Trading desk comments 交易台市场观点 Yesterday, Asia IG space widened 3-7bps across the board as US-China tension escalated. We saw better selling on TW lifers FUBON 35/SHIKON 35, China TMTs BABA/MEITUA, Japanese banks fixed bonds and FRNs, and Southeast Asian names SIASP/OCBCSP 35/TOPTB/CBKIN/HDFCB. FAEACO 12.814 Perp was 0.1pt lower. See our comments on FAEACO yesterday. NWDEVLs/LIFUNGs/FOSUNI 26-29s leaked 0.2-0.7pt. CWAHK 4.85 05/18/26 was 0.1pt lower. See comments below on CWAHK's proposed 5NC3 blue bonds. In ...

Summary of Global Water Resources Conference Call Company Overview - **Company**: Global Water Resources (NasdaqGM:GWRS) - **Date of Conference**: September 17, 2025 Key Points Industry Context - The water utility industry is experiencing a transition with a focus on integrating agricultural water usage into residential supply, particularly in Arizona [doc id='30'][doc id='31']. Weather Impact - Comparison of weather conditions: 3Q 2024 had over 1.5 inches of rain, while 3Q 2025 recorded over 3 inches, indicating a wetter season [doc id='2']. - Revenue from utilities is largely stable due to fixed wastewater and water fees, minimizing weather-related revenue fluctuations [doc id='2']. Tucson Acquisition - The acquisition of the Tucson water system is projected to generate approximately $1.5 million in annualized revenue, with a 5% rate increase planned for the following year [doc id='4']. - Integration of the Tucson utility is proceeding smoothly without major surprises [doc id='4']. Rate Case Cycles - The company is considering a formula rates proposal that could lead to annual rate adjustments for some utilities, while others may remain on a two to three-year cycle [doc id='5'][doc id='6']. - Continuous capital investment is necessary to keep up with costs and maintain service quality [doc id='5']. Growth Opportunities - There are about 300 investor-owned utilities in Arizona, presenting significant acquisition opportunities [doc id='7']. - Organic customer growth remains strong at just under 4% year-to-date, despite a slowdown in new construction permits [doc id='9']. Construction Trends - A noted slowdown in single-family and multifamily construction permits, attributed to macroeconomic factors such as interest rates and affordability [doc id='9'][doc id='11']. - Anticipation of a rebound in permits due to potential Fed rate reductions and ongoing business growth in the region [doc id='14']. Economic Development - Major investments in Arizona include a $65 billion investment from Taiwan Semiconductor Manufacturing Company and a $1.9 billion expansion by Mayo Clinic, expected to create thousands of jobs [doc id='22']. - The business boom in Arizona is expected to drive organic growth for the company [doc id='17']. Agricultural to Urban Transition - Legislation has been signed to facilitate the conversion of agricultural water usage to residential use, which is expected to benefit the utility by increasing customer base while reducing overall water consumption [doc id='30']. - Agriculture currently consumes 74% of the available water supply in Arizona, indicating significant potential for urban growth [doc id='31']. Financial Outlook - The company has recently completed an equity raise to support its growth strategy, with plans to access capital markets as needed [doc id='28']. - The water utility sector may see a rebound in stock prices with potential interest rate reductions, which could enhance valuations [doc id='36']. Conclusion - The conference highlighted the strategic focus on growth through acquisitions, integration of new utilities, and adapting to macroeconomic changes while maintaining a stable revenue model through fixed fees and ongoing capital investments [doc id='36'][doc id='37'].

Core Insights - American States Water Company (AWR) reported second-quarter 2025 operating earnings per share (EPS) of 87 cents, missing the Zacks Consensus Estimate of 92 cents by 5.4% and up from 85 cents in the same quarter last year [1][9] AWR's Total Revenues - Total operating revenues reached $163.1 million, falling short of the Zacks Consensus Estimate of $169 million by 3.5%, but increased by 5% from $155.3 million in the prior-year period [2][9] Highlights of AWR's Q2 Release - Operating expenses were $112.1 million, an increase of 8.2% from $103.6 million in the year-ago quarter, driven by higher water purchases, administrative costs, depreciation, and maintenance expenses [3] - Operating income was $51 million, down 1.3% from $51.7 million in the corresponding period of 2024 [3] Interest and Income - Interest expenses totaled $12.1 million, a decrease of 7.6% year over year, while interest income was $1.5 million compared to $2.1 million in the previous year [4] AWR's Segmental Details - Water segment earnings were 73 cents per share, up 9% from 67 cents a year ago, attributed to new rate increases authorized by the CPUC effective January 1, 2025 [5] - Electric segment EPS was 3 cents, an increase of 2 cents from the year-ago quarter, due to revenue increases from new rates implemented in 2025 [6] - Contracted Services segment EPS was 13 cents, down from 19 cents in the year-ago quarter, while AWR (Parent) reported a loss of 1 cent per share compared to a loss of 2 cents previously [7] AWR's Financial Update - As of June 30, 2025, cash and cash equivalents were $20.2 million, down from $26.7 million as of December 31, 2024 [8] - Long-term debt increased to $789.5 million from $640.4 million as of December 31, 2024 [8] Cash Flow - Cash provided by operating activities in the first half of 2025 totaled $109.6 million, compared to $70.5 million in the same period last year [10]

Core Insights - Essential Utilities Inc. (WTRG) reported second-quarter 2025 operating earnings per share (EPS) of 38 cents, exceeding the Zacks Consensus Estimate of 29 cents by 31% and reflecting a year-over-year increase of 35.7% [1][7] - Total operating revenues reached $515 million, surpassing the Zacks Consensus Estimate of $473 million by 8.8% and showing an 18.7% increase year over year, driven by higher rates and purchased gas costs [2][7] Revenue Breakdown - The regulated water segment generated revenues of $332.3 million, a 9.9% increase from $302.5 million in the second quarter of 2024, primarily due to higher water and wastewater rates [3] - The regulated natural gas segment reported revenues of $177.3 million, a significant 38.3% increase from $128.2 million in the same quarter last year, driven by higher purchased gas costs and increased rates and surcharges [4] Expense and Investment Highlights - Operation and maintenance expenses were $148.5 million, up 4.2% from $142.5 million in the prior year [5] - Operating income totaled $185.3 million, reflecting a 27.5% year-over-year increase [5] - The company invested $613 million in the first half of 2025 to upgrade its regulated water and natural gas infrastructure [5] Strategic Acquisitions and Future Guidance - Essential Utilities acquired systems serving nearly 10,300 customers for approximately $58 million in 2025, with new water and gas rate approvals expected to increase annual revenues by $92.6 million and $8.2 million, respectively [6] - The company reaffirmed its 2025 EPS guidance in the range of $2.07-$2.11, with a long-term annual earnings growth forecast of 5% to 7% through 2027 [9] - Planned investments for infrastructure in 2025 are projected to be between $1.4 billion and $1.5 billion, with a total of $7.8 billion planned from 2025 to 2029 [10]

Group 1 - The stock of Consolidated Water Co. Ltd. (CWCO) is experiencing significant attention due to high implied volatility in the options market, particularly the Aug 15, 2025 $22.50 Put option [1] - Implied volatility indicates the market's expectation of future price movement, suggesting that investors anticipate a significant change in the stock's price, potentially due to an upcoming event [2] - Analysts have a cautious outlook on Consolidated Water, with no increases in earnings estimates over the last 60 days and a decrease in the Zacks Consensus Estimate from 24 cents to 20 cents per share [3] Group 2 - The high implied volatility may indicate a trading opportunity, as options traders often seek to sell premium on options with elevated implied volatility, aiming to benefit from time decay [4]

Core Insights - Essential Utilities Inc. (WTRG) reported first-quarter 2025 operating earnings per share (EPS) of $1.03, exceeding the Zacks Consensus Estimate of 80 cents by 28.8% and showing a year-over-year improvement of 41.1% [1] - Total operating revenues reached $784 million, surpassing the Zacks Consensus Estimate of $691 million by 13.3% and reflecting a year-over-year increase of 28.1% [2] - The regulated Water segment generated revenues of $300.8 million, a 7.5% increase from $279.9 million in the first quarter of 2024, driven by higher rates and surcharges [2] - The regulated Natural Gas segment reported revenues of $470.8 million, up from $324.3 million in the first quarter of 2024, primarily due to higher purchased gas costs and increased delivery volumes from colder weather [3] Financial Performance - Operating income totaled $338.9 million, marking a 46.9% year-over-year increase, while operation and maintenance expenses rose slightly by 0.7% to $137.8 million [4] - Interest expenses increased by 12% to $82.1 million from $73.3 million in the prior-year quarter [4] - Current assets were $494.5 million as of March 31, 2025, compared to $485.9 million as of December 31, 2024, while long-term debt rose to $7.52 billion from $7.36 billion [5] Future Outlook - The company reaffirmed its 2025 EPS guidance in the range of $2.07-$2.11, with the Zacks Consensus Estimate at $2.10, exceeding the midpoint of the projected range [6] - Management anticipates a 2-3% expansion in the customer base for the water segment through acquisitions and organic growth [6] - Essential Utilities plans to invest $1.4-$1.5 billion in infrastructure in 2025 and a total of $7.8 billion from 2025 to 2029 to enhance water and natural gas systems and improve customer service [7]

Financial Data and Key Metrics Changes - Consolidated earnings per share for Q1 2025 were $0.70, an increase from $0.62 in Q1 2024, attributed to favorable decisions from the CPUC regarding new water and electric rates [7][8] - Consolidated revenues for Q1 increased by $12.7 million compared to the same quarter last year [9] - Net cash provided by operating activities was $45.1 million for the quarter, slightly down from $45.8 million in the same quarter last year [13] Business Line Data and Key Metrics Changes - Water utility earnings increased to $0.52 per share from $0.48 per share, primarily due to new water rates [8] - Electric segment earnings rose to $0.07 per share from $0.05 per share, driven by new electric rates [9] - ASUS earnings remained stable at $0.13 per share, with increased management fee revenues offset by decreased construction activity [23] Market Data and Key Metrics Changes - Revenues for the water segment increased by $11.7 million due to new 2025 water rates [10] - Electric segment revenues increased by $2.8 million, also due to new rates [10] - Revenues from ASUS decreased by $1.8 million, primarily due to lower construction activities impacted by unfavorable weather [11] Company Strategy and Development Direction - The company plans to invest $170 million to $210 million in infrastructure in 2025, with a focus on capital projects approved by the CPUC [7][15] - Golden State Water is transitioning to a modified rate adjustment mechanism, which may introduce future revenue volatility [19][20] - The company anticipates sustained growth in its rate base due to recent regulatory approvals [21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the regulatory environment, noting successful rate case outcomes and ongoing investments [17][22] - There is uncertainty regarding future military base privatizations, with expectations of potential opportunities in 2025 [33][34] - The company remains committed to maintaining a strong dividend growth rate, exceeding its long-term goals [25] Other Important Information - The company raised $25.8 million through its at-the-market offering program in Q1 2025 [15] - Credit facility terms were extended, and borrowing capacity increased from $165 million to $195 million [16] Q&A Session Summary Question: Equity raise expectations for 2025 - Management confirmed a target of raising approximately $60 million over the full year 2025, with reassessment based on credit facility capacity [28][29] Question: Update on military base privatization efforts - Management indicated no current fifty-year privatizations are available, but potential Army privatizations may arise later in the year [32][33] - The Navy is actively pursuing privatization opportunities, with ongoing efforts to secure contracts [34][35] Question: Nature of nontraditional contracts - Management noted that fifteen-year contracts may be easier for bases to manage compared to fifty-year contracts, with ongoing pursuits in this area [41][42]

Core Viewpoint - Dongguan's housing and urban-rural development bureau, along with the market supervision bureau, has issued a notification to standardize the housing rental market and address the issue of illegal surcharges on water and electricity fees, introducing a revised rental contract template for residential properties [1][3]. Summary by Relevant Sections Rental Contract Template - The new rental contract template specifies that water and electricity fees must adhere to the rates published by the Dongguan Development and Reform Bureau, ensuring that landlords cannot charge more than what they pay to utility companies [3][5]. - Landlords are prohibited from charging service or management fees disguised as water or electricity fees [3]. Implementation and Promotion - The notification emphasizes the importance of promoting the use of the new rental contract template among rental parties and guiding rental agencies in Dongguan to adopt it [5][11]. - The contract template is effective immediately upon issuance [5]. Background and Issues - Previous reports highlighted widespread illegal surcharges on water and electricity fees in Dongguan's urban villages, prompting the need for regulatory action [5][9]. - The market supervision bureau has noted an increase in complaints regarding illegal surcharges, particularly in urban villages where rental agreements are often informal and based on verbal agreements [9][12]. Regulatory Recommendations - The market supervision bureau suggests legislative measures to clarify illegal practices and establish penalties, as well as the implementation of direct metering for water and electricity to prevent surcharges [10][18]. - Recommendations include creating reference standards for shared costs and enhancing cooperation among various departments to regulate utility pricing in rental properties [10][18].