Essential Utilities, Inc.

Good day and welcome to the Essential Utilities Q2 2020 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Brian Dingerdissen. Please go ahead, sir.

Good morning, everyone, and thank you for joining us for Essential Utilities Second Quarter 2020 Earnings Call. I am Brian Dingerdissen, Vice President, Chief of Staff, Investor Relations and Communications. If you did not receive a copy of the press release, you can find it by visiting the Investor Relations section of our website. at essential.co. The slides that we will be referencing in a webcast of this event can also be found there. Here's our forward-looking statement. As a reminder, some of the matters discussed during this call may include forward-looking statements that involve risk, uncertainties, and other factors that may cause the actual results to be materially different from any future results expressed or implied by such forward-looking statements. Please refer to our most recent 10Q and other SEC filings for description of such risk and uncertainties. During the course of this call, reference may be made to certain non-GAAP financial measures. A reconciliation of these non-GAAP to GAAP financial measures is included at the end of the presentation and also posted in the Investor Relations section of the website. After the presentation, we will open the call for questions. For our agenda for today, we will start with Chris Franklin, our Chairman and CEO. who will discuss highlights from the year to date and provide an update on our people's leadership team. Dan Schuller, CFO, will then discuss our financial results. Dan will be followed by Matt Rhodes, EVP of Strategy and Corporate Development, who will provide an update on our municipal acquisition program. Finally, Chris Franklin will conclude the call and then open the call up for questions. With that, I will turn the call over to Chris Franklin.

Hey, thank you, Brian, and good morning, everyone. It's hard to believe that we're now almost Thank you for joining us today. as we work through this pandemic. But before we get started with the primary agenda Brian just talked about on the call, I want to touch on some issues that we believe are important at Essential. First, social justice issues have been the primary focus of the country really this summer. This is a topic that should be a key topic or a key focus of good companies and good people. Long before the events of this summer, I'm proud of the work that we've done and continue to do at ACWA now at Essential to ensure that we have a diverse and inclusive workforce at the company. I'll tell you, this journey began at the top. We built our board where more than 50% of our members are diverse, either racially or by gender. Our work continues as we try to make our workforce reflect the demographics of the communities we serve. An example, today 22% of our workforce is black or brown versus the industry average of 16%. We've supplemented this work by creating black employee resource groups and women's employee resource groups among others. Our work to make our management team more diverse has also been a key focus. Today, at the senior levels of the company, nearly half of my direct reports are women. And just this year, we've hired several people of color in key management roles. In addition, we continue to work to diversify our supplier network. We've got a strong program to bring diverse suppliers into our network in all aspects of our work, including professional services. I want to highlight this Thank you. Thank you. and elected officials. We've all been reading about some of the events occurring in Illinois and Ohio over the last series of months. It's important for you as our investors to know that we pride ourselves in living up to the three core values that we've posted, frankly, in all of our buildings across our company. And among the three values is integrity. I want to assure you that Essential has processes in place to review, approve and continuously monitor charitable giving, political giving, and lobbying activities. We remain confident that we're in full compliance with all governing laws and regulations. I'm also confident that our leadership team and our employees have made compliance with the law a central principle in the work we do with elected and appointed officials across our 10 state footprint. Also, for your reference, we've posted our corporate foundation giving policies on our website in our ESG pair sheets in case you're interested. Finally, the last issue I want to mention before we jump into the agenda, we've been closely monitoring the infrastructure package that the U.S. House earlier this summer looked at. and any time the federal government focuses on water and wastewater infrastructure, we consider it a good thing because it elevates the importance of the work we do. That being said, the regulated water industry is working proactively to work to make sure that our customers benefit in the same way that customers of municipal water systems would benefit from any legislation that were to pass either in the Congress or in our states. All right, with that, let's talk about the second quarter. I'm really happy to report on our continued progress on our objectives. So far, we've invested $346.6 million in infrastructure in the communities we serve during the first six months of the year. Of that $346.6 million, $217.6 million of it was invested in our regulated water segment, and $129 million was invested in our regulated natural gas segment. Importantly, you should note that $53.5 million was invested by Peebles in the first quarter pre-closing. Now, despite the brief COVID-related pause in construction back in mid-March, we remain on track for record capital spending of $950 million this year. Our work on the Goodwin Tomball gas gathering system is also well underway. I know many of you will recall this was an important topic during our regulatory approval process, and we're happy to say we're on schedule there. As a reminder, we have approximately 2,700 miles of natural gas pipe to replace, which will be done through the Pennsylvania Public Utility Commission's Long-Term Infrastructure Improvement Program. Many of you know that as the LTIP. The Pipe Replacement Program is very effective in our efforts to also reduce methane emissions in the environment. We'll begin to report on that in the coming months and years. We said in February that once we owned Peeples, we would quickly elect and implement tax repair. I want to report that we elected the tax repair soon after we closed in March by filing our paperwork with the IRS. We also told you that we would file with the Pennsylvania Public Utility Commission this summer for treatment of the catch-up portion of the tax repair. That has been accomplished as of just today. On the next box over, you'll notice that net income per share on a GAAP basis increased 16% compared to the same period last year. Dan's going to give you a lot more detail and an overview of the strong performance we achieved in the first full quarter of our ownership of Peoples, as well as we'll give you a reaffirmation on our annual earnings per share guidance range of $1.53 to $1.58. Now, our municipal acquisition strategy remains strong with signed municipal agreements totaling over $300 million in expected rate base and over 200,000 new customers. We also announced the closing of East Norton in Pennsylvania. adding almost 5,000 customers and 21 million in rate base. Finally, another milestone for the quarter included the announcement of our first fair market value acquisition in Texas. I think most of you will recall that the fair market value legislation passed just last year in 2019. Matt will give you some details on that in just a few moments. Finally, Tuesday of this week, The Board approved a 7% dividend increase, which marks the 29th consecutive year of dividend increases. You can see here on the next slide, the announced 7% dividend increase marks the 30th increase in 29 years and the 75th consecutive year of quarterly dividend payments, something we are very proud of at our company. Following the increase, the annualized dividend rate will be just over a dollar per share, We take great pride in our long, consistent record of delivering shareholder value. We also believe that our dividend policy is indicative of our financial strength. I would say the board's action is a reflection of their confidence, not only in our strategy, but also in our execution. This next slide is an important one. I'm really proud of the leadership team that we have at People's, and I want to take a couple of minutes make sure you understand what's happening with our management team there. We announced in July that Joe Gregorini, the president of Peoples, is going to retire effective September 1st. Joe's been with Peoples for 33 years and has really made significant contributions to the organization and the community as well throughout his career. His influence on the company will continue long after he retires. I know I speak for all the employees and saying how thankful I am to Joe for his leadership over the years and especially over the past four months since closing when we've had to deal with the onset of the pandemic as well as all of the integration work. Joe's leadership has been outstanding. And while I'm sorry to see Joe's tenure end, I wish him and his family the best in his well-deserved retirement. Now recently, after conducting a national search We announced that Mike Huwar will be Joe's successor at Peoples as President. Mike most recently served as President and Chief Operating Officer of Columbia Gases Pennsylvania and Maryland Utilities and is a long-time resident of the Pittsburgh community, so he's right at home in the new job. He comes to Peoples after more than 34 years with Columbia, which is a subsidiary of NYSORCE. Mike is a true professional, proven operator, and is really well-known and well-respected at the Pennsylvania PUC. We're very fortunate to have Mike on board leading our gas company. Now in June, we also announced the appointment of Mike Torzai as General Counsel for Peoples and Kim Edwardson as Vice President of Finance for Peoples. Mike Torzai is also a native of southwestern Pennsylvania and spent the last 10 terms in the Pennsylvania Legislature, including his last three terms as Speaker of the House here in Pennsylvania. Throughout Mike's career, he's focused on creating jobs across the state and across various industries. Mike's had a law degree from Duke and was a prosecutor before holding elected office, and he's already hit the ground running, very strong general counsel, and will help take the company to the next level. Kim Edgerton brings more than 30 years of extensive experience Most recently, Kim was vice president and controller for HM Health Solutions there in Pittsburgh, and her general industry experience and background as a former auditor make her a great fit to lead the finance team for our regulated natural gas segment. Now that we have the full team in place, we're looking forward to supporting them as they focus on continued employee customer safety, ramped up capital plan, and the same solid dedication to our core mission. With that, Dan, let me turn it to you for our financial results.