Earnings per share of $0.30 Reaffirms annual guidance Publishes
2022 ESG report, highlighting strong progress on commitments and
targets
Essential Utilities Inc. (NYSE: WTRG) today reported results for
the third quarter ended September 30, 2023.
“We are pleased with the strong execution and financial
performance in the third quarter of the year, and we remain on
track to meet our 2023 guidance,” said Essential Utilities Chairman
and Chief Executive Officer Christopher Franklin. “Our proven track
record of capital investment and operational excellence has
positioned us as an industry leading water, wastewater, and natural
gas utility, and our commitment to the environment, our employees
and the communities we serve is evidenced by our strong ESG
progress.”
Operating Results
Essential reported net income of $80.1 million for the third
quarter of 2023, compared to $68.6 million for the same quarter in
2022. Earnings per share were $0.30 for the quarter compared to
$0.26 in the third quarter of 2022. For the quarter, revenues from
regulatory recoveries and lower expenses were offset by decreased
volume from the regulated water segment and other items.
Revenues for the quarter were $411.3 million compared to $434.6
million in the third quarter of 2022. Lower purchased gas costs and
decreased volume from the regulated water segment contributed to
the decrease in revenues for the quarter, which was offset by
additional revenues from regulatory recoveries, increased customer
growth from the regulated water segment and other items. Operations
and maintenance expenses decreased 2.9% to $147.0 million for the
third quarter of 2023 compared to $151.4 million in the third
quarter of 2022.
Essential’s regulated water segment reported revenues for the
quarter of $310.6 million, an increase of 3.1% compared to $301.3
million in the third quarter of 2022. Regulatory recoveries and
customer growth were the largest contributors to the increase in
revenues for the period. Operations and maintenance expenses for
Essential’s regulated water segment increased to $98.7 million for
the third quarter of 2023 compared to $94.9 million in the third
quarter of 2022.
Essential’s regulated natural gas segment reported revenues for
the quarter of $94.8 million, compared to $119.0 million in the
third quarter of 2022. Purchased gas costs decreased 65.0% to $14.4
million for the quarter, as compared to $41.1 million for the same
quarter in 2022. As a result, the recovery of lower purchased gas
costs was the primary driver in the decrease of revenues.
Operations and maintenance expenses for Essential’s regulated
natural gas segment decreased to $50.0 million for the third
quarter of 2023 compared to $51.9 million in the third quarter of
2022.
As of September 30, 2023, Essential reported year-to-date net
income of $362.8 million, or $1.37 per share compared to $350.3
million or $1.33 per share through the same period of 2022.
For the first nine months of 2023, the company reported revenues
of $1,574.4 million, a decrease of 0.5%, compared to $1,582.6
million in the first nine months of 2022. Operations and
maintenance expenses for the first nine months of 2023 were $418.5
million, down 2.4%, compared to $428.9 million in 2022.
Dividend
On October 25, 2023, Essential’s board of directors declared a
quarterly cash dividend of $0.3071 per share of common stock. This
dividend will be payable on December 1, 2023, to shareholders of
record on November 10, 2023. The company has paid a consecutive
quarterly cash dividend for more than 78 years.
Financing
In August and September 2023, pursuant to Essential’s
at-the-market (ATM) equity program, the company satisfied its
previously announced 2023 common equity needs by agreeing to
issuances of common stock at market pricing to raise approximately
$300 million. The proceeds were used for general corporate
purposes, including for water and wastewater acquisitions, working
capital, and capital expenditures. In August 2023, the company’s
regulated water subsidiary, Aqua Pennsylvania, issued $225.0
million of First Mortgage Bonds. The bonds consisted of $175.0
million of 5.48% first mortgage bonds due in 2053; and $50.0
million of 5.56% first mortgage bonds due in 2061. The proceeds
from these bonds were used to repay existing indebtedness and for
general corporate purposes.
Rate Activity
To date in 2023, the company’s regulated water segment received
rate awards or infrastructure surcharges in Illinois, Indiana, New
Jersey, North Carolina, Ohio, Pennsylvania, Texas, and Virginia of
$42.4 million and its regulated natural gas segment received
infrastructure surcharges in Pennsylvania and Kentucky of $21.3
million. The company currently has base rate cases or
infrastructure surcharges pending in New Jersey, Ohio and Virginia
for its regulated water segment, which combined would add an
estimated $16.8 million in incremental annual revenues.
Capital Expenditures
Essential invested approximately $874.5 million in the first
nine months of the year to improve its regulated water and natural
gas infrastructure systems and to enhance customer service across
its operations. The company continues to be a leader in the country
at replacing miles of underground utility pipe and is committed to
maintaining elevated levels of infrastructure investment. The
company expects to invest approximately $1.1 billion annually
through 2025 to improve water and natural gas systems and better
serve customers through improved information technology.
Essential’s investments include replacing and expanding its water
and wastewater utility infrastructure and replacing and upgrading
its natural gas utility infrastructure, with the latter leading to
significant reductions in methane emissions that occur in aged gas
pipes. The capital investments made to rehabilitate and expand the
infrastructure of the communities’ Essential serves are critical to
its mission of safely and reliably delivering Earth’s most
essential resources.
Water Utility Growth by Acquisition
Essential’s continued growth by acquisition allows the company
to provide safe and reliable water and wastewater service to an
even larger customer base than it could from organic customer
growth alone. So far in 2023, the company has acquired seven
systems, that collectively have added over $44.5 million in rate
base and more than 11,000 new customers or equivalent dwelling
units to the company’s footprint.
The company has five signed purchase agreements for additional
wastewater systems in Pennsylvania and Illinois that are pending
closing and are expected to serve over 211,000 equivalent retail
customers or equivalent dwelling units and total nearly $354
million in purchase price. This includes the recently announced
agreement with the Greenville Municipal Water Authority to acquire
the water system in Greenville, Pennsylvania. This system is
expected to add approximately 3,000 customers and totals $18
million in purchase price. The company’s $276.5 million agreement
to acquire the Delaware County Regional Water Quality Control
Authority (DELCORA), a Pennsylvania sewer authority that serves
approximately 198,000 equivalent dwelling units in the Philadelphia
suburbs, is included among these signed purchase agreements.
The pipeline of potential water and wastewater municipal
acquisitions the company is actively pursuing represents over
400,000 total customers. The company remains on track to annually
increase customer connections by 2% to 3%, on average, through
acquisitions and organic customer growth.
Sale of Assets
As previously announced on October 2, 2023, the company
completed the sale of its West Virginia natural gas utility assets.
The sale enables Essential to prioritize growth of its water and
wastewater utilities in states in which it has scale, while the
remaining gas operations will continue to focus on efficient, safe
operation and reducing emissions through pipeline replacement.
The company also previously announced on October 3, 2023, a $165
million binding agreement to sell its three non-utility microgrid
and district energy projects in Pittsburgh, including the
innovative microgrid at the Pittsburgh International Airport. The
transaction is subject to various closing conditions and regulatory
approvals and is expected to close in late 2023 or early 2024. The
company will use the $165 million in transaction proceeds to
finance its capital expenditures and water and wastewater
acquisitions, in place of external funding from equity and debt
issuances.
Environmental, Social and Governance
As announced in September 2023, Essential published its 2022
Environmental, Social and Governance (ESG) report. The updated
report tracks key progress on the company’s commitments and
highlights the supplier and employee diversity goals and the
reduction of Scope 1 and Scope 2 greenhouse gas emissions by 25%
from our 2019 baseline.
The updated report is aligned with leading reporting frameworks
and principles, including Sustainability Accounting Standards Board
(SASB) disclosures, the Task Force on Climate-Related Financial
Disclosures (TCFD) recommendations, the Climate Disclosure Project
(CDP) questionnaire, and the American Gas Association
sustainability template.
“For the fifth time, Essential has been recognized as a Champion
of Board Diversity by the Forum of Executive Women. We are proud of
the ESG work we have completed and look forward to continuing to
make progress towards our commitments to environmental stewardship,
sustainable business practices, employee safety, diversity and
inclusion, customer experience and community engagement,” Franklin
added.
Essential’s ESG report is published as an interactive microsite
at ESG.Essential.co.
Reaffirms 2023 Financial and Growth Guidance
Essential reaffirms its published 2023 guidance, including its
long-term guidance:
- In 2023, net income per diluted common share will be $1.85 to
$1.90
- Through 2025, earnings per share will grow at a compounded
annual growth rate of 5 to 7%, based off the company’s 2022
earnings per share of $1.77
- Through 2025, we will make regulated infrastructure investments
of approximately $1.1 billion annually, weighted towards the
regulated water segment
- Through 2025, the regulated water segment rate base will grow
at a compounded annual growth rate of 6 to 7%
- Through 2025, the regulated natural gas segment rate base will
grow at a compounded annual growth rate of 8 to 10%
- The regulated water customer base (or equivalent dwelling
units) of the business will grow at an average annual growth rate
of between 2 and 3% from acquisitions and organic customer
growth
- Excluding the divestiture of West Virginia, the regulated
natural gas customer base of the business will be stable for
2023.
Reaffirms ESG Guidance and Commitments
- Reduction of Scope 1 and Scope 2 greenhouse gas emissions by
60% by 2035 from the company’s 2019 baseline
- Multiyear plan to ensure that finished water does not exceed
the federal maximum contaminant level once finalized, of PFOA,
PFOS, and PFNA compounds
- Multiyear plan to increase diverse supplier spend to 15%
- Multiyear plan to reach 17% employees of color
Essential reaffirms its commitment to substantially reduce Scope
1 and 2 greenhouse gas emissions by 2035. The company plans to
achieve these reductions through extensive gas pipeline
replacement, the purchase of renewable energy, accelerated methane
leak detection and repair, and various other planned initiatives.
Essential also remains committed to diversity, equity, and
inclusion efforts to ensure the diversity of its employees and
suppliers reflects the diversity of its customer population.
Essential continues to be an industry leader regarding water
quality with its commitment to test and treat for PFOA, PFOS, and
PFNA compounds across all states served by its regulated water
segment. The company reaffirms its commitment to providing finished
water that will meet the EPA timelines and standards.
Guidance Assumptions
Essential Utilities does not guarantee future results of any
kind. Guidance is subject to risks and uncertainties, including,
without limitation, those factors outlined in the “Forward Looking
Statements” of this release and the “Risk Factors” section of the
company’s annual and quarterly reports filed with the Securities
and Exchange Commission.
The earnings per share, infrastructure investment and rate base
guidance includes the signed municipal water and wastewater
acquisitions for which the company has entered into signed purchase
agreements as of the date the guidance was announced but does not
include DELCORA prior to the second half of 2025 or other potential
municipal acquisitions from the company’s list of acquisition
opportunities that currently represents over 400,000 customer
equivalents. The average annual regulated water segment growth
guidance reflects the company’s proven acquisition track record of
adding nearly 129,000 customers or equivalent dwelling units and
over $526 million in rate base since 2015, its current backlog of
nearly $354 million of signed pending acquisitions with over
211,000 equivalent customers, and the current acquisition
landscape.
The guidance is also based on the company’s expectation that it
will continue to issue equity and debt on an as needed basis to
support acquisitions and capital investment plans.
The company’s guidance does not include any impact from the sale
of its West Virginia natural gas utility, as it did not materially
impact the earnings per share, infrastructure investment and rate
base guidance.
Third Quarter 2023 Earnings Call Information Date:
November 7, 2023 Time: 11 a.m. EST (please dial in by 10:45 a.m.)
Webcast and slide presentation link:
https://www.essential.co/events-and-presentations/events-calendar
Replay Dial-in #: 866.583.1035 (U.S.) & International callers
can find their dial in here Confirmation code: 0950701
The company’s conference call with financial analysts will take
place on Tuesday, November 7, 2023, at 11 a.m. Eastern Standard
Time. The call and presentation will be webcast live so interested
parties may listen over the internet by logging on to Essential.co
and following the link for Investors. The conference call will be
archived in the Investor Relations section of the company’s website
for 90 days following the call. Additionally, the call will be
recorded and made available for replay at 2 p.m. on November 7,
2023, for 10 business days following the call. To access the audio
replay in the U.S., dial 866.583.1035 (pass code 0950701).
International callers can find their dial in number here (pass code
0950701).
About Essential
Essential Utilities, Inc. (NYSE: WTRG) delivers safe, clean,
reliable services that improve quality of life for individuals,
families, and entire communities. With a focus on water, wastewater
and natural gas, Essential is committed to sustainable growth,
operational excellence, a superior customer experience, and premier
employer status. We are advocates for the communities we serve and
are dedicated stewards of natural lands, protecting more than 7,600
acres of forests and other habitats throughout our footprint.
Operating as the Aqua and Peoples brands, Essential serves
approximately 5.5 million people across nine states. Essential is
one of the most significant publicly traded water, wastewater
service and natural gas providers in the U.S. Learn more at
www.essential.co.
Forward-Looking Statements
This release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995,
which generally include words such as “believes,” “expects,”
“intends,” “anticipates,” “estimates,” and similar expressions. The
Company can give no assurance that any actual or future results or
events discussed in these statements will be achieved. Any
forward-looking statements represent its views only as of today and
should not be relied upon as representing its views as of any
subsequent date. Readers are cautioned that such forward-looking
statements are subject to a variety of risks and uncertainties that
could cause the company’s actual results to differ materially from
the statements contained in this release. Such forward-looking
statements include, among others: the guidance range of net income
per diluted common share; the continuation of the three-year period
of earnings growth; the anticipated amount of capital investment
through 2025; the rate base growth of company through 2025; the
reduction of Scope 1 and Scope 2 greenhouse gas emissions by 60% by
2035 from the company’s 2019 baseline; its multi-year plan to
ensure that finished water does not exceed the federal maximum
contaminant level once finalized, of PFOA, PFOS, and PFNA compounds
and that it is positioned to comply with the final EPA standards
once finalized; that the company’s municipal growth pipeline is
strong; and, that the company will be able to positively impact the
company’s employees, customers, communities it serves, the
environment, and its shareholders through its acquisition program..
There are important factors that could cause actual results to
differ materially from those expressed or implied by such
forward-looking statements including: disruptions in the global
economy; potential disruptions in the supply chain for raw and
finished materials; the continuation of the company's
growth-through-acquisition program; general economic business
conditions; the company’s ability to raise additional equity,
including on an as needed basis; housing and customer growth
trends; unfavorable weather conditions; the success of certain
cost-containment initiatives; changes in regulations or regulatory
treatment; the company’s ability to successfully close municipally
owned systems presently under agreement and successfully complete
other acquisitions and dispositions; and other factors discussed in
our Annual Report on Form 10-K and our Quarterly Reports on Form
10-Q, which are filed with the Securities and Exchange Commission.
For more information regarding risks and uncertainties associated
with Essential's business, please refer to Essential's annual,
quarterly, and other SEC filings. Essential is not under any
obligation - and expressly disclaims any such obligation - to
update or alter its forward-looking statements whether as a result
of new information, future events or otherwise.
WTRGF
Essential Utilities, Inc. and Subsidiaries Selected
Operating Data (In thousands, except per share amounts) (Unaudited)
Quarter Ended Nine Months Ended September 30, September 30,
2023
2022
2023
2022
Operating revenues
$
411,255
$
434,618
$
1,574,405
$
1,582,649
Operations and maintenance expense
$
147,018
$
151,361
$
418,520
$
428,923
Net income
$
80,076
$
68,638
$
362,778
$
350,305
Basic net income per common share
$
0.30
$
0.26
$
1.37
$
1.34
Diluted net income per common share
$
0.30
$
0.26
$
1.37
$
1.33
Basic average common shares outstanding
266,767
262,213
265,135
262,089
Diluted average common shares outstanding
267,176
262,754
265,688
262,641
Essential Utilities, Inc. and Subsidiaries Consolidated
Statement of Operations (In thousands, except per share amounts)
(Unaudited) Quarter Ended Nine Months Ended September 30,
September 30,
2023
2022
2023
2022
Operating revenues
$
411,255
$
434,618
$
1,574,405
$
1,582,649
Cost & expenses: Operations and maintenance
147,018
151,361
418,520
428,923
Purchased gas
16,590
52,041
314,838
354,896
Depreciation
84,348
80,471
252,208
235,774
Amortization
1,687
2,259
3,282
4,478
Taxes other than income taxes
24,207
22,625
67,433
67,352
Total
273,850
308,757
1,056,281
1,091,423
Operating income
137,405
125,861
518,124
491,226
Other expense (income): Interest expense
68,590
60,488
210,440
169,345
Interest income
(942
)
(1,510
)
(2,731
)
(2,943
)
Allowance for funds used during construction
(5,455
)
(5,812
)
(14,567
)
(17,802
)
Gain on sale of other assets
285
(299
)
(184
)
(777
)
Other
(1,438
)
(441
)
(2,001
)
(2,566
)
Income before income taxes
76,365
73,435
327,167
345,969
Provision for income taxes (benefit)
(3,711
)
4,797
(35,611
)
(4,336
)
Net income
$
80,076
$
68,638
$
362,778
$
350,305
Net income per common share:
Basic
$
0.30
$
0.26
$
1.37
$
1.34
Diluted
$
0.30
$
0.26
$
1.37
$
1.33
Average common shares outstanding:
Basic
266,767
262,213
265,135
262,089
Diluted
267,176
262,754
265,688
262,641
Essential Utilities, Inc. and Subsidiaries Condensed
Consolidated Balance Sheets (In thousands of dollars) (Unaudited)
September 30,
December 31,
2023
2022
Net property, plant and equipment
$
11,846,565
$
11,130,946
Current assets
409,348
658,159
Regulatory assets and other assets
4,176,880
3,930,002
$
16,432,793
$
15,719,107
Total equity
$
5,922,557
$
5,377,386
Long-term debt, excluding current portion, net of debt issuance
costs
6,456,040
6,371,057
Current portion of long-term debt and loans payable
350,451
427,856
Other current liabilities
546,117
594,013
Deferred credits and other liabilities
3,157,628
2,948,795
$
16,432,793
$
15,719,107
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231106730812/en/
Media Contact: David Kralle Communications Media Hotline:
1.877.325.3477 Media@Essential.co Investor Contact: Brian
Dingerdissen Vice President, IR and Treasurer O: 610.645.1191
BJDingerdissen@Essential.co
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