DEFA14A: American States Water Company Reports Strong 2024 Performance, Highlights Dividend Growth and Strategic Investments

American States Water Company (AWR) announces positive 2024 results driven by rate increases, new military contracts, and strategic capital investments, while maintaining a strong dividend growth record.

Summary

• American States Water Company (AWR) reported earnings per share (EPS) of $3.17 for 2024, compared to $3.36 in 2023.
• Adjusted EPS for 2023 was $2.85, making the 2024 EPS an increase of $0.32 or 11.2%.
• The increase was primarily due to rate increases in water and electric utilities, commencement of operations under new military contracts, and successful economic price adjustments in the contracted services business.
• The company achieved a consolidated return on equity of 14.1%.
• AWR increased its quarterly dividend by 8.3% and has increased its calendar year dividend for the 70th consecutive year.
• The company aims to achieve a compound annual dividend growth rate of over 7% in the long term.
• For the 10-year period ended December 31, 2024, AWR achieved a compound annual growth rate (CAGR) of 7.3% in its recorded consolidated diluted EPS and an 8.0% CAGR in its calendar year dividend payments.
• The company invested $235.5 million in company-funded capital work in its utility systems, a 34.2% increase over the prior year.
• The water utility general rate case sets new rates for 2025-2027, with a 38.4% increase in authorized capital investments compared to the last rate cycle.
• The electric utility general rate case sets new rates for 2023-2026, retroactive to January 1, 2023, with an adopted ROE of 10.0%.
• ASUS commenced operations at two new military bases in April 2024: Naval Air Station Patuxent River (contract value of $378 million over 50 years) and Joint Base Cape Cod (contract value of $75 million over 15 years).
• ASUS was awarded $56.5 million in new capital upgrade (NCU) projects for military contracts.
• AWR maintains an A credit rating from S&P and A+ for GSWC, with stable outlooks.
• Moodys affirmed an A2 rating with a stable outlook on GSWC.
• The company's regulated utilities' spending with diverse suppliers was 33.9%, exceeding the CPUC's target of 23% for the 12th consecutive year.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial performance, dividend growth, and strategic investments. The company's high credit ratings and commitment to sustainability further contribute to the positive sentiment.

Positives

• Strong EPS growth of 11.2% compared to adjusted 2023 EPS.
• High return on equity of 14.1%.
• Consistent dividend growth, with an 8.3% increase and 70 consecutive years of increases.
• Significant capital investments in utility systems, increasing reliability and reducing water loss.
• Successful commencement of operations at new military bases, expanding the contracted services business.
• Record high awards for new capital upgrade projects for military contracts.
• High credit ratings from S&P and Moody's, indicating financial stability.
• Exceeding CPUC's target for spending with diverse suppliers, demonstrating commitment to diversity and inclusion.

Negatives

• Reported EPS for 2024 ($3.17) was lower than the reported EPS for 2023 ($3.36), although adjusted EPS shows an increase.

Risks

• Forward-looking statements are subject to risks and uncertainties detailed in the company's SEC filings.
• Security ratings are not recommendations and are subject to revision or withdrawal.

Future Outlook

The company aims to achieve a compound annual dividend growth rate of more than 7% over the long term and is targeting a 60% reduction in Greenhouse Gas emissions by 2035 compared to 2020.

Industry Context

The document highlights AWR's position as a low volatility water utility operating in a constructive regulatory environment in California, with a growing unregulated contracted services business. The company's performance is compared to both a compensation peer group (utilities) and a water utility peer group, showing strong relative performance.

Comparison to Industry Standards

• The company's return on equity of 14.1% compares favorably to other publicly-traded water utilities.
• AWR's credit ratings (A from S&P, A2 from Moody's) are among the highest in the U.S. investor-owned water utility industry.
• The company compares its performance to a compensation peer group of water, gas, and electric utilities, as well as a water utility peer group including American Water Works Company, Essential Utilities, California Water Service Group, SJW Group, Middlesex Water Company, The York Water Company, and Artesian Resources Corporation.
• Compared to the water utility peer group, the company has been in the top quartile for three of the measurement periods (with AWR being the highest for the three-year period), and in the third quartile for one of the measurement periods.

Stakeholder Impact

• Shareholders benefit from consistent dividend growth and strong financial performance.
• Customers benefit from improved water and electric reliability due to capital investments.
• Employees benefit from the company's commitment to diversity and inclusion.
• The company's sustainability efforts contribute to environmental stewardship.

Key Dates

Keywords

dividends, capital expenditures, military contracts, credit ratings, earnings per share, water utility, electric utility, American States Water Company, AWR