California Water Service (CWT) 26 Apr 182018 Q1 Earnings call transcript

Company Profile

Participants

David Healey	VP, Controller and Assistant Treasurer
Martin Kropelnicki	President & CEO
Paul Townsley	VP of Rates & Regulatory Matters
Thomas Smegal	VP, CFO & Treasurer
Spencer Joyce	Hilliard Lyons
Jonathan Reeder	Wells Fargo
Angie Storozynski	Macquarie
Tyler Frank	Robert W. Baird

Call transcript

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Operator

Good day, ladies and gentlemen. And welcome to the California Water Service Group Conference Call to discuss the proposed acquisition of SJW Group and its First Quarter results. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. to conference like to now would turn over the Mr. I and Cal Water Healy, Corporate Vice David President Controller. may you Sir, begin.

David Healey

acquisition and Thank you, me CEO; call proposed and conference Water today Service SJW Brian. Welcome our everyone to to is Martin discuss President results. first quarter its California Kropelnicki, Group's of With will Group and Thomas for earnings be replay can our quarterly available this release, today. Vice was be found Chief earlier Officer. Financial XX, President, our June call Smegal, Replay information issued which XXXX. dial-in until in The its

reminder, website As morning were this two call www.calwatergroup.com. at furnished accompany we this a decks earnings company's X-K an and before has is begin, the the decks with slide also company quarter. available slide The the to at

the to statements. cover to the results at acquisition, proposed quarter's like forward-looking moments Before looking take this few discussion of a and we'd

Tom they because Because risks shareholders forward-looking During deal differ Commission. the the with the make results expectations. interested actual the going press reports found may course materially carefully events, to advises strongly company as certain this, and subject as company could of disclosures from begin. call, I'm company's it time to statements Form to these read uncertainties, the and from are to current to of statements uncertainties Securities filed well risks this Exchange future on to releases the current and and in understand various and XX-K, parties Form other our company's XX-Q, and with over time pass

Thomas Smegal

cash, with compelling Water well Martin California merger we and why to joined Water to our standalone acquire results. quarter prospects. it's proposal Service begin us joining and of of SJW's SJW's CEO clearly Group. proposed thanks superior Connecticut as per to proposal our Good by SJW the believe share will discussion our with morning, Marty and first $XX.XX Dave. Thanks, and President discuss for everyone Group Kropelnicki, as for in I'm to

Following the will review first quarter our will our open to results. call questions. that After we we your prepared remarks,

over So, hand it let me to Marty.

Martin Kropelnicki

everyone. that Tom. taking Thank here saying I morning, begin cash deal San time a to Jose is proposal by us in good stockholders. for acquire busy want to Good $XX.XX this morning. for you, appreciate our been morning. It's to you Water I join SJW share a a

substantial SJW clearly offer Our and merger superior value pending stockholders SJW is provides to and immediate with Connecticut the Water.

page few to If turn three, highlight take in to what's you to moments included like a our proposal. I'd

SJW including cash for share approximately transaction of $X.X all debt. at First, we a $XX.XX to in acquire valuing billion propose the assumption

sent to the high and I'd on Second, the out closing at letter the Xth and closing written the also proposal offer the exceeds was they price. XX% SJW yesterday, on the stock XX% represents April like premium that board to SJW's price when all-time point closing time to a price a premium

value water. Our merger the be the offer could and which stock that exceeds far significant, all pending immediate provides under with stockholders certain received Connecticut for

integration agreement where into with this extremely and our we Water. is operations proposal believe financing would move We number Together Cal to acquisition SJW will little well us. know Because into our utility. that with strategic seamless a we about down diligence water the stronger based can risk. would any due addition, quickly street there subject California confident that fit their literally no we integrate is In and operational quickly. a not it from superb we forward contingencies and definitive to create conduct are the larger mile be SJW to

overall benefit operating from make the a would us one The financial companies to stronger scale, combined California. stronger us create enables State have of territory of officially Our within company and the these to State together joining a position bring California. system within our utility service greater

about our greater we offer serve. turn to substantial communities customers, minute. to to that SJW talk about will I I proposals we bringing everyone can want talk benefits directly page detail and in four are If our in why to I these proposal employees get stockholders. Our just a to

discussion. so we’ve This San did the good without over and to Since fortunately further they to a in stock to ago while superior two each XX% be to constructively long-standing their and years this, to our year Water San out our outright we’ve cash XXXX been several definitive had formal together XX% able into in companies September First, four was us. substantial combination discussions private numerous made to to at rejected to that there stockholders. the a September refused had to to entered time reached with Water had never relationship very we’ve We privately we but without Connecticut proposal bring a also times board conclusion. discuss offer merge from of our premium efforts a their includes a or then It’s it to Corporation. engage. noteworthy admired that that proposal, last and Jose bring Water meaningful was Jose Approximately them simply talking weeks attempts and accommodate six try announced of we of they a agreement

long execution apart rationale we all for benefits now approve with on proposal, X,XXX page turn materialized. so merger to to it approximately forward over stockholders as have with separate go that promise bearing associated SJW’s surprised would with businesses will strategic We yesterday our that deliver. the their right over the substantial prevented may for the Water believe I want April for the were the would value him the of rejected miles learning can uncertain different stockholders board if us. superior regulatory locate to actions in stock operating let under down know SJW’s inform comparison never wait well proposal we and they stockholders two decide themselves certain to value fact, they about have environments. long-term can Connecticut to laid and that term, immediate accretion give. our Tom waited cover about In In the but of SJW’s XX learn that be until deserve to

Thomas Smegal

Thanks, Marty.

rationale in anticipate million our Western and X five compelling details Cal X.X area. combination based, would people proposal. The our large be States over slide including San United Water the California for million of strategic company Bay to stronger a needs Francisco of So, and the better SJW serve the able the and customers meet create in

intimately the community, headquartered decision San with it’s a both about are we and its mile priorities literally in Jose, We are makers. apart and familiar

inside in of have water of water deep also and the California We Jose’s system sensitivities and supply, environmental into San particular. in many operational water quality systems

purchasing financial water to can far reliable with of and efficiently page in something system. to needed greater six, are with familiarity power stringent operations substantial be water territories Furthermore, benefits to If have that Jose and insure will the continue no standards. This meets us Our to the would difficult that seamlessly joining presence. operate to to increasingly stockholders. our enable I San you a that enable quality turn service scale Cal invest efficiently supply accomplish Water there to is infrastructure would critical our partner integrate combined combine Water’s economies more us and local has

and base carry total position utility. to $XXX ranging traded a combination As as the out XX.X%. you profile rate assets as of $X.X the enhances combined water financial company regulated largest million we would stronger access of net would have billion Water’s strategy. nation’s Cal can and with billion third ROEs to publicly X.X% We better capital see have our The approved income of $X.X from a

synergy to of deliver redundant and company eliminating the accretive be would related costs, scale earnings We cost meaningful and primarily and purchasing expect efficiencies. transaction economies would operating public to a

our grades to We are maintaining long-term back steady base strong continued turn drive investment our and also rating over And investment growth our Marty. would dividend. to EPS support credit rate it growth in now, I'll that in committed our and believe

Martin Kropelnicki

our benefits like particular other get we slide about turn overview six particular, page serve. of the highlight would I'd to like customers, Tom. meaningful and our that to bring If can are In page. I'd that stakeholders. Thanks, In to I provide seven, talk points on we to employees this the benefits everyone there to major on tangible to proposal an seven, communities

combined leading-edge we the the customers through First, better efficiencies and company of systems. receive customer well would operational service confident resources our as award as are information technology increased service that sharing winning and

California commitments deliver presence our we to a are value cost to cannot. including of make significant other benefits Second, savings the prepared local partner with and ways received sharing customers in firm we to

paid Our the increased fixed reduce by cost scale are will customer. us allow that each to

building of including utilities. has Water high-quality investment to record and proven water continue infrastructure had and provide critical planned a both efficiency also reliable to service maintaining and Cal maintaining operating the infrastructure we track diligently Third,

Next, for across have lead our customer stake. utility, our California personnel service and the the greater based invest believe we'd ability operations them the combination larger offer to clear greater to talented opportunities employees, and as we will in broader opportunities is

Next, communities the change importantly collective be all borrowing of we existing union local there enhance or by the the we agreements customer will represented personnel. life SJW's further field quality two same service communities. the in companies together, union number no in are of of could the represented Working and honor would in

larger a industry territory. leverage, Cal service would we initiative across quality leading example, For Water's water

We Connecticut to after same of to serve. far complete confident going to and our next our the is sustainability, size remain results options, conclusion. protection to to us a can now Tom, our diligence SJW increased to such upon We turn to reviewing XXXX. merger We to Water. And quarter our the closely the to turn environmental over proposal talk expand with I'm communities to believe work we moment as two agreed that the reach constructive finalize also stockholders engage the with talk to If like for I first enable We to definitive is will conservation, scale discuss going everyone get and agreement. and are SJW are superior steps. prepared will about eight. ready affordability, and believe who page the due SJW's programs we

Thomas Smegal

Thank you, Marty.

And now summary call six slide So, to I'm first we'll start going the quarter. to for page results on over flip earnings slide the financial decks to deck. of our go results the

operating our up our million, quarter, XX.X% first million. up expenses X.X% $XXX.X the to to operating up $XXX.X was revenue were in also So,

that a moment. interest talk were costs we'll Our in up, about

slide million net and of Our quarter during $X.XX a as the in the XXXX, compared to we to $X.X I a we'll gain up earnings EPS significantly, we of that deck. are investments lost of quarter our XXXX. seven through on loss in highlight to the the again we first basis gain first of $X.XX compared as as the had and this million a about capital of Flipping income do $X.X page quarter on talk go deck.

and the highlights, first Our the earnings leanest is financial quarter year of revenue. the always for

$X.X of If had in and the a back one during our the significant in a unbilled unrealized service $X.X million we've territories talked outside And last due we calls and from about And factors about that that's primarily earnings weather in years, that's sales with a we'll expense factors related does And decrease our as have is business revenue past the water use when benefit from main main bounce come losses That's breaks other related customer are and the water. time-to-time to in a first us in to you consumption number volatile activity our $XXX,XXX to quarter. our several on quarter. unbilled to having look immediate unsecured in increase seasonality $XXX,XXX is of reduction of break the bit our and the our really reduction the for stock revenue. attributable number in talk how quarters, customers some in from which lost Including million company's moment. the do quarter-to-quarter. these around income planned The investments. to largely a control. market

or see in not year. may of indicative may items these the we what be So, later

offset we a by I'm higher here been year. in also had million million we in installing California and of that wage do January and in XXXX. million had developer had cost to to capital expense increase funded body the increase maintenance in our well Marty taxes increases that the $XXX,XXX was increase Offsetting a on to that’s increased some were and to expenses A and million during the the property which CapEx our February investments a continuing anticipate price X reduction $X.X of related we to employee standard going related investments December for quarter. increase in that the over meet and to standard. slide $XXX,XXX project XXXX. have $XXX,XXX and we’re form eight. expect the had with throughout expense we I We company that $X.X the other XX ongoing rate And also has water company TCP, $X.X complying do Now, to CapEx capital lot treatment due we compared again an and in going we’ll California target an to in California million XXXX expect $X.X to do slide decision as in it again to and our amortization capital XXXX, with net a new regulation wage XXXX. including on the increase has in of continue to $XXX million the XX.X% and $XX.X million at last sites expense in activity would new changes for There had expenses $XXX employee these general so propane to and of interest related of company We turn items, of to that’s of meet depreciation CapEx. to in reduction that highlight here in

Martin Kropelnicki

balance along adopted conference looks the driven a in in because that our and our the the good and always revenue is for Great. our slide year. I is the Thanks, does like up and which true the on adopted through we’re what rate case curve, California balance eight being illustrating it coupled Tom job modify by revenue in is two-way include or Tom. business revenue first ask that this really revenue what’s always the account. slide to account eight to the goes by a in seasonality quarter this cost so, call number is RAM adopted be month was account so with

quarter as can you as this third as revenue first consumption you of to and the So, quarters see quarter go the the the so and quarter lowest our always are on up can is chart quarter there’s first best in year hit spring as always they slide to always starts we for the they go fourth are in the seasonality see the kind effect is so quarter really our kind start explains which into getting you and take to leanest of where start are of declining QXs terms quarter results rate this consumption the quarter, of release. see

Thomas Smegal

bridge going cost think EPS in we’re to are the skip that there time Marty I nine, about decision. jump will the slide about that of and for items being talked that’s talk the over we’ll I the so capital

Martin Kropelnicki

Great.

has capital adjustment job million Commission other issue includes California due X.XX of did California as it’s The and will saw, news efforts of to of in equity. that cost work company the proposed As if ultimately X.X% able rates during estimated of The by company good California a adjustment Service or this as been decision utilities this to million so we major done, you do the money of customer through $X.X to good water the proposed very hard an the about cost really led many hearing a state X.X% had common and raised from so the really State of proposed look for has were has that period refinancing. and the cap $X.X equity XX.X% Water the ROE and The and the on stay that to and a the the as the the efforts amount Lobby had the able in stockholders. ROE the to get Sacramento. an well structure with everyone’s you X.X% remaining company refinancing to which refinancing the a result million the another primarily public reduce with year is that to for is at $X.X discussed ROE we Water State

index. as rate you a of adjusted remember to been to payers. should be debt a through change making approved AA cost set utility rates, retroactive that case and If The decision was to at returns bond lower trigger CPUC it the back refinancing rate cost pass-through mechanism, couple change X the years rate ROE in believe so and adjustment XXX-basis of The we our authorized this cost in XXXX. a is pass-through January that point we’ve last every because also that’s for capital is given for that our the significant with Moody’s allows to

extent rate change. to rising over rates and that year. foreign we more change interest basis We to XXX the to than So, a points adjusted as have into apply environment XX% ROE to a go can of we adjust by a can our

we our So, and XX go out going we by start can in if the to up Tom? up. rates believe apply have just X%, going move to X% ROE under adjusted rate that period, as basis significant points,

Thomas Smegal

the on tax update Quick Marty. jobs implementation. cuts and Thanks, act

the four changes So, of that’s the on initiated customer’s expense the procedures in on earnings benefits and tax reform state incorporate to so, commissions XX% to change, the the the for our embedded utilities has on its to ensure summary June from asked literally of that tax have change the XX% regulatory the Xst. to from California purposes all operations, commission

Xst. lower going and we’re rates starting So, ahead June our to go

on collected for in of As over rates a that recording that will date. liability and a at future pass the amount we’re now, has been

with about deal to that expect deferred California liabilities rate that case Marty rate be to jurisdictions of about. assets general in is activity we'll the next talk The We will tax handled cases. that rate case and issue, in particularly related the balance the our sheet each

that excess, deferred the application customer how July purpose to remeasurement the we will refund after with file So, tax liability. to something in of

Now, me about it talk turn Marty, let to GRC

Martin Kropelnicki

Great.

are rate So, thousands before involves of in of preparation. talked cases massive about projects as hours the of California that we’ve general State

replacement So, primarily we awarded driven of by capital will in case replacement was in early – release. forecast second the transmission, July. base more needs earnings capital it’s quarter infrastructure aging XXXX-to than the be and The last for here in begin filing investment our anticipate including We XXXX will company the capital mains. rates XXXX general rate, the distribution what requesting rate cycle the

you, approved two what going an January request. rate California rates So, it’s capital a than years goes process, support investments tell and for and made and and it our as for be effective will over that in schedule, commission changes XXXX. other once the X, staff planned the prepare our lot The in company this last capital XXXX, how the words, we’re we five and for may we've with more years included XXXX recall, case of These capital to to everything to if XX-month for the about covers to we’ve working case, execute program. you for

this I also So, three-rate a case were like of ever kind cycle we’ve at prepared then from a And my perspective, we’ve case, the of capital planning. rate to looking gone regarding feel been. we best in terms

at So, going and out, looking what years are the company. needs for XX the that really horizon replacement

what give call, the we’re be So, general you July. case, second Tom? able color filed quarter for early conference looking in we'll rate be XXXX in will to it on more

Thomas Smegal

Marty. Thanks,

MCBA. the Particularly conditions respect California. and in about and RAM So, water mechanisms of briefly the the our with the status regulatory I’ll talk to

news working. that sales it’s a our of filing XXX% our we in about quarter, volume sales and decline reconciliation are mechanism, and through rent drought sign in January, people with out that adopted X% is that sales. And million call $XX.X in SRM, adopted million, volumes, new the this received SRM. first reported sales our after in $X.X of The the receivable balance by sales SRM the the California adopted So, that that water what’s our is change had in good relief, of our a general mechanism are escalation is rate coming adjustments the was great along and

money to or down spend it’s that see a receive that RAM us operations come So, invested once customers. start company that for we good is ongoing could receivable. be otherwise for balance That’s sign it the a to from in

month. net receivables, we in $XX billing began to March. recover we to And middle about weather miracle also MCBA conditions, close We a had in started the the of million RAM doing then really that surcharges on very

March calling think did XX and we about to at April. into miracle have of are in people afraid here that, tremendous years rainfall in amount a March ago. I But even California

And state. normal, lower so, good as not than of conditions most drought we’re And water I pretty storage in in but think as is okay, reservoir far conditions, the the really we’re in shape.

over in year as in patterns goes California see the concern always but next another precipitation always fine So, the water without there year supplies, concern is in a California. changes and we

see we authorized deal for we rain, the a the a then of And other had rate less through commission the X, notes January on wary a slide be notes XXXX, state mentioned about couple to million our of snow As projects that. at with XXXX. how projects company $X.X vice component long-term more have other approved letter and revenue. vice CPUC always just do totaling We and of the annual base because letter our to that's flip

is We if don't there the a flip for you later expense in end will you on it and so first effective XX%, statutory in other the bullet is we final mentioned mains I'm the on for be seen not some rate the the our again this update there that a law interpreted, repairs tax vice the - estimate be letters to second look between see the component rate earnings year year. those year to change second we files. XX% projects to so take call, on in reduction XX% it we has we'll on so you'll filed will We any a was and notes and Marty we close the XXXX reduction as anticipate and the the budgets pretty and us mention quarter. call on quarter, eligible forward of as a way pension at non-service the is do be go that, I income but filed additional now expenses you've few have shown during filing financial have to and to that going statements to different can in summary. today, that over Last be that presented company where obviously in than the an Marty be And changes before. could of continuing I'll these accounting quarter

Martin Kropelnicki

Great. Thanks, Tom.

Just wrapping up the never and we quarter excited QX QX typically is adopted close tell to don't breakeven excited curve. revenue QX. about about always as too people you saw We the get get

which up ended a break thought we So, big of about in did would we a we district, obviously school. where homes, and church have number the we Bayshore main be affected

mass the the shut church our superb uninsured responding we but open did our of and responded school Roth we had our a insurance kicks just a our church it Monday the Saturday retention management was under morning basically for I was kids to school team night moment Tom the despite for the extensive the to $XXX,XXX on back event, reserve want catholic back were the church and had school. - Bayshore in job flooding complement on So, to in mentioned that down, They crisis. the loss of and a before take quickly to

getting damage homes process for we're the were XX the hours. within there had in sustained we first addition, five substantial house of back in were that One opening affected, homeowners homes of the and and those the there. their In up re-work and that majority homeowners

We're a the CPUC their meet lot thing capital that us a the will job was what water this So, discussed initial as year, was to work the commission team hear of companies. the that it significantly Well, moved there the decision. and and issues to with was capital proposal payers. well as I the going great that. and other a reduce for fact rates California to which The decision is cost of cost pleased did good responding rate particularly from of with appreciate get

we've So, three cost good for resolute about I think X.X got a to of next for the capital years.

started RAM we're mechanism that's the mentioned, is net Tom, MCBA has for balance. the consumption since higher actual XXXX which the the the mechanisms, reconciliation sales first this been regulatory than seeing time where particularly has believe had Tom effects would As reduce positive of adopted us you to adopted I that that delta we We the gets a and accounts. balance and pretty be if the and big XX truing of kind gap booked function the between XX% there. of early sales up in forecast, remember on decoupling, sales XXX and

And it's to in we rate California filed I call. second So, see the focused quarter data And questions. time for with of steadfast finally on we numbers forward you are open cross. that some on lastly, nice the sharing those and that conference that, case look with to operator, our on will it up

Operator

Lyons. Hilliard question line Spencer from of the first Joyce our comes And Instructions] from [Operator

line now is open. Your

Spencer Joyce

call good the this Thanks for morning. Tom, morning. Marty,

Martin Kropelnicki

you? morning, are Good Spencer. How

Spencer Joyce

Two Hey doing from questions me. well. Thanks.

the why out, back really the to a high standpoint of mean Whether the refresh push want regular combination jump just of level decades. over to back on maybe why was it you regulatory played cultural, CWT, they hasn’t us I refresh kind from can that happened perhaps from on it acquisition, -- yet? a and or just First, -- SJW I hasn’t

Martin Kropelnicki

when Sure, get you franchised to a well married. remember to monopolies two we're people monopoly, franchised you and are agree need

We great on relationship used the together. Water members to in had San or back, be the going not we had Board same SJW always way, believe a board. building of with So, way Jose time a our were long ago we've way,

So that a history of there two go is lot way companies. back these between

year, host whole of discussions been while for they there think materialize reasons. a just throughout I so, And the didn’t probably has

kind were statement what to had. actually that in thought us are we put submit and a For offer to also right that we in was and our significant be Connecticut make time they to merger it writing benefits it. into us going believe was that and fact again, there a the of prompted offering now hard with submit it registration And

apart, you York sets mile that company two Board have D&O of two insurance. two If teams, companies on officer you two listing operating Directors, two fees sets are the public audits, a New of companies Exchange, about two that at public look sets of public of literally Stock

And in parties offer California lot very And a this a we of involved share that would that into release deal believe is so there make ratepayers. by to is in considered with that bring both what our put duplicative we in those the we costs transaction. synergies compelling it be our synergies

good for So ratepayers. stockholders for and is benefit a there

Spencer Joyce

and three of inertia Cal follow-up down sort that assets difficult lot anything a kind would work off that all San anything might do It's not a the that may Jose or long-term? Legacy on of at still persist to of legacy to Connecticut in is of road. year you that Water guess two, se East think you there but same franchises positives the kind I for the tie mean up there future, about mean being per Coast I with years is be this would I closed might the where indicate the about Water This kind SJW and point. Connecticut combining address, assume the a Cal we of if of assume reasonable as

Martin Kropelnicki

as rapport within regulation sometimes West a skill we the Spencer a we’ve of kind to and I California question and California. but a challenging, we’ve view mastered tough good people Coast and That lot is would you and being built State a of say brand know have answer. will historically been outlandish, that difficult as of maybe Company,

think of West Coast a comfortable being company. focused I kind So, we’re

forget in it’s have California for a We is. our to how a California example, big, CapEx have XX% in and state. growth XX% massive People is its California we

the we here, Union. It’s being to it’s the state state. think U.S. be. contributor in the to largest the great It’s Ag largest largest place GDP. the It’s So, a

and certainly lot here that are there keep of water So, remained needs we us focused. have challenged where

Now could yeah, and could, we running all think we kind like game Coast of think economies as the utility West we of feel I is consider the of scale. [indiscernible] I know, we but

result pieces to of operation that’s you the savings you the synergies other, the service have close that to get So, where for extent customers. each really operational in and improved are that

Spencer Joyce

I question. if above that ask, an the of for QX full QX, that or Tom I rate it kind but a the might next tax Separately, three for of way, I rate taken across me we thanks been across well model was might bit was kind point Yes, and year. we QX in what may expect quarters. wondering so cadence of be. rates talk if a addressing the the lowest like little historically kind standpoint, from could you guess QX still what of a looks similar the continue to of about we to there the see is maybe should QX, rate kind effective

Thomas Smegal

this schedules those to make us those and have deductions. in due a to be allows the we benefit determine I are, the on of the that's That that year, And of the the of and I in that do so necessarily pattern benefits Maybe getting installations have, the to tax in but later year. repairs and little or I'll going in think where tax the seeing in it's mains lower tax year rate that pattern plant last tax that's difficult those we in oftentimes pattern that with quarter. range the to been just slides those that's years. the in for mentioned service. of the the that that to So, really going maybe mains is three you estimates and tell a fourth couple what are next lot we're bit that quarters. What us you're in isn't terms deductions to land get the closing over remaining the construction California, later the

Spencer Joyce

had. Okay. That's I Thanks helpful. all guys. That's

Martin Kropelnicki

All right. Spencer. Thanks,

Operator

from now And our Reeder Sir, open. line from your Fargo. of is comes Wells the Jonathan question next line

Jonathan Reeder

Marty. morning, good Hey

Thomas Smegal

Good morning, Jon.

Martin Kropelnicki

Good morning Jonathan.

Jonathan Reeder

was SJW -- wondering, the envision you Is how could XX-XX stock… Hey, you I deal. financing it

Martin Kropelnicki

structure the we State As is part file cap contingencies. and California our of letter advisor of get our the together. noting to this offer upon Stanley, Morgan no with submitted deal SJW highly have regulatory to your put and an who Obviously, confident prepared finance closing, would they Board, could application approval a that then we that with you

maintain So, highly can this there yet, is get saying we have that can that to are us ahead transaction we confident about I done talk don't a pay cash. we of steps we other think that than and because off couple

Jonathan Reeder

assumptions particular, on $XXX some you there? the added of key of that way retention assume expect? the permanent you of elaborate synergies million of of Okay. Maybe some income basis somewhat get kind of does another to In net you can that said, a the cost

Thomas Smegal

filings. I only like as our in and Connecticut believe and don't available documents. documents I the quick call. some we the forma last did a get with have think the the what and street. was look earnings for probably it SJW last we far synergy took XX% But and and model looks in preparing than more And in analysis what merger there their release of kind that's were our filed was like front into consensus I with Board is Connecticut lower on basically data of me. as to information this given for estimates I able pro a I limited were night. the about the yesterday Meeting SJW mean

the of right updating working call to into boost one this and digging analysis. we'll after will obviously So be really our be things on accretion numbers the our now

Jonathan Reeder

Okay. I may you rejected publicly. mean And your proposal have lastly, the they just SJW Board how then seen

you you out a might I potential next letter. regard do the But think sent see the they playing with have steps to deal? how

Martin Kropelnicki

their rather registration and be their you'll which merger there We've cash is through us. do our Well, or stockholders will to have And for we're deal Connecticut an we like I a out let in a we to put combination have from see. with what think someone SJW stockholders and to offer essentially their all stock-for-stock efficient it forward market will gone doing, SX making the offer work? the stockholders on decide do vote want

to I cash all so, all the for on think offer. stockholders, it ultimately be within we've superior cash deal will a And we believe SJW offered

Jonathan Reeder

going your cross the that from the from an there that's to line point, from How -- in helping that engaging standpoint regulatory a then. is stockholder standpoint. advantage you're outreach be was but proposal finish what Strategically get your

Martin Kropelnicki

SEC went regulators. of phones ringing questions know the local to debt Well that's our going from through some I politicians obviously, and from sure and been I'm just X-K. calls with we gotten that I've already filed hook. in the and up the was some the the generate the

it's going think out be I to there. So,

here payers the stockholders. for is real the synergies achieved just how think be issue and how operational rate a well I better as can much can deal we bring as

now really a thing a heard me are pipes pumps and we company of because those they other and are prepared side, say the we’re physical you the and the to company SJW those assets, have for the to because really we real I commitments, assets same the employees ones The in. make that to honor just note employee it’s commitments the some want serving is the mention on are to of customers this, union of of take that operate are

just And operational so could think a to transaction hard the again synergies, the we be that this synergies achieved through lot of opposite there’s on those partners the of side it’s and that achieve U.S. with

Jonathan Reeder

Right.

of received well this further move you the files the with forward out, as as Okay, looking to forward as you well as combining obviously update. good course luck but signing

Martin Kropelnicki

All right, thanks Jonathan.

Operator

line Macquarie. the comes Angie from And of from Storozynski next question our

open. Your line now is

Angie Storozynski

you. Thank

the Connecticut of and and happen it the arrangement seen SJW it’s where my I is. the career the question usually So, that management looking and issues would with management think similar be at is problem around is Water cannot past, first kind I’ve a looking that’s succession that deals succession the

there anyway So, address a is guys to you between and impairment SJW? combination to this maybe

Thomas Smegal

hospital the It’s a on fair believe obviously dialogue but several refuse and offers this be to we like, by isn’t a cash to combining be with market very us. at SJW. I we board forward, kind want hard other have submitted and engage by doesn’t good but can’t on to of We based what say it’s to engage, that. party the would talking they premium when the times way and bed the table written would love space, for a we about believe that

Angie Storozynski

so secondly, And invested about file. under up you're assets to in to another your big we're Okay. Jersey then the step clearly you the CapEx see hopeful from have guys

utility. to with you So goals, in in make of your okay an business some so it’s think plenty yet X.X worthwhile rate you and have times offer opportunities existing base California

versus talk larger would your on the how paying, rate So you to base recognized the be future that full your how that goodwill sheet paying premium earnings be amount earn and me this for, just through the accounted able dollars? other be of you’re would ROE would key you’re on big balance

Martin Kropelnicki

model an obviously and things us operate address utility, road can two fundamentally things, you Sure, we’re of I to the our that goodwill, of extent the can’t I table. scale spread larger economy you one right some it one at to fixed economies of those scale. sitting some can utilities not base. and to of utility just goes back when because take under you things expand your we’re point That’s cost at where it of the can the because we address, can really But work

So, first foremost. that’s first and

Bay we area. XXX,XXX So, serve population in Greater people a the already about

all We’re just Area the to whole spread, much state. a over itself expand in cost so around fixed us the broader region would our through SJW, pulling let give that by base in would Bay our us, allow piece alone

between synergies. basically traded lot publicly we cost Second a again, that good cost. doubled two thing have are it’s about the duplicative And companies

So, for premium. they’re jurisdiction, able door to it us. terms in that would are premium the certainly we it those the centers, premium right pay a squeezing it line SJW. we’re affect in state, the that the enable affect extent, of those fact rate synergies pay are would is to the a different extent not in the next amount different driven getting to us of pay amount bottom they really And a To they basically to to by could

and payers cost that rate synergies lowering fact the we that’s believe their think there we're cost. down rates reduce willing bring a that to So, share We with point. fixed to synergies those significant significant their are by there, help the

Angie Storozynski

company or just into the entire really a a purchase the the But be to given of that that acquisitions, the it very would Would was already seen I state commission? just time. haven’t picture the base for little rate of question allow the a you by rate base authorized bigger the price is put scale it long acquisition California bit

Thomas Smegal

we’re in of companies. the is customer into And negotiations. Water subject I've to be would dealt real Domingo’s a proceeding the started base point time, both two we our Cal to law this the premium there able some of process premium take merger, regulator, merger clear of And this So the yet. tell XXXX-XXXX. relatively at back and early, State plenty that and we get and on. really commission, companies that counting with premium the base. be to – is to a of recognition Water savings expected your allows and really as that’s at rate and put haven’t a has could limitation rate that’s were really the -- show regulator the customers the on the that benefit a But, in of that large The rate regulatory a with off to earn that’s it acquisition an could angle for you that But that could at it put, hard put savings benefits, amount on was customer and the a you and in those the looking base we long to were of from customers that such synergies instance, that, into

Angie Storozynski

you. Thank Okay.

Operator

Baird. [Operator And Tyler do we have from Instructions] One from for one moment questions Frank please.

are Your open. lines

Tyler Frank

the Thank Hi of you - and on you. can to you need discuss from {indiscernible]. there {indiscernible] and provide standpoint word any standpoint question. guys. Thanks would need what about further if capital from is And capital year, then It standpoint? is from you could needs for sort this is taking about that things equity debt any color how

Thomas Smegal

California that that of this – Let capital California in presentation credit line so go from and investment line have our a strategy do of through, two calls year in limitation the and to by XXXX. for so need on use me our we to we’ve commission off line and get been we a October not past financing were to it credit our address finance ongoing,

expect financing now end. and we between some So, to do

whether that {indiscernible] that So, ongoing it’s this an at whether point would operation debt would unclear in be equity. or

match commission. by Our been that’s has try to goal been awarded the the to years equity the debt structure, was

our doing So, or to as decision. look equity debt to we’ll guide continue that in when

Martin Kropelnicki

would program. on page capital refer of history I slide the show deck. our from and XX the just again Yeah, We

our comp is XX-year annual shy XX.X%. rate growth just of -- current XX% So, it's

it’s estimate for For about XXXX, of cycle year, the a end XXXX us. we the third rate case

track goes in we’re regulated of we and But engaged the in been capital core SEC available and analyzing in And we've they’re a the capital the filings to capital we to do they They similar little California the it Water, and of this experiences still year. program same need committed endpoint what and had last have project-by-project kind on needs are, in {indiscernible] a all would do. their on nothing of commission the continue in don’t than But have that we the process. rich rate capital a utilities regulator lighter that's fully our more year will drive what be the fully has have Cal through. where probably have and basis. information, I down And So, very of want Tom of any for see I the diligent we process, is by projects what’s I think case for said we review there don’t going that and speculate process again that. of changed terms so. to SJW, of forward we

think needs SJW as as similar maybe probably large has would I what have. with that So, not we capital

Tyler Frank

you. thank Okay,

Martin Kropelnicki

Tyler. Thanks,

Operator

further the Marty Kropelnicki I turn back for call no remarks. like further questions. would And to I’m to any now showing

Martin Kropelnicki

for we covered And information. be any of this for the combining believe come once gets we'll call put look These discussion case. able to lot one, we there we forward rate SJW forth offer say our and believe, will synergies on Have we lot appreciate service that and at July, our a and in I cash more improve it a look of earnings And on talk talking at I end point rate when everyone filed. that to create to like we're color we the rate And And case any things, superior. conference to be want with of Tom we face a stockholders the to we Great, that it things closing, SJW And - to about the more improve can good to stockholders. provide good forward general was all about two of with two SJW, XXXX to QX us. day. will results customer case QX. being at you that,

Operator

program. thank disconnect. And great gentlemen, you for participating a today's have day. today's in Ladies now conference. Everyone, This may and you all concludes

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