American Water Works pany(AWK) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported earnings of $4.90 per share for 2023, an increase of $0.39 per share compared to 2022, and $0.32 per share on a weather-normalized basis [25][5] - Increased revenues were driven by general rate cases completed in late 2022 and early 2023, reflecting significant investments in systems [25] - Operating costs increased due to higher pension expenses of about $0.13 per share and increased chemical costs of about $0.11 per share [26] Business Line Data and Key Metrics Changes - The company closed on acquisitions totaling $77 million across eight states in 2023, with 25 transactions under agreement totaling $589 million and 88,000 customer connections [28] - Rate-based growth is expected to drive earnings growth, with a long-term target of 8% to 9% [13] Market Data and Key Metrics Changes - The company has $390 million in annualized new revenues and rates since January 2023, with $670 million of total annualized revenue requests pending [17] - The regulatory environment in Pennsylvania is undergoing changes, which may impact the timing of acquisitions [29] Company Strategy and Development Direction - The company aims for 7% to 9% EPS and dividend growth, supported by significant investments in infrastructure and acquisitions [8][9] - The focus remains on customer affordability and operating efficiency, with ongoing strategies around rate design and technology [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in executing plans for 2024 and beyond, highlighting strong performance amid challenging macroeconomic conditions [7][10] - The company continues to receive support from state and federal levels for infrastructure improvements [10][11] Other Important Information - The company is actively involved in addressing regulatory challenges related to PFAS and lead service lines, with significant investments planned [21][22] - The five-year capital plan includes $1 billion for PFAS and approximately $500 million for lead service line replacements [21] Q&A Session Summary Question: M&A appetite and geographic aversions - Management emphasized the need for confidence in regulatory environments and growth potential before pursuing M&A opportunities [38][39] Question: CapEx upside related to lead and copper rule - Management indicated it is too early to provide guidance on impacts to the overall plan, noting the longer timeline for compliance compared to PFAS [40][41] Question: Update on Pennsylvania rate case - Management confirmed the case is proceeding as planned, focusing on investment recovery without significant policy changes [48][50] Question: Regulatory outcomes in Illinois - Management stated that the Illinois case is on schedule and focused on investment, with no significant issues anticipated [54][55] Question: Fair market value changes - Management believes the commission process is the best path to resolve fair market value issues, with ongoing discussions expected [86][87]