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spk01: Hello and welcome to Essential Utilities Q3 2022 earnings call. My name is Sarah and I will be your coordinator for today's event. Please note this conference is being recorded and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions. This can be done by pressing star 1 on your telephone keypad to register your question. If you require assistance at any point, please press star 0 and you will be connected to an operator. I will now hand you over to your host, Brian Dingerdissen, to begin today's conference. Thank you.
spk04: Thanks, Sarah. Good morning, everyone, and thank you for joining us for Essential Utilities' third quarter 2022 earnings call. I am Brian Dingerdissen, Vice President of Investor Relations and Treasurer at Essential. 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 and a webcast of that event will also be found there. 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 10-Q, 10-K, and other SEC filings for a 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 company's website. Here is our agenda for the call today. We'll start with Chris Franklin, our chairman and CEO, who will discuss the highlights from the quarter and provide a company update. Next, Dan Shuler, our executive vice president and CFO, will discuss our financial results. Lastly, Chris will provide an update on our acquisition program and conclude the presentation with a summary of our guidance before opening the call for questions. With that, I will turn the call over to Chris Franklin.
spk02: Hey, thanks, Brian, and good morning, everyone. Thanks for joining us. Let's start off with some highlights from the quarter. We continue our focus on the fundamentals of operational efficiency, infrastructure improvement, and service-related priorities, and as a result, we had a strong third quarter with earnings per share of 26 cents and year-to-date net income growth of 11.2%. Dan will provide you some details on this in just a few moments. Our commitment to investing in critical infrastructure has resulted in an investment of $719.7 million through our water, wastewater, and natural gas systems in the first nine months of the year. This compares favorably to $675.8 million from the same period in 2021. We remain on target to achieve our capital plans of approximately $1 billion of capital spending for the year. Currently, we have asset purchase agreements signed for seven municipal acquisitions, totaling nearly $365 million in purchase price. This year, 2022, we've closed two acquisitions, which added over 19,000 customer equivalents to our footprint. As I'll discuss later, we continue to have a robust pipeline of opportunities. Now, just this month, last month in October, The board appointed Brian Lewis to our board. Brian currently serves as the chief investment officer for U.S. Steel Corporation, which is headquartered in Pittsburgh, Pennsylvania. Brian is responsible for the company's global investments for both the defined contribution and defined benefit plans, as well as other related programs at the company. Prior to his appointment at U.S. Steel, Brian managed a $30 billion pension fund for the Pennsylvania State Employees Retirement System. And before that, served as executive director of the $20 billion Illinois State University's Retirement System. Now, in addition to Brian's professional career, he's dedicated to increasing the financial literacy and leadership presence in underrepresented populations and serves on several nonprofit boards. At the Essential Board, Brian will serve on our Audit Committee, as well as our Risk Mitigation Committee. Great addition to our board. We welcome Brian, filling an open seat. Now, I wanted to take a moment to update you on a few other salient issues. Last week, we were informed for the second consecutive year that MSCI has upgraded our ESG rating, and it's now AA. In their upgrade, MSCI noted that essential is a global leader in governance, that we are stronger than the industry average in the environmental and social areas as well. We are really pleased with this outcome. A lot of hard work went into this and really pleased with that result. Now, staying with the ESG theme, we recently announced a hydrogen pilot with the University of Pittsburgh. Partnership will study the potential of safety and safely and securely transporting hydrogen through natural gas systems Now together people's and Pitt will conduct some in-depth research Related to the technical issues involved with using natural gas pipelines to transport a blend of hydrogen and natural gas following our research phase The organizations expect to work together on a pilot project to test the impacts of hydrogen on people's natural gas distribution infrastructure. In addition, we're now a member of a consortium that is applying for federal funds to create one of the hydrogen hubs in the country. This one would be based in the Appalachian region. Forty-four entities, including businesses, state governments, and other organizations have all signed on to this consortium. It will be an exciting part of this to see what these hydrogen hubs around the country can do to advance hydrogen as a component of clean energy. I should also mention that legislation was just approved in Pennsylvania, which included $50 million in annual tax credits to incentivize hydrogen production. Certainly a developing area for us to be involved in. So now let's move on to some organizational announcements. You may have read that Rick Fox, our Executive Vice President and Chief Operating Officer, is retiring next month, actually at the end of this month. I want to thank Rick for his dedication to the company and his contributions over the last 20 years. He has served as Chief Operating Officer since 2015 when I became CEO, and prior to COO, Rick had multiple leadership roles, including regional president and vice president of customer operations. Over his career, Rick has led important change at the company, including the standardization of our customer service across all states, implementing best practices, and leading some of our key acquisitions and divestitures. He was also responsible for the execution of our first ever billion dollar capital budget in 2021. Also, Rick's work in safety allowed our company to experience dramatic reductions in workplace injuries. His contributions are really too numerous for us to mention today. You know, when we experience key retirements like Rick's, it often triggers some level of reflection. Most of our management team now has been together since 2015, and so we looked at a few measures that demonstrate the good work we've done together over that time. In addition to delivering annual earnings growth in line with our guidance and raising our annualized dividend, slide 8 here demonstrates that we've grown the rate base and customer base of the company from nearly 3.5 billion and 958,000 customers to to approximately $9.5 billion and 1.8 million customers over that time. During this time, the market cap of the company has grown from $4.5 billion to $10 billion, over $10 billion today. So nice, really nice outcome. This performance would not have been made possible without people like Rick Fox on the leadership team. Rick, I'd like to congratulate you on a great career, and I am happy to call you my friend. We wish you and Ellen great happiness in your retirement. And now as we look to the future, we've been working diligently on our succession planning, and I'm happy to report that we have two strong executives that will now report directly to me when Rick retires. Colleen Arnold, president of ACWA, and Mike Heuer, president of Peoples. Colleen has been the president of our eight state water and wastewater utility operations since 2020, Prior to becoming the first female president in the company's history, Colleen was the deputy chief operating officer reporting to RIC. Colleen joined the company in 2007 and is active in the American Water Works Association and the National Association of Water Companies. Now, Mike's been the president of our three state natural gas utility operations since 2020. Prior to coming to the company, Mike had a 34-year career with Columbia Gas, where he was president and COO of Columbia's Pennsylvania and Maryland operations since 2017. Now, here on the next slide, you may have seen this, that Whitney Kellett was recognized as the 2022 Philadelphia CIO of the Year. This is the annual Orbi Award, one of the most prestigious awards for CIOs. Whitney was recently promoted to Senior Vice President of Business Transformation and is responsible for the company's technology strategies, decisions, and policies in areas like cybersecurity and the protection of our customer information. Whitney will also be the company's Chief Administrative Officer in 2023 when our current CAO, Sue Heindel, retires. Now, as part of our succession plan, we've hired Sumit Nair to replace Whitney as the new Vice President and Chief Information Officer. Sumit will oversee our internal group of 130 IT professionals and will execute the strategic and operational imperatives that are so important to the company's operations and growth. Sumit comes with a wealth of technology experience from companies like Independence Blue Cross, Delage Landon, and ICON. Lastly, I want to recognize Gene Russo, who joined the company early this fall as Vice President of Communications. In this newly elevated role, Gene will report directly to me and will oversee all internal and external communications across the enterprise. With growing public interest in our acquisition initiatives, Jean will bring important and focused communications counsel to our work. She also brings a wealth of experience having worked on top global brands across several industries. We're really excited to have Jean and these other executives take their new roles. Hopefully, this brief update on our organization gives you some sense of the depth of our team, but also the new young leadership that is stepping up in the organization. So with that, let me hand it over to Dan to discuss our financial results for the quarter. Dan?
spk03: Thanks, Chris, and good morning, everyone. Moving to slide 13, looking at the third quarter highlights, we ended the quarter with revenues of $434.6 million, up about 20% from last year. Our regulated water segment contributed $301.3 million, and our regulated natural gas segment contributed $119 million, with the balance coming from our limited non-regulated operations. We continue to see higher natural gas commodity prices and therefore purchase gas costs increased by 26.6 million year-over-year and gross margin increased by 46.2 million. The largest contributors to the increase in gross margin for the quarter were additional revenues from regulatory recoveries, increased volumes, and organic and acquisition related customer growth from our water segment. O&M expenses increased to $151.4 million for the quarter, up from $139.4 million in the third quarter of last year. Employee-related costs, higher water production costs, recoverable costs related to our natural gas segment customer assistance program, and other expenses were the main drivers for the quarter. Net income was up year over year from $50.5 million to $68.6 million, and gap earnings per share increased from $0.19 to $0.26 for the quarter. Next, we'll walk through the waterfall slide, starting with revenue. As we look at the third quarter for 2022, revenues increased $72.8 million, or approximately 20% on a gap basis. Regulatory recoveries were the largest driver of increased revenues since the third quarter was the first full quarter to include the new rates from the Pennsylvania water rate case. Next, you'll notice the recovery of higher purchase gas costs of $26.6 million due to the significant increase in natural gas commodity prices, which we've been reporting throughout the year so far. Increased volumes and growth from our regulated water segment contributed an additional $15.7 million, and other provided $3.4 million toward the revenue increase, which was offset slightly by reduced volumes from our regulated natural gas segment. Next, let's take a look at our operations and maintenance expenses. Looking at the operations and maintenance waterfall, expenses for the third quarter increased to $151.4 million, compared to 139.4 million for the same period in 2021. Employee-related costs added 5.2 million for the quarter, and increased production costs in our regulated water segment added an additional 2.8 million. We continue to see year-on-year increases in production costs, with the largest inflation-related expenses being in the areas of chemicals and sludge. The increased employee-related expenses included an accrual for one-time incentive compensation for non-officer-level employees. Other items contributed $1.6 million to the increase, and much of this is the O&M expenses related to our acquired systems. The gas customer assistance program expenses, which are fully recoverable through a revenue surcharge, increased $1.4 million, And finally, bad debt increased by about $1 million. So end to end, we have an increase of about $12 million year over year. If we subtract off the one-time incentive compensation that I mentioned, as well as the O&M costs related to growth and the increase in the customer assistance program costs, we get to about $6 million, or just over a 4% increase year on year. That roughly 4% increase makes sense given increased production, which added about $9.5 million in revenue, plus above-average inflation in the areas of chemicals, sludge hauling, and other expenses. Next, we'll spend a minute on the earnings per share waterfall. Beginning on the left side of the slide, GAAP EPS for the third quarter of 2021 was $0.19. Rates and surcharges contributed $0.7.4. and increased volume and growth from our regulated water segment combined added another 4 cents. These were offset by 3 cents from other items, which include increased depreciation, interest and taxes, as well as 1.4 cents of expenses. The result is a GAAP EPS of 26 cents for the third quarter of 2022. We remain confident in our full year guidance and our ability to deliver on the 5% to 7% earnings growth per share expectation that we set at the beginning of the year. And presuming that we have fairly normal weather for the fourth quarter, we expect to land in the middle of our EPS guidance range of $1.75 to $1.80 for 2022. As always, we're watching the weather in western Pennsylvania closely. And so far, the temperatures are a bit warmer in November following a colder than normal October. Moving on to rate activity and other regulatory matters. So far in 2022, we completed rate cases or surcharge filings in our regulated water segment in Illinois, North Carolina, Ohio, and Pennsylvania. And we completed a rate case in our regulated natural gas segment in Kentucky. The combined total annualized revenue increase is approximately $88.8 million. Also, we currently have base rate cases or surcharge filings underway in North Carolina, New Jersey, Texas, and Virginia for a regulated water segment and a surcharge filing in Kentucky for a regulated natural gas segment. Now, many of you have asked about the status of the Pennsylvania PUC on previous calls, so it's certainly worth noting that the three nominees have now been approved and the commission is back to full staff. We certainly see this as a positive development. While we won't provide guidance until early next year, the budget and plan that we're currently finalizing results in continued strong EPS growth and improvement of our credit metrics. While we're on the topic of credit metrics, we did establish an equity ATM program for up to $500 million in October. This gives us a mechanism to issue equity as needed as we continue to deploy a significant amount of capital to build rate base in both municipal acquisitions and capital expenditures. And with that, I'll hand it back over to Chris. Chris?
spk02: All right. Thanks, Dan. Appreciate it. Let's move on to our municipal transaction activity. which, along with investing in infrastructure in our existing business, is the core of our growth strategy. So in August, we announced the closing of East Whiteland Township Wastewater System. This system serves nearly 8,200 customer equivalents, including residential and commercial connections in Chester County, Pennsylvania. Now, to connect the dots for you, this is one of the systems served by the Terriferent Township trunk line we purchased in December of 2018. You may recall this is the nine-mile pipeline that passes waste to the large Valley Forge Sewer Authority for treatment, the plant that they have. We've already identified 17 million in infrastructure improvements in that East Whiteland area expected to be completed over the next decade. We look forward to having a positive impact on this community and continuing to provide excellent service in an area where we already provide the water service. We also think there's a lot more opportunity as a result of that trunk line. As of this call, we have seven signed asset purchase agreements pending, which together will add over 217,000 customers or customer equivalents and total nearly $365 million in purchase price. We are pleased to report that we received approval from the Illinois Commerce Commission to close the Oak Brook, Illinois water transaction and anticipate closing this year. Now on slide 21, I'm going to take a minute to talk about Delcoura. On our last call, we indicated our optimism on this transaction based on the PUC restarting the process and the ALJ with the ALJ and the strong legal outcomes in our favor. And even since that time, the Delaware County Court of Common Pleas, just on November 2nd this month, once again found in our favor. The court determined that its previous order of September 8th, 2022, already constituted a final order that addressed the claims of all parties and thereby disposing of all the claims, the recent claims. And we view this latest court order as a significant development in bringing this litigation closer to an end, basically saying that the agreement with Del Cora is valid and enforceable. We also continue to be confident that we will close Del Cora. However, given the recently released PUC procedural schedule, we now expect to close Del Cora around mid-year 2023. We also continue to hold out some hope that there's a path towards settlement. As you know, we've been at that for some time. Now, in the guidance we provided you at the beginning of this year, Del Coro was included in the 2023 earnings per share guidance, but we didn't indicate its level of contribution. Despite Del Coro's delay, we remain confident in our ability to achieve investor expectations in 2023. Importantly, I want to remind you that there is continued capital spending expected even after closing of Delcorra because of their requirement to upgrade the large sewer plant by 2028. We expect to provide our annual roll forward of guidance in early 2023 and details on the exact timing of the guidance will be forthcoming. I remain confident that we will be able to provide and deliver guidance in line with our historical performance based on the current draft of our multi-year financial plan. Now, in addition to the signed municipal transactions just discussed, our pipeline of opportunities for growth remains strong and healthy. Currently, we're engaged in active discussions with municipalities and pursuing approximately $430,000 potential water and wastewater customers, as you can see on this slide. While we were disappointed in the outcome of the discussion with Bucks County, we remain confident and committed to our strategy and have a strong pipeline. We have professionals in each of our states that are focused on the blocking and tackling of our growth strategy, focusing on 2,500 to 25,000 customer-sized acquisitions and this has not wavered. When larger opportunities come along, we will always pursue them, but they don't distract from the in-state teams from the more typically sized acquisitions, so they remain on track. Our technical and operational expertise, our commitment to capital investment along with long-term rate stability continue to demonstrate our value proposition to these municipal systems we're talking to. we will continue to focus on growth in all eight states where we have water utilities and fair market value statutes are in place. With that, let me wrap up the formal remarks by reaffirming our 2022 guidance. Despite the current economic conditions, we are pleased to be on track to meet the 5% to 7% earnings guidance we set for the year. As Dan mentioned, we believe we're on track for the middle of our $1.75 to $1.80 per share guidance range. We remain confident that our three-year earnings per share growth will be 5% to 7% through 2024. Our capital plans remain on track as we anticipate investing approximately $1 billion on regulated infrastructure this year to rehabilitate and strengthen water, wastewater, and natural gas systems, and nearly $3 billion across the platform by 2024. continue to expect rate-based growth to be between 6% to 7% for water and between 8% and 10% for natural gas, and customer growth to be between 2% and 3% on average for water and stable in natural gas. We also remain committed to our ESG targets, having reported strong progress on our second quarter call, including an estimated 14% greenhouse gas emissions reduction toward our goal of 60%. Diverse supplier spend of 13% against our target of 15%, and 16% employees of color with our ultimate target of 17%. We expect to report on our continued progress again after the end of the year. We are confident in our guidance because of the strong foundation that we have, and despite the various headwinds that all companies are facing in today's economic environment, We believe we have a solid and achievable plan to continue to deliver long-term shareholder value. Finally, in line with past practice, we expect to present the role forward of our guidance in early 2023. We're finalizing those plans now, and we recently presented the board with a draft of our forward-looking financial plan. We believe that you will be pleased with the guidance that we'll provide based on that plan. That concludes our formal remarks, and with that, let me turn back to you, the operator, for questions.
spk01: As a reminder, if you would like to ask a question or make a contribution on today's call, please press star 1 on your telephone keypad. To withdraw your question, please press star 2. Please ensure your lines are unmuted locally, as you will be advised when to ask your questions. The first question comes from the line of Travis Miller from Morningstar. Please go ahead.
spk08: Hello, thank you. Hey, Travis. Good morning, Travis. Hi. You made a couple of comments there, Chris, but on the Muni M&A, just wondering, obviously you've been a big shift in cost of capital here over the last, call it three, even just the last month, right? But call it even the last three months. How is that impacting the financing side? I understand kind of the fundamental side on the meeting. Do you have more thoughts in terms of financing those and making them accretive relative to what you've had in the past?
spk02: Yeah, I think, listen, long term, as you know, we finance these things accordingly with our capital structure, roughly 50-50. What it really does, I think, Travis, is it makes us think about our hurdle in order to do the transactions. We look at these and we've got hurdles. As we think about these as multi-year, often, almost always, we bring these municipal transactions in at less than full earnings power, right? They need capital investment and they need rates. And so, therefore, we look at a multi-year look at a hurdle, and it probably nudges that hurdle a little bit further north as we think about what we need to do to do these deals. I don't think it slows our interest. In fact, as I look at it, some of the financing challenges are not only on our side, but also the municipal side, and could actually trigger a little bit more activity. I just don't see that there's just not enough federal dollars to bail these things out, and I just think there's continued opportunity for us. Dan, you have anything to add to that?
spk03: Yeah, Chris, what I might add, Travis, is just that, you know, obviously on the debt side, we tend to finance these initially on a revolving credit facility, and then with long-term debt that we put into place. And of course, we are seeing higher costs. If you look at LIBOR over the past year, which is really the marker for our revolving credit facility, it's up nearly 400 basis points. So what that does is it creates a higher initial cost of borrowing than we finance long-term. That's a higher cost than we would have had a year, year and a half ago. And so it just really creates some additional lag between now and when that new acquisition comes into play. into full earnings with a rate case. So period from closing the transaction to new rates, we'll see a bit more of a lag, and we model that in as we look at our pro formas and have the conversations with the investment committee to decide what we're willing to accept in terms of that lag.
spk08: Okay. Yeah, no, that's great. I appreciate that. And one follow-up, anything in terms of the election or – New people who might come into offices in terms of fair market value, anything along those lines in other states?
spk02: Well, I think we always focus initially on our largest state, Pennsylvania. The expectation here is that... on the state level, which is most impactful for our business, that it'll be a Democrat for governor. Looks like Josh Shapiro is solidly ahead in the polls. And then looks like the Republican legislature, both House and Senate, remain firmly in place. And that's probably a pretty nice outcome here in Pennsylvania. Probably the impact that we will see most immediately, the chairman of the Public Utility Commission, Gladys Dutrel, is up for renewal or retirement, whichever she decides, in the first quarter of next year. So the new governor and the Senate will have a say on who that is. It will be a Democrat, whether it's Gladys or a replacement. So that's probably the first major impact of the newly elected officials. But while we're hearing some noise about fair market value, at this point, all indications would be that those statutes will stay in place without too much trouble.
spk08: Any states where you think the legislature or governor or whoever is in charge of doing that might institute it?
spk02: Well, it's a good question. Beyond our states, in all eight of our water states, we have one statute or another. It's not always called fair market value, but we've got the ability to use a tool like fair market value. But beyond our states, there might be others. I'm just not familiar with where that might be added. Sure. Okay. Thanks so much. Appreciate it. You got it.
spk03: Thanks, Travis.
spk01: The next question comes from the line of Ryan Connors from North Coast Research. Please go ahead.
spk02: Hey, Ryan.
spk07: Hey, great.
spk01: Good morning.
spk07: Good morning. So, yeah, I wanted to ask you about the interest rate environment from a different perspective in terms of returns on equity and the outlook and some of your rate proceedings and whether there's any appetite among these commissions, especially with the larger cases in North Carolina and Texas, but I guess also your early read in Pennsylvania, too. Is there any appetite to move ROEs up as interest rates go up? I know they held up pretty well when interest rates went down, but what's your outlook there for what will happen with ROEs going forward?
spk03: It's a good question, Ryan. I think that to your point, ROEs were sticky on the way down as interest rates fell. They're likely to be somewhat sticky on the way back up. Now, if we saw... a consistent period with high interest rates and thus a higher cost of equity capital when you calculate that, we would obviously be making the case for higher ROEs. I don't think, and we think that's a justifiable case if that is the economic situation at the time. I think the other thing that's important for all of us as utilities to think about is, as we talk to our commissions, is that The utility industry is not immune from the inflation that everyone else is experiencing, and so you'll see that those conversations need to be had with regulators as well as utilities file cases going forward.
spk02: Yeah, I think to add to that, hopefully what we continue to see is additional regulatory mechanisms put in place. that address lag. Because if you don't have future test years, what they're going to find is just an inundation with rate cases in all these commissions. And so we need to continue to focus on how do we address inflation, reduce lag, so that the caseload isn't overwhelming to these commissions.
spk07: Got it. Okay. And then kind of a follow-up to the prior question there by Travis, on the electoral scene, specifically to Pennsylvania, the Water Quality Accountability Act there, the SB 597, that seemed like it had some momentum, seemed like it's kind of stalled. I don't know that it's actually come to the fore. And is that something that, is there any key leaves here suggesting that it might move forward based upon, you know, the early read on the election here?
spk02: Yeah, that's a good question, Ryan. I think probably that bill, as passed out of the Senate, which now sits in the House, probably needs some amendment to it to get it advanced further. I think we'll have to see what the committee chairmanships look like in the reformed House. But I think that bill is going to take some amendment. We've got some thoughts. and we are still hopeful we can get it past both the House and the Senate next year.
spk07: Got it. Okay. And then one last one. Look, I apologize. I know you don't want to focus on Bucks County, but if you could just kind of give us your perspective, Chris, on that one didn't go your way. You mentioned there's lots of smaller and mid-sized deals, so it's certainly not the end of the world. But what is your quick postmortem there? I mean, is there anything that the company learned from that process, things you learned? you may not have done differently and things that might have, um, changed the outcome there. Just kind of curious what your, your, um, your sort of thoughts are now that that's in the rear view mirror.
spk02: Yeah, but I think, um, I'm not sure there was, there was anything that the company could have done differently. As you know, the, um, at the end, uh, release came from the commissioners basically saying that the, you know, the timing wasn't, uh, wasn't appropriate. So, um, whether something happens in the future or not is going to be up to the elected officials. But I think, you know, two takeaways, and I would say this holds true for most of these municipal acquisitions. Up front, the seller has to identify clearly why are they selling the assets and what are they doing with the proceeds. And I do think the lack of clarity in Bucks County did hurt the prospect of ultimately completing the transaction. Bucks County has a structural deficit. They need the money. And so it would have been ideal had they said, listen, we're selling because we've got a structural deficit, and we're going to hold rates steady for the next decade through a fund, which was the plan, and then we're going to delete or pay off all county debt. I think those would have been powerful statements, and they just weren't made and articulated properly. So I would say for all the transactions that we're working through, those two aspects have to be clear from the seller. Why am I selling, and what am I doing with the proceeds? I see time and time again where those aren't clearly articulated, and it just hurts the transaction.
spk07: Okay. So you said there were two. Was that the first? Those are the two, yeah. Got it. I see.
spk02: Listen, I think politics in Bucks County was pretty nicely aligned. I think the Republicans and Democrats get along fairly well in Bucks County in terms of the economic conditions of the county. So I really felt pretty good about that. And certainly the people who were against the transaction, Ryan, you attended some of those hearings. A lot of the same people that continue to attend One of the disappointments that I think we have is that so much misinformation was repeated at those public hearings. People were just not well-informed or chose not to be well-informed either way, but so much misinformation.
spk07: Yep, yep. Well, I appreciate you updating us on that. Thanks for your time today.
spk03: Thank you, Ryan. Take care.
spk01: As a reminder... Please press star 1 on your telephone keypad should you want to ask a question. The next question comes from the line of Julian Dumoulin-Smith from Bank of America. Please go ahead.
spk02: Hey, Julian.
spk01: Good morning, Julian.
spk05: Hey, good morning, team. Thank you guys very much for the time. Appreciate it. And congratulations to everyone on the various tenants here. Just maybe if I can kick it off here, just coming back to 23 and expectations, you talked about Del Cora. you know, and obviously the timing shifting there a little bit. You've got this ATM that's certainly fluid, and you talked about some cost pressures in the quarter. Can you give us a little bit of an update? I know you reaffirmed 5 to 7 and midpoint here for 22, but how are you thinking about it over the longer term? Where do some of these shifts position you as you think about 23? Anything that just flagged? I get that you haven't launched your formal 23 process yet, but maybe early indications. How do you think about some of the offsets here? Maybe some additional capital spending to offset that? the impact of the timing for Delcor and the associated spend that you would have done at Delcor as well.
spk02: Yeah, I think, you know, we're looking at our budgeting now, and obviously our 2023 budget will be approved by the board in December. But as things look right now, and I said it in my comments, despite the continued delay in Delcor, we remain confident in our previously discussed guidance And so we'll have an update for you all in another month or so here. But at this point, we remain confident that we can achieve our long-term guidance that we've communicated already. Dan, anything to add?
spk03: No, I think you covered it, Chris.
spk05: Can you guys talk about some of the offsets? Maybe just as you think about it, I know it's in flux, but maybe just speak through some of them here in terms of the ability to raise and adjust CapEx and or the timing of the dilution itself. As you think about it, clearly some of that capital raise would have been in tandem with the core itself, you would think.
spk02: Yeah, yeah, I think you're thinking about it the right way. You know, as we think about our capital spend, you know, we do have some flexibility, and obviously weather and our ability to execute against the capital budget gives us some flexibility there. Not a ton, but there are levers we can pull there. And, yeah, listen, Dan, I think, discussed pretty well our equity needs. I think we covered that.
spk03: Yeah, and I would just add, too, as you think about offsets and achieving objectives, we're constantly working with our state teams to look at their controllable expenses and make sure that we're rebidding things and we're getting the best contract at the best price. And all of our state team management teams, they all have incentives in place that that really rely on them achieving their cost metrics. So, you know, they're incentivized to help drive costs down as well.
spk05: Got it. Excellent. And you'll roll forward your outlook with the next update too?
spk03: Yeah. Well, you know, our plan is to share all of our guidance just after the first of the year. And at this point, we would anticipate that that looks like guidance we've provided in the past, meaning EPS guidance for 2023, EPS growth rate guidance, capital guidance, and then the other ESG-related metrics.
spk05: All right. Excellent team. Best of luck. Speak to you then. Cheers. All right. Take care, Julian.
spk01: The next question comes from the line of Greg Orrell from UBS. Please go ahead.
spk06: Hey, Greg. Sorry to... Hey, there. So do we know what the duration of the growth rate guidance is going to be that you're going to update us on?
spk03: You know, at this point, we would presume it's three-year guidance like we've provided in the past.
spk06: Okay. Okay. And then on the PFAS rule from EPA, are we still looking for that this year?
spk02: December timeframe, it sounds like. We expect an MCL to be established around that time. I think that's still on track.
spk06: Okay.
spk02: Best of luck.
spk06: Thanks.
spk04: Thanks, Greg. Thanks, Greg. Take care.
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spk02: Thank you all for attending, and as always, we stand ready to answer any questions, any follow-up questions you might have. Thanks again for joining us today.
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