SJW - Earnings call transcript Q4 2018

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Operator

Good day, ladies and gentlemen, and welcome to the SJW Group Q4 2018 Financial Results Conference Call. 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, today's call is being recorded. to host like Ms. today's now would introduce for your conference, I Papazian, Counsel. Suzy General

begin. You may

Suzy Papazian

Thanks, the Group. Welcome President Chief Results Eric operator. Financial to Chairman and Conference XXXX Fourth Thornburg, and Call Financial Chief Quarter Officer. Executive for James the SJW of Presenting Officer; are Full today Board, Year Lynch, and

For would like these on available are at those to www.sjwgroup.com. accompanying who our remarks follow along, website slides

appropriate related you begin posted today's would that its and assumptions, estimates presentation, expected website from the this factors of as developments contain Many the on factors materials actual under remind could trends, cause in well historical by company the are or and expressed may as forward-looking statements and we our different the Before are future be These like presentation assumptions I conditions, statements. performance statements. to company's circumstances. that current by made experience, light other to on implied results forward-looking those believes the based company

website. made description X-K and duty For and at forward-looking Group forms be look our factors, which Exchange update on can to are today, revise disclaims copies you XX-Q may available our those or Securities statements of with XX-K, Commission, as the filed statements. of of and any All SJW a such

the the presentation. of questions end You have at to opportunity will ask the

webcast of a be being reminder, archive and until the will As April this is XXXX. webcast available an XX, recorded

and call to website. will the I press over You corporate can now access the webcast release our on the Eric. turn

Eric Thornburg

to and Vice am Jim of with quarter is Jose thank of us. San President results from Executive SJW and everyone, President and be recurring of Jensen, it for joining Financial delivered I'm serve Suzy. Group, the strong year operations. honor pleased Lynch, Water. Officer Palle SJW here Chief SJW very Group. as and Thornburg CEO to Chairman, I Thank you, and my Eric for Welcome, you

years the accomplishments accessible our and processing million to infrastructure financial Water, SJW including Water San the rate of XXXX Jose a retrofit our Water of communications year rates setting were stewardship, water our also in significant our of addition and $XXX successful meeting public of website. completion program; standards continues and utility environmental XXXX; with through investment discuss and In high San to case sensible systematic to further of number through the on drinking enhancements Incorporated. our out, delivering regulations, project; combination Plant customer Service stand to addition which Treatment strong Water's stakeholder environmental our Montevina we Sustainability to Report that general another plant there for pursue commitment for the results, the health our and Connecticut on Jose program; compelling

thorough after As or Utilities decided file regulatory in we with a Authority, our yesterday's and Public new Regulatory noted together Water, we've release, Commission. approach, review of the to press Public with Maine Utilities Connecticut the PURA, applications Connecticut

commissions the of combine would several with to a compelling best new SJW intends Connecticut PURA stated Commission end, combination combination that We last the expects shareholders. to best the PURA's December then have Water our of reopen we and to and of path we proposed Both Utilities forward. application financial and subsequently demonstrate benefits unique our concerns SJW and what customers, our combination Upon and to interest Connecticut As and communities, final can in the Public file benefits denied issued applications you to evaluate request decision and and that for we a pursuing Maine the record with final Connecticut our employees July Connecticut important combination. QX. in environment new additional address the with and in both legal closely our with believe denying combined reviewing adequately XXXX, to Water proposed be and XXXX applications Maine advisers, is withdrew in PURA's that our our concluded across this demonstrate to allow our Water, consultation and To concerns in all stakeholders pending before forward potential provide the interest, the remains in PURA the stated time our application to the the to weeks path know, public for then decision, spent the organization.

who advocate remarks, will Jim's customer and After be both more be throughout reliable staff technology, service efforts also address in do review of market than key the and business results. proceedings. our of and a for We public will Connecticut and leader financial the operational, offices other commissions, and Jim, these customers. Maine to their the our water I in We continue over service regulatory and opportunities providing will responsible Jim? to capable respective time states environmentally their new employment innovative and will now turn to call all believe company sound members and will thank fiscally the safe, matters. I

James Lynch

Thank you, Eric.

Tax California fourth Texas, customer the by the Tax the in decision our Our of Act, positive Cuts cost operating quarter higher impact in capital results and or the water partially usage rate reflect both impact and and Jobs and Act. increases California of of offset

addition, due cost offset higher experienced production partially to lower increased price In of and usage, we primarily water. by cost higher surface water increases wholesale

increases over million in $X.XX This quarter per fourth $X.X diluted of XXXX. share transaction million, reflect quarter proposed contributed acquisition or and connection by $X.XX per increase for $X.X million memorandum balancing quarter connection items expense was $X.XX $X.XX in and revenue CTWS Our the share $X.XX. share per surface Rate of were expense decrease share, also transaction These our and for share. increase $X.XX of $X.XX per higher results per of the offset share depreciation share. was or with Fourth higher income per Services. diluted quarter increases Net incurred amortization compares million XXXX. account of the water incurred in other share. earnings per contributed availability cost with and fourth contributed increased with of of The in Water $XX.X share, our for per Connecticut revenue $X.XX per was the acquisition costs a an quarter $X.XX $XX.X diluted

to our increase proceeding sale taxes that and for a gain recover a The Texas decrease for our in sale XXXX, Texas of the million the benefits XXXX. a both No from XXXX, addition, company District implemented activities Clara to Santa revenue. capital regulatory by rate Act. The a regulated rate the additional the to implemented groundwater offset our In our Jose XXXX commissions Act The directed July in a of $X.X decrease $X.X $X the general by X% District. or on or as rate pump share from pass quarter California regulated million in of general decision. in on cost increase the fourth customers. also XXXX Tax occurred Valley implemented Recall rate TWA. Water effective in XX% Rate increase, quarter Water in and provided by was million rate we a cost of X.X% a recognized increase purchased the and of water Water were from $X.XX company case of increases of company similar California resulted fourth implementation of increases quarter per XXXX, Tax January San Alliance, X, X, X.X%

Other for and to maintenance quarter, water $X.X higher $X administrative operating primarily plant The by new expenses in added and were million customers partially added addition, expenses. net production increases memorandum in was in increased new increase million CTWS cost Water million a a and in revenue the cost $X.X related account In of and of quarter. balancing $X.X power $X.X $X.X of recovery surface decrease These a increase primarily lower increased in offset partially million, expenses cost increased in in customer usage offset million of by increase production during our higher $XXX,XXX. expenses million unit million to $XXX,XXX. of due balancing the due for general million purchased water $X.X acquisition and an additions, of memorandum cost per and of $X.X and decrease accounts $X.X to the and million $X.X utility depreciation impact million.

of by was contributed share, Account, factors income and in impact share Water million, decrease Net primarily For per last many customers which customer to of memorandum contributed availability contributed water contributed offset increased capital the Conservation $XX.X the million California WCMA, $X.XX $X.XX $X.XX of XXXX surface share, by per same quarter; a account and rate XXXX. proceeding million as changes XXXX diluted due represented revenue $X.XX of year, were driven X% same $X.XX was was year. per share; Tax period Diluted merger-related $XXX.X increases earnings and Memorandum share the new of or per by additional The or in the $X.XX. $XX.X balancing or increases share. per of usage per share; compared $X.XX the cost impact increase per the to share cost decreased of and $X.XX the increased $X.XX the per These Act. the net over per share diluted an

of of and per This $XX.X XXX Other the of gain along expenses. $X.X due and a were rate by primarily XXXX cost was $X.X million also XXXX. $X offset capital of due of $X.X depreciation increases earnings included in a $XX.X TWA offset million increase expenses million Increased In million $X.XX. and from related the per pre-tax to TWA increased Water our primarily resulted $XX.X reduction depreciation Act and revenue per impact sales a to undeveloped of share due CTWS in in that the million million. sale water of and These West land year-to-date for customers production expenses addition, lower memorandum implementation Act. increased and in rate and in Guadalupe-Blanco and Authority, to $X.XX cost expenses, increase of Tax Street XXXX, balancing customer additional in per Partnership's The share Santa million base of in accounts $XXX,XXX to were was changes production power million partially with in $XX.X water million. $X.XX $X.X rate and sale account higher a offset per $XX.X proceeding by $X.X a Clara $X.X water cost change per in additional a $X.X new WCMA, share, XXXX, related operating real in and of and a XXXX. pre-tax increased and of and $X.X of by the on other by to in higher million reduced million Land No which in pretax recovery interest similar million balancing the to production the the XXXX expense revenue gain million Other estate $X increases the contributed occurred operating related lower Company and of owned partnership authorized commercial memorandum owned. gain amortization cost to income proceeding. items $XX.X decrease net million in decrease Rate River capital acquisition cost and Limited the $X.XX million the expenses federal building that sale year-to-date on the an implementation return from $X.XX of in Tax the Recall our increased sale usage revenue cost California share, million a higher added surface of increase respectively. unit in in other SJW added tax partially sales cost of share purchased million usage. land, of $XX.X another

mentioned, I As in XXXX. transactions no occurred similar

total capital our of expenditure plant capital to quarter $XXX to the million. funded in utility added year we million bringing additions the $XX.X for company now Turning funded fourth in program, XXXX,

we and decreased and the a Our XXXX $X.X balancing and memorandum items. water short-term of for non-cash million adjustment quarter, were plant of additions bank activities. the a capital a in income was decrease million cash $X.X by operating primarily $XX collection credit partially and At our of working reduction increase from had end in million XXXX. income decrease lines after production for tax net on other in accounts $X.X flows utility expenses over These the XX% decreases $X.X offset financing available reduction receivable. million the operations million accrued of of of The result

purchase that XXXX, shares, we we approximately CTWS X, stop general to on intend SJW in I new the call proceeds finance will With and issued or, XXXX. Eric. the use share approximately $XXX XX% million an purposes. the shares, over turn issuance approximately to for to in of price Lastly, that transaction, X.X December net in of back to the The offering raised million of that, absence closed corporate

Eric Thornburg

remain favorable reality the to supply Jim. above recent that atmospheric you, water year. a of increased water California's ability is this Clara the to that beyond. and the Thank both bank linked in high-quality rivers of levels outlook snowpack, and in environment, Santa precipitation series service local owing remains groundwater their state's for reliable water very average largest SJW Locally, reservoir, range, a Valley inextricably the signifying time Group's full Sierra to in the locally deliver levels our to available. safe and is health of normal

and stewardship operations in guidance Sustainability always to cement a our health the reaffirmed has our as corporate delivery. as industry further provide service This longstanding to As critical our company's protecting on social supply of will Board treatment, commitment responsibility aspects key Board safety, water culture. reported, water of our through previously and look environmental and of Sustainability to committee status part we preserving been environment and creation the including Committee. the program, a leaders we

investments sustainable in approaches our continued service in leak and before to role to resource. acoustic design surface, using evidence vital our locations leak and all understand of satellites protection facilities build sensors are our water the environmentally commitment pinpoint they new to actually system this sensitive acoustic like future. a high-tech of stewardship providers, our innovative water As detection, technologies, And we in

and recognize sustainability that aspect information touches operations. water also of business, quality from technology our every to to We

environment do While we that ask announce To has our where This can customers future both has of already further and comprehensive and engage Sustainability proud will accomplished, to been further I commitment. to can what employees. be must and proud its we we our stewards the first for demonstrate look SJW our end, Report. that more areas role also today's of document as and forward also in successes Corporate report published we recognize can what of generations am

now historically to the Turning have commissions system have accordingly, infrastructure regulatory regulated need in Texas for continued and the water utilities Both California recognized utilities investments affairs. and, make to public enabled water our billion systems especially SJW's Capital been investments. In serve. It's last invested has exceeded the Program the we Consolidated than and $XXX those noteworthy that million. XXXX more in $X decade, water communities

term, In actual and utility XXXX to the numbers will totaling opportunity X, through of the realistic be SJW's of changes, million. the received Water's service ability levels on approximately rates to and long receive customers decision allowance sales regional communities a of on residential Jose provisions to through became XXXX. a company that provides and the validates current onetime period X-year service final $XXX rate rate $X.XX. sales XX% enhance new these June high-quality issue include safe, program for the reliable A in the approval business the program. December with capital San decision Key XXXX collected investments, total fix increase lowers refund XXXX, additional capital with X.X% allowing decision million also of San deliver Jose rate Over typical revenue decision general, company's covering recovery efficient they benefit covering effective the to its general The shareholders Water customers, of model charge, for increase XXXX earn for to refunds a totaling cost The its shift proration $X of about received through and and Jose San customer January Water rate investments return. and a as a consumption. XXXX. case, water a XXXX supports shareholder years nicely align authorized charge for value.

ratio, has dividend payout with between over growth. Creek We the to the into prospects organic also our connections in and of base of a and anticipate in January shareholders. States. acquisition growth was bringing increase each fastest-growing matter Since to returning have XXXX XX,XXX. value per payout our XXXX. the and X,XXX earnings. robust growing Inc., wastewater a dividend authorized acquisition last approximately of continues in XX% continue year a to Texas X.X% matter and to reach diverse in is as September this dividends well Board compared recurring increased of a this and Ranch record $X.XX investigation and cooperate XX%, in previously through supplies, With growth another the dividend what of in track dividend of company's annual and grown to XXXX. for of our the resolution increase to portfolio Utility, years, shareholders water additions continued XX continuously its one commitment capital of. a water as Wastewater strong the with its total dividend remain the in regions share system paid the SJWTX, the delivering as United organic to line for XX% SJWTX us to continues business the of a over increased strong enjoyed SJW's concluding raises resulting We've to This in XXXX, be a in proud Deer to CPUC's years, and about growth XXXX reported fair the to This consolidated earnings. shareholders, Total strong record more be target acquisitions, and XXXX, we Demonstrating or from the to XX SJW's contributions customer Water paid dividend optimistic

water-related Peterman, appreciation and the in their I'd our Lastly, back faced welcome With we utilities. Genevieve Utilities We California's to for working the look Shiroma to to that, Carla a like colleagues warm Commission to her questions. to service. Shiroma to to regulated staff the Public would outgoing Commissioner express call many extend her and for water the turn Commissioner address forward issues like operator commissioner, to with and California

Operator

[Operator Instructions].

with Our Durgesh first ISI. from question Evercore Chopra comes

Durgesh Chopra

I the actually questions, have two merger. both on

terms stated going in time the second you has said year. line, actually release your in Just the think how Then the you so Eric file in here that to this quarter in decision? early the time you're and to again I much on of commission on, rule commentary that

Eric Thornburg

that background line Regulatory has period the in decision. Utilities statutory for Utilities a statutory you made, filing but it we'll carefully. new length to When Public Commission XXX-day purposes, runs Connecticut the Authority the But Thank time for Maine same it a Public so specific a the just question, ultimately can Durgesh. which is have about that, track its reach of for provide does The period, not time. typically you

actually file have a can when then both once by So project date, if the approval we we states. we schedule close get and might and regulatory we update beginning

Durgesh Chopra

the of then is And how California tie review Perfect. merger, all this? of still into that or just does ongoing, that

Eric Thornburg

Yes, a Commission we in the There few here weeks the input ago session here Public thoughts Commission to were, that, Public was Investigation, accounts, of very just and and this up. feel that Instituting our area. or California in public I what close San customers Order gave as think, a Utilities Jose. a And an that view by well wrapping we all went to refer had pretty OII, launched Utility

may would hold announced we've up. from to decision refile, next wait It's come see, wrapped is that again and And that, that so, would review possible PUC. decision but a their California nearly our step the as be they the to

Durgesh Chopra

Perfect. And one just last. then

you're have? if -- raised wondering the going that a an commentary event that like could purposes. doesn't merger you've mentioned was on close, corporate What options to elaborate that your you you little the is are that bit. that in what money for You the use that in I

James Lynch

Jim. Durgesh, this is

a committed So this our we've through, or go S-X, that that had board acquisitions and the point, use in buyback. money the we not event include in purposes in I structure. would But alternatives to of that could efficient. is we stock with considering we the general At our dividends we equity would corporate may be tell mentioned And any acquisitions, the terms an without transaction structure XX% doesn't discussions or for money. capital of had that what with certainly, capital the terms you not disposition can efficient what of that they of consider maintaining a all in about are

can point. all that's we by guidance So this about give of way at

Operator

question with from Michael next Scott. comes Gaugler Montgomery Janney Our

Michael Gaugler

I am from or quarter, just SJW question. I if filing? or the one wondering on impacts territory its has Perhaps foresee can either California you negative had service any PG&E's

Eric Thornburg

the properly and issue we I think don't lands likes. do. fire the the has managing around concern watershed elevated Certainly,

-- particular impact impact standpoint us, general don't from Michael. on a we but there, So see of any

Michael Gaugler

we ago, or Okay. mentioned going for you to And watershed much SJW many, look a forward I know follow-up table? pretty do many was to something out clear not off tried now its still that watershed. so. since years is the the and like allowed that Can

Eric Thornburg

all to some we it. were We would concerns really resource work great wanted great works clearly and raised And a and if people very, to but with had officials very certainly in was intentions. constituencies, of -- among We carefully fire It with again. that We of properly area. closely group controversial. steward pursue that property owners. take the regulators We've got local care that

all sure watershed. also our that and we care took carefully understand met we role make we'd of those with this, work very the to good so concerns, parties but And on their

Operator

[Operator Instructions].

comes Jonathan Our from Reeder next with Wells question Fargo.

Jonathan Reeder

know I with bit, a but decision that it of had it? you that going you elaborate believe to little look was proposed come denying can with led any could hoping makers previous of of to state you they're Eric, bias with the address the specified decision in as fresh to a PURA's at have the -- lenses what opposed I merger a through you in concerns, set lead you you the conversations to application. refile think conclude you

Eric Thornburg

extremely The PURA's that Jonathan. clear straight question. made helpful I was to draft us. what appreciate you, the decision It was very talking. and areas of Thank were focus

areas of I staff when focus. address commission testimony be evidence filed in in will proceedings. filing Pennsylvania, our worked I intended those to actually and specifically Pennsylvania remember So

able you so but the And are they process, different. a every in early is of were view get of to kind where commission

we were what areas when And clear those were. very did we then it decision, the -- so proposed us, for to finally us final receive when became

fresh look taken we coming at and that and address having adequately burden consulting respect So we in, those. believe other process can make eyes, address recognize some But we a we sure that to that we their back concerns alleviate with that careful and the experts and that commission have we those issues.

So I do sure that can, respect believe that again answer to that have the confident and questions any and feel but we their with very commission process we we remain. a that's make of

Jonathan Reeder

mean, control, others your ownership some of obviously, like stuff that. I are kind those concerns are, concerns, beyond Right. addressable; local of

So to addressed, have state, still deal. concerns the any you be to is can address just can't do XX% than insight, do with there XX% blessing commission with enough importance others? all the greater that that's you you the the them want keep concerns, simply which weigh Because but from of

Eric Thornburg

respect process. do Jonathan, I believe control. have of for I how on local specifics, concerns, real like we to we but won't actually to address those we those intend have ability the concerns, the address some go into

proposal in Connecticut our craft commission, and our case so and in and And Maine. best our then we before accordingly, evidence will the make both

Jonathan Reeder

at juncture? this insight any nominate Governor on I've seat any then Okay. indication And empty think PURA's -- to Lamont I the intends to seen don't who

Eric Thornburg

proceed any in Acting possible in will and ahead quite serving. very time Betkoski, not names our that intend well. for experienced be commissioner long third as It's QX. that and to filing heard but and we're Commissioner, with go the by We've both Chair, Karen, hearings, the appointed, We the

in there in prudent the believe the commission get we back quarter. forward get to so second it's of And and that front

Jonathan Reeder

Okay.

So, third I with be the made? a line going time appointed mind the wait appointment don't know, in guess, to is which for and I you to be need you guess, your don't commissioner to

Eric Thornburg

right. That's

new got a You've governor.

that the look lots So two on that new And in be with at can new whether and we appointed as to will concerns. will -- the information reflecting time we address and commissioner areas but commission place. the focus the able -- commissioners need forward or not, believe there that, governor we we and address and draft there a is the the PURA's decision put evidence going to proceed at those with we be

believe now. wait to control be we right -- we can don't address commissioner for a the third So concerns and to we that, so but appointed,

Jonathan Reeder

if need And you a commissioners, would approval? Okay. there to are vote just in two then there then X-X get

Eric Thornburg

Yes, would we votes two need regardless.

that's if We there were need would unanimous scenario. a right. need commissioners, that two we'd So in decision -- just

Jonathan Reeder

Okay. we thinking proceeding, And CPUC's order the about just that? would question have be some attaching be concluding on or should how sort or like, they is would be lastly exactly it going Durgesh's whether just to an back then or jurisdiction what it even mean, of I saying addressing? not conditions to merger? Or

Palle Jensen

here. is this Palle Jonathan,

-- commission and and has it then only should matters whether and procedural in that front now ahead jurisdiction the have get want the submitted don't completed. decision to all we it this how would in decision, want decision come all at on been followed but the that been steps be there get rests commission whether a evidence in any company case, commission front of right would at impact point. time the of by is the be would to could that any Water And proposed the has Jose over don't expectation We such San impact customers -- determine rate of transaction addressed. Our be rate any the are

So issues -- be expect be the in the major we proposed those decision. that will would would commission their to address

Jonathan Reeder

Okay.

figure guess, an do just we both that do It get want of -- way and both, want to to it's so additional issue? rate "hey, say, have we out the handle address though. So it I jurisdiction now wouldn't It would outstanding how would proceeding cleared impact." out we're we not, and any another to

Palle Jensen

That Traditionally, the addressed of utilities. in the California general transaction customers would expectation. in cases following any be rate the has commission impacts on

to in the been has that has issue. addressed manner commission impact which So the the traditional rate

Jonathan Reeder

Okay.

rate make -- the general next might case to but the be that until wait it, would they to saying would they in having you're they sure So OII signal do

Palle Jensen

That it these expectation been be the address or and be addressed would has signal that how -- our traditionally done rate would matters rate commission future cases. would would in

Jonathan Reeder

Sorry, today. for Appreciate confusion guys taking the there. you the questions

Eric Thornburg

and you've appreciate look on so your recently glad working it as coverage, to to we're forward today, with we we you have Jonathan, initiated you. participation

Operator

showing at like to not call the any time. to I'd this over to And I'm further turn Eric. back questions

Eric Thornburg

about on with appreciate company, We're interest call getting Thank Thank to Very we're company look the in the excited support, much. you in just started. but our of company. We're very you very today. XXX-year-old your good. for future. you, everybody, forward and our participating future working and our We

Operator

Ladies concludes today's that and gentlemen, presentation.

and You may have day. now wonderful disconnect, a

SJW (SJW) 22 Feb 192018 Q4 Earnings call transcript