Earnings per share of $0.72; Company reaffirms annual
guidance
Essential Utilities Inc. (NYSE: WTRG) today reported results for
the first quarter ended March 31, 2023.
“We remain on track to meet our full year earnings per share
guidance despite the unusually warm weather in our natural gas
footprint in addition to continued elevated inflation and rising
interest rates in the first quarter. Despite the inflationary
headwinds, our heightened focus reduced overall operating and
maintenance expenses in the first quarter,” said Essential
Utilities Chairman and Chief Executive Officer Christopher
Franklin.
Operating Results
Essential’s operating results were impacted meaningfully by
decreased natural gas usage due to warmer-than-normal weather. The
Pittsburgh area experienced the warmest first quarter in the last
decade and the fourth warmest first quarter since 1955.
Essential reported net income of $191.4 million and earnings per
share of $0.72 for the first quarter of 2023. For the quarter,
rates and surcharges, and regulated water segment customer growth
were offset by decreased regulated natural gas segment volume and
other items.
Revenues for the quarter were $726.5 million compared to $699.3
million in the first quarter of 2022, an increase of 3.9%. Recovery
of higher purchased gas costs, additional revenues from rates and
surcharges, and customer growth from the regulated water segment
all contributed to the increase in revenues for the quarter, which
was offset by decreased volume from the regulated natural gas
segment. Operations and maintenance expenses decreased to $138.0
million for the first quarter of 2023 compared to $142.6 million in
the first quarter of 2022. The 3.2% decrease in operations and
maintenance expenses was primarily a result of lower customer
assistance program expenses, employee retirement expenses,
maintenance expenses, and customer bad debt, offset partially by
higher water production expenses.
Essential’s regulated water segment reported revenues for the
quarter of $267.3 million, an increase of 11.7% compared to $239.2
million in the first quarter of 2022. Rates and surcharges 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 decreased to $82.8 million for
the first quarter of 2023 compared to $86.1 million in the first
quarter of 2022.
Essential’s regulated natural gas segment reported revenues for
the quarter of $441.3 million, compared to $445.2 million in the
first quarter of 2022. Purchased gas costs were $241.9 million for
the quarter as compared to $217.3 million for the same quarter in
2022. As a result, the recovery of higher purchased gas costs was
the largest driver in the increase of revenues, which was offset by
reduced natural gas volumes. Operations and maintenance expenses
for Essential’s regulated natural gas segment decreased to $57.2
million for the first quarter of 2023 compared to $59.5 million in
the first quarter of 2022.
Dividend
As previously announced, on February 22, 2023, Essential’s board
of directors declared a quarterly cash dividend of $0.2870 per
share of common stock. This dividend will be payable on June 1,
2023, to shareholders of record on May 12, 2023. The company has
paid a consecutive quarterly cash dividend for more than 78
years.
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. On March 31, 2023, the company’s regulated water
segment subsidiary, Aqua Pennsylvania, acquired the North
Heidelberg Sewer Company and added approximately 270 wastewater
customers to the company’s footprint. Aqua Pennsylvania had
previously been serving as the PUC appointed receiver for the North
Heidelberg system.
The company has eight signed purchase agreements for nine
additional water and wastewater systems in Pennsylvania, Illinois,
Texas, and Ohio that are pending closing and are expected to serve
nearly 219,000 equivalent retail customers or equivalent dwelling
units and total over $380 million in purchase price. This includes
the recently announced agreement with the Greenville Sanitary
Authority to acquire the municipal wastewater system in Mercer
County, Pennsylvania. This system is expected to add approximately
2,300 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.
Capital Expenditures
Essential invested approximately $243.7 million in the first
three 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.
Rate Activity
To date in 2023, the company’s regulated water segment received
rate awards or infrastructure surcharges in Illinois, Indiana,
Ohio, and Virginia of $3.6 million. The company currently has base
rate cases or infrastructure surcharges pending in North Carolina,
Ohio, and Texas for its regulated water segment, which combined
would add an estimated $44.7 million in incremental annual
revenues, and an infrastructure surcharge pending in Kentucky for
its regulated natural gas segment for an estimated $1.5 million in
incremental annual revenues.
Environmental, Social and Governance
As announced in January, Essential reaffirmed its ESG
commitments, including its industry-leading, multi-year plan to
ensure that finished water does not exceed 13 parts per trillion
(ppt) of PFOA, PFOS, and PFNA compounds across all states served by
its regulated water segment. This commitment better positions the
company to meet the recently proposed maximum level for PFAS
chemicals from the U.S. Environmental Protection Agency (EPA), the
company is confident that we will be able to comply with the final
EPA standards and timeline, thus ensuring high quality water and
exceptional service to our customers.
“We recognize the EPA’s proposed maximum contaminant level for
PFAS chemicals as an important step in protecting the public
health. We are proud to be an industry leader and an advocate for
our customers and the communities we serve,” said Franklin.
“The timing of the EPA’s proposal also coincided with our second
annual Essential Earth Day activities. We were excited to kick off
events throughout our ten-state footprint again this year and
enjoyed a month of opportunities for customer education, employee
volunteerism, community engagement and corporate giving,” added
Franklin.
Reaffirms 2023 Financial and Growth Guidance
Essential published guidance for 2023, including its long-term
guidance, and reaffirms this guidance as previously announced:
- 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; an increase of approximately $100 million
annually from the prior plan.
- 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 planned 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 reaffirms its commitment 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.
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 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 118,000 customers or equivalent
dwelling units and over $481 million in rate base since 2015, its
current backlog of over $380 million of signed pending acquisitions
with nearly 219,000 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
agreement to sell its West Virginia natural gas utility, which is
expected to close mid-year 2023, as it is not expected to
materially impact the earnings per share, infrastructure investment
and rate base guidance.
First Quarter 2023 Earnings Call Information Date: May 9,
2023 Time: 11 a.m. EDT (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: 0324863
The company’s conference call with financial analysts will take
place on Tuesday, May 9, 2023, at 11 a.m. Eastern Daylight 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 May 9, 2023,
for 10 business days following the call. To access the audio replay
in the U.S., dial 866.583.1035 (pass code 0324863). International
callers can find their dial in number here (pass code 0324863).
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 10 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;
the anticipated amount of capital investment; 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 13 parts per trillion, or the
federal maximum contaminant level once finalized, of PFOA, PFOS,
and PFNA compounds, that the company’s municipal growth pipeline is
strong; that the company will be able to positively impact the
company’s employees, customers, communities it serves, the
environment, and its shareholders; the company’s ability to
increase diverse supplier spend to 15%; the company’s ability to
achieve 17% employees of color; and, the company’s commitment to
maintaining strong investment grade credit ratings with S & P
and Moody’s. 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; financial and workforce impacts from the COVID-19
pandemic; 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
March 31,
2023
2022
Operating revenues
$
726,450
$
699,275
Operations and maintenance expense
$
137,994
$
142,581
Net income
$
191,434
$
199,376
Basic net income per common share
$
0.72
$
0.76
Diluted net income per common share
$
0.72
$
0.76
Basic average common shares outstanding
264,192
261,952
Diluted average common shares outstanding
264,751
262,431
Essential Utilities, Inc. and Subsidiaries Consolidated
Statement of Operations (In thousands, except per share amounts)
(Unaudited) Quarter Ended
March
31,
2023
2022
Operating revenues
$
726,450
$
699,275
Cost & expenses: Operations and maintenance
137,994
142,581
Purchased gas
256,315
227,712
Depreciation
82,923
77,878
Amortization
871
468
Taxes other than income taxes
22,878
23,007
Total
500,981
471,646
Operating income
225,469
227,629
Other expense (income): Interest expense
72,668
53,636
Interest income
(819
)
(609
)
Allowance for funds used during construction
(5,688
)
(5,839
)
Other
(489
)
(1,702
)
Income before income taxes
159,797
182,143
Provision for income taxes benefit
(31,637
)
(17,233
)
Net income
$
191,434
$
199,376
Net income per common share: Basic
$
0.72
$
0.76
Diluted
$
0.72
$
0.76
Average common shares outstanding: Basic
264,192
261,952
Diluted
264,751
262,431
Essential Utilities, Inc. and Subsidiaries Condensed
Consolidated Balance Sheets (In thousands of dollars) (Unaudited)
March 31, December 31,
2023
2022
Net property, plant and equipment
$
11,294,580
$
11,130,946
Current assets
509,772
658,159
Regulatory assets and other assets
4,013,914
3,930,002
$
15,818,266
$
15,719,107
Total equity
$
5,515,942
$
5,377,386
Long-term debt, excluding current portion, net of debt issuance
costs
6,484,516
6,371,057
Current portion of long-term debt and loans payable
221,183
427,856
Other current liabilities
582,103
594,013
Deferred credits and other liabilities
3,014,522
2,948,795
$
15,818,266
$
15,719,107
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230508005573/en/
Media: Jeanne Russo Vice President, Communications Media
Hotline: 1.877.325.3477 Media@Essential.co
Investor: Brian Dingerdissen Vice President, IR and
Treasurer O: 610.645.1191 BJDingerdissen@Essential.co
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