California Water Service Group (CWT): history, ownership, mission, how it works & makes money

A Brief History of California Water Service Group (CWT)

Overview

California Water Service Group (CWT), established in 1926, has grown to become the largest publicly traded water utility in the United States. As of 2024, it operates multiple subsidiaries, including California Water Service Company, New Mexico Water Service Company, and Hawaii Water Service Company, serving over 2 million people across California, New Mexico, Hawaii, and Texas.

Financial Performance

For the nine months ended September 30, 2024, CWT reported a net income of $170.6 million, a significant increase from $21.4 million in the same period of 2023. This represents an earnings per diluted share of $2.93 compared to $0.38 in the prior year.

Revenue Growth

CWT's operating revenue for the nine months ended September 30, 2024, reached $814.6 million, up from $580.1 million in the same period of 2023, driven by rate increases and an expanding customer base.

Dividends

CWT has a strong history of returning value to its shareholders. As of October 30, 2024, the company declared a quarterly dividend of $0.28 per share, marking its 319th consecutive quarterly dividend payment. For the nine months ended September 30, 2024, total dividend payments amounted to $48.8 million.

Capital Expenditures

In 2024, CWT's estimated utility capital expenditures are projected to be $365 million, which includes both company-funded and developer-funded projects. The focus remains on improving infrastructure and expanding service capabilities.

Debt and Financing

As of September 30, 2024, CWT had total liabilities of $3.23 billion, including long-term debt of approximately $1.05 billion. The company's short-term borrowings stood at $260 million. CWT continues to maintain a balanced approach to financing its operational needs through a combination of debt and equity.

Regulatory Environment

CWT operates in a heavily regulated environment. The California Public Utilities Commission (CPUC) plays a critical role in setting rates and approving capital projects. In March 2024, the CPUC approved CWT's General Rate Case (GRC), allowing for necessary investments in infrastructure.

Recent Developments

In 2024, CWT benefited from the California Extended Water and Wastewater Arrearages Payment Program, receiving $82 million to assist customers with unpaid bills resulting from the COVID-19 pandemic. This program has helped improve cash flow and reduce outstanding receivables.

Environmental Initiatives

CWT is committed to sustainability and responsible water management. The company has implemented various initiatives to promote conservation and ensure compliance with environmental regulations, particularly in California, where water scarcity remains a pressing issue.

Conclusion

The financial strength and operational performance of California Water Service Group position it well for future growth. The company remains focused on sustainable practices while navigating the complexities of regulatory requirements and market demands.

A Who Owns California Water Service Group (CWT)

Major Institutional Shareholders

As of 2024, the following table outlines the major institutional shareholders of California Water Service Group (CWT):

Individual Shareholders

In addition to institutional investors, individual shareholders also play a role in ownership:

• President and CEO Martin A. Kropelnicki: 250,000 shares
• Board Chair William D. D. McCarty: 150,000 shares
• Other executives and board members collectively own approximately 200,000 shares.

Stockholder Count

As of August 12, 2024, there were approximately 1,716 stockholders of record for California Water Service Group's common stock.

Stock Performance

The stock price of CWT as of September 30, 2024, was $27.38 per share, reflecting a book value increase from $24.72 at the end of 2023.

Dividend Payments

California Water Service Group has maintained a consistent dividend policy. The quarterly common stock dividend for the fourth quarter of 2024 was declared at $0.28 per share, payable on November 22, 2024.

Equity Issuance and Buybacks

During the nine months ended September 30, 2024, the company raised $86.5 million through the issuance of common stock via its at-the-market equity program. The company also repurchased approximately 29,000 shares during the same period.

Summary of Financial Data

The following table summarizes key financial data relevant to ownership and performance:

Conclusion

The ownership structure of California Water Service Group is characterized by a mix of institutional and individual shareholders, with a solid performance in stock price and dividends. The company's financial health remains robust, with significant operating revenue and net income reported in 2024.

California Water Service Group (CWT) Mission Statement

Mission Statement Overview

The mission of California Water Service Group (CWT) is to provide high-quality, reliable water service to its customers while maintaining environmental stewardship and supporting the communities it serves.

Financial Performance

As of September 30, 2024, California Water Service Group reported significant financial growth. The operating revenue for the three months ended was $299.6 million, an increase of $44.6 million, or 17.5%, compared to the same period in 2023. For the nine months ended, the operating revenue reached $814.6 million, which is a remarkable increase of $234.5 million, or 40.4% year-over-year.

Key Drivers of Revenue Growth

The increase in operating revenue has been primarily driven by:

• Rate Increases: Contributing approximately $74.1 million for nine months.
• New Customers: An increase of $14.1 million attributed to new customer additions.
• Increased Consumption: Contributing an additional $6.7 million due to higher water usage.

Operating Expenses

Total operating expenses for the three months ended September 30, 2024, increased by $21.3 million, or 10.1%, to $232.8 million. For the nine months, operating expenses rose by $83.6 million, or 15.5%, to $621.8 million. The main areas contributing to this increase include:

• Water production costs increased by $2.7 million for the three months and by $18.7 million for the nine months.
• Depreciation and amortization expenses rose by $3.2 million for the three months and $9.3 million for the nine months.
• Income tax expense surged by $11.5 million for the three months and $41.1 million for the nine months due to increased pre-tax operating income.

Water Sources and Production Costs

As of September 30, 2024, the sources of water production were as follows:

Utility Plant Expenditures

For the nine months ended September 30, 2024, utility plant expenditures totaled $332.2 million for both Company-funded and developer-funded projects. The projected utility capital expenditures for 2024 are estimated to be $365.0 million, excluding approximately $20.0 million of developer-funded capital expenditures.

Dividends

During the nine months ended September 30, 2024, California Water Service Group paid quarterly common stock dividends of $0.84 per share compared to $0.78 per share for the same period in 2023. The fourth-quarter dividend of $0.28 per share was declared on October 30, 2024.

Regulatory Activities and Future Outlook

In March 2024, the California Public Utilities Commission approved the 2021 General Rate Case (GRC), leading to a significant adjustment in rates that took effect on May 31, 2024. This decision is expected to facilitate ongoing capital improvements and operational efficiencies, supporting the company's mission to ensure reliable water service to its customers.

How California Water Service Group (CWT) Works

Overview of Operations

California Water Service Group (CWT) operates as a regulated public utility that provides water service to residential, commercial, and industrial customers in California and other states. The company primarily generates revenue through customer billing based on water usage, regulated rate increases, and adjustments approved by the California Public Utilities Commission (CPUC).

Financial Performance

For the three months ended September 30, 2024, CWT reported:

• Operating Revenue: $299.6 million, an increase of $44.6 million or 17.5% compared to the same period in 2023.
• Total Operating Expenses: $232.8 million, a rise of $21.3 million or 10.1% year-over-year.
• Net Income: $60.7 million, compared to $34.4 million for the same quarter in 2023.
• Earnings per Share (EPS): $1.03, up from $0.60 in Q3 2023.

For the nine months ended September 30, 2024, the figures were:

• Operating Revenue: $814.6 million, an increase of $234.5 million or 40.4% year-over-year.
• Total Operating Expenses: $621.8 million, a rise of $83.6 million or 15.5% from the previous year.
• Net Income: $171.1 million, significantly up from $21.8 million in the same period of 2023.
• Earnings per Share (EPS): $2.93, compared to $0.38 for the nine months ended September 30, 2023.

Revenue Breakdown

The sources of the change in operating revenue for the three and nine months ended September 30, 2024, are detailed as follows:

Cost Structure

For the three months ended September 30, 2024, the breakdown of water production costs was as follows:

Capital Expenditures

CWT's capital expenditures for the nine months ended September 30, 2024, totaled $332.2 million, with an estimated total for the year of $365.0 million. The expenditures primarily focus on utility plant improvements and expansions.

Debt and Financing

As of September 30, 2024, CWT's long-term debt was $1.051 billion, with total liabilities amounting to $3.234 billion. The company utilized $370 million in short-term borrowings during the nine months ended September 30, 2024, compared to $165 million in the same period in 2023.

Dividend Policy

During the nine months ended September 30, 2024, CWT paid dividends of $0.84 per share, up from $0.78 per share in the same period of 2023. The company aims for a long-term dividend payout ratio of approximately 60% of net income.

Regulatory Environment

CWT operates under the regulatory framework set by the CPUC, which impacts its rate-setting processes and revenue recognition. The 2021 General Rate Case (GRC), approved in March 2024, allowed for significant adjustments in rates retroactive to January 1, 2023, contributing to the revenue increases noted above.

How California Water Service Group (CWT) Makes Money

Revenue Generation

California Water Service Group (CWT) generates revenue primarily through the provision of regulated water and wastewater services. The company operates under tariff rates authorized by the California Public Utilities Commission (CPUC). The revenue is recognized based on the volume of water consumed and service charges.

Operating Revenue Analysis

For the nine months ended September 30, 2024, CWT reported operating revenue of $814.6 million, an increase of 40.4% compared to $580.1 million for the same period in 2023. The increase in revenue was attributed to:

• Rate changes: $74.1 million
• Increased consumption and new customers: $14.1 million
• Accrued and unbilled revenue: $6.7 million

The breakdown of operating revenue for the three and nine months ended September 30, 2024, is shown in the table below:

Regulatory Mechanisms

CWT utilizes various regulatory mechanisms to stabilize revenue. The Monterey-Style Water Revenue Adjustment Mechanism (MWRAM) and the Water Revenue Adjustment Mechanism (WRAM) are essential tools that allow the company to adjust revenues based on consumption patterns and address variances in actual versus expected revenue.

Operating Expenses

For the nine months ended September 30, 2024, total operating expenses increased to $621.8 million, up 15.5% from $538.2 million in 2023. The primary components of operating expenses include:

• Water production costs: $236.9 million
• Administrative and general expenses: $103.1 million
• Other operations: $86.2 million
• Depreciation and amortization: $98.9 million
• Income tax expense: $39.7 million

A detailed breakdown of water production costs for the three and nine months ended September 30, 2024, is presented in the following table:

Net Income and Earnings

CWT reported a net income of $171.1 million for the nine months ended September 30, 2024, compared to $21.8 million for the same period in 2023. This significant increase in net income is largely due to the rise in operating revenue and improved operational efficiency.

For the three months ended September 30, 2024, the net income attributable to CWT was $60.7 million, or $1.03 per diluted share, compared to $34.4 million, or $0.60 per diluted share in 2023.

Cash Flow and Financing Activities

During the nine months ended September 30, 2024, CWT generated $222.8 million in cash flow from operations, a notable increase from $143.5 million in the prior year. The company utilized cash generated from operations and short-term borrowings for capital investments, with total capital expenditures projected to be $365.0 million for 2024.

Details regarding the cash flow from financing activities for the nine months ended September 30, 2024, are summarized below:

Market Presence and Customer Base

CWT serves a diverse customer base, including residential, commercial, and industrial clients. For the nine months ended September 30, 2024, the revenue breakdown by customer class is as follows:

Article updated on 8 Nov 2024

Resources:

• California Water Service Group (CWT) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of California Water Service Group (CWT)' financial performance, including balance sheets, income statements, and cash flow statements.
• SEC Filings – View California Water Service Group (CWT)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.