Q4 2023 Summary
Published Jan 10, 2025, 5:10 PM UTC- American Water Works expects no material impact on M&A opportunities from regulatory changes and is confident in delivering on their M&A capital expenditure plans.
- The company is proceeding as planned with rate cases in key states like Pennsylvania and Illinois involving significant investments, and does not foresee significant issues, supporting future earnings growth.
- American Water Works increased their 2024 EPS guidance, reflecting confidence in their growth outlook through 2026 and strong future performance.
- The Pennsylvania rate case may face regulatory delays or issues, as the commission may have suspended the rate case schedule, raising concerns about possible impacts on the company's investment plans.
- Regulatory risks in Illinois due to negative outcomes in electric and gas sectors, which could affect AWK's rate case and lead to unfavorable regulatory decisions impacting earnings.
- Exposure to PFAS litigation and potential liabilities, as the company faces lawsuits related to PFAS contamination, which could result in financial risks and impact future earnings.
-
M&A Appetite
Q: What's your interest in M&A, especially regarding Aquarion?
A: We focus on opportunities in the states we operate in, but we'll evaluate M&A that meets our standards: confidence in growth, favorable regulatory environments, and policy support.
-
Pennsylvania Rate Case Progress
Q: Any issues with the Pennsylvania rate case schedule?
A: The rate case is proceeding on schedule without changes; it's about investment, and we're confident in our ability to work through it successfully.
-
Illinois Regulatory Environment
Q: How is the Illinois rate case progressing amid concerns?
A: Our Illinois case is progressing normally, focused on capital investment; we're not experiencing issues like those affecting electric and gas utilities.
-
PFAS Litigation Risk Management
Q: How are you managing PFAS litigation risks?
A: We're proactive in complying with PFAS regulations and working with the EPA to protect water utilities; we shouldn't be held accountable for upstream pollution, and we're seeking recovery from the polluters.
-
Growth Guidance Through 2026
Q: Is your increased guidance a long-term statement of confidence?
A: The increased guidance reflects confidence through 2026; we've not made changes to our original regulated strategy but see this as an increase over our ongoing guidance.
-
Fair Market Value Process in Pennsylvania
Q: Thoughts on the FMV process in Pennsylvania?
A: We believe the PUC's efforts help implement FMV legislation effectively; we're working through guidelines and expect no material impact on opportunities or transactions.
-
HOS Note Interest and Repayment
Q: How secure is the increased interest on the HOS note?
A: The underlying business has improved; extending the New York contract and owner equity support increase our confidence in repayment at the higher interest rate.
-
Lead and Copper Rule Impact on CapEx
Q: Will the Lead and Copper Rule add to CapEx?
A: It's too early to quantify impacts, but the rule's longer timeframe allows us to adjust our plans; we continue to focus on removing lead service lines.
-
Opportunities from Compliance Requirements
Q: Will compliance needs lead to more acquisitions?
A: Increasing regulatory demands like PFAS and cybersecurity may challenge smaller systems, creating opportunities for acquisitions over time.
-
Decoupling Mechanisms in Rate Cases
Q: Are you pursuing decoupling in rate cases?
A: We propose mechanisms like decoupling where appropriate; it's part of our effort to educate commissions on regulatory solutions that work best in each jurisdiction.