some or all of these items could have a material adverse effect on our business. TheIn addition, state laws on acquisition treatment or PUC interpretation thereof may affect our ability to recover costs associated with our investments in newly-acquired water and wastewater systems and businesses we acquire in the future may not achieve anticipated revenue, return on equity or profitability, or other perceived synergies, and any difficulties we encounter in the negotiation, execution or integration process could interfere withhave a material adverse impact on our results of operations, reduce our net income and profitability or adversely affect our internal control over financial reporting.

Furthermore, the law in certain jurisdictions in which our Regulated Businesses operate provides for eminent domain rights allowing private property owners to file a lawsuit to seek just compensation against a public utility, if the public utility’s infrastructure has been determined to be a substantial cause of damage to that property. In these actions, the plaintiff would not have to prove that the public utility acted negligently. In California, lawsuits have been filed in connection with large-scale natural events such as wildfires. Some of these lawsuits have included allegations that infrastructure of certain utilities triggered the natural event that resulted in damage to the property. In some cases, the PUC has disallowed recovery in rates of losses incurred by these utilities as a result of such lawsuits.

Contesting an exercise of condemnation, eminent domain or other similar process, or responding to a citizen petition, may result in costly legal proceedings and may divert the attention of management. Moreover, our efforts to resist the condemnation, eminent domain or other process may not be successful, which may require us to sell the operations at issue in a condemnation proceeding or to pay a private property owner compensation for the property damage suffered. If a municipality or other government subdivision succeeds in acquiring the assets of one or more of our Regulated Businesses through eminent domain or other process, there is a risk that we will not receive adequate compensation for the business, that we will not be able to keep the compensation, or that we will not be able to divest the business without incurring significant charges. Any of these outcomes may have a material adverse effect on our business, results of operations, financial condition, cash flows and liquidity.

If, despite our security measures, a significant physical attack or cyber breach occurred, our operations could be disrupted, property damaged, and customer and other confidential information lost or stolen; we could experience substantial loss of revenues, response costs and other financial loss; we could suffer a loss or redirection of management time, attention and resources from our regular business operations; and we may be subject to increased regulation,regulatory requirements; and we may experience litigation and damage to our reputation, any of which could have a negative impact on our business, results of operations and cash flows. Experiencing a cyber security incident could also cause us to be non-compliant with applicableApplicable laws and regulations or contracts thatmay require us to report cybersecurity incidents or breaches or securely maintain confidential data causingin the event that we experience a physical or cyber security incident. Our efforts to comply with such laws and regulations or contractual provisions, or our failure to do so, may cause us to incur costs related to legal claims or proceedings and regulatory fines or penalties. These types of events, and their resulting impacts, either impactingto our facilities or assets, those of third parties, or the industry in general, could also cause us to incur additional security and insurance related costs.

We have obtained cyber insurance to provide coverage for a portion of the losses and damages that may result from a physical attack, cyber attack or a security breach, but such insurance is subject to a number of exclusions and may not cover the total loss or damage caused by an attack or a breach. The market for cybersecurity insurance is relatively new and coverage available for cybersecurity events may evolve as the industry matures. In the future, adequate insurance may not be available at rates that we believe are reasonable, and the costs of responding to and recovering from a physical attack, cyber attack or security breach incident may not be covered by insurance or recoverable in rates.

Although we do not believe that the technology we have implemented or may in the future implement is at a materially greater risk of failure than that used by other similar organizations, our technology and operations that use or rely on technology remain vulnerable to damage or interruption from, among other things: failure or interruption of the technology or its related systems; loss or failure of power, internet, telecommunications or data network systems; and operator error or improper operation by, the negligent or improper supervision of, or the intentional acts of, employees, contractors and other third parties. Any or all of these events could have a material adverse impact on our business, results of operations, financial condition and cash flows.

In addition, our operations can involve the delivery, handling, storage, use and storagedisposal of hazardous chemicals, which, if improperly delivered, handled, stored, used or disposed of, could result inor if the location and identification of these chemicals are not reported accurately or timely, serious injury, death, environmental damage or property damage could result, and we could subject usbe subjected to fines, penalties or other liabilities. We are also subject to various environmental, transportation and occupational health and safety regulations. Although we maintain functional employee groups whose primary purpose is to implement effective environmental health and safety work procedures and practices throughout our organization, including construction sites and operating facilities, the failure to comply with these regulations or procedures could subject us to liability.

Financial, Economic and Market-Related Risks

Our indebtedness could adversely affect our business and limit our ability to plan for or respond to changes in our business, and we may be unable to generate sufficient cash flows to satisfy our liquidity needs.

In order to meet our capital expenditure needs,During 2023, we may be required to borrow additional funds under the revolving credit facility or issue a combination of new short-term and long-term debt securities and/or equity. We continue to assess our short- and long-term liquidity needs in light of the impact of the COVID-19 pandemic on the financial and capital markets, especially with respect to the market for corporate commercial paper, which experienced volatility and shortages of liquidity in March 2020. In response to these events, in March 2020, we entered into a $750 million 364-day term loan facility and immediately executed a $500 million draw thereunder to support our short-term liquidity by retaining that amount in cash. No further borrowings may be made under the term loan facility. During 2020, we utilized other existing sources of liquidity, such as our current cash balances, cash flows from operations and borrowings under the revolving credit facility as necessary or desirableour commercial paper program, to meet our short-term liquidity requirements. We believe that existing sources of liquidity will be sufficient to meet our cash requirements for the foreseeable future. However, asIn order to meet our capital expenditure and other operational needs, however, we may be required to borrow additional funds under the impacts of the COVID-19 pandemic on the economy, the financial and capital markets and our operations evolve, we will continue to assess our liquidity needs.revolving credit facility. In the event of a sustained market deterioration, we may need to obtain additional sources of liquidity, which would require us to evaluate available alternatives and take appropriate actions.

We have in the past entered into, and in the future may enter into, financial derivative instruments, including without limitation, interest rate swaps, forward starting swaps swaptions and U.S. Treasury lock agreements. See Item 7A—Quantitative and Qualitative Disclosures About Market Risk. However, these efforts may not be effective to fully mitigate interest rate risk, and may expose us to other risks and uncertainties, including quarterly “mark to market” valuation risk associated with these instruments, that could negatively and materially affect our financial condition, results of operations and cash flows.

Our ability to pay our expenses and satisfy our debt service obligations depends in significant part on our future performance, which will be affected by the financial, business, economic, competitive, legislative (including tax initiatives and reforms, and other similar legislation or regulation), regulatory and other risk factors described in this section, many of which are beyond our control. If we do not have sufficient cash flows to pay the principal and interest on our outstanding debt, we may be required to refinance all or part of our existing debt, reduce capital investments, sell assets, borrow additional funds or sell additional equity. In addition, if our business does not generate sufficient cash flows from operations, or if we are unable to incur indebtedness sufficient to enable us to fund our liquidity needs, we may be unable to plan for or respond to changes in our business, which could cause our financial condition, operating results and prospects to be affected materially and adversely.

UnderOur ability to comply with covenants in our revolving credit facility and our other consolidated indebtedness is subject to various risks and uncertainties, including events beyond our control. For example, under the terms of the revolving credit facility and the 364-day term loan facility, our consolidated debt cannot exceed 70% of our consolidated capitalization, as determined under the terms of the those facilities.facility. If our equity were to decline or debt were to increase to a level that causes us to exceed this limit, lenders under those facilitiesthe facility would be entitled to refuse any further extension of credit under the revolving credit facility and to declare all of the outstanding debt under the revolving credit facility and/or the term loan facilitythereunder immediately due and payable. Events that could cause a reduction in equity include, without limitation, a significant write-down of our goodwill. To avoid such a default, a waiver or renegotiation of this covenant would be required, which would likely increase funding costs and could result in additional covenants that would restrict our operational and financing flexibility. Our ability to comply with this and other covenants contained in the revolving credit facility, the term loan facility and our

As provided in our five-year capital plan, in order to meet our capital expenditure needs, we intend to issue a combination of short-term and long-term debt securities and/or additional equity shares of common stock. Disruptions in the debt or equity capital markets or changes in our credit ratings or other events could also limit our ability to access capital on terms favorable to us or at all. While the lending banks that participate in the revolving credit facility have to date honored their commitments under those facilities, disruptions in the credit markets, changes in our credit ratings, or deterioration of the banking industry’s financial condition could discourage or prevent lenders from meeting their existing lending commitments, extending the terms of such commitments, or agreeing to new commitments. In such a case, we may not be able to access the commercial paper, or debt or equity capital markets, or other sources of potential liquidity, in the future on terms acceptable to us or at all. Furthermore, our inability to maintain, renew or replace commitments under our revolving credit facility could materially increase our cost of capital and adversely affect our financial condition, results of operations and liquidity. Short- or long-term disruptions or volatility in the debt or equity capital and credit markets as a result of economic, legislative, political or other uncertainty,uncertainties, including as a result of the current COVID-19 pandemic, changes in U.S. tax and other laws, reduced financing alternatives, or failures of significant financial institutions could adversely affect our access to the capital necessary to provide adequate liquidity needed for our business. Any significant disruptionSignificant volatility or disruptions in the debt or equity capital debt or credit markets, or financial institution failures, could require us to take measures to conserve cash until the market stabilizes or until alternative financing can be arranged. Such measures could include delaying or deferring capital expenditures, reducing or suspending dividend payments, and reducing other discretionary expenditures. Finally, even absent significant volatility or disruptions in the capital markets, there iscan be no assurance that we will be able to access the equity markets to obtain capital or financing when necessary or desirable and on terms that are reasonable or acceptable to us.

Additional Risks Related to Our Market-BasedOther Businesses

Parent company provides performance guarantees with respect to certain of the obligations of our Market-Based Businesses,Other businesses, including financial guarantees or deposits, which may adversely affect parent company if the guarantees are successfully enforced.

The properties of the Company’s Regulated Businesses consist mainly of approximately:

The Company has ongoing infrastructure renewal programs in all states in which its Regulated Businesses operate. These programs consist of both the rehabilitation of existing mains and equipment, and the replacement of mains and equipment that have been damaged or have reached, or are near, the end of their useful service lives. The properties of its Market-Based Businesseswithin Other consist mainly of office furniture and IT equipment. Approximately 52%50% of all properties that the Company owns are located in New Jersey and Pennsylvania.

The Company maintains property insurance against loss or damage to its properties by fire or other perils, subject to certain exceptions. For insured losses, the Company is self-insured to the extent that any losses are within the policy deductible or exceed the amount of insurance maintained.

Compliance with SWRCB Orders to Reduce Carmel River Diversions

The 2009 Order includes a condition prohibiting Cal Am from diverting water from the Carmel River for new service connections or for any increased use of water at existing service addresses resulting from a change in zoning or use. In 2011, the California Public Utilities Commission (the “CPUC”) issued a decision directing modifications in Cal Am’s tariffs to recognize the moratorium mandated by the 2009 Order, and directing Cal Am to seek written guidance from the SWRCB with respect to any unresolved issues of interpretation or implementation of this condition. In 2012, the Deputy Director of the SWRCB sent a letter to Cal Am providing an interpretation as to the calculation of a baseline to determine increases in use of water at existing service addresses. In March 2018, the MPWMD adopted a resolution directing Cal Am to interpret the baseline in a manner that conflicts with the SWRCB’s written interpretation. In May 2018, Cal Am notified the MPWMD and the SWRCB that it intends to seek declaratory relief concerning the conflicting regulatory interpretations under the 2009 Order. In an attempt to resolve these conflicting interpretations prior to seeking judicial intervention, Cal Am has met with the MPWMD and the SWRCB several times. The SWRCB agreed to circulate revisions to its 2012 interpretive letter, which would be subject to a public comment period. Any failure to follow the MPWMD’s resolution or the SWRCB’s written interpretation, despite these conflicting interpretations, could potentially result in fines, penalties and other actions against Cal Am.

While Cal Am believes that its expenditures to date have been prudent and necessary to comply with the 2009 Order and the 2016 Order, as well as the CPUC’s 2016 and 2018relevant final decisions of the CPUC related thereto, Cal Am cannot currently predict its ability to recover all of its costs and expenses associated with the Water Supply Project and there can be no assurance that Cal Am will be able to recover all of such costs and expenses in excess of the $50$112 million in aggregate construction costs, plus applicable AFUDC, previously approved by the CPUC in its 2016 and December 2022 final decisions, as amended by its March 30, 2023 rehearing decision. See Note 17—16—Commitments and Contingencies in the Notes to the Consolidated Financial Statements for further discussion.

In November 6, 2020. On December 3, 2020,2022, the Coastal Commission sentapproved the Marina Application and the Original Jurisdiction Application with respect to the phased development of the proposed desalination plant, subject to compliance with a number of conditions, all of which Cal Am expects to satisfy. Cal Am continues to seek the remaining permits necessary to construct the Water Supply Project.

In December 2022, the City, Marina Coast Water District (“MCWD”), MCWD’s groundwater sustainability agency (“GSA”), and the MPWMD jointly filed a petition for writ of mandate in Monterey County Superior Court against the Coastal Commission, alleging that the Coastal Commission violated the California Coastal Act and the California Environmental Quality Act in issuing a coastal development permit to Cal Am a noticefor construction of incomplete application, identifying certain additional information needed to consider the application complete.MPWSP slant wells. Cal Am is preparingnamed as a responsereal party in interest. On November 14, 2023, the court set an initial trial date of May 1, 2024. This matter remains pending.

Subject to the Coastal Commission’s notice.impact or resolution of this litigation, construction of the desalination plant is expected to begin in 2025 and the desalination plant is estimated to be in-service by the end of 2027.

In December 2018, the Marina City Council considered the proposed amendments. Cal Am, CEMEX and the Coastal Commission again submitted letters opposing the proposed changes, but the City Council unanimously adopted a resolution amending its local coastal plan and a draft amendment to its zoning ordinance. Changes to the ordinance require a second reading before becoming final, which occurred at the City’s December 2018 meeting. The changes to the local coastal plan mustwould need to be submitted to the Coastal Commission for approval; however, the Coastal Commission’s November 2022 approval of Cal Am’s coastal development permit application has rendered moot the impact of these proposed local coastal program and are not effective until such approval is obtained.

OnIn May 8, 2020, the City filed a lawsuit which it amended on June 29, 2020 and October 15, 2020, in Monterey County Superior Court, naming Cal Am and CEMEX as defendants, and MCWRA and MCWD as real parties in interest. The lawsuit, as amended, alleges a claim for breach of contract against CEMEX and seeks declaratory relief to void the permanent easement and prohibiting extraction of water by Cal Am’s slant wells at the CEMEX site in excess of 500 acre-feet per year and the export of such water outside the groundwater basin. OnIn November 17, 2020, Cal Am, CEMEX and MCWRA filed demurrers, which were overruled by the court at a hearing held onin February 9, 2021.

OnIn August 4, 2020, MCWD filed a cross-complaint in the May 8, 2020 lawsuit against Cal Am, CEMEX and MCWRA, alleging claims for specific performance of certain provisions of the 1996 annexation agreement related to the property owned by CEMEX on which intake wells for the Water Supply Project will be located, water rights, nuisance, unreasonable water use, and declaratory relief. On September 9, 2020, Cal Am filed a demurrer and motion to strike challenging theas well as claims asserted by MCWD. On October 14, 2020, the court sustained, with leave to amend, the demurrers as to the claims for specific performance, enjoinment of invasion of water rights, nuisance and unreasonable water use, and the court overruled the demurrers as to the claim forseeking additional declaratory relief. MCWDFollowing various rulings on demurrers filed a first amended complaint on November 13, 2020. On December 7, 2020,by Cal Am, CEMEX and MCWRA, filed demurrers to the amended claims. Onin February 23, 2021, the court sustained, without leave to amend, the demurrer to MCWD’s nuisance claim and overruled the remainder of the demurrers. In October 2021, the court granted a motion filed by Cal Am related to MCWD’s cross-complaint, which motion requested a referral of certain issues related to MCWD’s water rights and unreasonable use claims to the SWRCB for its expert advisory opinion. The SWRCB held hearings in 2022 and 2023, on the referred issues before its Administrative Hearing Officer. The Monterey County Superior Court has set a trial date of July 15, 2024, for the City’s lawsuit.

In late 2016, the Salinas Valley Basin Groundwater Sustainability Agency (the “SVBGSA”) was formed as a joint powers authority to become the GSA for the Salinas Valley Groundwater Basin and prepare a GSP. In April 2018, the City filed a notice to become the GSA for the CEMEX site, creating an overlap with the SVBGSA’s filing for the 180/400 Subbasin. In 2016, the SVBGSA commenced preparation of a GSP covering the entire 180/400 subbasin, including the CEMEX site, but in August 2019 the City filed a notice that it intends to prepare its own GSP for the CEMEX site with the intent to severely limit or prohibit groundwater pumping at that site. The State Department of Water Resources (“SDWR”) has taken the position that until the overlap is resolved, it will not accept the GSP from either agency, placing the subbasin at risk of being placed in a probationary status and subject to state management. In December 2019, the County of Monterey filed its own notice to become the exclusive GSA at the CEMEX site in order to resolve the overlap, which is permitted under SGMA. SDWR accepted theMonterey County’s filing onin December 18, 2019, and now lists theMonterey County as the exclusive GSA for the site.

After a hearing, in August 2021, the court denied the claims brought by the City and granted Monterey County’s cross-claims, finding that the City’s GSA notice was untimely, the Monterey County GSA was the exclusive GSA for the CEMEX site, and the SVBGSA’s GSP was properly adopted for the entire 180/400 subbasin, including the CEMEX site. In November 2021, the City appealed this decision, and in December 2021, Monterey County appealed the court’s decision as to the finding that the City’s action creating a GSA was not void. The related validation and reverse validation actions remain stayed during the pendency of the appeal. On November 13, 2023, the California Court of Appeal affirmed the trial court's decision. On December 21, 2020,22, 2023, the court stayedCity filed a petition for review with the validation action.California Supreme Court.

In February 2021, the MPWMD filed an application with the Local Agency Formation Commission of Monterey County (“LAFCO”) seeking approval to become a retail water provider and annex approximately 58 parcels of land into the MPWMD’s boundaries. In June 2021, LAFCO’s commissioners voted to require a third-party independent financial study as to the feasibility of an acquisition by the MPWMD of the Monterey system assets. In December 2021, LAFCO’s commissioners denied the MPWMD’s application to become a retail water provider, determining that the MPWMD does not have the authority to proceed with a condemnation of the Monterey system assets. In April 2022, the MPWMD filed a lawsuit against LAFCO challenging its decision to deny the MPWMD’s application seeking approval to become a retail water provider. In June 2022, the court granted, with conditions, a motion by Cal Am to intervene in the MPWMD’s lawsuit against LAFCO. In December 2022, the court sustained in part, and denied in part, demurrers that had been filed by LAFCO seeking to dismiss the MPWMD’s lawsuit.

On December 11, 2023, the Monterey County Superior Court issued a petition for writ of mandate directing LAFCO to vacate and set aside its original denial of the MPWMD’s application to serve as a retail water provider (in conjunction with its effort to acquire the Monterey water system assets) and allowing the MPWMD to seek further LAFCO review of its application in compliance with all applicable law. The court held that LAFCO incorrectly applied two statutory standards and noted a lack of sufficient evidence to support certain of LAFCO’s factual findings. As a result, the LAFCO denial has been nullified and LAFCO will be required to hold another hearing on the MPWMD’s application. On February 8, 2024, and February 9, 2024, each of Cal Am and LAFCO, respectively, filed a notice of appeal with the California Court of Appeals regarding the Monterey County Superior Court’s decision to issue the writ of mandate. Cal Am is evaluating potential additional actions to contest the writ of mandate and to seek to uphold LAFCO’s denial of the MPWMD’s application, including filing other challenges and/or making suitable presentations at a subsequent LAFCO rehearing.

The Company and WVAWC believe that WVAWC has meritorious defenses to the claims raised in this class action complaint and WVAWC will continue to vigorously defend itself against these allegations.

TAWC and the Company believe that TAWC has meritorious defenses to the claims raised in this class action complaint, and TAWC is vigorously defending itself against these allegations.

In February 2015, the Board of Directors authorized an anti-dilutive stock repurchase program to mitigate the dilutive effect of shares issued through the Company’s dividend reinvestment, employee stock purchase and executive compensation activities. The program allows the Company to purchase up to 10 million shares of its outstanding common stock over an unrestricted period of time in the open market or through privately negotiated transactions. The program is conducted in accordance with Rule 10b-18 of the Exchange Act, and, to facilitate these repurchases, the Company enters into Rule 10b5-1 stock repurchase plans with a third-party broker, which allow the Company to repurchase shares of its common stock at times when it otherwise might be prevented from doing so under insider trading laws or because of self-imposed trading blackout periods. Subject to applicable regulations, the Company may elect to amend or cancel the program or the stock repurchase parameters at its discretion to manage dilution.