10-K: SJW Group Files 10-K, Details Financials and Governance

• SJW Group's 10-K filing details the company's business, financial performance, and governance.
• The company operates through several subsidiaries providing water and real estate services.
• Water Utility Services are subject to rate regulation, with authorized returns on equity ranging from 9.00% to 10.88% across different states.
• SJW Group's net income for 2023 was $84.987 million, a 15% increase from $73.828 million in 2022.
• Operating revenue increased to $670.363 million in 2023, up from $620.698 million in 2022, primarily due to rate increases and customer growth.
• The company's capital expenditures for 2023 were $271.772 million, with plans for approximately $332 million in 2024.
• SJW Group has access to $350 million in unsecured lines of credit.
• The company issued $70 million in new long-term debt and $80.659 million in equity in 2023.
• SJW Group paid cash dividends of $47.905 million in 2023.
• The company's water supply sources include groundwater, surface water, reclaimed water, and purchased water.
• SJW Group has 808 full-time employees as of December 31, 2023, with 240 union members at SJWC.

Score: 7

Explanation: The document presents a generally positive outlook with strong financial performance and strategic growth initiatives, but also highlights some risks and challenges. The increase in net income and revenue is a positive sign, but the company faces regulatory and operational risks that need to be managed.

• SJW Group experienced a significant increase in net income and operating revenue in 2023.
• The company has a robust capital expenditure plan for 2024, indicating continued investment in infrastructure.
• SJW Group has access to substantial credit facilities, providing financial flexibility.
• The company successfully raised capital through debt and equity issuances in 2023.
• SJW Group has a diverse water supply portfolio, reducing reliance on any single source.

• Water production expenses increased due to higher per unit costs for purchased water, groundwater extraction, and energy.
• Customer water usage decreased in 2023 compared to 2022 across all service areas.
• The company's debt-to-equity ratio may reduce business flexibility and increase borrowing costs.
• SJW Group faces potential litigation risks concerning water quality and contamination.
• The company is subject to various regulatory risks, including potential disallowance of costs and delays in rate approvals.

• Changes in the regulatory environment could adversely affect the company's revenue and operating results.
• Water supply adequacy depends on factors beyond the company's control, such as rainfall and weather conditions.
• Contamination events or declines in source water quality could impact the company's water supply and operating results.
• Cybersecurity threats and system malfunctions could disrupt operations and expose the company to liability.
• The company's real estate holdings are subject to market and economic risks.
• Work stoppages and other labor relations matters could adversely affect the company's business.
• High inflation could increase operating costs and affect the company's financial performance.
• The company's dividend policy is subject to the discretion of the board of directors and may be limited by legal and contractual requirements.
• The company's charter documents and Delaware law could prevent a takeover that stockholders consider favorable.
• The company may not be able to maintain adequate insurance coverage at reasonable costs.

SJW Group plans to continue investing in its infrastructure, expanding its regulated customer base, and pursuing strategic business opportunities. The company expects to fund its capital expenditures through a variety of sources, including earnings, debt, and equity financing. The company also anticipates that its various sources of water supply will be sufficient to meet customer demand in 2024.

• Management believes that the collection rate for its accounts receivables will increase as service disconnections gradually return to normal operations.
• Management believes that based on our successful 2023 activities, we will have access to the external funding sources necessary to implement our ongoing capital investment programs in the future.

The water utility industry is largely fragmented and dominated by municipal-owned systems. SJW Group operates in a regulated environment, which provides some protection against competition. The company's strategy includes acquiring regulated water systems and expanding non-tariffed services, which aligns with industry trends towards consolidation and diversification.

• SJW Group's authorized returns on equity are within the range of other regulated water utilities, but vary by state.
• The company's capital structure is consistent with regulatory guidelines in the locations where it operates.
• SJW Group's water supply mix is similar to other water utilities, with a combination of groundwater, surface water, and purchased water.
• The company's focus on infrastructure investment and compliance with environmental regulations is consistent with industry best practices.
• SJW Group's employee engagement and diversity initiatives are comparable to other leading companies in the utility sector.

• Shareholders will benefit from the company's increased profitability and continued dividend payments.
• Employees will benefit from the company's commitment to fair wages, competitive benefits, and training opportunities.
• Customers will benefit from the company's investments in infrastructure and commitment to providing reliable, clean, and safe drinking water.
• Communities will benefit from the company's outreach programs and charitable donations.

• SJW Group will continue to implement its capital expenditure plan for 2024.
• The company will continue to pursue strategic business opportunities, including acquisitions.
• SJW Group will continue to monitor and manage its water supply and demand.
• The company will continue to engage with regulatory bodies to ensure compliance and favorable rate outcomes.
• SJW Group will continue to focus on employee engagement, diversity, and safety.

• In October 2023, The Connecticut Water Company was named as a defendant in a class action lawsuit alleging that the water provided by Connecticut Water contained contaminants.

• 1866: San Jose Water Company was originally incorporated.
• February 8, 1985: SJW Group was initially incorporated as SJW Corp. and SJWC became a wholly owned subsidiary.
• 1985: SJW Land Company was incorporated.
• October 9, 2019: Merger transaction between SJW Group and Connecticut Water Service, Inc.
• October 2, 2023: CPUC approved the continuation of WCMA and Water Conservation Expense Memorandum Account under the voluntary call for conservation effective April 20, 2023.
• August 14, 2023: TWC closed on the acquisition of KT Water Development Ltd.
• December 31, 2023: End of the fiscal year for which the 10-K report was filed.
• January 1, 2024: The Biddeford and Saco divisions authorized return on equity is 9.5% and its authorized capital structure is 49% debt and 51% equity.
• January 1, 2024: The approved WCCM-adjusted return on equity is 10.01% starting January 1, 2024, less a 20 basis point reduction due to the reimplementation of the WCMA.
• January 2, 2024: SJWC filed General Rate Case Application No. 24-01-001 with the CPUC.
• January 26, 2024: TWC closed on the acquisition of the Elm Ridge water system.
• February 2, 2024: The CPUC approved the joint request for one-year deferment on the cost of capital filings.
• February 15, 2024: Date of share count and market value calculation.
• February 22, 2024: Date of the 10-K filing.