Essential Utilities, Inc.

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

Thank you, Christy. Good morning, everyone, and thank you for joining us for Essential Utilities 2020 Full-Year Earnings Call. I'm Brian Dingerdissen, Vice President, Chief of Staff, and Head of Investor Relations. If you do not receive a copy of the press release, you can find it by visiting the Investor Relations section of our website. The slides that we will be referencing and the webcast of this event can also be found on our website. Here is 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, 10K, and other SEC filings for description of such risk and uncertainties. During the course of this call, our reference may be made to certain non-GAAP financial measures. Reconciliation of these non-GAAP to GAAP financial measures is included at the end of the presentation and also in the Investor Relations section of our website. After the formal presentation, we will open the call to questions. Here is our agenda for the call today. We'll start with Chris Franklin, our chairman and CEO, who will provide a company update on our successes from 2020, including our municipal acquisition program. Next, Dan Schuller, our CFO, will discuss our fourth quarter and full-year financial results. Chris will then conclude the presentation with a review of our guidance. At the conclusion, we will open the call for questions. With that, I would like to turn the call over to Chris Franklin.

Thanks, Brian, and good morning, everyone. Thanks for joining us today. Let me start with a discussion about of the impact of this bitter, cold winter weather that so many of us experienced in February. In terms of the impact on our operation, it's really been a tale of two cities. Let's start in Texas. First, our hearts go out to those who are impacted and living for days without electric and water service, some frigid temperatures, particularly last week. Water systems and wastewater systems are highly dependent on power to operate our pumps and our plants. So when the power went out in Texas, many of our community well systems went down as well. In fact, at the peak of the winter weather, we had approximately two-thirds of our Texas customers impacted, which was largely due to those rolling blackouts we heard or brownouts. as the power went down and then we'd restore it and then we'd have to go back out again once the rolling ground went through. We quickly activated our incident command system to marshal the necessary resources to bring service back to our customers as quickly as possible. We brought in teams from our other state operations to supplement the Texas workforce, and they also brought with them supplies like bottled water, repair materials, and equipment to supplement what we had in Texas. We don't always think about it, but as our employees were working to restore service to our customers, they themselves were dealing with personal hardships resulting from the storm, too. Thank you for joining us. and so there were no financial or operational impacts to our natural gas customers which are in Pennsylvania, Kentucky and West Virginia. Now I mentioned the impact of the weather was a tale of two cities and despite the extreme cold temperatures here in the Mid-Atlantic where the majority of our operations are, we had very good news this winter, particularly in Pennsylvania where we have been replacing water mains for nearly 30 years now. We really saw the benefit of that investment over the last few weeks and last few months even. It's impressive to see that even during a difficult winter, we're seeing fairly low numbers of name breaks. As a result, we have fewer service disruptions and less overtime than we had in previous years. And you can see by the chart on the right here, there is real benefit to investing in infrastructure. All right. Let's talk about some of the 2020 highlights. We invested about $900 million in infrastructure in the community we served during 2020, of which about $53.5 million was invested by peoples in the first quarter before we owned the company. This is, once again, a record amount of capital spending for our company. On a non-GAAP basis, adjusted income per share was $1.58 for the year, up 7.5%. They'll take you through more details around that when he presents the financial results. Our municipal acquisition strategy remains strong with six signed municipal agreements pending closing, totaling $438 million in purchase price. Finally, coupled with organic growth, the company increased its water and wastewater customer base by 2% and increased its rate base by 9.6%, ending the year with nearly 1.8 million customers and 8 billion in rate base across our regulated segments. Very good year. All right. On the next slide here, you can see a more comprehensive summary of the execution of our 2020 objectives. These were the three primary themes we set for 2020. We've talked with you before about this. You saw it in our investor event. and despite the challenges of 2020, we still delivered on all three of these objectives in one of the most historic years of our company. Throughout the year, we adapted our new combined water and gas business to overcome the effects of the pandemic. And through the dedication and resiliency of our people, we remain focused on the mission of providing essential natural resources to our customers. As I mentioned, Our commitment to infrastructure improvement drove us to executing a record investment, ensuring that our customers had safe and reliable service. Now, as we approach our one-year anniversary of the closing of the People's Transaction, I'm pleased to report that we have successfully integrated our employees and customers and we will continue to work to adopt the best practices from both utilities across the platform. I feel confident that our team's integration experience and expertise will prove invaluable as we continue to acquire water utilities across our footprint and beyond. Here's a reminder of the municipal acquisitions we closed in 2020 for our regulated water segment. The six acquisitions include Campbell Water System, you've seen that one before in Ohio, East Norton Wastewater System in Pennsylvania, Rockwell Utilities, that's water and wastewater in Illinois, New Garden, that's wastewater in Pennsylvania, and a small one in North Carolina called Dogwood Knolls. Together, these acquisitions added over 12,000 customers and nearly $63 million in rate base. Combined with organic growth, the company increased its customer base by over 20,500 customers in 2020. Here on this slide, we updated it since our presentation at the guidance event. You can see that we now have six municipal acquisitions that have been signed and are pending closing. The addition of Willistown Township in Pennsylvania, which we announced just last month, along with the other transactions will add close to 227,000 customers or customer equivalents when closed. It's important to think about this. Based on the approximate rate base of $438 million, these signed agreements are expected to generate about $22 million of incremental annual income when they're fully earning. These are great examples of are our acquisition strategy at work and we look forward to serving these communities and having them join the essential family. Now, Del Cora is never far from our minds and I'm sure not from yours when you think about Aqua and Essential. Let's bring you up to date. You'll recall that we received a very favorable ruling in late December from the Pennsylvania Common Pleas Court Judge in a lawsuit with Delaware County. Subsequently, The county appealed that decision and in January the PUC administrative law judge recommended that the transaction be denied for three reasons. The first reason was we had some outstanding municipal interveners. The second reason was they felt that we didn't include a rate stabilization plan in our application. And the third one was the ongoing litigation with the county. So since the ALJ issued the recommendation, we have made significant progress in trying to remedy these situations, these issues. And several municipal intervenors have already withdrawn from the process. We've been in constructive conversations with the remaining municipal intervenors, and we're hopeful and optimistic that they will also withdraw before the Pennsylvania Public Utility Commission rules on the case. We've also taken measures to address the argument that we don't have a rate stabilization plan, and we feel good about the progress on that issue as well. Now, the Pennsylvania PUC is expected to render their decision at one of the two regularly scheduled public meetings in March, so we'll stay tuned. With that, Dan, I'll turn it over to you.