Ladies and gentlemen, thank you for standing by. Welcome to the American States Water Company Conference Call discussing the company's fourth quarter and full year 2021 results. This call is being recorded. If you would like to listen to the replay of this call, it will begin this afternoon at approximately 5 P.M. Eastern Time and run through Wednesday, March 2, 2022 on the company's website, www.aswater.com. The slides that the company will be referring to are also available on the website. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Today's call will be limited to an hour. Presenting today from American States Water Company is Bob Sprowls, President and Chief Executive Officer; and Eva Tang, Senior Vice President of Finance and Chief Financial Officer. As a reminder, certain matters discussed during this conference call may be forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Please review a description of the company's risks and uncertainties in our most recent Form 10-K and Form 10-Q on file with the Securities and Exchange Commission. In addition, this conference call will include a discussion of certain measures that are not prepared in accordance with Generally Accepted Accounting Principles or GAAP in the United States and constitute non-GAAP financial measures under SEC rules. These non-GAAP financial measures are derived from consolidated financial information, but are not presented in our financial statements that are prepared in accordance with GAAP. For more details, please refer to the press release. At this time, I will turn the call over to Bob Sprowls, President and Chief Executive Officer of American States Water Company.

Thank you, Rocco. Welcome, everyone and thank you for joining us today. I'll begin with some comments on the highlights for the year. Eva will then discuss some financial details for both the quarter and the year, and then I'll wrap it up with some updates on regulatory filings, ASUS and dividends and then we'll take your questions. I'm pleased to report that we had a very strong 2021. Our earnings per share increased 9.4% to $2.55 for 2021 compared to $2.33 reported for 2020, driven by higher year-over-year performance by the Water segment largely as a result of new rates authorized by the California Public Utilities Commission or CPUC. In fact, we had increased earnings in each of our business segments for the year. Eva will discuss our financial results for the fourth quarter shortly. There are a number of other highlights for the year. We continue to invest in the reliability of our systems spending a record high $142.6 million in company-funded infrastructure at our regulated utilities during the year and continue to maintain the infrastructure at 11 military bases. Infrastructure investment and improvements is critical to providing safe and reliable service to our customers and allow us to maintain water quality, reduce leaks, promote energy efficiency and fortify the systems for national disasters and other events. In 2021, we reached a joint settlement agreement on key items with the Public Advocates Office of the CPUC on Golden State Water's general rate case to set new rates for the years 2022 through 2024, which if approved will allow us to continue our investment in our water systems. The company's environmental social responsibility and governance or ESG profile remains strong. We increased the breadth and depth of our ESG disclosures during the year. This month we set a target…

Thank you, Bob, and hello, everyone. Let me start with an overview of our fourth quarter financial results. Consolidated diluted earnings for the quarter were $0.55 per share compared to $0.54 per share, reported for the same quarter of 2020. Earnings at our water segment increased to $0.04 per share for the quarter. This increase was largely due to an increase in water revenues from new rates for 2021, authorized by the California Public Utilities Commission. Earnings from the electric segment for the fourth quarter of 2021 as well as 2020 was $0.07 per share. Higher electric revenues and lower electric supply costs were offset by an overall increase in operating and interest expenses, as compared to the fourth quarter of 2020. Earnings from the contracted services segment were $0.13 per share, as compared to $0.17 per share for the same quarter of 2020. The decrease was largely due to a decrease in construction activity, partially offset by an increase in management fee revenue and an overall decrease in operating expenses. The decrease in construction activity was due largely to timing differences of when construction work was performed as compared to the fourth quarter of 2020. Consolidated revenue for the three months ended December 31, 2021, decreased by $7.6 million, as compared to the same period in 2020. The decrease was due to lower construction activity at our contracted services segment due to timing as just discussed, partially offset by increase at our water segment. Turning to slide 10. Total operating expenses decreased approximately $8.3 million versus the fourth quarter of 2020, mostly due to a decrease in construction costs at ASUS as a result of lower construction activity, a decrease in property and other taxes and a sale of non-utility-related land at the water segment, resulted in a gain…

Thank you, Eva. I'd like to provide an update on our recent regulatory activity. In July 2020, Golden State Water filed a general rate case application for all of its water regions and the general office for new water rates for the years 2022, 2023 and 2024. In November of last year, we reached a settlement agreement with the Public Advocates Office on this general rate case. Only three issues remain. Among other things, the settlement authorizes Golden State Water to invest approximately $404.8 million in capital infrastructure for the three-year rate cycle. Settlement also authorizes Golden State Water to complete certain advice letter capital projects approved in the last general rate case, which have recently been completed for a total capital investment of $9.4 million. The additional annual revenue requirements generated from these capital investments are $1.2 million and became effective February 15 of this year. Excluding the advice letter project revenues, the amounts included in the settlement agreement, if approved would increase the 2022 adopted revenues by approximately $30.3 million as compared to the 2021 adopted revenues and increased the 2022 adopted supply cost by $9.7 million as compared to the 2021 adopted supply costs. The three issues not included in the settlement agreement were contested through the briefing process rather than hearings and include Golden State Water's request for a medical cost balancing account, a general liability insurance cost balancing account and consolidation of two of the company's smaller customer service areas for ratemaking purposes. Our proposed decision in the water general rate case is expected in mid-2022. Once the final decision is issued by the CPUC, new water rates will be effective retroactive to January 1 2022. Turning our attention to Slide 15. We present the growth in Golden State Water's average rate base as authorized…

[Operator Instructions] Today's first question comes from Angie Storozynski with Seaport. Please go ahead.

Thank you. I was just updating the model and just a couple of simple modeling questions. So it seems like the maintenance expense for 2021 seems much lower versus that for 2020. I understand that it's not a fourth quarter item, but you remember what was the reason for the decrease here?

I think it's the unplanned maintenance work Angie. I mean those kind of things is hard to expect. We plan our maintenance work. If emergency comes along and things happen during the year, we have to address it immediately. So they will have some fluctuation of the maintenance cost going forward, but we expect to be maintaining that. Hopefully there is not a lot of emergency work happening in 2022, but that was what's happening in 2020 I believe. Bob do you have anything to add?

Okay.

Yes. I mean it's -- I think it's a really good sign that our unplanned maintenance we didn't have to do a lot of it in terms of leaks et cetera. So I think it's a really good sign.

Yes for sure, especially in this inflationary environment. Now the second question again based on your reported numbers. So I see that you have this $31 million in notes payable. There's like a very de minimis increase in long-term debt, but there is this big short-term debt is the timing of when you plan to issue long-term debt?

For Golden State Water you mean Angie?

Well I'm looking at your 10-K I mean on a consolidated basis I see this big seemingly short-term debt increase. Again I can follow-up offline. That's not a problem. So just moving on to more crucial issues here. So I'm looking at your settlement and you mentioned that those revenue and supply cost increases versus the approved revenue levels meaning I cannot simply use the recorded revenues for the Water segment that you showed me in 2021 as a basis of this increase?

Yes. So we were -- we reported the change in adopted revenues from 2021 to 2022. And as you know with the full RAM revenues tend to be very close to adopt it. So what we were trying to do is, give you a sense of where -- if the settlement agreement gets approved where the 2022 revenues will end up.

Okay. So it's very close to basically if I just used the reported water revenues and I used this $30.3 million increase that is in the settlement.

Right.

Okay.

We also gave you the change in the supply cost.

Yes. That's absolutely sure. And on top of it, there is also an increase associated with those projects that are excluded from the GRC, right? So there is still some small upward adjustment to the water revenue in 2022 on the back of those.

Right.

$1.2 million is the annual effect of the…

But that started February 15. So it's not a full year for 2022. In addition to that Angie, for 2022, when the cost of capital proceeding got approved, we will have to retroact to January of this year for the revenue requirements to reflect the final cost of capital, both debt and equity. So you have to estimate the adjustment for that.

Speaking of the cost of capital, that's definitely an interesting proceeding that you guys are going through, actually electric utilities in California going through it as well. So there's -- I mean, we're seeing the arguments of the consumer advocate, at least on the electric side, very interesting to say the least, with a 7% handle of the allowed ROE and the argument that there is no connection between the cost of equity and performance of utility stocks, which is again an interesting argument. So how -- I mean, there have been changes of the commission. So we don't really know, at least from our vantage point, how the commission is going to opine on those future allowed ROEs. But is there anything that you guys can share, any sort of gauge of your sentiment of how the commission will act here? Again, there seems to be such a wide range of expectations between what you guys had filed for and what we just saw in the comments on the consumer advocate, at least on the electric side?

Yes. So, Angie, just to mention here, the public advocates in the water case has put their -- they have issued their report. For us, it was 7.51% ROE. We had requested 10.5%. So we're miles apart there.

Yes, exactly. Very wide.

Yes. Although, they did mention in their report a recommended capital structure of 56.85% equity. We had requested 57%. So we're close on that, but clearly miles to go on the ROE. Yes, it's a relatively new commission, as you know, with two new commissioners there, so we're not entirely certain how this is going to go. We think the 7.51 is ridiculous, of course. So we'll see. But we'll have hearings on April 5 through the 8 on this process and perhaps we'll know better after the hearings. We've got two new commissioners, although, they're both lawyers. So that's a good sign. Commissioner Reynolds, not President Reynolds, but Commissioner Reynolds, he worked at the commission for many years and was a commissioner's adviser for many years. So I feel like, he's probably got his arms around how the commission works. Not really sure about the President of the Commission, because she's new to the commission.

Yes. And just one other one. Eva you mentioned that there was some pressure on the electric utility side related to rising purchase power costs. I mean, that pressure is probably only likely to intensify, given what we're seeing happening with the natural gas and thus power prices. So there is this annual step-up, right, in electric revenue under the electric GRC. But again, if there is this inflation in the purchase power cost that is basically sort of mitigating any or any meaningful earnings increase on the electric side. Is that fair?

Yes, Angie. We do have a full cost -- full supply cost balancing count as they value.

Okay.

So to the extent the purchase power is higher than authorized we'll be able to recover that. So we'll book to the adopted -- yes we book to the adopted supply costs and recover that in the future through surcharges.

Okay. Thank you. That’s it from me. Thank you. Okay.

Thank you.

[Operator Instructions] Today's next question comes from Jonathan Reeder at Wells Fargo. Please go ahead.

Hi, Bob and Eva. How are you all today?

Good. How are you?

Good, Jonathan. How are you?

Not doing too bad. So just wondering if we strip out the $0.08 investment gain would you say the $2.47 is a good starting point as we're thinking about 2022 EPS and the growth from the potential uplift from the pending GRC settlement offset by any cost of capital adjustment, or are there some other things in there that we may need to adjust or that allowed you to come in a little stronger in 2021?

Yes. Jonathan so if you could -- could you give the step back again please in terms of how you're building 2022?

Well, no I'm just wondering if using the $2.47 so taking out the $0.08 investment gain is that a good starting point to kind of think about layering on the other drivers such as the uplift from the GRC settlement offset by the cost of capital adjustment, or are there some expense items or stuff at the utilities that may have led to some over-earning situations or something in 2021 that aren't perhaps repeatable?

Yes. So you'll have to adjust for the true-up of the cost of debt. Because we were -- our prior cost of capital at 6.6%. The filing we did here which is sort of truing up the debt cost is 5.1%.

That's right.

So that will be effective January 1 2022. So you'll have to factor that in Jonathan.

You know what that is off and sort of a revenue perspective?

About $7.5 million Jonathan if everything stays the same. We have our Return on Equity ROE remained at 8.9%. So just a decrease in debt from 6.6% to 5.1% would probably impact revenues by $7.5 million.

Okay. But then otherwise from the expense side of the equation you had kind of your normal ebbs and flows throughout the year and there's no kind of onetimers tucked in there that we should be adjusting for?

I can't think it of any majority one. And if we go to hearings then it would may incur additional legal regulatory costs for the capital proceedings. But other than that everything seems to be working normally.

Okay. And then on the electric side I saw on the 10-K that said Bear Valley expects to spend $13 million in 2022 just on wildfire mitigation projects. And it looks like maybe the electric utility 2021 CapEx was close to $20 million. So should we be thinking like $15 million to $20 million is like an annual type CapEx number, or does that wildfire mitigation spend decreased considerably in 2023 and beyond such that we get back closer to electric CapEx around $10 million?

Yes. So 10 seems light to me but 20 seems too happy.

Yes.

Maybe -- maybe in between there is probably the way to think about it.

Okay. As we're thinking about 2023 and beyond?

Yes.

Okay.

Yes. I mean there are other projects that could get included that -- we did a filing years ago for renewable solar facility and then needed to pull the filing because of some issues, but we're very interested in putting a solar facility up there. It will take some time to get that through the commission, but that would be sort of a kind of a one-off I would say, that may add to the CapEx. It's just hard to predict when that will be...

You're still -- kind of stealing my next question, well anticipated there Bob. So, no imminent plans to I guess, kind of refile that solar project?

Well, we're -- I mean we're working on it. We're working to find land for it. And that -- we've got to start with the land. And then, there's a lot of steps in the critical process of the critical path there. But the first is getting appropriate land that would accommodate it. So I mean it's something we're very interested in doing. We think the state policy supports it and we're working through it. It just takes time.

Okay. Is it -- should we think of it as being driven by meeting the next kind of RPS hurdle I think in the K, you cited 50% by 2026 and you're at 37% or something like that?

Yes. There's a lot of benefits to a solar facility. One is to help with the RPS requirements also reduction in greenhouse gas emissions is another issue and having generation -- technically generation on at the location is important too given -- although this hasn't been a problem but given that we've got power coming from places to go to the facility. And if that has not had to ratchet back their power because of public safety power shutoffs. We understand that's a bit of a risk for us although it has not been a problem to-date.

Got you. Okay. So, I mean when Bear Valley filed its electric rate case, I think it's here in a couple of months. Can you give us any sense the size of the case both in terms of what kind of value the Bear Valley rate base is up to, maybe what kind of rate increase we're talking about, and it kind of sounds like on an ongoing basis, the $15 million CapEx is somewhere to kind of bogey that around?

Yes. So we're still working on the numbers Jonathan. But you're right we do plan to file a rate case later this year. One of the things everyone should be aware of that these wildfire mitigation expenditures, we've been including those in memorandum accounts and none of those are in rates yet. And part of the process in the general rate case will be to include those through 2021. And so, we're very sensitive to the increase in rates this will have on our customers but it is -- we do feel these expenditures were necessary and are important for safety, et cetera.

All right. Any guidance you can give in terms of the value of the rates? I mean I know there's a disconnect right now between what you're kind of technically allowed to earn on versus what it is with a lot of that CapEx -- the wildfire lease CapEx not in rates?

I think Jonathan, the top rate base is approximately right now for Bear Valley is about $69 million and we spent $10 million to $12 million verify a capital projects, so we can kind of estimate how much the rate base will file the starting point will be, because all those wildwire plants since 2020 I think, right Bob?

Yes. 2019, even I think Eva.

Yes. So it will be included in our filing per commission decision on the wildfire plant, we're not supposed to get recovery until the GRC process. So those were all being included in the filing plus the annual regular CapEx that we have to do for the electric segment. So, that should give you some good approximation there.

Okay. And the $69 million that's the average value for 2022, or was it for 2021?

2021 actually.

Okay, awesome. And then I guess just lastly I know AWK on their call they indicated they have a couple of active bids out there said one, being naval station Mayport they thought would be decided this summer. Is that one that you guys are involved with, in terms of trying to win that RFP? And any additional color in terms of when we might get some new bases awarded?

Yes. Jonathan we're very active in the space. I think you could assume that we're, bidding on a number of bases. And Mayport is one that we have submitted a bid on.

And any of you size Mayport that you think are near in terms of award or is that the only one that kind of seems like maybe a 2022 event?

Yes. I would say, of the traditional utility privatization Mayport is one, that we would think would be awarded. Perhaps, there's another one that will get awarded. I don't know it would be earlier than what is normal. There's a PaxRiver RFP that's out there by the Navy but it's earlier -- I mean it's earlier in the process than Mayport is.

Okay.

And then it's possible there'll be quasi awards that are out of the norm, not part of the UPP process that you might -- sorry utility privatization process that may look a little different. I don't know what our competitors are working on. So it's possible you'll see some other awards but probably not, sort of some nontraditional things going on in the space and we're -- I think it's fairly early on in the process but we're just looking at some projects I guess.

Got you. We'll just stay tuned on that and good luck as is our -- come now hopefully ASUS to be successful.

Thank you.

And ladies and gentlemen this concludes our question-and-answer session. I'd like to turn the conference back over to Bob Sprowls for closing remarks.

Yes, I just want to wrap it up today by again thanking everyone, for their participation on the call today and for their interest in American States Water Company and wish you all a good 2022.

Thank you, sir. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.